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Norma Hudson and the Hudson Revocable Trust (the Trust) appealed from a summary judgment entered in favor of Farm Bureau Mutual Insurance Company of Arkansas, Inc. (Farm Bureau). In the summary-judgment order, the trial court found as a matter of law that Farm Bureau had no duty of defense or indemnification to the appellants arising from a lawsuit filed against the Trust by Dewayne Evans, Mark White, and Billy Taylor. In Norma Hudson And Hudson Revocable Trust v. Farm Bureau Mutual Insurance Company Of Arkansas, Inc., No. CV-21-396, Court of Appeals of Arkansas, Division II (October 5, 2022) the Court of Appeal resolved the coverage dispute.
FACTS
Benjamin Hudson (Norma’s adult grandson) shot and killed two coon dogs and allegedly traumatized a third on property owned by the Trust. The dog owners sued Benjamin Hudson (Benjamin) and the Trust, raising claims for destruction of property, negligence, and tort of outrage and seeking compensatory and punitive damages. The allegations in the complaint against the Trust were that Benjamin was employed to oversee the Trust property, that he was acting in a scope of that authority, and that his outrageous conduct was ratified by the Trust.
Norma has two insurance policies with Farm Bureau. One policy is a homeowner’s policy that insures the property where the shootings occurred, and the other is a property owner’s policy. After the dog owners’ sued Norma and the Trust made a claim with Farm Bureau for coverage under the insurance policies. Farm Bureau subsequently sued seeking a declaratory judgment that it owed no duty to defend or indemnify Benjamin, Norma, or the Trust based on exclusionary language in the policies relating to bodily injury or property damage arising out of intentional acts.
The policies provided that Farm Bureau provided that there is no coverage for “bodily injury or property damage caused intentionally by you or any covered person or at the direction of you or any covered person” and that “[t]he expected or unexpected results of such acts are not covered.” (Emphasis added.)
Farm Bureau asserted that the dog owners’ complaint alleged that Benjamin was acting as an agent of the Trust when he shot the dogs. Farm Bureau argued that because the insurance policies expressly excluded liability coverage for damage arising out of an intentional act, it had no duty to defend or indemnify Norma or the Trust and that it should be granted summary judgment.
The trial court agreed and entered an order granting Farm Bureau’s summary-judgment motion. Specifically, the trial court found:
Liability insurance coverage is expressly and unambiguously excluded under both the Homeowner Policy and the Property Owners Policy for bodily injury or property damage arising out of the intentional conduct of an insured.
That it is alleged in the underlying lawsuit Benjamin C. Hudson was acting on behalf of Hudson Revocable Trust at the time of the subject incident, and it is undisputed in this matter that Benjamin C. Hudson acted intentionally in shooting the dogs in the course of the subject incident.
That, as a matter of Arkansas law, liability insurance coverage is excluded under the Homeowner Policy and Property Owners Policy from covering Dewayne Evans, Mark White, and Billy Taylor’s alleged damages in the Underlying Lawsuit and relating to the dog-shooting event.
ANALYSIS
Once the moving party has established a prima facie entitlement to summary judgment, the opposing party must meet proof with proof and demonstrate the existence of a material issue of fact. On appellate review, the appellate court must determine if summary judgment was appropriate based on whether the evidentiary items presented by the moving party in support of the motion leave a material fact unanswered. The Court of Appeal views the evidence in the light most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party. The review focuses not only on the pleadings but also on the affidavits and other documents filed by the parties.
Arkansas law regarding the construction of insurance contracts is well settled and requires the language in an insurance policy is to be construed in its plain, ordinary, and popular sense. If the language of the policy is unambiguous, the Court of Appeal will give effect to the plain language of the policy without resorting to the rules of construction.
Once it is determined that coverage exists, it then must be determined whether the exclusionary language within the policy eliminates coverage. Exclusionary endorsements must adhere to the general requirements that the insurance terms must be expressed in clear and unambiguous language. If a provision is unambiguous, and only one reasonable interpretation is possible, the court will give effect to the plain language of the policy without resorting to the rules of construction.
The appellants state that the undisputed facts show that the insured, Norma, did not shoot the dogs, nor did she direct or encourage Benjamin to shoot the dogs. The appellants state it is implicit in the trial court’s ruling that Benjamin was acting on behalf of the Trust when the unrebutted evidence – the affidavits submitted by Norma and Benjamin-proved otherwise.
The Court of Appeal disagreed and held that Farm Bureau was properly granted summary judgment. In the dog owners’ complaint against Benjamin and the Trust, they alleged that Benjamin intentionally shot the dogs while acting in a scope of authority to oversee Trust property and that his outrageous conduct was ratified by the Trust. In reviewing the actual allegations in the complaint, the insurance policies unambiguously exclude coverage for “bodily injury or property damage caused intentionally by you or any covered person or at the direction of you or any covered person.” (Emphasis added.)
The duty to defend arises when there is a possibility that the damage falls within the policy coverage. Where there is no possibility that the damage alleged in the complaint may fall within the policy coverage, there would be no duty to defend.
The Court of Appeal concluded that there is no possibility that the damage alleged in the complaint falls within the policy coverage because if Benjamin acted at the direction of the Trust, as alleged in the dog owners’ complaint, the policy exclusion for committing an intentional act would apply and defeat coverage. Conversely, if Benjamin acted unilaterally and not on behalf of the Trust, the Farm Bureau policy would not provide coverage because Benjamin was not a named insured as defined in the policies.
Therefore, the trial court’s order of summary judgment was affirmed.
ZALMA OPINION
The Trust denied causation claiming the shooter did not act for it. If he did act for the trust there was no coverage because of the intentional act. If he did not act for the trust, he was not an insured, and there is no coverage. Intentionally killing two coon dogs could never be a covered event under any liability insurance policy.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
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