Title: Schultz v. Farm Bureau Mut. Ins. Co.

State: arkansas

Issuer: Arkansas Supreme Court

Document:

Mary R. SCHULTZ and Robert M. Schultz v. FARM
BUREAU MUTUAL INSURANCE COMPANY

96-1075                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered April 7, 1997


1.   Judgment -- summary judgment -- when granted -- burden on movant. --
     Summary judgment is a remedy that should be granted only when
     it is clear that there is no genuine issue of material fact to
     be litigated; the burden of proving that there is no genuine
     issue of material fact is upon the movant, and all proof
     submitted must be viewed in a light most favorable to the
     party resisting the motion; any doubts and inferences must be
     resolved against the moving party; the burden on the moving
     party in a summary-judgment proceeding cannot be shifted when
     there is no offer of proof on a controverted issue; when the
     movant makes a prima facie showing of entitlement, the
     respondent must meet proof with proof by showing a genuine
     issue as to a material fact.

2.   Insurance -- valid endorsement becomes part of insurance contract as if
     actually incorporated -- general condition governing changes to policy
     applicable to vacancy permit. -- Where, by its express terms, the
     vacancy permit was "continuous until cancelled or until [the]
     policy expires, whichever occurs first," the language was
     plain and unambiguous; therefore, the supreme court concluded,
     appellee insurance company must have effectively cancelled the
     endorsement in order to reinstate the policy's exclusion for
     vacancies of sixty days; when an otherwise valid endorsement
     is issued, it becomes a part of the insurance contract as if
     it were actually incorporated therein; thus, the general
     condition governing changes to the policy was applicable to
     the vacancy permit as well.

3.   Insurance -- documents satisfied policy's general condition regarding
     changes -- trial court's grant of summary judgment affirmed. -- The
     supreme court found that the 1994 change-in-policy form and
     declaration page satisfied the policy's general condition
     regarding changes; the change was noted in writing by appellee
     on the 1994 change-in-policy form executed by appellee's agent
     and appellant, which clearly noted the requested change,
     "Delete FB24," in writing; moreover, the cancellation was
     reflected on the 1994 declaration page, which conspicuously
     described coverage "ON THE TENANT OCCUPIED DWELLING"; without
     the prior "FB-24" qualification, this description clearly
     referenced the policy's general exclusion for unoccupied
     dwellings; additionally, the evidence suggested that
     appellants' premium was decreased following the cancellation
     of the vacancy permit; thus, the supreme court affirmed,
     holding that the trial court correctly granted appellee's
     motion for summary judgment.


     Appeal from Marion Chancery Court; Roger V. Logan, Jr.,
Chancellor; affirmed.
     Roy Danuser and Griffin Smith, for appellants.
     Davis, Cox & Wright, PLC, by: Don A. Taylor, for appellee.

     Annabelle Clinton Imber, Justice.
      At issue in this property insurance case is whether the
insurer effectively cancelled a vacancy permit issued to the
insured.  The appellants argue that the trial court erroneously
granted summary judgment to the appellee.  The appellants also
argue that the trial court misconstrued Ark. R. Civ. P. 56.  We
find no error and affirm.
     On April 20, 1995, a building owned by the appellants, Mary
and Robert Schultz, was damaged by fire.  Prior to that date, the
appellee, Farm Bureau Mutual Insurance Company of Arkansas, Inc.,
issued a policy of insurance on the property.  Farm Bureau denied
coverage, and filed a complaint for declaratory judgment in Marion
County chancery court seeking declaratory relief to that effect.  
     Among other things, Farm Bureau asserted that the building was
an unoccupied dwelling, and thus fell under the policy's exclusion
providing that "we will not be liable for any loss if the dwelling
is vacant or unoccupied by you or a tenant for a period of sixty
consecutive days."  The Schultzes in turn moved for partial summary
judgment, maintaining that an endorsement to the policy, "Vacancy
or Unoccupancy Permit FB-24," prohibited Farm Bureau from using the
policy's vacancy provision to deny coverage.
     The endorsement provided as follows:
          VACANCY OR UNOCCUPANCY PERMIT FB-24
              (Annual Renewable Coverage)

Permission is granted for the dwelling described in your
latest declaration, and shown with this endorsement
number, to remain vacant or unoccupied.  (The terms
"vacant" and "unoccupied" are defined in your policy
booklet.)

As a condition for this coverage, during periods of
vacancy or unoccupancy, the dwelling must be kept closed
and secured to prevent the trespassing or entry of
unauthorized persons.  All other terms and conditions
remain unchanged.

During times of vacancy or unoccupancy, there will be an
increased chance of loss.  Our charge for this increase
of risk is $15.00 for each dwelling with endorsement FB-
24.  Such charge is non-refundable and becomes fully
earned upon payment.

This permit is continuous until cancelled or until your
policy expires, whichever occurs first.

