Henry v. Continental Casualty Co.

2011 Ark. 224, 381 S.W.3d 802, 2011 Ark. LEXIS 208

• Court: Supreme Court of Arkansas
• Decided: May 19, 2011
• Docket: No. 10-1255
• Status: Published

Opinions

KAREN R. BAKER, Justice.

11 This appeal from the circuit court’s dismissal of a medical-malpractice action involves whether vicarious-liability princi-pies are applicable to a negligence action against the insurer of a hospital that enjoys charitable immunity under the direct-action statute, Ark.Code Ann. § 23-79-210 (Repl.2009). Appellant Jane M. Henry, as the personal representative of the estate of her deceased husband, Ernest L. Henry, brought an action in the Washington County Circuit Court against multiple pax-ties, including Continental Casualty Company |2(“Continental”), Washington Regional Medical Center (“Washington Regional”), Irma De La Cruz, R.N., and Amber Hefner, R.N. (sometimes referred to collectively herein as “Defendants”). Among other things, the complaint broadly asserted that Washington Regional was vicariously liable for the conduct of its employees, including nurses De La Cruz and Hefner. Appellant moved to voluntarily dismiss Washington Regional, De La Cruz, and Hefner, stating that she was proceeding only against the hospital’s insurer, Continental, under the direct-action statute. Defendants also moved to dismiss, asserting that appellant failed to obtain service of process on De La Cruz and Hefner and that the statute of limitations had expired with respect to any claims against the nurses. The circuit court granted Defendants’ motion to dismiss the claims against De La Cruz and Hefner with prejudice, finding that appellant acknowledged that she failed to obtain service on the nurses prior to the expiration of the statute of limitations. Additionally, the circuit court found that because Washington Regional’s alleged negligence arose from its vicarious liability based on the actions of the dismissed nurses, all claims against Washington Regional and Continental must likewise be dismissed with prejudice. The circuit court certified the judgment pursuant to Rule 54(b) of the Arkansas Rules of Civil Procedure. After the circuit court denied appellant’s motion to reconsider, appellant timely filed a notice of appeal. We reverse and remand.

The underlying facts in this case are not in dispute. Ernest Henry suffered severe injuries in an automobile accident that occurred on October 29, 2007, in Eureka Springs, Arkansas. Mr. Henry was transported to Washington Regional where he was treated for his injuries and subsequent complications until his death on November 11, 2007. Appellant, as |sthe court-appointed personal representative and surviving spouse of Mr. Henry, filed a medical-malpractice suit on October 9, 2009, against Defendants, as well as the five treating physicians and three independent medical clinics with which the physicians were associated.

On November 17, 2009, an answer was filed on behalf of Defendants. In then-answer, Defendants admitted certain critical issues: (1) De La Cruz and Hefner were at all times relevant to this action employed by Washington Regional and were acting within the course and scope of their employment; (2) Washington Regional is a nonprofit corporation organized under the laws of the State of Arkansas, and enjoys charitable immunity; and (3) Continental was the primary liability carrier for Washington Regional at all relevant times. In their original answer, Defendants stated as follows:

[T]o the extent that Arkansas vicarious liability law is applicable to the facts of this case, these separate Defendants admit that any proved negligent actions of Washington Regional’s agents or employees, occurring within the scope of their employment and which are proved to be the proximate cause of Plaintiffs alleged injuries or damages, may be imputed to Continental, as the liability insurance carrier providing coverage for Washington Regional at the time of the events alleged in Plaintiffs Complaint and First Amended Complaint, pursuant to the direct action statute, Ark.Code Ann. § 23-79-210.

The answer preserved the nurses’ defenses under Rule 12(b) of the Arkansas Rules of Civil Procedure, including insufficiency of process and insufficiency of service of process. On May 19, 2010, Defendants moved to dismiss the complaint. Defendants alleged that because the nurses were not served within 120 days of filing the complaint,¹ the claims against the nurses | ¿must be dismissed under Ark. R. Civ. P. 4(i), and that the dismissal must be with prejudice because the two-year statute of limitations for medical-negligence actions set forth at Ark.Code Ann. § 16-114-203 had expired.

