National Standard Ins. Co. v. Westbrooks

NATIONAL STANDARD INSURANCE COMPANY v. 
Aubrey WESTBROOKS

97-333                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered February 19, 1998


1.   Statutes -- construction -- rules of. -- The first rule in
     interpreting a statute is to construe it just as it reads by
     giving words their ordinary and usually accepted meaning; in
     interpreting a statute and attempting to construe legislative
     intent, the supreme court looks to the language of the
     statute, the subject matter, the object to be accomplished,
     the purpose to be served, the remedy provided, legislative
     history, and other appropriate matters that throw light on the
     matter.

2.   Insurance -- damages and attorneys' fees on loss claims -- governing
     statute strictly construed. -- Being penal in nature, the statute
     governing damages and attorneys' fees on loss claims, Ark.
     Code Ann.  23-79-208(d) (Repl. 1992), is strictly construed;
     the purpose of  23-79-208 is to punish the unwarranted
     delaying tactics of insurance companies.

3.   Insurance -- damages and attorneys' fees on loss claims -- statutory
     requirement -- twenty percent of amount sued for. -- The plain wording
     of Ark. Code Ann.  23-79-208 (d) provides that attorneys'
     fees and the twelve-percent penalty are authorized only if the
     insured's recovery is within twenty percent of the amount
     demanded or sought in the suit; the supreme court has
     previously interpreted the language "amount demanded or which
     is sought in the suit" as "the amount sued for." 

4.   Insurance -- damages and attorneys' fees on loss claims -- appellee fell
     short of recovering within twenty percent of amount demanded. -- Where
     appellee demanded the sum of $78,908.89 in his complaint and
     would thus have had to recover $63,527.11 or greater to come
     within the statutory twenty-percent requirement, and where the
     jury's verdict was $62,750, appellee fell short of recovering
     within twenty percent of the amount he demanded.

5.   Insurance -- damages and attorneys' fees on loss claims -- appellee failed
     to amend complaint to reflect true amount due him. -- Appellee could
     have made a new and lesser demand by amendment after he filed
     his suit to reflect the true amount he claimed was due him,
     but he did not do so.

6.   Appeal & error -- lack of record of in-chambers hearing precluded review
     of stipulation issue. -- Where appellee did not request that the
     trial court rule on his "Statement of the Evidence" concerning
     certain in-chambers stipulations, as required by Ark. R. App.
     P. 6--Civil, there was no record of the in-chambers hearing,
     and the supreme court could not determine whether any hearing
     or stipulation took place.

7.   Insurance -- order assessing penalty and attorneys' fees reversed and
     remanded. -- The supreme court reversed the order of the trial
     court assessing a penalty and attorneys' fees against
     appellant under Ark. Code Ann.  23-70-208, and the cause was
     remanded for an appropriate order to be entered.


     Appeal from Crawford Circuit Court; Don R. Langston, Judge;
reversed and remanded.
     Everett & Mars, by: David D. Stills, for appellant.
     Fred Caddell, for appellee.

