Colonia Underwriters Ins. Co. v. Richardson

Annotate this Case
COLONIA UNDERWRITERS INSURANCE COMPANY v.
Darrell RICHARDSON

96-330                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered July 8, 1996


1.   Judgment -- standard of review of a summary judgment --
     determination on appeal. -- The standard for review of a
     summary judgment is whether the evidentiary items presented by
     the moving party in support of the motion left a question of
     material fact unanswered and, if not, whether the moving party
     is entitled to judgment as a matter of law; all proof is
     viewed in the light most favorable to the party opposing the
     motion; all doubts and inferences are resolved against the
     moving party; however, where the operative facts of the case
     are undisputed, the court simply determines on appeal whether
     the appellee was entitled to summary judgment as a matter of
     law. 

2.   Insurance -- underinsured motorist coverage -- what is
     required by statute. -- Arkansas Code Annotated  23-89-
     209(a), which provides for underinsured motorist coverage,
     requires insurers to provide underinsured motorist coverage to
     the named insured unless such coverage is rejected in writing
     by the insured.  

3.   Insurance -- uninsured motorist coverage -- substituted
     coverage constitutes new insurance. -- Where parties to an
     insurance contract agree to a policy endorsement which has the
     effect of substituting coverage of one automobile for that of
     another, the transaction constitutes new insurance "delivered
     or issued for delivery in this State" within the meaning of
     the uninsured motorist statute; insurers must offer uninsured
     motorist coverage to the insured upon the event of
     substituting vehicles even though the insured previously
     rejected such coverage.

4.   Insurance -- no-fault insurance -- declaration of insurance
     issued with substituted vehicle requires a second rejection. -
     - A declaration of automobile insurance issued with a
     substituted vehicle also requires a second rejection of no-
     fault insurance under Ark. Code Ann.  23-89-203 (Repl. 1992).
     
5.   Insurance -- underinsured motorist coverage -- once named
     insured rejects coverage it need not be offered again. -- The
     underinsured motorist coverage statute, Ark. Code Ann.  23-
     89-209, makes clear that "after a named insured or applicant
     for insurance rejects underinsured motorist coverage, the
     insurer or any of its affiliates shall not be required to
     notify any insured in any renewal, reinstatement, substitute,
     amended or replacement policy as to the availability of such
     coverage"; here, appellee amended his policy to add two
     vehicles after he had rejected underinsured motorist coverage.
     
6.   Insurance -- coverage may not be implied by operation of law
     when insurer is in compliance with statute -- trial court
     mistaken. -- The trial judge mistakenly relied upon his
     conclusion that the rejection that appellee signed was not
     broad enough to include rejection of coverage for an amendment
     to the contract by the addition of another vehicle; in order
     for underinsured motorist coverage to be implied by operation
     of law, appellant must fail to comply with the underinsured
     motorist coverage statute; the trial court mistakenly
     concluded that coverage may be implied by operation of law
     even if appellant was in compliance with the statute; the
     court cannot force upon the insurance company something that
     is not present in the statute. 

7.   Insurance -- appellee rejected underinsured motorist coverage
     -- no basis existed for coverage to be implied by operation of
     law. -- The underinsured motorist coverage statute at issue
     provided that after a named insured rejects coverage, the
     insurer is not required to notify the insured in any amended
     policy as to the availability of such coverage; appellee
     rejected underinsured motorist coverage when he purchased his
     policy, and appellant was not required to notify him as to the
     availability of such coverage when his policy was amended;
     therefore, there was no basis for underinsured motorist
     coverage to be implied by operation of law; the summary
     judgment in favor of appellee was reversed; appellant's motion
     for summary judgment should have been granted.


     Appeal from Stone Circuit Court; John Dan Camp, Judge;
reversed and remanded.
     Huckabay, Munson, Rowlett & Tilley, P.A., by:  John E. Moore
and Julia L. Busfield, for appellant.
     Gregg, Hart & Farris, by:  Phillip Farris, for appellee.

     Andree Layton Roaf, Justice. 
     July 8, 1996
*ADVREP*SC8*







COLONIA UNDERWRITERS INSURANCE
COMPANY,
                    APPELLANT,

V.

DARRELL RICHARDSON,
                    APPELLEE.