On June 3, 2010, appellant responded to the motion to dismiss by simultaneously filing a motion to dismiss her claims against Washington Regional and the nurses without prejudice and a second amended complaint. Appellant stated in her motion to dismiss that based on Defendants’ admissions that Washington Regional was immune and that the direct-action statute applied, Washington Regional and the nurses were not proper parties to the action. Appellant moved to dismiss these parties and proceed solely against Continental under the direct-action statute.

On June 16, 2010, Defendants filed an answer to the second amended complaint and a motion to dismiss. Defendants denied that Continental could be held liable for the alleged negligence of Washington Regional’s employees, including the alleged negligence of De La Cruz and Hefner, and asserted that appellant’s failure to timely serve the nurses, or any other allegedly negligent agent or employee of Washington Regional, extinguished any vicarious-liability claims against Continental. In its motion to dismiss, Defendants argued that under principles of vicarious liability, once an employee has been released or dismissed, the employer’s liability is likewise extinguished, and that because Continental stands in the shoes of the employer, no cause of action can be maintained against it.

After a July 13, 2010 hearing on both motions to dismiss, the circuit court entered an order on July 22, 2010, granting Defendants’ motion to dismiss with prejudice. The circuit | Bcourt specifically found (1) that service of process against De La Cruz and Hefner was not obtained and the statute of limitations had expired with respect to appellant’s claims against the nurses, requiring the court to dismiss the complaint with prejudice as to these nurses, and (2) that “[ujnder Arkansas law, an employer’s vicarious liability arises directly from the alleged negligence of the employee, and where the allegedly negligent employee has been released or dismissed, any vicarious liability that could be imputed to the employer is likewise eliminated,” requiring the court to dismiss appellant’s claims against Washington Regional and Continental.

In reviewing a court’s decision on a motion to dismiss, we treat the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff. Downing v. Lawrence Hall Nursing Ctr., 2010 Ark. 175, 369 S.W.3d 8. In testing the sufficiency of a complaint on a motion to dismiss, all reasonable inferences must be resolved in favor of the complaint, and all pleadings are to be liberally construed. Id. However, when a complaint is dismissed on a question of law, this court conducts a de novo review. Id.

In addition, the circuit court’s grant of Defendants’ motion to dismiss was based on its interpretation of the relationship between the direct-action statute and common-law negligence principles of vicarious liability. We review issues of statutory construction de novo. Couch v. Farmers Ins. Co., 375 Ark. 255, 289 S.W.3d 909 (2008). It is for this court to decide what a statute means, and we are not bound by the circuit court’s interpretation. Id. The basic rule of statutory construction to which all other interpretive guides must yield is |fito give effect to the intent of the General Assembly. Dachs v. Hendrix, 2009 Ark. 542, 354 S.W.3d 95. Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. Id. In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Id. We construe the statute so that no word is left void, superfluous or insignificant, and we give meaning and effect to every word in the statute, if possible. Id. In ascertaining legislative intent, we look to the statutory language, subject matter, object to be accomplished, purpose to be served, remedy provided, legislative history, and other appropriate matters. Rogers v. Tudor Ins. Co., 325 Ark. 226, 925 S.W.2d 395 (1996).

We must first examine the direct-action statute, codified at Ark.Code Ann. § 23-79-210, which states as follows:

(a)(1) When liability insurance is carried by any cooperative nonprofit corporation, association, or organization, ... or by any other organization or association of any kind or character and not subject to suit for tort, and if any person, firm, or corporation suffers injury or damage to person or property on account of the negligence or wrongful conduct of the organization, association, municipality, or subdivision, its servants, agents, or employees acting within the scope of their employment or agency, then the person, firm, or corporation so injured or damaged shall have a direct cause of action against the insurer with which the liability insurance is carried to the extent of the amounts provided for in the insurance policy as would ordinarily be paid under the terms of the policy.

