Parker v. Southern Farm Bureau Casualty Insurance Co./Dissent Stubblefield
MICHAEL E. STUBBLEFIELD, Special Justice, dissenting. I would affirm the trial court's ruling on the issues of insurance coverage, the statutory twelve percent penalty, and attorney's fees. But because I think the discovery in this case was unduly restricted by the trial court's protective order, I would reverse and remand on the bad faith and discovery issues. Summary judgment is an extreme remedy which should only be granted when there is no factual dispute. When considering a motion for summary judgment, the court views the facts in the light most favorable to the party against whom judgment is sought, and when reasonable minds might differ as to conclusions to be drawn from the facts disclosed, a summary judgment is not proper. Culpepper v. Smith, 302 Ark. 558, 792 S.W.2d 293 (1990). I think the facts in this case show that reasonable minds might differ as to conclusions to be drawn from the insurance company's handling and denial of the plaintiff's claim.
Unlike the majority, I am convinced that denial of a claim may be evidence of bad faith where, as here, the insurance company acknowledges that statutory law and its own policy require a ten-day notice of cancellation. As noted in Justice Glaze's concurring opinion, the defendant insurance company in the instant case relied on the ruling in Farmers Ins. Co. v. Hall, 263 Ark. 734, 567 S.W.2d 296 (1978) for the proposition that it was not required to give the ten-day notice. But that stance was based on a plain misapplication of Hall to the facts of the instant case, and was inconsistent with the company's admission in discovery that their policy language and the applicable statute, Ark. Code Ann. § 23-89-304(a)(2), required a ten-day notice of cancellation to the insured. Farm Bureau's agents also admitted that no such notice was sent to the insured in this case. So the company's alleged good-faith denial of coverage was based on a disingenuous argument which, I contend, is tangible evidence of bad faith.
And I believe that the trial court abused its discretion in denying the plaintiff the requested discovery of Farm Bureau's cancellation notices sent to twenty other policyholders. The insured argued in the trial court that he should be allowed to make discovery of twenty cancellation notices sent to other insureds of the company who were similarly situated, but he was denied access by the trial court's ruling that the requested discovery was irrelevant and, in any case, would violate the privacy of other policyholders. The insured's effort to produce evidence of bad faith was thereby effectively foreclosed. The majority opinion condones that ruling as fair application of discovery rules and caselaw, but I agree with Justice Brown's cogent analysis of the discovery issue in his dissent. Especially telling is his point that "[t]he essence of litigation is proof – not representations by an adversary of what should have been done." If we accept the proposition that an insurance company's disparate treatment of a policyholder in denying coverage may be shown to be oppressive or dishonest conduct rising to the level of bad faith, then a policyholder who has reason to suspect that he may have been treated disparately from other policyholders should be allowed reasonable access to defense documents which may show that his suspicions are accurate (or inaccurate). Even if characterized as a "fishing expedition" (with which characterization I disagree), discovery of twenty notices would not have been burdensome or oppressive for the insurance company. And if the insurance company's defense was genuine and there was, in fact, no disparate or unfair treatment of the plaintiff, then the company's good faith would have been established without doubt. As the trial court left it, the plaintiff was summarily overruled and outpowered.
Farm Bureau issued a six-month policy to the insured which was, according to the declaration page of the policy, to be effective through December 9, 1993. But the company took the position (and staunchly maintained it throughout this action and through oral argument on appeal), that the policy had lapsed for nonpayment of premium after three months. Insurance contracts are adhesion contracts in the truest sense of the word. 2 COUCH ON INSURANCE 3D § 22:11 (1995). The insurance company drafts the language and is in the best position to understand its meaning. Therefore, this court has long followed the majority rule that the intent to exclude coverage in insurance contracts should be expressed in clear and unambiguous language, and that such provisions are strictly construed against the insurance company and liberally construed in favor of the insured. Nationwide Mut. Ins. Co. v. Worthey, 314 Ark. 185, 861 S.W.2d 307 (1993). Insurers and their legal counsel know this well. The trial court in this case found in the insured's favor on the coverage question on grounds that Farm Bureau failed to comply with the ten-day notice requirement. The company has not appealed that ruling. Yet the company insisted throughout this litigation that it was genuinely defending its denial of coverage on the belief that it had fully complied with the ten-day notice required by policy language and Ark. Code Ann. § 23-89-304(a)(2). That argument is clearly untenable. Did it amount to bad faith? Was it dishonest, malicious, or oppressive under the analysis of Aetna Cas. & Surety Co. v. Broadway Arms Corp., 281 Ark. 128, 664 S.W.2d 463 (1984) and its progeny?
This court has stated that the tort of first-party bad faith requires a showing of dishonest, malicious, or oppressive conduct by the insurer in an effort to avoid contractual liability. Aetna Cas. & Surety Co. v. Broadway Arms Corp., supra; see also RJ "Bob" Jones Excavating Contractor, Inc. v. Firemen's Ins. Co., 324 Ark. 282, 920 S.W.2d 483 (1996); Employers Equitable Life Ins. Co. v. Williams, 282 Ark. 29, 665 S.W.2d 873 (1984). While the evidence in this case may have been insufficiently developed to prove absolutely the presence of bad faith, I posit that the denial of coverage notwithstanding the plain language of the policy is prima facie evidence of bad faith sufficient to avoid summary judgment. Farm Bureau denied coverage for a lengthy period of several months, at least enough time to force the insured to seek legal aid with his claim. His lawyer's detailed billing record shows that considerable effort was expended to resolve the dispute over a minor claim, all of which was resisted by the insurer. And while the suit itself may have somehow encouraged the insurer to dig in its heels on the claim, that is not in itself sufficient justification for continuing to deny a claim. I do not think an insured's filing suit can be fairly characterized, as the majority has suggested, as sufficient provocation of an insurer to shield the insurer from being found guilty of engaging in bad faith. Adversarial relationships are often spawned by the passage of time and what appears on the surface to be slight resistance. It is possible, rather, that Farm Bureau's personnel, perhaps all the while smiling, consoling, and reassuring their policyholder of their personal regrets, were acting in bad faith. I disagree with the majority's apparent belief that all evidence of bad faith must have occurred before suit is filed, or that it must be patent and striking. Such a belief would encourage all insurers "merely" to delay payment of claims and deny coverage long enough to provoke their insureds to file suit for recovery, after which the insurers are effectively insulated from bad-faith claims. That would be especially true in such a case as the one at bar, where a claim of less than $2,000 would produce a very slight penalty under the 12% provisions of Ark. Code Ann. § 23-79-208. I am of the opinion that inordinate foot-dragging and delay or unreasonable denial of coverage may be strong evidence of bad faith. I would let that issue go to the jury.
Therefore, I respectfully dissent.