Flemens v. Harris

Roger D. FLEMENS and Nancy Flemens v. Glen D.
HARRIS

94-245                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered February 12, 1996


1.   Insurance -- statute of limitations commences for an insurance
     agent at the time the negligent act occurs. -- The statute of
     limitations for an insurance agent commences at the time the
     negligent act occurs, in keeping with the traditional rule in
     professional malpractice cases.

2.   Courts -- decisions are applied retrospectively  -- limitation
     rules have long been in effect. --  The decisions of the
     supreme court are applied retrospectively -- a decision of the
     court, when overruled, stands as though it had never been;
     furthermore, limitation rules regarding malpractice actions
     have been applicable since 1877.

3.   Insurance -- limitation of actions -- decision based on
     longstanding rule -- trial court correctly applied the law. -- 
      Where there had been no change in the applicable rule and
     thus no "retroactive" application, the trial court correctly
     applied the decisional law of the Court as it existed when it
     decided appellant's case.  


     Appeal from Howard Circuit Court; Ted Capeheart, Judge;
affirmed.
     Wright, Chaney, Berry & Daniel, P,A., by:  Don P. Chaney, for
appellants.
     Wood, Smith, Schnipper & Clay, by:  Lynn Williams and Philip
M. Clay, for appellee.
     Andree Layton Roaf, Justice.February 12, 1996 *ADVREP12*









ROGER D. FLEMENS AND NANCY
FLEMENS,
                    APPELLANTS,

V.

GLEN D. HARRIS,
                    APPELLEE.


94-245




APPEAL FROM THE HOWARD COUNTY
CIRCUIT COURT,
NO. CIV91-87,
HON. TED CAPEHEART, JUDGE,



AFFIRMED.


                  Andree Layton Roaf, Justice.

     This is the second appeal of this case involving a claim of
negligence against an insurance agent; the first appeal was
dismissed without prejudice pursuant to Ark. R. Civ. P. 54(b). 
Flemens v. Harris, 319 Ark. 659, 893 S.W.2d 783 (1995).  Appellants
Roger and Nancy Flemens appeal from an order granting summary
judgment in favor of appellee Glen D. Harris on the basis that the
Flemenses' action was barred by the running of the statute of
limitations.  We affirm.
                             Facts.
     Appellee Glen Harris passed the state examination for
insurance agents in June 1988 and opened a Shelter Life Insurance
Company office in Dierks, Arkansas.  Roger Flemens, a self-employed
grocery store and gas station operator, submitted a disability
insurance application through appellee's office on August 8, 1988,
and was issued a policy by Shelter Life Insurance Company
(Shelter).  Roger Flemens' wife, appellant Nancy Flemens, was the
intended third party beneficiary of the disability insurance
policy.
     On December 15, 1988, Roger Flemens sustained injuries as a
result of a motor vehicle accident.  Mr. Flemens made a claim for
disability insurance benefits from Shelter and received one payment
for the period December 16, 1988, through December 29, 1988.  The
payment was made on February 7, 1989.  On March 21, 1989, Flemens
was notified by Shelter that there was "a problem with this
matter."  Shelter Life Insurance stated that there had been a
misrepresentation on the application regarding Flemens' income --
the income shown on his tax returns was significantly below that
which he claimed on the application form.  Subsequently, Roger
Flemens' disability benefits were terminated.
     Roger and Nancy Flemens filed a complaint against Shelter and
Glen Harris on December 13, 1991.  The complaint alleged Harris was
negligent in handling Roger Flemens' application for disability
insurance.  The complaint further alleged that the negligence on
the part of Harris was imputable to Shelter under the law of
agency.  In addition, the complaint alleged that Flemens
substantially complied with the terms of the policy and, despite
demand, Shelter failed to pay benefits due under the policy.
     Appellee Harris moved for summary judgment asserting that the
three-year statute of limitations barred the Flemenses' action. 
The trial court found that the applicable statute of limitations
for negligence of an insurance agent is three years and begins to
run at the time the negligent act occurs, not when it is
discovered.  The trial court further concluded that the negligence,
if any, committed by Harris occurred in August 1988 and the action
against Harris was filed in December 1991.  Accordingly, the trial
court granted separate defendant Glen Harris' motion for summary
judgment.  The record reflects that Shelter entered into a
settlement agreement with the Flemenses and the action against
Shelter was dismissed with prejudice.