(3) The insurer shall be directly liable to the injured person, firm, or corporation for damages to the extent of the coverage in the liability insurance policy, and the . plaintiff may proceed directly against the insurer regardless of the fact that the actual tortfeasor may not be sued under the laws of the state.

|7Ark.Code Ann. § 23-79-210(a). In Low v. Insurance Co. of North America, 364 Ark. 427, 220 S.W.3d 670 (2005), we opined that where a charitable organization is immune from an action in tort, its liability insurance carrier is subject to a direct action under Ark.Code Ann. § 23-79-210.² We have rejected the notion that a new cause of action has been created through our direct-action statute. See Archer v. Sisters of Mercy Health Sys., 375 Ark. 523, 294 S.W.3d 414 (2009). In Archer, the court observed that the direct-action statute is remedial in nature and refused to adopt the view that direct-action statutes create substantive rights. Id. (citing Rogers v. Tudor Ins. Co., 325 Ark. 226, 925 S.W.2d 395 (1996); and 12A Couch on Insurance 2d §§ 45:798, 45:800, at 455, 458 (1981)). In rejecting the insurer’s argument that the direct-action statute operated to create a new cause of action for injured plaintiffs, this court observed that the negligence cause of action at issue “is grounded in this state’s common law and is regulated by statute.” Id. at 529, 294 S.W.3d at 418 (citing Ark.Code Ann. §§ 16-114-201 to -212 (Repl.2006 & Supp. 2007) (governing causes of action for medical injury)). We noted that the charitable-immunity doctrine prevents recovery for some injured parties for negligence against charitable organizations directly. Id.; see Ark.Code Ann. § 16-114-201. The direct-action statute, however, “provides a new or substitute remedy for the underlying claim of negligence in cases where the plaintiff cannot recover directly from a negligent charitable hospital.” Archer, 375 Ark. at 530, 294 S.W.3d at 418. In concluding that Act 750³ |Rwas remedial in nature, the court stated that it “must then apply the cardinal principle for construing remedial legislation and examine what is ‘the spirit which promoted its enactment, the mischief sought to be abolished, and the remedy proposed.’ ” Id. at 532, 294 S.W.3d at 420 (quoting McMickle v. Griffin, 369 Ark. 318, 338, 254 S.W.3d 729, 746 (2007)).

We have noted that injured parties can bring an action directly against the immune charitable organization’s insurance carrier under the direct-action statute, as well as against individual employees of the charitable organization who are not immune to suit. Sowders v. St. Joseph’s Mercy Health Ctr., 368 Ark. 466, 247 S.W.3d 514 (2007) (citing Low, supra; and Helton v. Sisters of Mercy, 234 Ark. 76, 351 S.W.2d 129 (1961)).⁴ In Helton, this court concluded that while a charitable hospital was immune from the suit, the allegedly negligent employees were not immune from suit and the direct-action statute provided a cause of action directly against the insurer. Helton, 234 Ark. at 84, 351 S.W.2d at 133. The court did not state that these remedies were in any way tied to or otherwise dependent upon one another.

Appellees argue that the direct-action statute does not act to overrule common-law principles of vicarious liability. They assert that this court should apply the rationale expressed in Hartford Ins. Co. v. Mullinax, 336 Ark. 335, 984 S.W.2d 812 (1999). Mullinax is ^distinguishable from the instant case on several points. Notably, Mullinax did not involve the application of our remedial direct-action statute, but involved the under-insured motorist coverage statute.⁵ Id. There, the court strictly construed the statute at issue because it was in derogation of the common law. Id. Here, we will not strictly construe the statute before us because the direct-action statute is not in derogation of the common law. Instead, it affords a remedy that would not be available because of our generous charitable-immunity doctrine, and we liberally construe application of the direct-action statute for the benefit of the injured parties.⁶ See Archer, 375 Ark. at 532, 294 S.W.3d at 420. Also, Mullinax did not involve a suit against an immune charitable organization, which is a critical difference. This court’s decision in Thomas v. Sessions, 307 Ark. 203, 818 S.W.2d 940 (1991), supports this conclusion. In Thomas, this court observed that although physicians may subject a business corporation to liability under the doctrine of respondeat superior, this doctrine has not been extended to charitable organizations. Id. at 211, 818 S.W.2d at 944; see also Kenning v. St. Paul Fire & Marine Ins. Co., 990 F.Supp. 1104 (W.D.Ark.1997).

| inBecause direct-action statutes are remedial in nature, we liberally construe them for the benefit of the injured parties and to effectuate the intended purposes. Rogers, 325 Ark. at 234, 925 S.W.2d at 399 (citing 12A Couch on Insurance 2d §§ 45:798, 45:800, at 455, 458 (1981)). Looking at the plain language of the statute, it is clear that the legislature sought to provide a plaintiff a right to directly pursue an insurer in situations where the injury is caused by the negligence of a nonprofit organization or its employees who are acting within the scope of their employment.

