Shelter Ins. Co. v. Arnold

SHELTER INSURANCE COMPANY v. Sheila ARNOLD

CA 96-678                                          ___ S.W.2d ___

                  Court of Appeals of Arkansas
                           Division II
                Opinion delivered March 26, 1997


1.   Limitation of actions -- gist of action determines which
     statute of limitations applies -- when three-year statute of
     limitations for tort actions begins. -- The gist of the action
     as alleged determines which statute of limitations applies;
     the three-year statute of limitations for tort actions begins
     to run when the underlying tort is complete.

2.   Limitation of actions -- limitations as applied to subrogee
     insurance company -- insurance company is subject to same
     limitation as its insured. -- As a general rule, indemnity is
     not allowed absent an express or implied contract; the duty of
     the insurer to pay damages arises solely out of its contract
     with its insured and not by reason of any special relationship
     between the insurer and the uninsured motorist; the rights
     acquired by the insurer upon payment to the insured are solely
     derivative rights of subrogation; thus, the insurer stands in
     the shoes of the insured and takes no rights other than those
     which the insured had, and this is true regarding the
     applicable statute of limitations; a subrogee insurance
     company is subject to the same limitations as its insured.

3.   Insurance -- rights of subrogee -- subrogee subject to same
     rights and defenses as its predecessor in interest. -- A
     subrogee acquires no greater rights and is subject to the same
     defenses as its predecessor in interest.  

4.   Insurance -- three-year statute of limitations argument
     without merit -- appellant had ample notice of its subrogation
     claim prior to expiration of limitations period. --
     Appellant's argument that the three-year statute of
     limitations may force insurance companies to bring actions
     against tortfeasors without knowing whether their insureds
     would seek benefits or the amount of those benefits was
     without merit; here, appellant had paid the claim of its
     insured in full some four months prior to the expiration of
     the three-year statue of limitations, appellant thus had ample
     notice of its subrogation claim, and knew the exact amount of
     its claim more than four months prior to the expiration of the
     statute of limitations.

5.   Limitation of actions -- subrogee insurance company subject to
     same limitations period as its insured in actions based on
     negligence -- trial court correctly dismissed appellant's
     action. -- In actions based on negligence, a subrogee
     insurance company is subject to the same three-year statute of
     limitations period as its insured; the trial court correctly
     dismissed appellant's action as a matter of law.


     Appeal from Pulaski Circuit Court; John Ward, Judge; affirmed.
     Matthews, Sanders, & Sayes, by: Margaret M. Newton and Roy
Gene Sanders, for appellant.
     Bailey Law Firm, by:  Rita F. Bailey, for appellee.

     Andree Layton Roaf, Judge. 
     Shelter Insurance Company (Shelter) settled a claim with its
insured pursuant to uninsured motorist coverage, and filed an
action to recover from the alleged negligent driver more than three
years after the date of the accident.  On appeal, Shelter argues
that the trial court erred in granting a motion to dismiss based on
the three-year tort statute of limitations.  We affirm.
     Shelter provided an automobile insurance policy to Deborah
Day.  The policy included medical payments and uninsured motorist
coverage.  On September 18, 1992, Ms. Day was involved in a car
accident with the appellee, Sheila Arnold, who was uninsured. 
Beginning on May 17, 1993, Shelter paid medical benefits to Ms.
Day, pursuant to the uninsured motorist provision in her policy,
and paid a final settlement to her on May 15, 1995.
     On October 6, 1995, Shelter, as Ms. Day's subrogee, filed a
complaint against Ms. Arnold alleging that her negligence caused
the accident and resulting injuries to Ms. Day.  Ms. Arnold filed
an answer denying liability and asserting as an affirmative defense
that the action was time barred by the statute of limitations.  Ms.
Arnold also filed a motion to dismiss that invoked the same
affirmative defense.  In a brief filed in response to the motion to
dismiss, Shelter argued that its cause of action against Ms. Arnold
had not accrued until it paid Ms. Dayþs medical expenses, and
attached copies of the drafts it paid to Ms. Day as exhibits.  The
trial court granted the motion to dismiss, finding that the three-
year statute of limitations had run. 
     Shelterþs sole point on appeal is that the trial court erred
in granting Ms. Arnoldþs motion to dismiss based upon the statute
of limitations; however, its argument is twofold.  Shelter asserts
both procedural error and errors in the application of substantive
law.  We will address each in turn.  
     First, Shelter asserts that the trial court erred in granting
the motion to dismiss pursuant to Ark. R. Civ. P. 12(b), because
matters outside the pleadings in the form of the exhibits it
attached to its response to the motion to dismiss were presented to
and not excluded by the trial court.  Shelter contends that,
consequently, the motion to dismiss should be treated as one for
summary judgment, pursuant to Ark. R. Civ. P. 56, and that this
court must view the evidence in the light most favorable to the one
against whom summary judgment was granted.  See, e.g., Pastchol v.
St. Paul Fire & Marine Ins. Co., 326 Ark. 140, 929 S.W.2d 713
(1996).
     In response, Ms. Arnold asserts that she properly raised the
statute of limitations as an affirmative defense in both her answer
and in a separate motion to dismiss.  She argues that Shelter
should not be allowed to change the nature of her motion or request
for relief by simply attaching exhibits to its response.
     Although we agree that it is improper for the trial court to
look beyond the complaint to decide a motion to dismiss, see, e.g.,
University Hosp. v. Undernehr, 307 Ark. 445, 821 S.W.2d 27 (1991), 
it is not clear that the trial court considered Shelterþs exhibits
in granting the motion to dismiss.  Nonetheless, because the
procedural dispute will not alter the disposition, we treat the
motion as one for summary judgment.  See Ark. R. Civ. P. 12(b) and
(c); Rogers v. Tudor Ins. Co., 325 Ark. 226, 925 S.W.2d 395 (1996). 
Summary judgment should only be granted when there are no genuine
issues of material fact, and when the case can be decided as a
matter of law.  Smothers v. Clouette, 326 Ark. 1017, 934 S.W.2d 923 
(1996).  
     Turning to the second part of its argument, wherein error in
the application of substantive law is alleged, Shelter contends
that the trial court erred in granting judgment as a matter of law,
because the law in Arkansas is unsettled regarding when the statute
of limitations begins to run for an action brought by a subrogee.
     Shelter asserted in its response to the motion to dismiss and
in arguments to the trial court that its action was not based on
tort, but was a subrogation or þcontribution indemnityþ case. 
Shelter contends that because Ms. Day had up to five years to sue
Shelter for uninsured motorist coverage, the three-year statute of
limitations did not apply, or did not begin to run until it paid
Ms. Dayþs medical expenses.
     Shelter further argues that if a three-year statute of
limitations is applicable when an insurance company becomes the
real party in interest as subrogee, the three-year statute of
limitations begins to run from either the initial or the final
payment of benefits to its insured.  This argument is unpersuasive. 
Furthermore, Shelterþs reliance upon Courtney v. First National
Bank, 300 Ark. 498, 780 S.W.2d 536 (1989), as authority for the
general proposition that the statute only begins to run when there
is a þcomplete and present cause of actionþ is likewise clearly
misplaced.
     It is well settled that the gist of the action as alleged
determines which statute of limitations applies, Ernest F. Loewer,
Jr. Farms, Inc. v. National Bank, 316 Ark. 54, 870 S.W.2d 726
(1994), and that the three-year statute of limitations for tort
actions begins to run when the underlying tort is complete. 
Faulkner v. Huie, 205 Ark. 332, 168 S.W.2d 839 (1943).  Moreover,
we agree with Ms. Arnold that Williams v. Globe Indemnity Co., 507 F.2d 837 (8th Cir. 1974), a diversity case interpreting Arkansas
law, is persuasive authority for the proposition that a subrogee
insurance company is subject to the same limitations as its
insured.  Globe, like Shelter, contended that its cause of action
did not accrue until it made payment to its insured.  The court of
appeals, in rejecting this argument and holding that Globe had no
separate right to indemnification, stated:
     Appellant argues that the insurer acquires the right of
     indemnification against Appellee when actual payment is
     made to its insured, thereby implying that an insurer has
     some type of implied contract or liability imposed by law
     vis-a-vis the uninsured motorist . . . .

