Colonia Underwriters Ins. Co. v. Worthen Nat'l Bank

COLONIA UNDERWRITERS INSURANCE COMPANY v.
WORTHEN NATIONAL BANK of Arkansas

CA 95-508                                          ___ S.W.2d ___

                  Court of Appeals of Arkansas
                           Division I
                Opinion delivered April 17, 1996


1.   Judgment -- summary judgment -- when granted -- standard of
     review. -- Summary judgment should be granted only when a
     review of the pleadings, depositions, and other filings
     reveals that there is no genuine issue as to any material
     fact, and the moving party is entitled to judgment as a matter
     of law; all proof submitted must be considered in the light
     most favorable to the non-moving party, and any doubts or
     inferences must be resolved against the moving party; on
     appeal, the appellate court determines whether the evidence
     presented by the movant leaves a material question of fact
     unanswered.

2.   Appeal & error -- no genuine issues of material fact -- trial
     court erred in finding appellee entitled to judgment as matter
     of law. -- Although the appellate court determined that there
     were no genuine issues of material fact presented before the
     trial court, it also held that the trial court erred in
     finding that appellee lienholder was entitled to judgment as
     a matter of law; the matter was reversed and remanded.

3.   Judgment -- appellant's motion for summary judgment should
     have been granted. -- Where appellee lienholder failed to act
     diligently in reviewing an insurance policy and its
     endorsements, which would have revealed relevant exclusion
     agreements, and where the terms of the policy were clear,
     appellee was not entitled to recover as a matter of law
     because a plain reading of the exclusion agreement at issue
     barred recovery; appellant insurance company's motion for
     summary judgment should have been granted.


     Appeal from Pulaski Circuit Court; David Bogard, Judge;
reversed and remanded.
     Huckabay, Munson, Rowlett & Tilley, P.A., by:  John E. Moore
and Julia L. Busfield, for appellant.
     Wright, Lindsey & Jennings, by:  Harry S. Hurst, Jr., for
appellee.

     John B. Robbins, Judge.*ADVREP*CA3*DIVISION I









COLONIA UNDERWRITERS INSURANCE
COMPANY
                     APPELLANT

V.


WORTHEN NATIONAL BANK OF
ARKANSAS
                      APPELLEE



CA 95-508

                                                   APRIL 17, 1996


APPEAL FROM THE PULASKI COUNTY
CIRCUIT COURT, [94-2092]


HONORABLE DAVID BOGARD,
CIRCUIT JUDGE


REVERSED AND REMANDED



                     John B. Robbins, Judge.

