James Dowden v. Cornerstone National Insurance, 11 F.4th 866

Cornerstone issued an automobile liability policy to Hugh Dana Huchingson with a $25,000 per-person BI limit and a Part G duty: insureds must "promptly send [Cornerstone] copies of any notices or legal papers" and the policy states "We have no duty to provide coverage ... unless there has been full compliance"; Part H bars suit until full compliance.
On March 31, 2017 Huchingson was in an accident; Duggan sued him April 24, 2017 and he was served May 15, 2017.
Two days after service Huchingson called Cornerstone’s toll-free line; the answering-agent memo said Duggan was "suing the insured," but Huchingson never told the agent he had been served nor that he was reading from a complaint; he did not promptly send Cornerstone the summons/complaint.
State court entered default judgment June 29, 2017 and later a damages judgment for $2.6M; Cornerstone reserved rights, defended at the damages hearing, and paid the $25,000 policy limit.
Trustee (bankruptcy trustee for Huchingson) sued Cornerstone for breach of contract (duty to defend), bad faith, and negligence; district court dismissed bad-faith and negligence, and granted summary judgment to Cornerstone on breach-of-contract for failure to comply with the policy condition precedent; Eighth Circuit affirmed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Characterization of the requirement to "promptly send... copies of any notices or legal papers"	Dowden: it's part of a cooperation clause, so insurer must show failure to cooperate, lack of good reason, and prejudice	Cornerstone: it's a separate notice/condition-precedent to coverage requiring strict compliance	Held: clause is a condition precedent (notice requirement) requiring strict compliance under Arkansas law
Whether Huchingson complied with the condition	Dowden: Huchingson complied (call and later transmission) or Cornerstone failed to show lack of cooperation	Cornerstone: Huchingson did not promptly forward summons/complaint and never told agent he had been served	Held: Huchingson did not promptly send legal papers and failed strict compliance; noncompliance relieves insurer of duty to defend/indemnify
Waiver/Estoppel from agent’s statements about police report	Dowden: answering-agent’s remarks misled insured and Cornerstone waived/should be estopped from asserting noncompliance	Cornerstone: agent’s statements did not knowingly relinquish rights and did not reasonably lead insured to believe he could omit forwarding the complaint	Held: No waiver or estoppel; agent’s remark about the police report did not justify excusing the failure to forward summons/complaint

Kimbrell v. Union Standard Ins., 207 F.3d 535 (8th Cir.) (conditions precedent requiring strict compliance under Arkansas law)
Fireman’s Fund Ins. v. Care Mgmt., Inc., 361 S.W.3d 800 (Ark. 2010) (Arkansas requires strict compliance with policy conditions precedent to recovery)
Am. Railcar Indus., Inc. v. Hartford Ins. Co. of the Midwest, 847 F.3d 970 (8th Cir.) (duty to promptly forward legal papers can be a condition precedent)
Design Pros. Ins. v. Chi. Ins. Co., 454 F.3d 906 (8th Cir.) (elements and burdens for estoppel under Arkansas law)
Ramey v. State Farm Mut. Auto. Ins., 924 S.W.2d 835 (Ark. Ct. App. 1996) (insurer generally cannot waive insured’s noncompliance without knowledge of material facts)
Pine Bluff Sch. Dist. v. Ace Am. Ins., 984 F.3d 583 (8th Cir.) (policy construction and interpretation of state law reviewed de novo)
Smith v. S. Farm Bureau Cas. Ins., 114 S.W.3d 205 (Ark. 2003) (unambiguous policy language enforced as written)