96-330



APPEAL FROM THE STONE COUNTY
CIRCUIT COURT,
NO. CIV-94-38,
HON. JOHN DAN CAMP, JUDGE,



REVERSED AND REMANDED.

                   Justice Andree Layton Roaf




     This case involves an interpretation of the underinsured
motorist coverage statute.  Ark. Code Ann.  23-89-209 (Supp.
1995).  Appellee Darrell Richardson was involved in an accident
with an underinsured vehicle.  At the time of the accident,
Richardson was insured by appellant Colonia Underwriters Insurance
Company (Colonia).  Richardson filed suit against Colonia alleging
that he was entitled to underinsured motorist coverage in the
amount of $25,000.  The trial court granted summary judgment in
favor of Richardson on the basis that he was entitled to
underinsured motorist coverage by operation of law.  We reverse and
remand.
     The relevant facts in the instant case are not in dispute.  On
July 13, 1992, Richardson purchased an insurance policy for a 1982
Oldsmobile Cutlass from Colonia.  At that time, he rejected
underinsured motorist coverage by signing the following statement:
     I have had Underinsured Motorist Coverage explained to me
     and fully understand it.  I reject Underinsured Motorist
     Coverage and understand that my policy will not contain
     this coverage when issued or renewed.  However, I may
     request to add the coverage later.
Richardson was issued a policy with a term from July 13, 1992, to
July 13, 1993.  On November 13, 1992, Colonia issued two General
Change Endorsements showing that his policy had been amended to add
insurance on a 1991 Isuzu Trooper and a 1982 Datsun truck.  The
1982 Oldsmobile remained on the policy after the addition of the
two new vehicles.
     On January 13, 1993, Richardson was injured when he was struck
by a truck owned by Big "M," Inc.  The liability carrier for Big
"M" ultimately paid Richardson $105,000, the total limits of its
policy.  Richardson, however, claimed bodily injury and damages in
excess of Big "M"'s insurance coverage.  In March 1994, Richardson
made demand upon Colonia to pay the underinsured motorist coverage;
Colonia refused payment.  Richardson had never been charged nor had
he ever paid a premium for underinsured motorist coverage.
     Richardson filed the present action against Colonia on August
19, 1994; he sought the policy limit of $25,000, a 12% penalty,
interest from the date of demand, and attorney's fees.  Colonia
admitted that Richardson made demand for the payment of
underinsured motorist coverage; however, Colonia contended that
Richardson specifically rejected underinsured motorist coverage. 
     Subsequently, Colonia moved for summary judgment on the basis
that Richardson rejected underinsured motorist coverage and,
pursuant to Ark. Code Ann.  23-89-209(2), that rejection was
effective as to substitute vehicles added to his policy.  In his
response to Colonia's motion, Richardson asserted that any time a
new vehicle is insured, a new policy is issued.  Richardson
asserted that he was not offered underinsured motorist coverage
either at the time that the 1991 Isuzu Trooper was insured or at
the time that a 1985 Nissan truck was insured.  In addition,
Richardson moved for partial summary judgment on the issue of
whether underinsured motorist coverage for the 1991 Isuzu Trooper
should be implied as a matter of law.
     On July 3, 1995, the trial court entered an order granting
summary judgment in favor of Richardson.  The trial court concluded
that the instant case involved the addition of a vehicle to an
existing policy rather than the substitution of vehicles on a
policy.  The trial court further concluded that Richardson's
rejection of underinsured motorist coverage was not broad enough to
include rejection of underinsured motorist coverage for an
amendment to the policy by the addition of another vehicle.  The
trial court noted that the contract language simply rejected
coverage for the policy when issued or renewed; the language was
not broad enough to include a substituted or amended policy. 
Finally, the trial court found that because Richardson was not
given the opportunity to reject in writing underinsured motorist
coverage on the 1991 Isuzu Trooper and the 1985 Nissan truck, such
coverage was implied by operation of law.
     A jury trial was held regarding the issue of damages, and the
jury returned a verdict in favor of Richardson in the amount of
$25,000.  On December 7, 1995, judgment was entered, and Richardson
was awarded $25,000, prejudgment interest from the date of demand,
12% penalty, attorney's fees, costs, and expenses.  On appeal,
Colonia contends that the trial court erred in finding that
underinsured motorist coverage was implied as a matter of law and
in awarding prejudgment interest.
     The standard for review of a summary judgment is whether the
evidentiary items presented by the moving party in support of the
motion left a question of material fact unanswered and, if not,
whether the moving party is entitled to judgment as a matter of
