Ramey v. State Farm Mut. Automobile Ins. Co.

Marla RAMEY v. STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY and Allstate Insurance
Company

CA 95-696                                          ___ S.W.2d ___

                  Court of Appeals of Arkansas
                             En Banc
                 Opinion delivered July 3, 1996


1.   Insurance -- statute used by appellant inapplicable -- Ark.
     Code Ann. 27-19-713 (f)(1)(Repl. 1994) had no applicability to
     insurance policy. -- Appellant's argument that appellee's
     coverage became absolute upon the occurrence of an accident
     under Ark. Code Ann.  27-19-713(f)(1) (Repl. 1994) was
     meritless where that statutory section was part of the Motor
     Vehicle Safety Responsibility Act, which has no applicability
     to an insurance policy where the pleadings failed to indicate
     that the policy in question had been used as proof of
     financial responsibility at the time the accident occurred.

2.   Insurance -- insured required under policy terms to notify
     insurer when sued as result of auto accident -- insurer must
     have knowledge of all material facts in order to waive
     provision. -- Where the provision in issue was one that
     required the insured to immediately inform the insurer in the
     event that the insured is sued as the result of an auto
     accident, and appellee was unaware that the suit was filed,
     appellee was not afforded any opportunity to defend on the
     merits of the case; the trial court did not err in granting
     appellee's motion for a directed verdict; the purpose of
     provisions requiring the insured to inform the insurer of
     suits filed is to afford the insurer the opportunity to defend
     on the merits of the case; as a general rule, there can be no
     waiver of an insured's noncompliance with such a provision
     where the insurer does not have knowledge of all the material
     facts.

3.   Judgment -- summary judgment improperly granted to one
     appellee -- this point reversed and remanded. -- The trial
     court erred in granting summary judgment in favor of one
     appellee insurer where, contrary to the trial court's
     conclusion based on its erroneous construction of the other
     driver's policy, there remained genuine issues of material
     fact as to whether the other driver in the accident was an
     uninsured motorist as defined in the appellant's policy with
     the appellee; consequently, this point was reversed and
     remanded for further consistent proceedings; summary judgment
     is appropriate only where there is no genuine issue as to any
     material fact and the moving party is entitled to a judgment
     as a matter of law.


     Appeal from Cross Circuit Court; Olly Neal and Harvey Yates,
Judges; affirmed in part; reversed in part; and remanded.
     Blackman Law Firm, by:  Keith Blackman, for appellant.
     Barrett & Deacon, by: Paul D. Waddell and D. P. Marshall, Jr.,
for appellee Allstate Ins. Co.
     Laser, Wilson, Bufford & Watts, P.A., by: Sam Laser and Brian
Allen Brown, for appellee State Farm Mut. Automobile Ins. Co.

     James R. Cooper, Judge. *ADVREP*CA6*
                                  EN BANC



                                        CA95-696

                                                          July 3, 1996


MARLA RAMEY                             APPEAL FROM THE CROSS COUNTY
          APPELLANT                     CIRCUIT COURT
                                        [NO. CIV92-11]

VS.                                     HON. OLLY NEAL AND
                                        HON. HARVEY YATES,
                                        CIRCUIT JUDGES

STATE FARM MUTUAL AUTOMOBILE            AFFIRMED IN PART; REVERSED
INSURANCE COMPANY AND                   IN PART; AND REMANDED.
ALLSTATE INSURANCE COMPANY              
          APPELLEES




                          James R. Cooper, Judge.