     W.H. "Dub" Arnold, Chief Justice.
     Appellant National Standard Insurance Company appeals an order
of the Crawford County Circuit Court assessing attorneysþ fees and
a twelve-percent penalty for its failure to pay loss claims upon
demand where the amount appellee Aubrey Westbrooks recovered at
trial was not within twenty percent of the amount he demanded or
sought in his suit as required by Ark Code Ann.  23-27-208(d)
(Repl. 1992).  We agree that the trial court erred in assessing
statutory penalties and attorneysþ fees, and we reverse and remand.
     Appelleeþs Crawford County home was destroyed by fire on July
2, 1995.  Appellant had issued a homeownersþ policy to appellee
that covered loss by fire in the amounts of $77,900.00 on the
dwelling and $3,500.00 for the contents.  On November 6, 1995,
appellee signed and forwarded to appellant a document entitled,
þSworn Statement in Proof of Loss,þ wherein he claimed that the
dwelling was a total fire loss and that the amount due him under
the policy was $78,908.89, representing $77,900.00 for the dwelling
and $1,508.09 for the contents, less a $500.00 deductible.  On
February 20, 1996, appellee filed a suit against appellant,
claiming that while he had made a due demand for the above
benefits, appellant had refused to tender the proceeds pursuant to
the policy.  In the prayer of his complaint, appellee sought
$78,908.89, attorneysþ fees, prejudgment and postjudgment interest,
and a twelve-percent penalty.  In its answer, appellant admitted
that appelleeþs house was damaged by fire, but denied that the
dwelling and personal property were a total loss.
     The case was tried to a jury on September 19 and 20, 1996. 
Appelleeþs þSworn Statement in Proof of Lossþ was presented to the
jury as the partiesþ Joint Exhibit No. 2, reflecting the amount
claimed under the policy as $78,908.89.   Before the case was
submitted to the jury, the parties stated at a bench conference
that, if the jury determined that appelleeþs home was a total loss,
they would stipulate as to the amount to which the appellee would
be entitled.
     The case was presented to the jury by way of three
interrogatories.  In answering the first interrogatory, the jury
found that appelleeþs home was not a total loss.  Answering the
second and third interrogatories, the jury determined that the
actual cash value of appelleeþs dwelling and its contents was
$62,000.00 and $750.00, respectively.  Thereafter, the trial court
entered its judgment against appellant awarding appellee
$62,750.00, representing the amount of the juryþs verdict.  In
addition to this amount and over appellantþs objection, the trial
court also awarded appellee a twelve-percent penalty in the amount
of $7,530.00, attorneysþ fees in the amount of $7,500.00,
prejudgment interest, and costs.
     The statute in question, Ark Code Ann  23-79-208 (Repl.
1992), governs the damages and attorneysþ fees available on loss
claims.  The pertinent subsection of the statute, as amended by Act
349 of 1991, provides as follows:
     (d) Recovery of less than the amount demanded by the person
     entitled to recover under policy shall not defeat the right to
     the twelve percent (12%) damages and attorneysþ fees provided
     for in this section if the amount recovered for the loss is
     within twenty percent (20%) of the amount demanded or which is
     sought in the suit. (Emphasis added.)

Prior to the 1991 amendment, in order to be entitled to the penalty
and attorneysþ fees, the insured must have recovered the full
amount that was demanded or sought in the suit.  See Millerþs
Mutual Ins. Co. v. Keith Smith Co., 284 Ark. 124, 680 S.W.2d
(1984).
     In its order awarding appellee attorneysþ fees and a twelve-
percent penalty, the trial court found that the juryþs verdict was
within eighty percent of the amount appellee demanded at trial.  On
appeal, appellant maintains that appellee was required to recover
within twenty percent of the amount demanded or sought in the suit
in order to recover the statutory penalty under  23-79-208.
     We have often stated our rules of statutory construction and
interpretation.  They include the following guidelines:
          The first rule in interpreting a statute is to construe
     it just as it reads by giving words their ordinary and usually
     accepted meaning.  Arkansas Vinegar Co. v. Ashby, 294 Ark.
     412, 743 S.W.2d 789 (1988). . . .In interpreting a statute and
     attempting to construe legislative intent, we look to the
     language of the statute, the subject matter, the object to be
     accomplished, the purpose to be served, the remedy provided,
     legislative history, and other appropriate matters that throw
     light on the matter.  Hanford Produce Co. v. Clemons, 242 Ark.
     240, 412 S.W.2d 828 (1967).

Board of Trustees v. Stodola, 328 Ark. 194, 199-200, 942 S.W.2d 255 (1997), quoting City of Ft. Smith v. Tate, 311 Ark. 405, 409-
410, 844 S.W.2d 356 (1993).  Particularly, we have held that  23-
79-208(d), being penal in nature, is strictly construed.  Farm Mut.
Auto Ins. Co. v. Thomas, 316 Ark. 345, 871 S.W.2d 571 (1994).  The
purpose of  23-79-208 we have said, is to punish the unwarranted
delaying tactics of insurance companies.  Farm Bureau Mut. Ins. Co.
v. David, 324 Ark. 387, 921 S.W.2d 930 (1996).
     The statute at issue is straightforward.  The plain wording of
 23-79-208 (d) provides that attorneysþ fees and the twelve-
percent penalty are authorized only if the insuredþs recovery is
within twenty percent of the amount demanded or sought in the suit. 
This court has previously interpreted the language þamount demanded
or which is sought in the suitþ as þthe amount sued for.þ Mutual
Relief Assn. v. Poindexter, 178 Ark. 205, 10 S.W.2d 17 (1928).  The
policy behind denying the penalty and attorneysþ fees where the
insured makes a demand for more than he is entitled to recover has
been explained as follows:
     It could never have been the purpose of the legislature to
     make the insurance company pay a penalty and attorneysþ fees
     for contesting a claim that they did not owe.  Such an act
     would be unconstitutional.  The companies have the right to
     resist the payment of a demand that they do not owe.  When the
     plaintiff demands an excessive amount he is in the wrong.  The
     penalty and attorneysþ fees is for the benefit of the one who
     is only seeking to recover, after demand, what is due him
     under the terms of his contract, and who is compelled to
     resort to the courts to obtain it.