law.  National Bank of Commerce v. Quirk, 323 Ark. 769, 918 S.W.2d 138 (1996).  We view all proof in the light most favorable to the
party opposing the motion, resolving all doubts and inferences
against the moving party.  Id.  However, where the operative facts
of the case are undisputed, we simply determine on appeal whether
the appellee was entitled to summary judgment as a matter of law. 
Hertlein v. St. Paul Fire and Marine Ins. Co., 323 Ark. 283, 914 S.W.2d 303 (1996).
     Richardson obtained the initial insurance policy from Colonia
in July 1992, the policy was amended in November 1992, and he was
injured in January 1993.  During that period, Ark. Code Ann.  23-
89-209(a), Underinsured motorist coverage, provided in part:
     Every insurer writing automobile liability insurance
     covering liability arising out of the ownership,
     maintenance, or use of any motor vehicles in this state
     shall provide underinsured motorist coverage unless
     rejected in writing by a named insured. . . .  After a
     named insured or applicant for insurance rejects
     underinsured motorist coverage, the insurer or any of its
     affiliates shall not be required to notify any insured in
     any renewal, reinstatement, substitute, amended or
     replacement policy as to the availability of such
     coverage.
(Emphasis supplied.)  We have recognized that this statute requires
insurers to provide underinsured motorist coverage to the named
insured unless such coverage is rejected in writing by the insured. 
Shelter Mutual Ins. Co. v. Irvin, 309 Ark. 331, 831 S.W.2d 135
(1992).  It is clear that Richardson rejected underinsured motorist
coverage on July 13, 1992.  Thus, the question presented in the
instant case is whether Colonia was required to notify Richardson
of the availability of underinsured motorist coverage when he added
vehicles to his policy in November 1992.
     We have not previously considered this issue; however, we have
addressed comparable issues regarding uninsured motorist coverage
and no-fault coverage.  In Lucky v. Equity Mutual Ins. Co., 259
Ark. 846, 537 S.W.2d 160 (1976), the appellant signed a rejection
of uninsured motorist coverage, and he was issued liability
insurance on his 1960 Ford truck by the appellee.  The appellant
continued to renew the policy; however, over five years later a
1964 Ford truck was substituted for the 1960 Ford truck in the
original policy.  We held that when the parties to an insurance
contract agree to a policy endorsement which has the effect of
substituting coverage of one automobile for that of another, the
transaction constitutes new insurance "delivered or issued for
delivery in this State" within the meaning of the uninsured
motorist statute.  See Ark. Code Ann.  23-89-403 (Supp. 1995);
American Nat'l Property & Casualty Co. v. Ellis, 315 Ark. 524, 868 S.W.2d 469 (1994).  
     We have recognized that the effect of the decision in Lucky
was to require insurers to offer uninsured motorist coverage to the
insured upon the event of substituting vehicles even though the
insured had previously rejected such coverage.  See Ellis, supra. 
At the time Lucky was decided, the uninsured motorist statute
provided in part:
     [T]he coverage required under this section shall not be
     applicable where any insured named in the policy shall
     reject the coverage.
See Ark. Stat. Ann.  66-4003 (Repl. 1966).  We noted that to
accept the construction suggested by the appellee would permit one
rejection to be effective for any and every automobile that might
be substituted by the insured for the original vehicle.  Lucky,
supra. 
     In American Nat'l Property & Casualty Co. v. Ellis, 315 Ark.
524, 868 S.W.2d 469 (1994), we addressed the effect of an amendment
to the uninsured motorist statute.  The statute was amended to
provide in part:
     [T]he coverage required under this section shall not be
     applicable where any insured named in the policy shall
     reject the coverage, and this rejection shall continue
     until withdrawn in writing by the insured.
(Emphasis supplied.) See Ark. Code Ann.  23-89-403(b) (Repl.
1992).  We held that the amendment did not change the law.  We
observed that if the General Assembly intended to, in effect,
overrule the Lucky decision, it failed to do so because it said
nothing which affected the holding of the case.  We stated that we
were certain that the General Assembly did not intend that
rejection of uninsured motorist coverage in one insurance contract
be binding in a subsequent one.
     Similarly, we have held that a declaration of automobile
insurance issued with a substituted vehicle also requires a second
rejection of no-fault insurance under Ark. Code Ann.  23-89-203
(Repl. 1992).  Fimpel v. State Auto. Mut. Ins. Co., 322 Ark. 797,
911 S.W.2d 950 (1995).  Section 23-89-203 provided for rejection of
no-fault coverage by the insured, and it provided:
          (a) The named insured shall have the right to reject
     in writing all or any one (1) or more of the coverages
     enumerated in  23-89-202.

