Clark v. S. Farm Bureau Cas. Ins. Co., Inc. , 487 S.W.3d 402 ( 2016 )

Cite as 2016 Ark. App. 196
ARKANSAS COURT OF APPEALS
DIVISION I
No. CV-15-675
TIM CLARK Opinion Delivered April 6, 2016
APPELLANT APPEAL FROM THE PULASKI
COUNTY CIRCUIT COURT,
V. SEVENTEENTH DIVISION
[NO. 60CV-12-471]
SOUTHERN FARM BUREAU HONORABLE MACKIE M. PIERCE,
CASUALTY INSURANCE COMPANY, JUDGE
INC.
APPELLEE REVERSED AND REMANDED
PHILLIP T. WHITEAKER, Judge
Tim Clark appeals a summary-judgment order denying his claim against appellee
Southern Farm Bureau Insurance Company (SFB) for underinsured motorist (UIM) coverage.
We reverse and remand for further proceedings.1
The facts are undisputed. Clark was injured in a car accident in Missouri in 2010.2 The
driver of the other vehicle, Carla Zender, was at fault. Zender carried a $100,000 automobile
liability policy, and Clark settled with her and her insurer for that amount. In consideration
1
We dismissed a prior appeal for lack of a final order. Clark v. S. Farm Bureau Ins. Co.,
2014 Ark. App. 391. The finality issues have been rectified, and we have jurisdiction to decide
the merits of the appeal.
2
Clark’s former wife, Sarah, who was also injured in the accident, was originally a
party to this appeal. Her claims against SFB have been dismissed, leaving Tim Clark as the
only appellant.
Cite as 2016 Ark. App. 196
of the settlement, Clark released Zender and her insurer from further liability arising out of
the accident. Clark did not give his own auto insurer, SFB, prior notice of the settlement.
At some point, Clark indicated to SFB that his damages exceeded Zender’s policy
limits and that he would seek UIM benefits. SFB filed suit, seeking a declaration that Clark’s
failure to give prior notice of the Zender settlement precluded UIM coverage. SFB
subsequently moved for summary judgment based on the following policy provision:
NOTICE REQUIREMENTS AND SETTLEMENT OF LOSS
You must provide us written notice if you reach, or if the covered person reaches,
a tentative agreement to settle the loss with the owner, operator, or liability insurer of
the underinsured auto.
The written notice must be by registered or certified mail, return receipt requested,
and include:
a. written documentation of the pecuniary losses incurred, including copies of all
medical bills; and
b. written authorization or court order authorizing us to obtain medical reports from
all employers and medical providers; and
c. written confirmation from the underinsured motorist’s liability insurance carrier
confirming the alleged underinsured motorist’s liability limits and the terms of the
tentative settlement.
(Emphasis in original.) The policy further provides that, within thirty days after receiving
written notice of a settlement, SFB will pay its insured an amount equal to the settlement and
recoup its payment through subrogation or, failing that, lose its right to decline UIM coverage
by reason of the settlement. See Ark. Code Ann. § 23-89-209(c) & (d) (Repl. 2014)
(containing similar provisions regarding notice of settlement to UIM insurers).
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Following a hearing, the circuit court granted summary judgment to SFB. The court
ruled that the above-quoted notice-of-settlement provision was a condition precedent to
UIM coverage and that Clark’s failure to abide by the provision forfeited his claim for UIM
benefits. Clark now appeals from the summary-judgment order.
Clark presents several arguments for reversal, but we direct our analysis to the sole basis
on which the circuit court granted summary judgment: that prior notice of the Zender
settlement was a condition precedent to Clark’s UIM coverage. When a notice provision
operates as a condition precedent to coverage, the insured must strictly comply with it.
Fireman’s Fund Ins. Co. v. Care Mgmt., Inc., 2010 Ark. 110, 361 S.W.3d 800. If the insured
fails to comply, he forfeits coverage. Id.; Vaughn v. Shelter Mut. Ins. Co., 2011 Ark. App. 208,
382 S.W.3d 736. Clark contends that SFB’s notice-of-settlement provision does not rise to
the level of a condition precedent. For the reasons set forth below, we agree.
The language of the insurance policy determines whether a notice-of-settlement
provision operates as a condition precedent. In order for timely notice to be a condition
precedent to insurance coverage, the insurance policy must use language expressly to that
effect, or language that necessarily implies that notice is a condition precedent. Kimbrell v.
Union Std. Ins. Co., 207 F.3d 535 (8th Cir. 2000); Hope Spoke Co. v. Md. Cas. Co., 102 Ark.
1, 143 S.W. 85 (1912). The distinction between a notice provision that is a condition
precedent and one that is not was aptly illustrated in Vaughn, supra. There, one notice
provision in an insurance policy stated that the insured had a duty to provide her insurer with
suit papers immediately upon filing. We ruled that this provision did not constitute a
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condition precedent to coverage because “the plain wording of the policy does not condition
coverage on fulfilling this condition.” 2011 Ark. App. 208, at 7–8, 382 S.W.3d at 741. By
contrast, we ruled that a separate provision, which required the insured to give notice of a
tentative settlement with an underinsured motorist, was a condition precedent. In doing so,
we relied on policy language under the heading “Exclusions,” which stated that UIM
coverage “[did] not apply” to damages for which the insured had released an underinsured
motorist without giving the required notice of settlement. We also cited a second policy
provision, which read that, if the insured chose not to give notice of her settlement with an
underinsured motorist, then “no insurance is provided under this coverage.” Id. at 6–7, 382
S.W.3d at 740–41.
Here, the SFB policy states that its insured must give notice of a tentative settlement
with the underinsured motorist. However, the policy provision does not expressly state or
necessarily imply that UIM coverage is conditioned on SFB’s receiving such notice. The
policy language falls short of declaring, as the policy did in Vaughn, that UIM coverage will
be completely forfeited or excluded if such notice is not given.
Accordingly, we conclude that Clark’s failure to provide prior notice of his settlement
with Zender did not violate a condition precedent under the SFB policy. When a notice
provision does not contain language sufficient to make it a condition precedent, the insurer
must show that it was prejudiced by any delay in notice in order to be relieved from liability.
See Fireman’s Fund, supra. SFB must therefore demonstrate that it was prejudiced by the lack
of notice in order to deny UIM benefits to Clark by reason of the settlement. Because the
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circuit court has not had the opportunity to rule on whether SFB was prejudiced, we reverse
and remand the summary-judgment order for further proceedings.3
Reversed and remanded.
GLADWIN, C.J., and HARRISON, J., agree.
Danny R. Crabtree, for appellant.
David A. Hodges, for appellee.
3
Clark maintains that our supreme court’s decision in Shelter Mutual Insurance Company
v. Bough, 310 Ark. 21, 834 S.W.2d 637 (1992), stands for the proposition that a UIM insurer
necessarily does not suffer prejudice from a lack of notice of settlement when its insured
recovers policy limits from the at-fault driver. However, Bough is distinguishable from the case
at bar because it did not involve a notice-of-settlement provision in the insurance policy.
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