Watkins v. S. Farm Bureau Cas. Ins. Co.

• Decision Date: 21 October 2009
• Docket Number: No. CA 09–120.,CA 09–120.
• Citation: Watkins v. S. Farm Bureau Cas. Ins. Co., 2009 Ark. App. 693, 370 S.W.3d 848 (Ark. App. 2009)
• Parties: Cleo WATKINS Jr., and Brenda Watkins, Appellants v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY and Farm Bureau Mutual Insurance Company of Arkansas, Inc., Appellees.
• Court: Arkansas Court of Appeals

2009 Ark. App. 693

370 S.W.3d 848

Cleo WATKINS Jr., and Brenda Watkins, Appellants

v.SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY and Farm Bureau Mutual Insurance Company of Arkansas, Inc., Appellees.

No. CA 09–120.

Court of Appeals of Arkansas.

Oct. 21, 2009.

Womack, Landis, Phelps & McNeill, P.A., by: J.V. Phelps and Mark Mayfield, Jonesboro, for appellants.

Watts, Donovan & Tilley, P.A., by: Richard N. Watts and David M. Donovan, Little Rock, for appellees.

COURTNEY HUDSON HENRY, Judge.

[Ark. App. 1]Appellants Brenda and Cleo Watkins appeal from the Pulaski County Circuit Court's entry of summary judgment in favor of appellees Southern Farm Bureau Casualty Insurance Company and Farm Bureau Mutual Insurance Company of Arkansas, Inc. (collectively “Farm Bureau”). For reversal, appellants contend that the trial court erred in ruling as a matter of law that Farm Bureau owed no duty to defend or to provide coverage to Cleo Watkins in connection with a lawsuit brought against him for assault and battery. Appellants further argue that the trial court erred in concluding that they had not pled sufficient facts to proceed on their claim of bad faith.¹ The issues in this case center on an “intentional-design” [Ark. App. 2]exclusion in a general-liability insurance policy and the question of whether the exclusion applies when the insured asserts self-defense to claims of assault and battery. We affirm the order of summary judgment on the issues of coverage and bad faith, but we reverse on the issue of Farm Bureau's duty to defend Watkins in the underlying lawsuit.

The record reveals that, on June 7, 2006, Watkins and Scotty Joe Turner became embroiled in a physical altercation after Turner accused Watkins of causing damage to Turner's rice crop. On July 18, 2006, Turner sued Watkins seeking compensatory and punitive damages for assault and battery. Specifically, Turner alleged that Watkins beat him with Turner's pistol during the confrontation.

Watkins owned both a homeowner's insurance policy and a general-liability policy issued by Farm Bureau. Upon being served with Turner's complaint, Watkins visited Thom Beasley, Farm Bureau's local agency manager. Beasley advised Watkins to consult attorney Benton Smith of the firm Cahoon and Smith in Jonesboro. Smith and his firm had provided legal representation to Farm Bureau in the past and were actively representing Farm Bureau in other litigation at the time of the referral. On July 28, 2006, Richie Burgin, an adjuster for Farm Bureau, interviewed Watkins about the incident. Burgin asked Watkins to describe the altercation and inquired if Watkins intended to harm Turner when he struck him. Appellant replied,

Mr. Turner drove up in his pickup, jumped out, and said get your [expletive] equipment off my property. I said let's get in your truck and talk. He pulled a semi-automatic pistol. I felt threatened. I called him an [expletive]. He then put the pistol back in its holster.

[Ark. App. 3]He was accusing me of damaging his crop. He was gonna show me where the damage was when I called him an unpleasant name. He put his hand back on the gun. I knocked his hand off and got the gun.

He was gonna jump me so I just hit him with it. He wanted to come back at me again, so I hit him again. I was wanting to get his attention because I was wanting him to, I, I, you know, out of fear, uh—not to cause him any harm but to stop the altercation. He said do not hit me with that loaded gun. He wanted to fight back until, uh, next thing I knowed he was getting in his truck. He tried to hit me. It is correct that I intentionally hit him to try to stop the altercation. I struck him once in the head and once in the arm. I did not want an altercation with Mr. Turner. I felt like I was defending myself, because he did have a gun.

Macey Harpole, Farm Bureau's claims manager, communicated with Smith regarding coverage in view of the “intentional-acts” exclusion found in the homeowner's policy and the “intentional-design” exclusion contained in the general liability policy. Harpole advised Smith that Farm Bureau would file a declaratory-judgment action, and in exchange for not filing suit, Harpole asked Smith for a letter stating that Farm Bureau did not owe Watkins a defense and had no obligation to provide coverage. Harpole and Smith had other discussions regarding coverage, and on October 3, 2006, Smith wrote Farm Bureau a letter stating that Watkins agreed and understood that his policies did not create a duty to defend and did not afford him coverage for intentional acts.