          (b) After the rejection, unless the named insured
     requests coverage in writing, the coverage need not be
     provided in, nor supplemental to, a renewal policy.
Although uninsured motorist coverage and no-fault coverage had
different purposes, we recognized that both are mandated coverages
which must be offered to prospective insureds.  Finally, we noted
that the Lucky, supra, and Ellis, supra, cases require a rejection
of the mandatory coverage when a new declaration occurs which
includes a substituted automobile, and we could "see no reason why
that construction should not apply to a second category of
mandatory automobile insurance -- in this case, no-fault coverage -
- as well."  
     In reaching our decision in Fimpel, supra, we recognized that
the General Assembly amended Ark. Code Ann.  23-89-203(b) to
provide in part:
          (b) After a named insured or applicant for insurance
     rejects this coverage, the insurer or any of its
     affiliates shall not be required to notify any insured in
     any renewal, reinstatement, substitute, amended, or
     replacement policy as to the availability of such
     coverage.
See Act 527 of 1995.  We concluded that it would be patently unfair
to sanction a legislative clarification of a preexisting statute
when we had previously construed the effect of mandatory coverage
on substituted vehicles contrary to the purported clarification. 
This language, however, is nearly identical to the language found
in the underinsured motorist coverage statute at issue in the
instant case. 
     Further, an Arkansas federal district court and the Eighth
Circuit Court of Appeals have addressed a similar issue involving
the underinsured motorist statute.  See Warford v. State Farm Mut.
Ins. Co., 69 F.3d 860 (8th Cir. 1995); Warford v. State Farm Mut.
Ins. Co., 871 F. Supp. 1085 (W.D.Ark. 1994).  According to the
district court, Warford was involved in an automobile accident in
April 1992, and the accident was proximately caused by the
negligence of the other driver.  At the time of the accident,
Warford had automobile insurance issued by State Farm Mutual
Insurance Company (State Farm).  The limits of the tortfeasor's
liability coverage had been exhausted, and Warford made demand upon
State Farm for underinsured motorist coverage in the amount of
$50,000 contending that such coverage was implied by law in view of
State Farm's failure to make such insurance available.
     Warford had first obtained insurance in Arkansas on September
2, 1987, for a 1976 AMC Hornet.  Warford signed a form which
provided in part:  "I have been offered Underinsured Motor Vehicle
Coverage for bodily injury, with limits up to my automobile bodily
injury liability limits, and I reject the coverage entirely."  In
February 1988, the insurance on the 1976 AMC Hornet was transferred
to a 1973 Chevrolet Impala.  In August 1988, the insurance coverage
on the Impala was transferred to a 1988 Honda Accord.  It was
undisputed that Warford's Arkansas policy did not contain
underinsured motorist coverage and that he had not paid premiums
for the coverage.
     According to the district court, Warford asserted that the
substitution of coverage constituted new insurance under Arkansas
case law, and since she did not reject underinsured motorist
coverage at the time of the substitution, it was implied by
operation of law.  State Farm contended that the substitution of
the 1973 Impala and then the 1988 Honda for the 1976 Hornet
constituted either a "substitute," "replacement," or "amended
policy" within the meaning of Ark. Code Ann.  23-89-203 and
required no new rejection.
     In concluding that no underinsured motorist coverage was
implied by operation of law, the district court stated that the
language of the uninsured motorist statute construed in Lucky,
supra, and Ellis, supra, differed significantly from that contained
in the underinsured motorist statute.  The court stated that it did
not believe the holding in Lucky and Ellis extended to the
underinsured motorist statute.  Finally, the court held that the
rejection of underinsured motorist coverage obtained from Warford
in 1987 was effective and that a second or subsequent rejection was
not required when a vehicle was substituted for the original
vehicle.
     On appeal, the Eighth Circuit affirmed the decision of the
district court.  Warford v. State Farm Mut. Ins. Co., 69 F.3d 860
