Alpha Insurance Company v. Gary Stapleton et al.

ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION

DIVISION II

ALPHA INSURANCE COMPANY

APPELLANT

V.

GARY STAPLETON, ET AL.

APPELLEES

CA 05-657

March 1, 2006

APPEAL FROM THE MILLER COUNTY CIRCUIT COURT

[NO. CV2003-36-2]

HONORABLE JAMES SCOTT HUDSON, JR.,

JUDGE

AFFIRMED

Terry Crabtree, Judge

Appellant Alpha Insurance Company brings this appeal from a judgment in favor of appellees, collectively referred to as the "Stapletons," for the breach of a settlement agreement concerning the proceeds of an automobile insurance policy. Appellant contends on appeal that the trial court erred in finding that the parties had entered into a binding contract. We find no error and affirm.

On November 25, 2001, the Stapletons were traveling on Interstate 30 near Malvern when their vehicle was struck from behind by a vehicle driven by Johnny Rush. As traffic had been at a standstill, this collision caused a chain reaction such that a total of five vehicles were involved in the accident. Mr. Rush was covered under a policy issued by appellant to Dorothy Rush that contained a liability limit of $50,000. On May 17, 2002, appellant paid $25,000 to Edward Clark, a passenger in Mr. Rush's vehicle.

On August 25, 2002, Dolly Upchurch, a claims adjuster employed by appellant, wrote Charles Walker, the Stapletons' attorney, a letter stating:

On behalf of Alpha Insurance Company, we are enclosing a copy of the status sheet reflecting policy limits under the automobile policy of Dorothy Rush.

Per our telephone conversation, an offer was made on behalf of Alpha Insurance Company to settle the claims of your clients [the Stapletons] for the policy limits of $25,000.

If this is acceptable, please advise and a settlement check will be requested. We will wait to hear from you in this regard.

On August 29, 2002, attorney Walker wrote a letter advising the Stapletons' insurance

carrier that a tentative settlement had been reached with appellant, the tortfeasor's insurance carrier, and giving notice pursuant to Ark. Code Ann. § 23-89-209 of an underinsurance claim.1 On October 10, 2002, Walker wrote Ms. Upchurch the following letter:

Pursuant to your offer to settle the above claim for $25,000, we will accept your offer if you have exhausted the policy limits under Mrs. Rush's policy except for this $25,000. I must have an affidavit from the company verifying that this is all the money that is available for these claimants.

I will be looking forward to hearing from you at your earliest convenience with a check, an affidavit and a release.

On November 8, 2002, Ms. Upchurch wrote this letter to Walker:

On behalf of Alpha Insurance Company, this acknowledges receipt of your correspondence dated October 10, 2002. Wherein, you requested an affidavit verifying that only $25,000 is all the money that is available to your clients.

In the interim, additional claims have been made under the claimant's policy. Therefore, on behalf of Alpha Insurance Company, we must withdraw the offer of $25,000.

Thereafter, on February 4, 2003, appellant filed an interpleader action depositing $25,000 into the registry of the court and naming the Stapletons as defendants in the lawsuit, in addition to the others laying claim to the remaining proceeds of the policy. The Stapletons answered the complaint and filed a counterclaim alleging that appellant had breached an agreement to settle their claims for $25,000.

On August 25, 2004, the trial court entered an order dividing the proceeds among the various defendants. The court held in abeyance the Stapleton's counterclaim, pending further hearing.

At the hearing, attorney Walker testified that he spoke on the phone with Ms. Upchurch in August 2002 and that she told him that $25,000 was all that remained under the policy. He said that she asked him if $25,000 was acceptable to him, and he said that he told her that it was. Walker further testified that he told Ms. Upchurch that he needed written evidence that the $25,000 would exhaust the limits of the policy so that he could supply that information to the Stapletons' underinsurance carrier. He also testified that he told Ms. Upchurch that the underinsurance carrier had thirty days to make a decision and that they could consummate the settlement as soon as that time had expired. Walker said that he asked Ms. Upchurch for written documentation that $25,000 was all that was available for dispersal and that Ms. Upchurch had sent him a DEC sheet. He said that the DEC sheet only showed the limits of the policy, but that it did not show how much money had been paid to resolve any other claims. Walker explained that he suggested verification in the form of an affidavit because the DEC sheet did not contain the necessary information. Walker said that he believed that he had accepted Ms. Upchurch's offer on October 10th and that he did not introduce any terms that had not already been discussed with Ms. Upchurch. Walker acknowledged that he would not have considered the Stapletons bound to accept $25,000 in settlement if the remaining proceeds had been greater than that amount.