                     Statute of limitations.
     On appeal, both parties agree that the applicable statute of
limitations on actions for the negligence of an insurance agent is
three years.  The appellants, however, submit that the trial court
erred in determining when the applicable three-year period began to
run.  The appellants assert that the statute of limitations did not
begin to run until receipt of the March 21, 1989, letter from
Shelter which terminated benefits because this letter represented
their first loss, i.e. damage, which was necessary for their tort
action to mature.
     The appellants rely upon Midwest Mutual Ins. Co. v. Ark. Nat'l
Co., 260 Ark. 352, 538 S.W.2d 574 (1976), where this Court
concluded the running of the statute of limitations did not
commence until an insured first learned it had no insurance
coverage.  The Arkansas National Company, an independent insurance
agency, obtained an assigned risk liability insurance policy for
Red Top Cab Company through Farm Bureau Mutual Insurance Company. 
Arkansas National and Red Top had a standing agreement to delete
from coverage taxicabs undergoing repair and to reinstate the
coverage upon request.  Pursuant to that agreement, on August 11,
1970, Red Top requested one of Arkansas National's agents to
reinstate a vehicle under the coverage; however, the agent
neglected to reinstate the vehicle.
     The vehicle was involved in a collision nine days later, and
on May 24, 1971, a suit was instituted against Red Top for injuries
resulting from the collision.  At that time, Red Top made demand on
Farm Bureau to provide it with a defense and to pay any judgment
that might be entered; however, Farm Bureau refused.  After
judgment was entered against it on September 11, 1973, Red Top
assigned to Midwest Mutual Insurance Company its "chose in action"
against Arkansas National for failure to reinstate insurance
coverage, and, on March 29, 1974, Midwest filed suit against
Arkansas National.  Arkansas National answered and asserted the
suit was barred by the three-year statute of limitations.  
     This Court concluded that Red Top's cause of action accrued on
or after May 24, 1971, when it was required to assume the cost of
its own defense due to the negligence of Arkansas National.  We
concluded Arkansas National's negligence in failing to reinstate
the insurance coverage did not become tortious as to Red Top until
at least some element of damage accrued to Red Top because of the
negligence.  However, the summary judgment in favor of Arkansas
National was affirmed because this Court held that Red Top's claim
was not assignable.
     In accordance with Midwest Mutual, the appellants submit that
the statute of limitations in their case did not begin to run until
they received the letter dated March 21, 1989, informing them
benefits were terminated.  The appellants assert that the statute
of limitations begins to run when there is a complete and present
cause of action.  See Courtney v. First Nat'l Bank, 300 Ark. 498,
780 S.W.2d 536 (1989); Corning Bank v. Rice, Adm'r, 278 Ark. 295,
645 S.W.2d 675 (1983).
     In response, the appellee cites a legal malpractice case,
Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991), where we
stated:
     Since 1877, it has been our rule that the statute of
     limitations applicable to a malpractice action begins to
     run, in the absence of concealment of the wrong, when the
     negligence occurs, and not when it is discovered.
We held that the statute of limitations begins to run upon the
occurrence of the last element essential to the cause of action. 
Id.; see also Wright v. Compton, Prewett, Thomas & Hickey, 315 Ark.
213, 866 S.W.2d 387 (1993).  Accordingly, we concluded that the
statute of limitations began to run at the time Alexander, an
attorney, represented Chapman in the sale of a business.  Although
the Chapman case involved legal malpractice, this Court commented
that under our traditional rule:
     an abstractor, accountant, architect, attorney, escrow
     agent, financial advisor, insurance agent, medical
     doctor, stockbroker, or other such person will not be
     forced to defend some alleged act of malpractice which
     occurred many years ago.
(Emphasis supplied.)  The appellee also relies upon Ford's Inc. v.
Russell Brown & Co., 299 Ark. 426, 773 S.W.2d 90 (1989), where we
held that the three-year statute of limitations commenced from the
date an accountant provided erroneous tax advice even though the
assessment of tax deficiency occurred more than three years later. 
This Court specifically rejected the appellant's contention that,
until they were assessed a tax deficiency, they had not sustained
an injury.
     The appellants' attempt to rely upon Midwest Mutual is
understandable.  However, the ultimate decision in Midwest Mutual
was based upon the assignability of the action.  Although this
Court first concluded that the action was not barred by the statute
of limitations, it was not necessary to do so in order to determine
