Rogers v. Tudor Ins. Co.

Barbara ROGERS v. TUDOR INSURANCE COMPANY

96-177                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered July 1, 1996


1.   Appeal & error -- notice of appeal -- filing is jurisdictional
     -- only substantial compliance with procedural rule required.
     -- The filing of a notice of appeal is jurisdictional, but
     irregularities in the other procedural steps are merely
     grounds for such action as the appellate court deems
     appropriate; the procedural steps outlined in Ark. R. App. P.
     Rule 3(e) require only substantial compliance, provided that
     the appellee has not been prejudiced by the failure to comply
     strictly with the rule.

2.   Appeal & error -- substantial compliance with Ark. R. App. P.
     3(e) -- motion to dismiss denied. -- Where the supreme court
     discerned no intent on appellant's part to disregard Ark. R.
     App. P. 3(e); where there was no prejudice to appellee
     occasioned by appellant's failure to designate the record or
     to state that the transcript had been ordered within the
     thirty-day period; where the Designation of the Record, which
     designated the pleadings, motions, and order, was filed two
     weeks after the notice of appeal; and where the appeal was
     from an order of summary judgment and no testimony was
     involved, the supreme court held that there was substantial
     compliance with Ark. R. App. P. 3(e) and denied the motion to
     dismiss.

3.   Appeal & error -- order reviewed as one for summary judgment.
     -- Although appellee insurance company moved to dismiss the
     case under Ark. R. Civ. P. 12(b)(6), the trial court correctly
     treated the motion as one for summary judgment, having made
     its decision based in part on the language of the insurance
     policy that was attached to appellee's reply to its motion to
     dismiss; as a consequence, the supreme court reviewed the
     order as one for summary judgment even though it was styled
     "Order of Dismissal."

4.   Statutes -- construction -- ascertaining legislative intent. -
     - The basic rule of statutory interpretation, to which all
     other interpretative guides must yield, is to give effect to
     the intent of the General Assembly; in ascertaining
     legislative intent, the supreme court looks to the statutory
     language, subject matter, object to be accomplished, purpose
     to be served, remedy provided, legislative history, and other
     appropriate matters.

5.   Statutes -- direct-action statute -- elements necessary for
     application. -- Under Ark. Code Ann.  23-79-210 (Repl. 1992),
     which provides for a direct cause of action against a
     liability insurer where the insured is not subject to a tort
     suit, the following elements must exist for the statute to
     apply: (1) liability insurance must be carried by a nonprofit
     corporation; (2) a person must suffer injury or damage on
     account of negligence or wrongful conduct; and (3) the damage
     or injury must be on account of the negligence or wrongful
     conduct of "servants, agents, or employees" of the nonprofit
     corporation acting within the scope of their agency or
     employment.

6.   Statutes -- direct-action statute -- General Assembly did not
     equate "carrying" liability insurance with "covering"
     corporation -- liberal construction. -- Where there was no
     dispute concerning the fact that appellant's former employer,
     a nonprofit corporation, "carried" liability insurance on its
     officers and directors, the issue was whether the General
     Assembly equated "carrying" liability insurance with
     "covering" the corporation itself, and the supreme court
     declined to give Ark. Code Ann.  23-79-210 such a narrow
     interpretation; direct-action statutes are remedial in nature
     and are liberally construed for the benefit of injured parties
     and to effectuate the intended purposes.

7.   Statutes -- direct-action statute -- officers and directors of
     nonprofit corporation were "servants, agents, or employees"
     under statute. -- The supreme court held that the officers and
     directors of appellant's former employer fell within the broad
     category of "servants, agents, or employees" of the nonprofit
     corporation under Ark. Code Ann.  23-79-210; officers and
     directors who are also employees of the nonprofit corporation
     qualify.

8.   Corporations -- nonprofit corporation -- corporate entity can
     act only through directors and officers. -- Arkansas Code
     Annotated  4-33-801(b) (Repl. 1996) makes it clear that the
     powers of a nonprofit corporation are exercised through its
     directors; it is the officers of a nonprofit corporation who
     perform the duties fixed by the corporation's by-laws and
     prescribed by its directors; officers and directors routinely
     act as agents for a corporation; indeed, a corporate entity
     can only act through its directors and officers; in the
     present case, it was the action of the president and the
     treasurer of the nonprofit corporation that gave rise to the
     litigation.