Pacific Mut. Life Ins. Co. v. Carter, 92 Ark. 378, 388, 123 S.W. 384 (1909).  In passing Act 349 of 1991, our legislature plainly
stated that, to recover the twelve-percent penalty and attorneysþ
fees, an insured must recover within twenty percent of the amount
he demands or seeks in the suit.  In this case, appellee demanded
the sum of $78,908.89 in his complaint.  Thus he would have had to
recover $63,527.11 or greater to come within the twenty percent. 
As the juryþs verdict was $62,750.00, the appellee fell short of
recovering within twenty percent of the amount he demanded.
     In response, appellee submits two theories as to why the trial
courtþs award of attorneysþ fees and the twelve-percent penalty was
proper.  First, appellee, who rented the home in question, claims
that, at the time he filed suit, appellant had paid loss of rents
pursuant to policy provisions in the amount of $5,193.36 in rental
income.  After appellee filed his complaint, appellant paid the
remaining balance of $2,596.64, totaling $7,790.00, or ten percent
of the dwelling coverage as provided in the policy.
     According to appellee, the case was somewhat unusual in its
presentation to the jury, referring to a bench discussion prior to
the case being submitted to the jury, at which the parties stated
that, if the jury determined that appelleeþs home was a total loss,
they would stipulate as to the amount to which appellee would be
entitled.  Appellee claims that there was no dispute that, at
trial, the maximum amount available to him in dwelling coverage was
$70,110.00, representing the amount initially demanded in his
complaint less rental payments received.  Adding the amount
demanded in contents damage, $1,508.89, appellee claims that the
þreal numberþ demanded was $71,618.89. Thus, appellee claims that
the juryþs verdict of $62,750.00 was a recovery within twenty
percent of the $71,618.89 figure.  Alternatively, appellee claims
that he recovered both the $62,740.00 juryþs verdict and $2,596.64
in rental payments he recovered after suit was filed, totaling
$65,346.64, or an eighty-three-percent recovery of the $78,908.89
demanded in his complaint.
     The problem with both of appelleeþs theories is that he never
amended his complaint to reflect the true amount he claimed was due
him.  Not only did he fail to amend his complaint, he submitted to
the jury the amount he demanded in his initial complaint þ-
$79,908.89 -þ by way of his þSworn Statement in Proof of Loss.þ 
While appellee could have made a new and lesser demand by amendment
after he filed his suit, see R. J. þBobþ Jones Excavating Contr.,
Inc. v. Firemenþs Ins. Co., 324 Ark. 282, 920 S.W.2d 483 (1996),
he did not do so.  See also Ark. R. Civ. P. 15 (allowing for the
liberal amendment to pleadings when no prejudice to the parties
would result).  Significantly, there was no evidence before the
jury that would allow it to consider that the rental payments had
been made.  Appellee contended that his dwelling was a total loss,
but the jury disagreed, returning a verdict that was outside the
twenty percent of the amount appellee demanded in the proof he
presented.
     Following the trial, appellee filed a þStatement of the
Evidence,þ purportedly under Rule 6(d) of the Arkansas Rules of
Appellate Procedure-þCivil, whereby he stated that, in off-the-
record discussions with the trial court, the parties stipulated
that the maximum amount in damages available to appellee under the
dwelling coverage was $70,110.00 in the event the jury determined
that the dwelling was a total loss.  According to appellee, both
parties acknowledged þthe amount demandedþ by him if þhe were
completely successful on the damage to the real property was in the
amount of $70,100.00.  Appellee did not request that the trial
court rule on his þStatement of the Evidence,þ as required by Rule
6.  Thus, as there is no record of the in-chambers hearing, we
cannot determine whether any hearing or stipulation took place. 
See, e.g., Houston v. Knoedl, 329 Ark. 91, 947 S.W.2d 745 (1997).
     Based on the foregoing, the order of the trial court assessing
a penalty and attorneysþ fees under  23-70-208 against appellant
is reversed, and this cause is remanded for an appropriate order to
be entered.