Ms. Upchurch testified that in their phone conversation, which she believed occurred in July 2002, she had advised Walker that $25,000 was all that remained under the policy. She said that Walker told her that he had the authority to settle the claim for that amount. Upchurch stated that Walker informed her that he would need a statement from the appellant documenting the policy limits so that he could pursue an underinsurance claim on behalf of the Stapletons. According to her, that is why she sent Walker the DEC sheet with her letter of August 25. Upchurch said that she did not hear from Walker until October 10 when he wrote the letter asking for an affidavit. She said that she did not believe that there was an agreement to settle at that point. She testified that she did not provide Walker with an affidavit, but she did say that she had requested one from the appellant. Upchurch testified that the offer was withdrawn because others had made claim to the proceeds of the policy.

The trial judge found both witnesses to be credible. However, he ruled that the standard in Arkansas was an objective one such that what the parties believed or thought was not dispositive and that the issue was whether their statements and actions manifested an intent to be bound. The court found that Ms. Upchurch's letter of August 25 was an offer which was accepted by Walker in his correspondence of October 10. The court further found that it was implied that some form of written documentation would be supplied to verify that $25,000 would exhaust the policy limits, but that the request for verification was incidental and not material to the formation of the contract. An order incorporating the trial court's findings was entered, and this appeal followed.

Appellant's arguments on appeal question the trial court's ruling that the parties had entered into a legally binding settlement agreement. Appellant submits that Walker's request for an affidavit introduced a new term to the offer made by Ms. Upchurch, and thus was not an unconditional acceptance of the offer to settle for $25,000. Appellant further contends that the trial court's finding of a binding contract is at odds with its finding that both witnesses at the hearing were credible. We find no merit in these arguments.

The essential elements of a contract are: (1) competent parties; (2) subject matter; (3) legal consideration; (4) mutual agreement; and (5) mutual obligations. Williamson v. Sanofi Winthrop Pharmaceuticals, Inc., 347 Ark. 89, 60 S.W.3d 428 (2001). It is well settled that in order to make a contract there must be a meeting of the minds on all terms, using objective indicators. Ward v. Williams, 354 Ark. 168, 118 S.W.3d 513 (2003). We employ an objective test for determining mutual assent. Id. Although the phrase "meeting of the minds" is used, what is meant by that phrase is that there must be objective indicators of agreement and not subjective opinions. Id.

An acceptance must unconditionally agree to all the material provisions of the offer. MDH Builders v. Nabholz Construction Corp., 70 Ark. App. 284, 17 S.W.2d 97 (2000). While the introduction of new terms may indicate a willingness to negotiate further, such a response is a counteroffer, not an acceptance. Id. A purported acceptance of an offer that changes the terms of the offer constitutes a rejection of the offer. Heartland Community Bank v. Holt, 68 Ark. App. 30, 3 S.W.3d 694 (1999).

Although the trial court found both witnesses to be credible, the court was eminently correct to point out that the witnesses' subjective opinions had no bearing on the issue of mutual assent and that the focus of the inquiry was whether the evidence objectively indicated that an agreement had been reached. As found by the trial court, there is no question nor any doubt that $25,000 was the remaining balance of the limits of the policy. The written evidence in this case shows that appellant offered to settle the case for $25,000, the balance remaining under the policy. Walker's letter was an acceptance of the offer to settle for $25,000, the available limits of the policy. By reference to these objective indicators, we agree with the trial court that the parties formed a contract to settle for $25,000 as the remaining proceeds of the policy. We also agree with the trial court that the request for an affidavit did not introduce a new term; rather this request was made to verify what both parties knew to be true, to wit, that there was only $25,000 remaining under the policy. In this respect, the request for verification was incidental and not material to the parties' agreement.

Affirmed.

Bird and Glover, JJ., agree.

1 Arkansas Code Annotated section 23-89-109 provides:

(c) If a tentative agreement to settle the liability limits of the owner or operator of the other vehicle has been reached between the insured and such owner or operator, written notice may be given by the insured injured party to his underinsurance motorist coverage insurer by certified mail, return receipt requested. Such written notice shall include:

(1) written documentation of pecuniary losses incurred, including copies of all medical bills;

(2) Written authorization or a court order authorizing the underinsured motorist insurer to obtain medical reports from all employers and medical providers;

(3) Written confirmation from the tortfeasor's liability insurer as to the amount of the alleged tortfeasor's liability limits and the terms of the tentative settlement, which shall in no event include any component sum representing punitive or exemplary damages.