9.   Statutes -- direct-action statute -- appellee insurance
     company subject to direct cause of action -- reversed and
     remanded. -- Where the direct-action statute did not require
     that the nonprofit corporation itself be the named insured
     under the policy, which would have been an easy matter for the
     General Assembly to have required, but only mandated that the
     coverage be carried by the nonprofit corporation, and where
     the nonprofit corporation in question carried the coverage,
     and the corporation's officers and directors were the named
     insureds, the supreme court concluded that appellee insurance
     company was subject to a direct cause of action; the matter
     was reversed and remanded.


     Appeal from Pulaski Circuit Court; David B. Bogard, Judge;
reversed and remanded.
     Karr & Hutchinson, by: W. Asa Hutchinson, for appellant.
     Wright, Lindsey & Jennings, by: Harry S. Hurst, Jr., for
appellee.

     Robert L. Brown, Justice. Associate Justice Robert L. Brown
July 1, 1996   *ADVREP*SC6*






BARBARA ROGERS,
                    APPELLANT,

V.

TUDOR INSURANCE COMPANY,
                     APPELLEE,

96-177




APPEAL FROM THE PULASKI COUNTY
CIRCUIT COURT,
NO. 95-7081,
HON. DAVID B. BOGARD, JUDGE,

MOTION TO DISMISS BY TUDOR
INSURANCE COMPANY DENIED,


REVERSED AND REMANDED.






     Two points are raised in this appeal.  The first is one of
jurisdiction and concerns whether appellant Barbara Rogers effected
her appeal in timely fashion.  We believe that she did, and we deny
the motion to dismiss by appellee Tudor Insurance Company.  The
second point is raised by Rogers and concerns alleged error by the
trial court in granting summary judgment in favor of Tudor
Insurance on the issue of whether the liability coverage carried by
Tudor Insurance permitted a direct action against that carrier.  We
conclude that the trial court did err, and we reverse the judgment
and remand the matter for trial.
     On June 29, 1995, Rogers sued Tudor Insurance as the insurance
carrier for PEOPL, Inc., a cooperative nonprofit corporation known
as Personal Empowerment of the Psychiatrically Labeled, Inc.
(PEOPL).  The suit was brought under the Direct Action statute,
which is codified at Ark. Code Ann.  23-79-210 (Repl. 1992).  The
complaint asserted that Rogers was employed by PEOPL from February
of 1994 through January 21, 1995.  She received a letter of
termination dated January 21, 1995, and signed by PEOPL's president
and treasurer.  Prior to that letter, she alleged that she had no
knowledge of any problems with her employment.  She further
asserted that the letter implied financial irregularities on her
part but did not invite her to present a response to any charges,
which was in violation of the organization's rules.
     As a result of her termination, Rogers claimed that she was
subjected to public embarrassment because the agents, directors,
and employees of PEOPL made public comments "about alleged
irregularities and financial misdealings on the part of the
Plaintiff."  According to her complaint, the stories were reported
in the Arkansas Democrat-Gazette newspaper and on television
broadcasts, and the public allegations and unfounded stories
damaged her reputation.  She sought to recover from Tudor Insurance
for the negligence of the "officers, directors and agents" of PEOPL
as well as for an intentional infliction of emotional distress. 
She further claimed a breach of her employment contract.
     On August 3, 1995, Tudor Insurance filed a motion to dismiss
under Ark. R. Civ. P. 12(b)(6) for failure to state facts upon
which relief could be granted.  In that motion, Tudor Insurance
argued that the Direct Action statute was inapplicable to the facts
as set forth in the complaint.  According to the carrier, the
statute allows direct actions against the insurer of a non-profit
entity and does not authorize direct actions against carriers which
provide coverage for officers and directors of non-profit
organizations.  Thus, because PEOPL was not insured, Tudor
Insurance maintained that a direct action could not survive.
     The trial court treated the motion as one for summary judgment
and on October 13, 1995, it entered its order of dismissal.  Rogers
then filed her notice of appeal on November 13, 1995.  Her notice
of appeal, however, did not designate the record on appeal or state
that a transcript of testimony had been ordered.  Tudor Insurance
filed a motion to dismiss the appeal in the trial court on grounds
that Rogers's notice of appeal was ineffective.  On November 27,
1995, which was two weeks after the notice of appeal was filed,
Rogers filed a "Designation of Record on Appeal."  In that filing,
she stated that no transcript was ordered because no testimony was
taken and the appeal was only based on a record which included the
pleadings, motions, and order on file with the circuit clerk.  In
an order entered on January 3, 1996, the trial court denied the
motion to dismiss for lack of jurisdiction.