     . . .

          As a general rule, indemnity is not allowed absent
     an express or implied contract.  There are, however,
     certain exceptions as between joint tort-feasors, one of
     whom was liable only because of his relationship to the
     other joint tort-feasor, or because of a specific statute
     where the right is imposed.  None of these exceptions are
     applicable to this case. . . .
          The duty of the insurer to pay damages arises solely
     out of its contract with its insured and not by reason of
     any special relationship between the insurer and the
     uninsured motorist.  The rights acquired by the insurer
     upon payment to the insured are solely derivative rights
     of subrogation. . . .
          Thus, the insurer stands in the shoes of the insured
     
     and takes no rights other than those which the insured
     had, and this is true regarding the applicable statute of
     limitations.

Id. at 840 (citing American States Ins. Co. v. Williams, 278 N.E.2d 295, 299-300 (Ind. App. 1972).
     Globe mirrors the decision of every jurisdiction that has
addressed this issue, except for those states that have specific
statutory provisions giving insurance companies the expanded
limitations period sought by Shelter in this case.  See Jane Massey
Draper, Annotation, When Does Statute of Limitations Begin to Run
Upon an Action by Subrogated Insurer Against Third-Party
Tortfeasor, 91 A.L.R. 3d 844, 850-55 (1979).  The holding in Globe
is further based on the well-settled rule that a subrogee acquires
no greater rights and is subject to the same defenses as its
predecessor in interest.  See, e.g., Midwest Mut. Ins. Co. v.
Arkansas Natþl Co., 260 Ark. 352, 538 S.W.2d 574 (1976).
     Moreover, Shelterþs policy arguments that this court should
judicially legislate a five-year limitation period for subrogation
claims to equal the length of its potential exposure to claims by
its insureds is not persuasive, and completely ignores Shelterþs
ability to contractually protect itself from untimely claims made
by its insureds.
     Finally, Shelterþs argument that the three-year statute of
limitations may force insurance companies to bring actions against
tortfeasors without knowing whether their insureds would seek
benefits or the amount of those benefits certainly does not apply
to the facts of this case.  Here, Shelter began paying Ms. Dayþs
claim in 1993, and paid the last dollar to her on May 15, 1995. 
The three-year limitations period did not run until September 18,
1995.  Shelter thus had ample notice of its subrogation claim, and
knew the exact amount of its claim more than four months prior to
the expiration of the statute of limitations.
     For the foregoing reasons, we hold that in actions based on
negligence, a subrogee insurance company is subject to the same
three-year statute of limitations period as its insured, and that
the trial court correctly dismissed Shelterþs action as a matter of
law.
     Affirmed.
     Robbins, C.J., and Griffen, J., agree.