that the action could not be assigned.  Consequently, although the
discussion of the limitation issue in Midwest Mutual is extensive,
the conclusion reached regarding this issue amounts to dictum.  Of
equal concern is the rationale employed by the Court in reaching
the conclusion that the statute of limitation did not begin to run
until the client of the insurance agency had suffered some actual
loss or damage.  The  opinion does not distinguish the work of
insurance agents from others who similarly render advice and
services, whether they be considered "professional" or not.  Nor is
there any real discussion of our traditional rule for malpractice
actions, as in Chapman, although one medical malpractice case is
discussed.  
     In fact, two cases discussed and cited in the Midwest Mutual
opinion as on point, and clearly relied upon by the court in
reaching its conclusion regarding the limitation issue, involved
damage to adjoining land resulting from the construction of a
culvert,  Chicago, R.I. & P. Ry. Co. v. Humphreys, 107 Ark. 330,
155 S.W. 127 (1916), and damage to property resulting from
construction of a power plant, Brown v. Arkansas Central Power Co.,
174 Ark. 177, 294 S.W. 709 (1927).  See Midwest Mutual, supra,
(quoting Faulkner v. Huie, 205 Ark. 332, 168 S.W.2d 834 (1943)). 
We thus conclude that the issue raised in the instant case is not
controlled by Midwest Mutual, and should not be.  
     The appellee's reliance upon Chapman, supra, presents a
similar problem, because the comment in Chapman that its decision
was applicable to insurance agents is also dictum; the running of
the statute of limitations for attorney malpractice was the only
issue before the court.  However, in Chapman, the traditional rule
that the statute of limitations applicable to malpractice actions
begins to run, absent concealment of the wrong, when the negligence
occurs, is thoroughly discussed, and the rationale behind it is
clearly appropriate to an insurance agent.  Certainly, damages
resulting from the negligent acts of insurance agents, like those
of accountants and attorneys, will seldom occur at the time the
negligent act is committed and often will only surface upon the
occurrence of some subsequent event.  The injury or damage from a
negligently prepared will does not arise until after the testator
has died.  The negligence of the insurance agent in Midwest Mutual
and in the instant case did not result in damages until claims were
presented and coverage denied.
      The appellants seek to distinguish insurance agents from the
other vocations listed in Chapman, by characterizing them as
"generally not professional."  Even if that be the case, we are not
prepared to suggest, as appellants argue, that because insurance
agents are not considered "professional," and do not render
"professional" services, they should therefore be subject to, in
effect, a longer statute of limitations than "true" professionals. 
Perhaps a better argument could be made for the opposite view. 
Also, the cases relied upon by the appellants in support of this
distinction merely hold that an insurance agent does not have a
duty to advise an insured with respect to different coverages.  See
Scott-Huff Ins. Agency v. Sandusky, 318 Ark. 613, 887 S.W.2d 516
(1994); Stokes v. Harrell, 289 Ark. 179, 711 S.W.2d 755 (1986). 
Insurance agents are not characterized as professional or non-
professional, nor are their services compared with or distinguished
from those of any other professions in reaching the holdings in
Scott-Huff and Stokes.  We are not persuaded that these decisions
have any utility in the analysis of the limitations issue before
us.
     We hold that the statute of limitations for an insurance agent
commences at the time the negligent act occurs, in keeping with our
traditional rule in professional malpractice cases.  However, in
doing so, we recognize the harshness of this rule to the clients of
not only insurance agents, but also of attorneys, accountants, and
others who may avail themselves of this rule in defending against
malpractice actions.  In the instant case, the appellant
participated in the preparation of his application for insurance
and knew that his income had been inaccurately stated.  He further
had two and one half years after suffering damage from the
appellee's negligence to bring legal action against him.  The facts
of Ford's Inc., supra present a more dramatic example of how dire
the consequences of our traditional rule can be to injured persons;
there, the damages did not result until after the statute of
limitations had run.
     In Chapman, we discussed the "current trend" cases from other
jurisdictions, which have adopted several approaches more favorable
to the injured party -- the "discovery rule," the "date of injury
rule," and the "termination of employment rule."  We suggested then
that any change to our long standing rule should come from the
General Assembly, and we do so once more.