                       I. Notice of Appeal
     We first address Tudor Insurance's contention that Rogers's
notice of appeal is defective for her failure to designate the
record and order a transcript as required by Ark. R. App. P. 3(e). 
As a corollary point, Tudor Insurance notes that when the
Designation of Record was filed, it was outside the 30-day period
for filing the notice of appeal and consequently was ineffective.
     Rule 3(e) of the Rules of Appellate Procedure states that a
notice of appeal:
     [S]hall designate the judgment, decree, order or part
     thereof appealed from and shall designate the contents of
     the record on appeal. The notice shall also contain a
     statement that the transcript, or specific portions
     thereof, have been ordered by the appellant.
Tudor Insurance concedes that the November 13, 1995 notice of
appeal does name the parties and the order appealed from, but the
carrier contends that the notice was fatally deficient nonetheless
because of its omissions relating to the transcript and record. 
Rogers, on the other hand, argues that there was substantial
compliance with Appellate Rule 3(e) because the record in this case
was obvious and, in any event, a Designation of Record was filed,
albeit two weeks after the notice of appeal.
     This court has held that "[t]he filing of a notice of appeal
is jurisdictional but irregularities in the other procedural steps
. . . are merely grounds for such action as this court deems
appropriate."  Brady v. Alken, Inc., 273 Ark. 147, 151, 617 S.W.2d 358, 360 (1981), quoting Davis v. Ralston Purina Co., 248 Ark. 14,
449 S.W.2d 709 (1970).  The procedural steps outlined in Appellate
Rule 3(e) require only substantial compliance, provided that the
appellee has not been prejudiced by the failure to comply strictly
with the rule.  Hudson v. Hudson, 277 Ark. 183, 641 S.W.2d 1
(1982). 
     For example, in Hudson v. Hudson, the appellant filed a timely
notice of appeal but failed to include a statement that the
transcript had been ordered.  We recognized the appellant's
responsibility in this regard and held that because this rule was
totally ignored, the appeal must be dismissed.  However, in Johnson
v. Carpenter, 290 Ark. 255, 718 S.W.2d 434 (1986), appellant's
notice of appeal did contain a statement that the transcript had
been ordered.  Nevertheless, there was a misunderstanding between
appellant's counsel and the court reporter about whether the
transcript had been requested.  Because the attorney had not
totally ignored Rule 3(e), we held that there was substantial
compliance with the rule.  Our holding in Carpenter further turned
on the absence of any prejudice to the appellee even though there
was a minor delay in ordering the transcript.
     There is, too, a line of cases where this court has examined
situations where language was omitted from the notice of appeal
about the designation of the record even though the requirements of
the rule were actually met.  This court has held that it was not
fatal to an appeal when the notice of appeal did not state that the
transcript had been ordered, but when in actuality it had been
ordered.  See Phillips v. LaValle, 293 Ark. 364, 737 S.W.2d 652
(1987); Wise v. Barron, 280 Ark. 202, 655 S.W.2d 446 (1983); see
also Johnson v. Carpenter, supra.  In these cases, we also hinged
our holding on the fact that there had been substantial compliance
with the rule.  We observed that the purpose of the rule had not
been frustrated and that the appellee had not been prejudiced by
any delay.  On the other hand, both this court and the Court of
Appeals have held that there is no substantial compliance when the
transcript is not actually ordered or when the notice of appeal
declares that the transcript has been ordered when, in fact, it has
not been.  See DeViney v. State, 299 Ark. 471, 772 S.W.2d 607
(1989); McElroy v. American Medical Int'l, Inc., 297 Ark. 527, 763 S.W.2d 89 (1989); Daffin v. Seymore, 14 Ark. App. 163, 685 S.W.2d 539 (1985); Hudson v. Hudson, supra.
     The case before us is most closely akin to Wise v. Barron,
supra, and to Phillips v. LaValle, supra, because we discern no
intent on Rogers's part to disregard Rule 3(e).  Moreover, there
was no prejudice to Tudor Insurance occasioned by the failure to
designate the record or to state that the transcript had been
ordered within the 30-day period.  The absence of prejudice, of
course, does not automatically determine the substantial-compliance
question.  But here, the Designation of the Record, which
designated the pleadings, motions, and order, was filed two weeks
after the notice of appeal.  Under these circumstances, where the
appeal was from an order of summary judgment and where no testimony
was involved, we hold that there was substantial compliance with
Ark. R. App. P. 3(e).  The motion to dismiss the appeal is denied.