(8th Cir. 1995).  The court concluded that the Arkansas Supreme
Court would hold that State Farm did not have a duty to offer
Warford underinsured motorist coverage in 1988 after she rejected
coverage in writing in 1987.  The court further stated that the
1991 amendments to the statute expressly provide that a written
rejection is effective as to "any renewal, reinstatement,
substitute, amended or replacement policy," and the amendments make
clear that State Farm had no duty to offer Warford underinsured
motorist coverage after she rejected coverage in writing in 1987.
     In the instant case, the trial court relied upon Lucky v.
Equity Mutual Ins. Co., 259 Ark. 846, 537 S.W.2d 160 (1976), and
American Nat'l Property & Casualty Co. v. Ellis, 315 Ark. 524, 868 S.W.2d 469 (1994), to conclude that Richardson's existing
automobile liability insurance would not have applied to the 1991
Isuzu Trooper without insurance having been "delivered or issued in
this state."  The court found that Richardson was not given the
opportunity to reject in writing underinsured motorist coverage
when the vehicle was added and that the rejection that Richardson
signed was not broad enough to cover and include rejection of
coverage for an amendment to the contract by the addition of
another vehicle.  The trial court stated that the rejection "merely
rejects coverage for the policy when issued or renewed."  The trial
court further found that because Colonia failed to give Richardson
the opportunity to purchase, or reject in writing, underinsured
motorist coverage on the 1991 Isuzu Trooper, such coverage would be
implied by operation of law.  The trial court stated that Colonia
could not rely on the statute to expand the contractual language of
Richardson's rejection to include a substituted, amended, or
replacement policy.
     We hold, however, that the underinsured motorist coverage
statute at issue makes clear that "[a]fter a named insured or
applicant for insurance rejects underinsured motorist coverage, the
insurer or any of its affiliates shall not be required to notify
any insured in any renewal, reinstatement, substitute, amended or
replacement policy as to the availability of such coverage."  Ark.
Code Ann.  23-89-209.  In the instant case, Richardson amended his
policy to add two vehicles after he rejected underinsured motorist
coverage.  The Lucky, supra, and Ellis, supra, cases are simply not
controlling because the uninsured motorist coverage statute
contained different and much narrower language.
     In addition, the trial judge mistakenly relied upon his
conclusion that the rejection that Richardson signed was not broad
enough to include rejection of coverage for an amendment to the
contract by the addition of another vehicle.   The language in the
contract is simply not relevant.  In order for underinsured
motorist coverage to be implied by operation of law, Colonia must
fail to comply with the underinsured motorist coverage statute. 
See Shelter Mutual Ins. Co. v. Irvin, supra.  The trial court seems
to have concluded that coverage may be implied by operation of law
even if Colonia is in compliance with the statute.  The court,
however, cannot force upon the insurance company something that is
not present in the statute.  See Ross v. United Servs. Auto. Ass'n,
320 Ark. 604, 899 S.W.2d 53 (1995).
     The underinsured motorist coverage statute at issue provides
that after a named insured rejects coverage, the insurer is not
required to notify the insured in any amended policy as to the
availability of such coverage.  Richardson rejected underinsured
motorist coverage when he purchased his policy, and Colonia was not
required to notify him as to the availability of such coverage when
his policy was amended.  Therefore, there is no basis for
underinsured motorist coverage to be implied by operation of law. 
The summary judgment in favor of Richardson is reversed; Colonia's
motion for summary judgment should have been granted.
     For its second point on appeal, Colonia asserts, in the
alternative, that the trial court erred in awarding prejudgment
interest.  However, because our resolution of Colonia's first point
on appeal disposes of the case, it is not necessary to address the
second point.
     Reversed and remanded for entry of an order consistent with
this opinion.
     Dudley, J., not participating.

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