Smith represented Watkins at the trial on Turner's complaint, and the trial court in that action instructed the jury on Turner's assault and battery claims and on Watkins's defense of justification. The jury returned a verdict for Turner and awarded him $500,000 in [Ark. App. 4]compensatory damages and $700,000 in punitive damages. Watkins and Turner later settled the judgment for $1,000,000.

Thereafter, Watkins filed a malpractice claim against Smith. Farm Bureau subsequently filed this action seeking a declaratory judgment that it did not have a duty to defend or provide coverage on behalf of Watkins in connection with Turner's lawsuit. Watkins counterclaimed for coverage and for the attorney's fees he incurred in defending Turner's allegations, and he also presented a claim of bad faith against Farm Bureau. Farm Bureau moved for summary judgment on the grounds that both policies excluded coverage for intentional acts and that collateral estoppel prevented Watkins from relitigating the claim of self-defense that the jury rejected in the Turner lawsuit. Farm Bureau also maintained that Watkins had not sufficiently stated a claim for bad faith.

Watkins responded that collateral estoppel did not preclude his claims that Farm Bureau owed a duty to defend and to provide coverage and that questions of fact remained as to coverage and his allegations of bad faith. He also moved for partial summary judgment on the duty to defend. In support of these contentions, Watkins filed the affidavit of Jerry Ramsey, a law professor at the University of Montana. Ramsey opined that, based on a conflict of interest, attorney Smith had failed to ask Watkins at the trial whether he had intended to do harm to Turner, and Ramsey expressed the view that Farm Bureau had a duty to defend Watkins under both policies. The professor was also critical of Farm Bureau for not [Ark. App. 5]having manuals or guidelines to explain coverage and the duty to defend. Ramsey stated his belief that Farm Bureau's conduct was “dishonest, oppressive, and malicious.”

Watkins also presented his own affidavit and supplemental affidavit recounting the sequence of events and the substance of his dealings with Farm Bureau representatives. He stated that Farm Bureau never advised him of attorney Smith's conflict of interest and that he did not tell Smith to release Farm Bureau from its obligations under either policy. In addition, Watkins submitted a “Claim Department Lawsuit Worksheet” noting that Turner's “complaint [has] been delivered to our attorney,” Benton Smith.

After a hearing on the dueling motions for summary judgment, the trial court declared that neither policy afforded coverage or obligated Farm Bureau to provide a defense to Turner's cause of action. The trial court also ruled that Watkins failed to state a claim for bad faith. Watkins brings this appeal from the trial court's order of summary judgment.²

On appeal, Watkins focuses his arguments entirely on the exclusion found in the general liability policy. This policy excludes coverage for compensatory damages arising out of an act “by any insured that is intentionally designed to do harm to others.” On appeal, Watkins argues that the trial court erred in concluding (1) that Farm Bureau had no duty to defend; (2) that it had no obligation to provide coverage; and (3) that Farm Bureau was entitled to judgment as a matter of law on the claim of bad faith. Because this case comes to [Ark. App. 6]us from an order of summary judgment, we apply our familiar standards of review in deciding these questions.

Summary judgment is to be granted by a trial court only when it is clear that there are no genuine issues of material fact to be litigated and the moving party is entitled to judgment as a matter of law. Gonzales v. City of DeWitt, 357 Ark. 10, 159 S.W.3d 298 (2004). On appellate review, we must determine whether summary judgment was proper based on whether the evidence presented by the moving party left a material fact unanswered. Windsong Enters., Inc. v. Upton, 366 Ark. 23, 233 S.W.3d 145 (2006). This court views the evidence in the light most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party. Cole v. Laws, 349 Ark. 177, 76 S.W.3d 878,cert. denied,537 U.S. 1003, 123 S.Ct. 509, 154 L.Ed.2d 400 (2002). Where there are no disputed material facts, our review must focus on the trial court's application of the law to those undisputed facts. Parker v. S. Farm Bureau Cas. Ins. Co., 104 Ark. App. 301, 292 S.W.3d 311 (2009). When the facts are not at issue but possible inferences therefrom are, we will consider whether those inferences can be reasonably drawn from the undisputed facts and whether reasonable minds might differ on those hypotheses. Flentje v. First Nat'l Bank of Wynne, 340 Ark. 563, 11 S.W.3d 531 (2000).

Duty to defend

Watkins argues that the intentional-design exclusion does not absolve Farm Bureau of its obligation to defend him in the Turner lawsuit because he asserted that he acted in self-defense.[Ark. App. 7]Watkins points out that Farm Bureau knew that he was claiming self defense from the interview with the claims adjuster that took place soon after the lawsuit was filed, wherein Watkins stated that he acted “not to cause [Turner] any harm but to stop the altercation.”

Our supreme court has been clear that...