                    II. Direct Action Statute
     We turn then to Rogers's sole point on appeal which is that
the trial court misconstrued the Direct Action statute, Ark. Code
Ann.  23-79-210 (Repl. 1992).  We note initially that although
Tudor Insurance moved to dismiss the case under Ark. R. Civ. P.
12(b)(6), the trial court treated the motion as one for summary
judgment.  This was correct because the court made its decision
based in part on the language of the insurance policy which was
attached to Tudor Insurance's reply to its motion to dismiss.  See
Ark. R. Civ. P. 12(b) and (c); see also Rankin v. Farmers Tractor
& Equip. Co., 319 Ark. 26, 888 S.W.2d 657 (1994); Amalgamated
Clothing & Textile Workers Int'l Union v. Earle Indus., Inc., 318
Ark. 524, 886 S.W.2d 594 (1994).  As a consequence, we review the
order as one for summary judgment though it is styled "Order of
Dismissal."
     The Direct Action statute reads in pertinent part:
          (a)(1) When liability insurance is carried by any
     cooperative nonprofit corporation, association, or
     organization, . . . and if any person, firm, or
     corporation suffers injury or damage to person or
     property on account of the negligence or wrongful conduct
     of the organization, association, municipality or
     subdivision, its servants, agents, or employees acting
     within the scope of their employment or agency, then the
     person, firm, or corporation so injured or damaged shall
     have a direct cause of action against the insurer with
     which the liability insurance is carried to the extent of
     the amounts provided for in the insurance policy as would
     ordinarily be paid under the terms of the policy.
          (2) The insurer shall be directly liable to the
     injured person, firm, or corporation for damages to the
     extent of the coverage in the liability insurance policy,
     and the plaintiff may proceed directly against the
     insurer regardless of the fact that the actual tortfeasor
     may not be sued under the laws of the state.
Ark. Code Ann.  23-79-210 (Repl. 1992).  (Emphasis added.)
     Tudor Insurance contended, and the trial court agreed, that
the Direct Action statute was inapplicable in this case because its
liability policy covers wrongful acts of the officers and directors
of PEOPL and not the wrongful acts of PEOPL itself.  Rogers
attached the Policy Declarations to her complaint to show that the
liability policy was issued to PEOPL.  However, the policy language
substantiates the fact that the officers and directors are the
named insureds under the policy and not the corporation:
     DIRECTORS AND OFFICERS LIABILITY
     The Insurer shall pay the Loss of each and every Director
     or Officer (hereinafter called the Insureds) arising from
     any claim first made against the Insureds and reported to
     the Insurer during the Policy Period by reason of any
     Wrongful Act.
     COMPANY REIMBURSEMENT
     The Insurer shall reimburse the Company for Loss arising
     from any claim first made against the Insureds and
     reported to the Insurer during the Policy Period by
     reason of any Wrongful Act but only when and to the
     extent the Company has indemnified the Insureds for such
     Loss pursuant to law, statutory or common, or pursuant to
     Charter or By-Laws of the Company.
The insurance policy goes on to define "Insureds" as "all persons
who were, now are, or shall be duly elected or appointed Directors
or Officers of the Company named in item 1 of the Declarations." 
The policy defines "Wrongful Act" as "any actual or alleged breach
of duty, neglect, error, misstatement, misleading statement or
omission by the Insureds solely in the discharge of their duties in
their capacity as Directors or Officers of the Company. . . ."  
     Our analysis then must focus on the Direct Action statute
itself.  The basic rule of statutory interpretation to which all
other interpretative guides must yield is to give effect to the
intent of the General Assembly.  Pugh v. St. Paul Fire & Marine
Ins. Co., 317 Ark. 304, 877 S.W.2d 577 (1994).  In ascertaining
legislative intent, we look to the statutory language, subject
matter, object to be accomplished, purpose to be served, remedy
provided, legislative history, and other appropriate matters. 
Omega Tube & Conduit Corp. v. Maples, 312 Ark. 489, 850 S.W.2d 317
(1993).
     Under the statute, the following elements must exist for it to
apply:
          (1) liability insurance must be carried by a
     nonprofit corporation;
          (2) a person must suffer injury or damage on account
     of negligence or wrongful conduct; and
          (3) the damage or injury must be on account of the
     negligence or wrongful conduct of "servants, agents, or
     employees" of the nonprofit corporation acting within the
     scope of their agency or employment.
In this case, there is no dispute over the fact that PEOPL
"carried" the liability insurance on its officers and directors. 
The issue is whether the General Assembly equated "carrying"
liability insurance with "covering" the corporation itself.  We
decline to give this statute such a narrow interpretation.  Direct
action statutes are remedial in nature and are liberally construed
for the benefit of injured parties and to effectuate the intended
purposes.  12A Couch on Insurance 2d  45:798, 45:800, pp. 455,
458 (1981).
     Furthermore, we have no hesitancy in holding that the officers
and directors of PEOPL fall within the broad category of "servants,
agents, or employees" of the nonprofit corporation under  23-79-
210.  Certainly, officers and directors who are also employees of
the nonprofit corporation qualify.  Our statutes further make it
clear that the powers of a nonprofit corporation are exercised
through its directors.  Ark. Code Ann.  4-33-801(b) (Repl. 1996). 
In addition, it is the officers of a nonprofit corporation who
perform the duties fixed by the corporation's by-laws and
prescribed by its directors.  See generally Ark. Code Ann.  4-27-
841 (Repl. 1996).  Officers and directors routinely act as agents
for a corporation.  See 3 Fletcher Cyc. Corp.  839, p. 211 (1994). 
Indeed, a corporate entity can only act through its directors and
officers.  See Madison Bank & Trust v. First Nat'l Bank of
Huntsville, 276 Ark. 405, 635 S.W.2d 268 (1982); see also Vogel v.
Simmons First Nat'l Bank of Pine Bluff, 15 Ark. App. 69, 689 S.W.2d 576 (1985); Hill v. State, 253 Ark. 512, 487 S.W.2d 624 (1972); see
also 2 Fletcher Cyc. Corp.  505, p. 601 (Perm. Ed.).  In the case
before us, it was the president and the treasurer of PEOPL who
terminated Rogers, which gave rise to this litigation.
     Finally, the Direct Action statute does not require that the
nonprofit corporation itself be the named insured under the policy. 
It would have been an easy matter for the General Assembly to have
required this.  But the Direct Action statute only mandates that
the coverage be carried by the nonprofit corporation.  PEOPL did
carry the coverage in this case, and the corporation's officers and
directors were the named insureds.  We conclude that under these
facts Tudor Insurance is subject to a direct cause of action.
     Motion of Tudor Insurance Company to dismiss the appeal is
denied.  Reversed and remanded.
     Dudley, J., not participating.
     Glaze and Roaf, JJ., dissent.*ADVREP*SC6-A*