                    Retroactive application.
     The appellants submit that if this Court holds the Chapman
case and its reference to insurance agents to be the controlling
precedent, a retroactive application of new law will result.  The
Chapman opinion was issued on October 28, 1991, and appellants
assert it is illogical and unfair for its application to result in
the running of the three year limitation period in August, 1991,
two months before Chapman was decided.  
     We have long held that our decisions are applied
retrospectively -- a decision of the court, when overruled, stands
as though it had never been.  See Baker v. Milam, 321 Ark. 234, 900 S.W.2d 209 (1995).  Appellants, however, mistakenly rely upon the
decision in Wiles v. Wiles, 289 Ark. 340, 711 S.W.2d 789 (1986), as
a deviation from this practice.  In Wiles, we declined to permit
retroactive application of a decision allowing for division of
military retirement pay as marital property to a divorce and
property settlement finalized nearly four years earlier.  We
determined that the previous holdings which did not allow such
division were justifiably relied upon, and that the doctrine of res
judicata would mandate against the reopening of cases already
decided, a significant consideration that is not present in the
instant case.  Furthermore, as we said in Chapman, our limitation
rules regarding malpractice actions have been applicable since
1877.  See White v. Reagan, 32 Ark. 281 (1877).  It is the
traditional rule that we today hold to be controlling.  The case of
Ford's Inc. v. Russell Brown & Co., supra, was decided in 1989 upon
the same rule as Chapman, and it also conflicts with the analysis
in Midwest Mutual.  Indeed, the dissent in Ford's Inc. made the
same argument the appellants now make in the instant case.  
     We find there has been no change in the applicable rule and
thus no "retroactive" application, because the decision in Midwest
Mutual cannot be viewed as a "line of precedents" which has been
relied upon.  The trial court correctly applied the decisional law
of the Court as it existed when it decided appellant's case.  Baker
v. Milam, supra. 
     Affirmed.
     Glaze and Corbin, JJ., dissent.*ADVREP12A*