Broadly construing the statute, it does not impose a new requirement that employees or agents of the immune, charitable organization must be joined.⁷ To the contrary, we have determined that the statute does not even require the joinder of the immune, charitable organization. See Sowders, 368 Ark. at 475-76, 247 S.W.3d at 521; cf. George v. Jefferson Hosp. Ass’n, 337 Ark. 206, 987 S.W.2d 710 (1999) (noting that the plaintiff could have sued both the charitable organization and its liability-insurance carrier through alternative pleading without jeopardizing its claim against either defendant). Accepting appellees’ argument that vicarious-liability principles must apply would defeat the legislature’s purpose in enacting the | T1 direct-action statute and judicially create a new requirement in pleading under the statute. Further, creating a new requirement that where an injured plaintiff alternatively pleads against an insurance carrier under the direct-action statute as well as against agents or employees of immune, charitable organizations under the theory of vicarious liability, the failure to continue suit against the agents or employees when the plaintiff elects to proceed only against the admittedly responsible insurance carrier is fatal, places the injured plaintiff in exactly the type of legal “catch-22” position that we eschewed in George, 337 Ark. at 216, 987 S.W.2d at 715.

We hold that under our direct-action statute, Continental, as Washington Regional’s liability-insurance carrier, is subject to a direct cause of action, and nothing in the direct-action statute requires the joinder of the allegedly negligent employees. Accordingly, we reverse the circuit court’s order dismissing appellant’s complaint with prejudice and remand for further proceedings.

Reversed and remanded.

CORBIN, DANIELSON, and HENRY, JJ., dissent.

1 . Appellant filed the initial complaint on October 9, 2009. The 120-day period in which to serve the named parties expired on February 6, 2010. Appellant conceded that she failed to serve the nurses.

2 . This court set forth the history of the direct-action statute and charitable immunity in detail in Neal v. Sparks Regional Medical Center, 375 Ark. 46, 289 S.W.3d 8 (2008).

3 . The portion of the direct-action statute at issue in Archer was the amendment of the act to include liability of pooled liability funds, amongst others, under the statute pursuant to Act of Mar. 30, 2007, No. 750, 2007 Ark. Acts 3963 ("Act 750”).

4 . The decision in Sowders was superseded by statutory amendment when the Legislature enacted Act 750 to include liability pools as insurers within the direct-action statute.

5 .The underinsured motorist statute, Ark. Code Ann. § 23-89-209, at issue in Mullinax is fundamentally different from the direct-action statute before us. In particular, the statute in Mullinax did not provide for a direct action against an insurer. That case involved whether common law subrogation rights against the tortfeasor’s employer, against whom the statute conferred no direct action, survived the insured's voluntary dismissal of the tortfeasor.

6 . In her dissent, Justice Henry cites us to no authority for the proposition that "the holding in Mullinax applies here with even greater force because the direct-action statute itself incorporates the very principles of vicarious liability.” In fact, there are no Arkansas cases applying this theory. This court has never required an injured plaintiff to join tortfeasors as parties to plead under vicarious-liability principles in a suit against an immune-charitable organization under our direct-action statute.

7 . Justice Danielson admits in his dissent that "there was no requirement that the nurses be joined.” He reasons that once the nurses were joined, even though joinder was unnecessary, their dismissal extinguished any claim against their immune employer. Arkansas law has never supported this theory, which clearly penalizes an injured plaintiff for alternatively pleading, even where such pleading may protect the injured party from unforeseen changes in the law. Also, we have drawn a distinction, which this dissent refuses to acknowledge, between business and charitable corporations in applying principles of vicarious liability. See Thomas, supra.