487 S.W.3d 402
Ark. Ct. App.2016Background
- Tim Clark was injured in a 2010 Missouri car wreck; the other driver (Carla Zender) was at fault.
- Zender carried $100,000 liability coverage; Clark settled with her and her insurer for the $100,000 and released them.
- Clark did not give his UIM insurer, Southern Farm Bureau (SFB), prior written notice of the tentative settlement.
- Clark later sought underinsured motorist (UIM) benefits from SFB; SFB sued for declaratory relief arguing the policy’s notice-of-settlement provision precluded coverage.
- The trial court granted summary judgment for SFB, finding prior notice was a condition precedent and Clark forfeited UIM coverage; Clark appealed.
- The Court of Appeals reversed and remanded, holding the policy language did not make notice a condition precedent and remanding for determination whether SFB showed prejudice from lack of notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy’s notice-of-settlement provision is a condition precedent to UIM coverage | Clark: the provision does not expressly or necessarily make notice a condition precedent | SFB: clause requires prior written notice and noncompliance forfeits coverage | Court: Not a condition precedent — policy language falls short of expressly conditioning coverage on notice |
| If not a condition precedent, whether insurer must show prejudice to deny coverage | Clark: insurer must show prejudice when notice is not a condition precedent | SFB: argued forfeiture without notice (trial court accepted) | Court: insurer must prove it was prejudiced by lack of notice to avoid liability |
| Appropriate remedy at summary judgment stage | Clark: summary judgment improper absent ruling on prejudice | SFB: summary judgment justified due to no prior notice | Court: reversed summary judgment and remanded for determination of prejudice |
| Applicability of precedent where insured recovers limits | Clark: cites Shelter Mut. v. Bough to argue insurer necessarily prejudiced when insured recovers policy limits | SFB: distinguished Bough as not involving a notice-of-settlement clause | Court: Bough distinguishable; remand to assess prejudice under this policy |
Key Cases Cited
- Fireman’s Fund Ins. Co. v. Care Mgmt., Inc., 361 S.W.3d 800 (Ark. 2010) (insurer must show prejudice when notice is not a condition precedent)
- Kimbrell v. Union Std. Ins. Co., 207 F.3d 535 (8th Cir. 2000) (language determines whether notice is a condition precedent)
- Vaughn v. Shelter Mut. Ins. Co., 382 S.W.3d 736 (Ark. Ct. App. 2011) (contrast of notice clauses that do and do not operate as condition precedent)
- Hope Spoke Co. v. Md. Cas. Co., 143 S.W. 85 (Ark. 1912) (classic rule on when notice creates a condition precedent)
- Shelter Mut. Ins. Co. v. Bough, 834 S.W.2d 637 (Ark. 1992) (distinguished: did not involve a contractual notice-of-settlement provision)