BARBARA ROGERS,
                    APPELLANT,

V.

TUDOR INSURANCE COMPANY,
                    APPELLEE.



96-177

Opinion Delivered:  7-1-96







DISSENTING OPINION





                  TOM GLAZE, Associate Justice

     The majority court totally misconstrues the purpose and intent
of Arkansas's direct action statute, Ark. Code Ann.  23-79-
210(a)(1) (Repl. 1992).  That statute recognizes that a nonprofit
organization, like PEOPL here, is immune from tort liability caused
by its agents or employees; but even so, that organization may
still opt to obtain liability insurance to provide an avenue of
redress to parties sustaining injuries caused by that tort-immune
entity's agents or employees.  See Savage v. Spencer, 235 Ark. 946,
362 S.W.2d 668 (1962).  In this respect,  23-79-210(a)(1) provides
in pertinent part that a nonprofit organization, not subject to
tort liability, may carry liability insurance, so that any person
who suffers injury on account of the wrongful conduct of the
organization shall have a direct cause of action against the
insurance company.  Thus, even though the organization itself is
immune from suit, the statute authorizes the organization's insurer
to be sued directly by the injured party.
     Individual board members and officers of nonprofit
organizations, on the other hand, have never been afforded tort
immunity, and a person may sue a board member or officer
individually for his or her negligence causing the plaintiff's
injury.  Section 23-79-210(a)(1) neither expressly nor
inferentially allows the injured person the right to file a direct
action against any insurance company carrying tort liability
coverage on any board member or officer of a nonprofit entity.  See
Savage, 235 Ark. at 950, 362 S.W.2d  at 670.  
     Because board members and officers of nonprofit organizations
can be individually sued, such organizations often feel obliged to
arrange for director and officer liability and company
reimbursement policies in order to protect those officials who
agree, voluntarily usually, to serve or assist the organization. 
Here, PEOPL indisputably obtained such coverage from Tudor
Insurance Company for its board and officer members and, in doing
so, those individual members were the designated "insureds" under
the policy.  PEOPL, as an entity, was not designated or qualified
as an insured.
     In sum, under Arkansas law, a nonprofit organization is immune
from tort liability, but if it obtains insurance naming itself as
an insured to cover tort liability caused by its servants, agents
and employees, a person injured by the organization's agents or
employees may bring his or her suit directly against the
organization's insurer.  However, the direct action statute is
inapplicable to the nonprofit organization's board members and
officers who, under Arkansas law, can be sued in tort and who are
named insureds in a liability policy.  Simply put,  23-79-
210(a)(1), by its own plain language, in no way is intended to
provide direct actions against insurers that issue policies
covering insureds like board members and officers who may be found
individually liable for tort liability.  
     For the reasons above, I would affirm the trial court's
decision.
     ROAF, J., joins this dissent.