ROGER D. FLEMENS AND NANCY
FLEMENS,
                    APPELLANTS,

V.

GLEN D. HARRIS,
                    APPELLEE.



94-245


Opinion Delivered:  2-12-96






DISSENTING OPINION




                  TOM GLAZE, Associate Justice

     In Midwest Mutual Ins. Co. v. Ark. Nat'l Co., 260 Ark. 352,
538 S.W.2d 574 (1976), this court concluded that, where an
insurance agent neglected to reinstate the insured's vehicle
coverage, the statute of limitations commenced when the insured
first learned he had no coverage and not the date the agent failed
to obtain it.  Applying that rule to the situation now before our
court, Roger and Nancy Flemens, the insureds, were first notified
on March 21, 1989 that their insurance agent had failed in August
1988 to obtain the disability insurance coverage they had
requested.  Using the March 21, 1989 date and the three-year
statute of limitations, the Flemens's complaint, alleging
negligence on their agent's part, was timely filed on December 13,
1991.
     The majority opinion concedes that the Flemenses, in
contending their action against their insurance agent was filed
timely, understandably relied on this court's decision in Midwest,
but the majority court then proceeds to offer reasons why the
Midwest decision should not decide this case.  The majority opinion
falls short of overruling that decision, but it might as well have
done so -- at least as to the Midwest court's extensive discussion
of the three-year limitations statute and its application to an
insurance agent's negligent acts.  
     Primarily, the majority court suggests Midwest's discussion of
the three-year statute of limitations issue was purely dictum and
for that reason, is not precedent here.  I strongly disagree!  In
Midwest, Arkansas National had a standing agreement to insure Red
Top's taxicabs effective the same day Red Top requested coverage. 
Arkansas National and its agent neglected to follow Red Top's
request made on August 11, 1970, and as a consequence, one of Red
Top's taxicabs was uninsured when it collided with a motorcycle on
August 20, 1970.  Robert Bratton was driving the motorcycle which
was owned by Archie Lee Lowe.  On May 24, 1971, Bratton and Lowe
sued Red Top for personal injuries and property damage.  Red Top
subsequently filed a third-party complaint against its insurance
agent, Arkansas National, alleging it had negligently failed to
obtain insurance per the parties' agreement and Arkansas National's
negligence had forced Red Top to defend against Bratton's and
Lowe's lawsuit.
     The trial court in Midwest dismissed Arkansas National from
the lawsuit, but the remaining claims were tried, resulting in a
verdict against Red Top, with Bratton and Lowe obtaining a judgment
in the sum of $6,850.  Afterwards, Red Top assigned to Midwest
Mutual Insurance company, its "chose in action" against Arkansas
National, representing Red Top's action against Arkansas National
for failing to obtain the insurance coverage Red Top had requested. 
Based upon that assignment, Midwest filed suit against Arkansas
National and its agent for the $6,850 paid Bratton and Lowe. 
Arkansas National conceded its agent had been negligent, but argued
(1) the statute of limitations had run and (2) Red Top's assignment
to Midwest was invalid.  The trial court granted Arkansas
National's motion for summary judgment, holding Red Top's cause of
action against Arkansas National was statutorily barred by the
three-year limitations, since Red Top's action accrued on
August 11, 1970 -- the date Arkansas National negligently failed to
obtain Red Top's vehicle insurance coverage.
     On appeal of the trial court's ruling, this court held the
trial court was wrong in concluding Midwest Mutual's cause of
action was barred by the statute of limitations.  In fact, the
Midwest court stated that "the limitations question on appeal
boiled down to when Red Top's cause of action accrued against its
insurance agent."  Most of the court's opinion in Midwest sets out
the cases and rationale it considered when deciding the trial court
erred in ruling Red Top's (and therefore its assignee's, Midwest
Mutual) cause of action against Arkansas National was procedurally
barred by the limitations statute.  Although it rejected the trial
court's statute of limitations ruling, the supreme court affirmed
the lower court on the second defense Arkansas National had argued
at trial -- Red Top's assignment to Midwest Mutual was invalid.
     As is readily discernable from the above, the Midwest court
had before it the trial court's ruling that Midwest Mutual's cause
of action was barred by the three-year statute of limitations
because its action commenced on the date its insurance agent
negligently failed to obtain the requested insurance coverage. 
That legal issue was before this court on appeal, and the court
addressed it, lest that trial court's erroneous ruling on the issue
be perceived as valid by that trial court and possibly other trial
courts and parties.  Because it was essential for the court in
Midwest to decide the limitations issue, that court's holding is
binding authority and controls the case now before us.      
     The remaining remarks in the majority opinion are largely
based on the erroneous assumption that the Midwest decision is
dicta and not controlling here.  For that reason alone, the
majority court's other points can be summarily discarded.  However,
I mention one matter briefly.  The majority court conceives of no
reason why professionals, such as attorneys, doctors and certified
public accountants, should be considered differently from insurance
agents when construing and applying the three-year statute of
limitations.  While much can be said and argued to counter the
majority opinion on this point, it is sufficient to say that
Midwest was decided in 1976, and the General Assembly could have
changed that case law so as to treat insurance agents under the
same limitations rationale or rule utilized in malpractice actions
against "professionals."  For two decades, the General Assembly has
been silent on this subject.  Nor, until today's decision, has this
court refused to follow Midwest.  
     For the foregoing reasons, I respectfully disagree with the
majority opinion, and would reverse this case.
     CORBIN, J., joins this dissent.