     On September 29, 1993, an automobile owned by Lucille and
Henry McCane was damaged in an accident.  The vehicle was insured
by appellant Colonia Underwriters Insurance Company (Colonia). 
Appellee Worthen National Bank of Arkansas (Worthen) was the
lienholder and filed a claim for recovery as loss payee.  Colonia
responded that it had denied coverage to the McCanes and that
Worthen had no greater right to recover than the policy holders. 
Worthen then brought suit against Colonia, seeking the proceeds for
the loss pursuant to the insurance policy.  Subsequently, both
Worthen and Colonia filed motions for summary judgment on the issue
of liability.  The trial court entered partial summary judgment in
favor of Worthen on this issue, and a trial followed solely on the
issue of damages.  Worthen was ultimately awarded approximately
$7,500 in damages plus attorney's fees.  Colonia now appeals,
arguing only that the trial court erred as a matter of law in
granting Worthen's motion for summary judgment as to the liability
issue.  We agree and reverse.
     Summary judgment should be granted only when a review of the
pleadings, depositions, and other filings reveals that there is no
genuine issue as to any material fact, and the moving party is
entitled to judgment as a matter of law.  Arkansas Blue Cross and
Blue Shield v. Hicky, 50 Ark. App. 173, 900 S.W.2d 598 (1995).  All
proof submitted must be considered in the light most favorable to
the non-moving party, and any doubts or inferences must be resolved
against the moving party.  Wozniak v. Colonial Ins. Co., 46 Ark.
App. 331, 885 S.W.2d 902 (1994).  On appeal, we determine whether
the evidence presented by the movant leaves a material question of
fact unanswered.  Bellanca v. Arkansas Power and Light Co., 316
Ark. 80, 870 S.W.2d 735 (1994).
     In the case at bar, it is undisputed that on November 11,
1992, Lucille and Henry McCane executed a retail installment
contract and security agreement for the purchase of a Nissan Stanza
automobile from Mike Baker Nissan.  Mike Baker Nissan then assigned
all its rights, title, and interest in the installment contract and
vendor's lien to Worthen, representing and securing the deferred
balance of $13,053.12 plus 8 percent annual interest.  On the same
day, the McCanes obtained insurance on the vehicle from Colonia,
which policy was renewed on June 25, 1993, for one year to expire
June 25, 1994.  Worthen was named as loss payee in the insurance
policy.
     After the automobile was damaged in the September 23, 1993,
accident, the McCanes stopped making timely payments on the
installment note.  Therefore, on January 26, 1994, Worthen
repossessed the damaged vehicle and sought payment from Colonia
pursuant to Ark. Code Ann.  23-79-104 (Repl. 1992), which
provides:
       (a) No contract of insurance of property or of any
     interest in property or arising from property shall be
     enforceable as to the insurance except for the benefit of
     persons having an insurable interest in the things
     insured at the time of the effectuation of the insurance
     and at the time of the loss.
       (b) "Insurable interest" as used in this section means
     any actual, lawful, and substantial economic interest in
     the safety or preservation of the subject of the
     insurance free from loss, destruction, or pecuniary
     damage or impairment.
     Upon being notified of Worthen's claim, Colonia responded that
neither Worthen nor the McCanes were entitled to recovery due to an
exclusion under the policy.  Colonia referred to an endorsement
signed by Lucille McCane and an authorized insurance representative
on June 25, 1991.  This endorsement was captioned "EXCLUSION OF
NAMED DRIVER" and provided that there would be no insurance
coverage under the existing policy, and any subsequent or new
policy, for any claim arising out of an accident where the vehicle
was being operated by Henry McCane.  A similar endorsement later
excluded coverage where the vehicle was being driven by Lucille
McCane. The apparent reason for these endorsements was because the
couple was elderly and other family members were available who
could drive them when necessary.  Because Henry McCane was driving
the car at the time of the September 29, 1993, accident, Colonia
informed Worthen that there was no coverage because of the
exclusion in the policy.
     In its motion for partial summary judgment, Worthen
acknowledged that an exclusion agreement had been executed between
Colonia and the McCanes.  However, Worthen asserted that the
endorsement did not bar recovery because it was never made aware of
this exclusion provision.  Worthen stated that, when the policy for
the Nissan Stanza went into effect on November 11, 1992, it was not
informed of any such exclusion.  Worthen further noted that, when
the policy was renewed on June 25, 1993, Colonia provided it with
a "declarations page," which named Worthen as the loss payee but
failed to disclose any exclusion agreement regarding Henry McCane. 
It was not until after the accident that Worthen learned of the
exclusion agreement.  The trial court was persuaded by Worthen's
argument, and granted summary judgment for Worthen on the liability
issue.
     For reversal, Colonia asserts that Worthen, as loss payee, had
the same rights under the insurance policy as the named insured. 
Colonia argues that, although it never directly informed Worthen
of the exclusion provision, if Worthen had requested copies of all
of the endorsements which accompanied the policy it would have
discovered this information.  Colonia points out that an insured
has a duty to educate himself concerning matters of insurance
coverage, see Scott-Huff Ins. Agency v. Sandusky, 318 Ark. 613,
887 S.W.2d 516 (1994), and submits that this rule should be
extended to include a loss payee claiming under an insurance
policy.  Alternatively, Colonia contends that it is irrelevant that
it failed to notify Worthen of the exclusion provision, given that
the only notice required by statute arises when an insured's policy
is canceled, after which the loss payee must be notified of such
cancellation at least twenty days prior to its effect.  See Ark.
Code Ann.  23-66-206(11)(B) (1987).  Finally, Colonia argues that,
even if it had a duty to disclose the disputed information and
failed to do so, it should not be held liable to Worthen under the
policy because Worthen has not established that it was prejudiced
by the omission, given that it has not asserted that it would have
acted any differently had the information been disclosed.
     We find that there were no genuine issues of material fact
presented before the trial court, but we also find that the trial
court erred in finding that Worthen was entitled to judgment as a
matter of law.  Therefore, we reverse.
     Although Colonia did not directly inform Worthen of the
exclusion agreement pertaining to Henry McCane, we know of no law
requiring such notification.  This is particularly true in light of
the fact that the exclusion endorsement was executed on an existing
insurance policy held by the McCanes well over a year before
Worthen obtained a security interest in the Nissan Maxima on
November 11, 1992.  More importantly, it is undisputed that, when
the McCanes' insurance was renewed on June 25, 1993, Worthen
received a "declarations page" in reference to the insurance
policy.  This document listed five endorsements which were
incorporated into the policy.  At the bottom of the "declarations
page" is the following language:
     THIS DECLARATIONS PAGE WITH PERSONAL AUTO POLICY
     PROVISIONS OR POLICY JACKET AND PERSONAL AUTO POLICY
     FORM, TOGETHER WITH ENDORSEMENTS, IF ANY, ISSUED TO FORM
     A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY.
     (Emphasis Added.)
One of the endorsements was labeled "AU 101" and represented an
exclusion agreement.  Although Worthen makes much of the fact
that there were actually two exclusion agreements but only one
endorsement listed for them, it could have reviewed the policy and
all of the endorsements, which would have revealed the exclusion
agreements as to Henry McCane and Lucille McCane.  Had Worthen
acted diligently, it would have easily become aware of all of the
contents of the insurance policy, including its endorsements.  Its
failure to do so was not the fault of Colonia.  The terms of the
policy were clear, and Worthen was not entitled to recover as a
matter of law because a plain reading of the exclusion agreement at
issue barred recovery.  Colonia's motion for summary judgment
should have been granted.
     Reversed and remanded.
     Cooper and Stroud, JJ., agree.