Trinity Universal Ins. v. State Farm Mutual Auto Ins.

Citations: 441 S.W.2d 95; 246 Ark. 1021; 1969 Ark. LEXIS 1342Docket: 5-4909

Court: Supreme Court of Arkansas; May 26, 1969; Arkansas; State Supreme Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

On November 22, 1964, Trinity Universal Insurance Company held a family automobile liability policy for Marguerite G. McCoy, covering damages for bodily injury arising from the use of any automobile she operated, with policy limits of $10,000 for any individual and $20,000 for any occurrence. This coverage was specified to apply as excess insurance over any other available insurance. On the same date, McCoy, driving Ralph Overstreet's car, collided with Gloria Jean King's vehicle, which had three passengers. Trinity alleged that McCoy's negligence—specifically, driving on the wrong side of the road—was a proximate cause of the accident, resulting in injuries to the passengers.

After notifying State Farm Mutual Automobile Insurance Company and Maryland Casualty Company of the accident and seeking coverage, Trinity settled the claims against McCoy for $9,729.34 when both companies denied liability. Trinity then sued State Farm and Maryland in Pulaski County Chancery Court for reimbursement of the settlement amount, including interest and costs. The appellees filed demurrers and a motion to transfer the case, which the court granted, dismissing Trinity's complaint.

Trinity appealed, questioning whether the court erred in sustaining the demurrers. In its complaint, Trinity detailed its coverage of McCoy and asserted that State Farm had a policy covering Chris Floyd that included liability for bodily injuries from non-owned automobiles used with permission by relatives, while Maryland had a policy for Overstreet covering liabilities for his vehicle. The complaint argued that McCoy was operating Overstreet's car with Floyd as a passenger, engaged in a joint venture to teach McCoy to drive, thereby implicating both appellees in the liability for the accident.

Floyd was claimed to have the authority to direct the operation of the Overstreet automobile, which was allegedly used by Marguerite McCoy and Lee Floyd with the permission of Ralph Overstreet, communicated through his son, Don Overstreet. The complaint asserts that Trinity (the appellant) notified the appellee insurance companies of the injuries sustained by the King passengers and demanded they either admit coverage or settle the claims against McCoy and Floyd’s estate. Both appellees denied coverage, leading Trinity to settle the claims in good faith, obtaining releases from the claimants. Appellees filed demurrers, asserting that Trinity's action was barred by the statute of limitations, that Trinity was a mere volunteer with no obligation to pay, that direct action against State Farm was improper under Arkansas law, and that Trinity had not exhausted remedies against Floyd's estate. The court found no merit in these grounds, determining that Trinity’s subrogation claim effectively sought contribution, with the right to contribution accruing only after Trinity's first settlement payment on May 11, 1965, thus the statute of limitations had not begun to run. The court clarified that Trinity was not a mere volunteer since it had a legitimate interest to protect. Furthermore, the question of whether McCoy was covered under the appellees' policies remained unresolved, indicating Trinity's potential primary liability if those policies did not provide coverage.

Appellant believed that appellee companies were primarily responsible for coverage in a liability claim but faced their refusal to engage in negotiations. Appellant, Trinity, contended it made a reasonable settlement given the circumstances of a collision involving its insured, Marguerite McCoy. The court emphasized that well-pleaded allegations in the complaint are accepted as true. 

Trinity is not pursuing a right of contribution but is enforcing McCoy's rights under the insurance policies after she settled with claimants using her own funds due to the insurers denying coverage. The situation illustrates that if McCoy had no insurance with Trinity, her ability to bring a direct action against the insurers would remain valid after her settlement. 

Appellees argued that the case should have been brought in Circuit Court, but the court did not rule on this motion, only sustaining the demurrers. The court noted that a failure to transfer the case to law was not a valid reason for dismissal. Previous case law supports that a party can pursue a complaint without having first sought remedies at law, and since the court's decision was based solely on the demurrers, the dismissal was deemed erroneous. Consequently, the decree was reversed, and the case was remanded for further proceedings consistent with the opinion.