United States Fire Insurance v. State Farm Fire & Casualty Co.

Citations: 246 Ark. 1269; 441 S.W.2d 787; 1969 Ark. LEXIS 1373Docket: 5-4924

Court: Supreme Court of Arkansas; June 9, 1969; Arkansas; State Supreme Court

Lead Opinion SummaryLead Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

An appeal involves three insurance companies disputing their respective liabilities under separate policies related to a personal injury case. On April 19, 1965, during water skiing on the Ouachita River, Gerald Carney was injured while being towed by a motorboat driven by Harry Parker III, with Walter Horne as the boat owner. Carney filed a lawsuit against Horne, Parker, and Eric Davis, resulting in a jury judgment of $40,000 against Parker (90% negligence) and Davis (10% negligence). Horne’s boat was insured by State Farm with a $25,000 liability limit. Parker and Davis were covered by homeowner's policies from National Investors and United States Fire, respectively, both with similar provisions limiting liability in case of other insurance. The judgment was settled with the insurance companies paying a total of $40,000: State Farm paid $25,000, United States Fire paid $4,000, and National Investors paid $11,000. Following this, the insurance companies agreed to adjust their liabilities through subsequent litigation, prompting United States Fire to sue State Farm and National Investors. The suit claims that Parker's coverage is excess to Horne's policy and seeks contribution from National Investors for 90% of the excess judgment amount, totaling $13,500.

Eric Davis's coverage was determined to be excess over the Horne Policy, with the plaintiff liable for 10% of any remaining judgment amount beyond that coverage, amounting to $1,500. The plaintiff seeks a judgment against National Investors Fire and Casualty Insurance Company for $2,500, including a 12% penalty and attorney fees, following a judgment in excess of the policies. Additionally, the plaintiff claims $3,045.87 from State Farm Fire and Casualty Company for defense and court costs incurred due to State Farm's failure to provide a defense for Davis, along with a 12% penalty and attorney fees. 

State Farm acknowledged coverage for the boat up to $25,000 but denied failure to fulfill its contractual obligations, asserting that Davis waived his right to a defense by not requesting one. National Investors counterclaimed for $3,500, arguing that both Parker and Davis were equally liable for the judgment exceeding $25,000. The trial court dismissed the plaintiff's complaint and ruled in favor of National Investors, awarding them $3,500 plus interest. 

The plaintiff, United States Fire, appealed, arguing that the Uniform Contribution Among Tort-Feasors Act applies to joint tort-feasors and that as an excess liability insurer, it deserves contribution from National Investors based on fault proportions. They also contend that they should recover defense costs from State Farm as the primary insurer.

National Investors argues that the appellant's claims overlook the core issue regarding the rights between Davis and Parker. It asserts that the claims of United States Fire cannot surpass Davis's rights against Parker, nor can National Investors' claims against United States Fire exceed Parker's rights against Davis. A key factor is the jury's determination that Parker and Davis were engaged in a joint enterprise at the time of the incident, which shapes their rights. The appellant's reliance on the contribution theory, based on relative negligence, misapplies the legal framework since this theory pertains to liability among tortfeasors rather than their rights against each other. 

Under the Contribution Among Tortfeasors Act, "joint tortfeasors" are defined as individuals liable for the same injury. The act stipulates that a joint tortfeasor can only seek contribution after discharging a common liability or paying more than their fair share. Furthermore, a joint tortfeasor who settles with an injured party cannot seek contribution from another whose liability remains. If fault among tortfeasors is disproportionate, it can influence their shares for contribution but does not absolve them of liability to the injured party. 

The appellant claims that, based on its determined 10% negligence in a $40,000 judgment, it overpaid in the remaining $15,000 liability, while National Investors asserts it has also overpaid its share of $11,000. National Investors argues that, due to the jury's joint venture finding, both Davis and Parker would be liable for half of any excess coverage. However, it fails to consider the jury's negligence allocation among the joint tortfeasors.

The appellees reference Shultz v. Young to argue against apportionment under the Contribution Act, citing a statement from the National Conference of Commissioners on Uniform State Laws regarding tortfeasor fault distribution. The statement indicates that if evidence shows disproportionate fault, the jury should determine the relative degrees of fault among tortfeasors, while courts without juries will directly make such apportionments. The Shultz case involved dual defendants in an assault on the plaintiff, where the jury was instructed they could apportion damages between the defendants. The jury awarded $2,000 against Shultz and $500 against Myrtle Liberto. On appeal, the defendants argued that damages for joint torts should not exceed the smallest verdict against any tortfeasor, supported by previous cases. However, the court upheld the judgments, referencing a 1941 act that addressed tort-feasor contribution and confirmed that the jury's verdicts were supported by sufficient testimony and permissible for apportionment. Additionally, it is noted that while contribution is typically based on equal shares among tortfeasors, some jurisdictions allow for liability distribution proportional to each defendant's comparative fault.

Prosser references Little v. Miles, which aligns with the rule allowing jury verdicts to apportion liability among joint tortfeasors, as established in Shultz v. Young. The relevant statute permits consideration of the relative fault of tortfeasors when inequitable to distribute liability equally. A distinction is made between contribution, which divides the loss proportionately, and indemnity, which transfers the entire loss from one tort-feasor to another. In this case, contribution applies, as both the appellant and appellee National Investors agreed to cover their insureds' legal obligations. The comparative negligence between the tort-feasors is relevant solely for equitable distribution of liability. It is concluded that under the jury verdict, Parker is liable for 90% of an excess amount, totaling $13,500, while Davis is liable for 10%, amounting to $1,500. The appellant, having paid more than its share, is entitled to recover $2,500 from National Investors. The trial court's dismissal of the appellant's complaint against National Investors is deemed erroneous. However, the appellant cannot seek reimbursement for defense costs from State Farm, as each party agreed to defend their insureds and State Farm had no obligation to intervene. The judgment is reversed regarding the appellant and National Investors, with a remand for consistent judgment, while affirming the judgment between the appellant and State Farm.