Spears v. State Farm Fire & Casualty Insurance

725 S.W.2d 835, 291 Ark. 465, 1987 Ark. LEXIS 1986
CourtSupreme Court of Arkansas
DecidedMarch 16, 1987
Docket86-192
StatusPublished
Cited by28 cases

This text of 725 S.W.2d 835 (Spears v. State Farm Fire & Casualty Insurance) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Spears v. State Farm Fire & Casualty Insurance, 725 S.W.2d 835, 291 Ark. 465, 1987 Ark. LEXIS 1986 (Ark. 1987).

Opinion

Darrell Hickman, Justice.

Robert L. Spears, a discjockey for radio station KSSN in Little Rock, was struck in the face with a baseball bat. He sued Bob Troutt and his wife for damages, alleging intentional, negligent and willful and wanton conduct by the Troutts. The appellee, State Farm Fire and Casualty Insurance, carried a home owners policy for the Troutts and provided a defense for the Troutts; however, State Farm specifically reserved the right to deny coverage through an exclusion in the policy for injuries “expected or intended by the insured.” State Farm expressly told counsel to consider only the Troutts’ best interest and not attempt to direct the lawsuit so that the jury would find an intentional tort by the Troutts. The jury answered eight interrogatories, finding the Troutts guilty of both negligence and willful and wanton disregard of the rights of others. The jury awarded Spears $505,000 and his wife $65,000 in compensatory damages and together they were awarded $2,000,000 in punitive damages. The trial court reduced the punitive award by half.

After the tort suit, State Farm filed this declaratory judgment action against the appellants and the Troutts to determine its liability for the judgment the Spearses had against the Troutts. The appellants moved for summary judgment alleging the prior lawsuit was res judicata of the issues now raised, binding State Farm to the jury’s findings in the first case. The trial court denied the motion, and the case was tried to a jury. Both Spears and Troutt were called as witnesses. State Farm offered the former testimony of Roosevelt Nelson, an employee of Troutt, who testified at the first trial that he struck Spears with a baseball bat. Jimmy Baldwin, another employee of Troutt, testified that he drove the “getaway” car after Spears was beaten. He also testified he was at Troutt’s house the day Troutt gave Lavonia Gray a baseball bat. Gray, a longtime employee of Troutt, gave a confession, which was introduced, to the Pulaski County Sheriff’s Department. In the confession Gray admitted that Troutt told him to hit Spears; he said Nelson left the vehicle that night and returned saying he had “hit him.” The jury returned a verdict for State Farm.

Appellants raise three arguments on appeal. First, it is argued the trial court was wrong in denying summary judgment because of res judicata. Second, it is argued that the trial court erroneously admitted Gray’s confession, which was hearsay, as a business record. Finally, it is argued that the trial court was wrong in declaring Nelson unavailable to testify, thereby admitting his testimony from the first trial.

We first consider the question of res judicata. The doctrine of res judicata “provides that a prior decree bars a subsequent suit when the subsequent case involves the same subject matters as that determined or which could have been determined in the former suit between the same parties; and the bar extends to those questions of law and fact which might well have been but were not presented.” Benedict v. Arbor Acres Farm, 265 Ark. 574, 579 S.W.2d 605 (1979); Wells v. Heath, 269 Ark. 473, 602 S.W.2d 665 (1980): see also Hickerson v. State, 286 Ark. 450, 693 S.W.2d 58 (1985). The purpose of res judicata is “to put an end to litigation by preventing a party who had one fair trial on a matter from relitigating the matter a second time.” Wells v. Heath, supra.

The first suit was between Spears and Troutt. While State Farm was not a party to the suit, it defended the Troutts as required by the policy.

Was there privity between State Farm and the Troutts ? A final judgment is binding on those in privity as well as the parties. Missouri Pacific Railroad Co. v. McGuire, 205 Ark. 658, 169 S.W.2d 872 (1943). Privity of parties within the meaning of res judicata means “a person so identified in interest with another that he represents the same legal right. . . .” Missouri Pacific Railroad Co. v. McGuire, supra.

We have held that “ordinarily an insurer is considered as being a privy to a judgment against its insured in which it furnished a defense and estopped to make an assertion contrary to a finding in the action against the insured.” Southern Farm Bureau Casualty Insurance Co. v. Jackson, 262 Ark. 152, 555 S.W.2d 4 (1977). On this basis the appellants argue State Farm is bound by the judgment in the tort suit. However, there is an exception to this rule and it applies to this case. That exception is when the interests of the insured and the insurance company conflict, there is no bar to a second suit. Restatement (Second) of Judgments, § 58 (1982) provides:

(1) When an indemnitor has an obligation to indemnify an indemnitee (such as an insured) against liability to third persons and also to provide the indemnitee with a defense
(b) The indemnitor is precluded from relitigating those issues determined in the action against the indemnitee as to which there was no conflict of interest between the indemnitor and the indemnitee.

The comment to this section explains the reasoning for this exception.

. . .For example, the indemnitee [T routt] may be charged alternatively with having acted negligently and intentionally. In such a situation, it is to the indemnitee’s interest that the claim, if sustained at all, be sustained on the basis of negligence because the loss will then fall on the indemnitor, but it is to the indemnitor’s interest that the claim of negligent wrongdoing be resisted because liability on that basis would fall with the obligation to indemnify.
On the other hand, the indemnitor has a right to its day in court on whether the indemnitee’s liability is within the scope of the indemnity obligation. A corollary of this right is that the indemnitor should not be estopped by steps or positions that the indemnitor may have taken in the course of performing its duty to defend the indemnitee. Hence, the usual rule that an indemnitor is precluded by the determination of issues which he litigates on behalf of an indemnitee, stated in § 57, should not apply to an indemnitor who defends, under the compulsion of an independent duty to defend, an indemnitee with whom he has a conflict of interest.
The only way to reconcile these duties is to recognize that an indemnitor who has an independent duty to defend the indemnitee in effect has two legal capacities with regard to the indemnitee. . . .

There was a conflict of interest between State Farm and Troutt in the first suit. The reservation of rights letter pointed out this conflict to the Troutts. The letter stated that although State Farm would provide a defense for the Troutts in the first suit, State Farm reserved its right to raise the defense of noncoverage because of the policy exclusion of liability arising from intentional acts. See also Great American Insurance Co. v. Ratliff, 242 F. Supp. 983 (D.C. Ark.

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Cite This Page — Counsel Stack

Bluebook (online)
725 S.W.2d 835, 291 Ark. 465, 1987 Ark. LEXIS 1986, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spears-v-state-farm-fire-casualty-insurance-ark-1987.