     The appellant, Marla Ramey, was injured when her automobile
collided with a vehicle driven by Ricky Wooten.  Mr. Wooten's
insurer, Allstate, contacted the appellant and negotiated a
settlement of her property damage claim, but no settlement was
reached concerning her personal injury claim.  Subsequently, the
appellant sued Mr. Wooten.  Neither the appellant nor Mr. Wooten
notified Allstate that a suit had been filed.  Mr. Wooten failed to
answer or appear, and a default judgment in the amount of $50,000
was entered for the appellant.  Allstate was subsequently contacted
but refused to pay the judgment amount because Mr. Wooten had
failed to provide it with notice that a suit had been filed.  The
appellant then requested payment under the uninsured motorist
provision of her own insurance policy with the appellee State Farm,
but State Farm refused payment on the ground that Mr. Wooten was
not an uninsured motorist by virtue of his coverage with Allstate. 
The appellant sued State Farm, alleging that Mr. Wooten was
uninsured within the meaning of her uninsured motorist policy with
State Farm.  She subsequently amended her complaint to include
Allstate as an additional defendant under the theory that the
appellant was a third-party beneficiary of Mr. Wooten's policy with
Allstate.  State Farm and Allstate filed reciprocal motions for
summary judgment.  The trial court concluded that Allstate was
liable to the appellant because it had knowledge of the appellant's
claim against its insured and, on that basis, dismissed the
complaint against State Farm.  The appellant went to trial against
Allstate and, at the conclusion of the evidence, Allstate moved for
a directed verdict on the same grounds previously rejected by the
trial court in the context of its motion for summary judgment,
i.e., that it was not liable because its insured failed to comply
with the policy provision requiring him to inform the insurer that
suit had been filed.  At this point, the trial court granted the
motion, leaving the appellant with no recovery from either insurer. 
From that decision, comes this appeal. 
     For reversal, the appellant contends that the trial court
erred in dismissing State Farm from the action; granting Allstate's
motion for a directed verdict; refusing to allow her to present
rebuttal evidence regarding her injuries; allowing the adjuster to
testify concerning the policy terms; and allowing the adjuster to
testify on the basis of documents not maintained by her.
     We first address the appellant's contention that the trial
court erred in granting Allstate's motion for a directed verdict
because we find it to be dispositive.  We find no merit in the
appellant's argument that Allstate's coverage became absolute upon
the occurrence of an accident under Ark. Code Ann.  27-19-
713(f)(1) (Repl. 1994).  That statutory section is part of the
Motor Vehicle Safety Responsibility Act, which has no applicability
to an insurance policy where, as here, the pleadings fail to
indicate that the policy in question had been used as proof of
financial responsibility at the time the accident occurred.  See
Aetna Cas. & Sur. Co. v. Simpson, 228 Ark. 157, 306 S.W.2d 117
(1957).
     Nor do we agree with the appellant's argument that the trial
court erred in granting a directed verdict in favor of Allstate
because Allstate failed to present proof concerning the reason for
Mr. Wooten's failure to give notice that a suit had been filed. 
This argument is based on Shelter Mut. Ins. Co. v. Page, 316 Ark.
623, 873 S.W.2d 534 (1994), which held that, where an insurer seeks
to avoid liability based on a breach of the policy's cooperation
clause resulting from the insured's failure to appear at trial, the
insurer must show that it exercised due diligence to locate the
insured or to find the reason for the insured's absence.  However,
the situation in Page is distinguishable from the case at bar
because the insurer in Page knew that suit had been filed and in
fact appeared at trial, whereas in the case at bar, Allstate was
not present at trial and was notified of the suit only after a
default judgment had been entered against its insured. 
Furthermore, the policy provision at issue in the case at bar was
not the "cooperation" clause at issue in Page, but was instead a
provision requiring the insured to immediately inform the insurer
in the event that the insured is sued as the result of an auto
accident.  As a general rule, there can be no waiver of an
insured's noncompliance with such a provision where the insurer
does not have knowledge of all the material facts.  See generally,
14 Couch on Insurance 2d  51:204 et seq. (Rev. ed. 1982).  In the
case at bar it is undisputed that Allstate was unaware that the
suit was filed.  The purpose of provisions requiring the insured to
inform the insurer of suits filed is to afford the insurer the
opportunity to defend on the merits of the case.  See M.F.A. Mut.
Ins. Co. v. White, 232 Ark. 28, 334 S.W.2d 686 (1960).  Allstate
was afforded no such opportunity, and we hold that the trial court
did not err in granting Allstate's motion for a directed verdict.
     Given our resolution of the foregoing issue, we conclude that
the trial court erred in granting summary judgment in favor of
State Farm.  Summary judgment is appropriate only where there is no
genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law.  Dickson v. Delhi Seed
Co., 26 Ark. App. 83, 760 S.W.2d 382 (1988).  Contrary to the trial
court's conclusion based on its erroneous construction of the
Allstate policy, there remained genuine issues of material fact as
to whether Mr. Wooten was an uninsured motorist as defined in the
State Farm policy.  Consequently, we reverse on this point and
remand for further consistent proceedings.
     Insofar as the remaining points for reversal are all
evidentiary issues relating to Allstate, they will not recur on
retrial and we need not address them.
     Affirmed in part, reversed in part, and remanded.
     Jennings, C.J., Pittman, and Robbins, JJ., agree on affirming
as to Allstate.
     Mayfield and Stroud, JJ., concur as to Allstate.
     Jennings, C.J., Pittman, Robbins, and Stroud, JJ., agree to
reverse and remand as to State Farm.
     Mayfield, J., dissents as to State Farm.