                Effective Date 1/16/90

 Attached to and Forming Part of Policy Number F491524

(Underscoring in original.)  The Schultzes also submitted a change
in policy form executed in 1990 by Farm Bureau's agent and Mary
Schultz, which form requested the vacancy permit.   
     Farm Bureau responded and filed its own cross-motion for
summary judgment.  Farm Bureau's position was that the endorsement
had been "deleted" from the policy in November of 1994.  As
evidence supporting this proposition, Farm Bureau submitted the
policy's declaration page for the policy period covering October
18, 1993, and October 18, 1994.  In the "schedule" section of the
declaration page, under the heading "DESCRIPTION AND OCCUPANCY,"
was the description, "ON THE TENANT OCCUPIED DWELLING.  FB24
APPLIES." Farm Bureau also submitted the declaration page for the
policy period covering November 1, 1994, to October 18, 1995.  On
this declaration page, the corresponding description merely
provided "ON THE TENANT OCCUPIED DWELLING."    
     Farm Bureau additionally submitted two affidavits.  The first
was from Dwight Shipman, the Farm Bureau agency manager for Marion
County, who stated that "on or about November 1, 1994, through
conversations with the Schultzes and my office, the FB24 vacancy or
unoccupancy permit was deleted from this policy, and to the best of
my information and belief, a new declarations sheet was delivered
to the Schultzes without the FB24 permit."  The second affidavit
was from Gayle Holmes, the manager of the Farm Bureau policy
services department.  She stated that on November 1, 1994, Farm
Bureau received a "change request form" from its Marion County
office regarding the Schultzes' policy.  According to Holmes, this
form requested the deletion of the FB-24 endorsement and a
correction of the spelling of Mary Schultz's name on the
declaration page.  Additionally, she stated that "a new
declarations page deleting the FB24 endorsement to the insurance
policy in question was mailed to the insureds" on November 2, 1994,
and that the Schultzes were charged a lower premium because of the
deletion of the endorsement.
     Farm Bureau also attached excerpts of the sworn statement and 
deposition testimony of Mary Schultz.  She stated that prior to the
fire, the last time the building had been rented out may have been
"a couple of years ago."  Her son stayed in the building some the
prior summer, and she also stated that about two weeks before the
fire, some fisherman stayed there while fishing in some
tournaments.  When asked, "Was this something that it was somebody
you knew, and you just loaned the place to them for a day or two?",
Schultz answered, "Yes."
     The Schultzes filed a reply to Farm Bureau's motion for
summary judgment, essentially arguing that a general condition of
the policy required a separate, formal cancellation notice to
effectively cancel the endorsement.  They argued that the
declarations page which omitted the reference to "FB-24" was "not
tantamount to a cancellation, standing alone."  The Schultzes
further alleged that "any evidence based on oral agreement
canceling the permit would be inadmissible, leaving only a question
of law the only issue."  
     At the hearing on the Schultzes's motion for partial summary
judgment and Farm Bureau's motion for summary judgment, the
following documents were submitted as joint exhibits without
objection:
     1.   Change in policy form executed in 1994 by Farm
          Bureau's agent and Mary Schultz, which form
          requested that FB-24 be deleted.
     2.   The insurance policy's general conditions
          entitled "Vacancy or Unoccupancy" and "Changes."
     3.   The policy's declaration page for the policy period
          covering October 18, 1993 and October 18, 1994.
     4.   The vacancy or unoccupancy permit FB-24.
     5.   The policy's declaration page for the policy period
          covering November 1, 1994, to October 18, 1995. 
     On June 6, 1996, the trial court entered an order granting
Farm Bureau's motion for summary judgment, and denying the
Schultz's partial motion for summary judgment.  The trial court
held that the vacancy permit, though valid, had been effectively
cancelled under the terms of the policy.  The chancellor noted
Shipman's testimony that the Schultzes had requested that the
endorsement be deleted.  The chancellor ultimately found that the
vacancy permit no longer applied to the Schultz's policy because it
was not noted on their last declaration page.
     On June 12, 1996, the Schultzes filed a request for additional
findings.  One of their enumerated "requests" concerned Shipman's
affidavit testimony submitted with Farm Bureau's motion for summary
judgment.  The Schultzes denied that they had ever been in
Shipman's office or that they had ever discussed the issue of the
endorsement's deletion with him.  They attached an affidavit
executed by both of them containing their testimony substantiating
this assertion.  The Schultzes also requested that the chancellor
"make a specific ruling on this question":
Is ARCP 56, (the rule on summary judgment procedure) to
be construed as permitting the affidavit of a party to
the proceeding to be classified as "undisputed" in
determining whether there exists a genuine issue of
material fact?
Finally, the Schultzes requested that the trial court enter an
order finding that its June 6 order was not final for purposes of
appeal, pending its decision on the request for additional
findings.
     On July 1, 1996, the trial court entered a second order.  In
this order, the chancellor found that Shipman's affidavit did not
"recite personal knowledge of the facts which were stated,"  thus
the court modified its prior order to delete the following:
The affidavit of Dwight Shipman says that ". . . about
November 1, 1994, through conversations with the
Schultzes in my office, the FB24 vacancy or unoccupancy
permit was deleted from this policy . .."
The trial court nonetheless held that even without considering
Shipman's affidavit, Farm Bureau had effectively cancelled the FB-
24 endorsement.  The chancellor also held that a party's affidavit
was not per se "disputed" under Ark. R. Civ. P. 56, and further
declined to address the finality issue.
     The Schultzes now bring the present appeal, and raise two
points of error.  The first is whether the trial court erroneously
granted Farm Bureau's motion for summary judgment.  The second is
whether the trial court misconstrued Ark. R. Civ. P. 56.
                 CANCELLATION OF VACANCY PERMIT
     For their first point, the Schultzes argue that the trial
court erroneously granted summary judgment for Farm Bureau on the
issue of coverage.  Essentially, this point revolves around whether
Farm Bureau effectively cancelled the vacancy permit.
     Summary judgment is a remedy that should be granted only when
it is clear that there is no genuine issue of material fact to be
litigated.  Shackelford v. Patterson, 327 Ark. 172, 936 S.W.2d 748
(1997).  The burden of proving that there is no genuine issue of
material fact is upon the movant, and all proof submitted must be
viewed in a light most favorable to the party resisting the motion. 
Id.  Any doubts and inferences must be resolved against the moving
party.  Id.  The burden in a summary-judgment proceeding is on the
moving party and cannot be shifted when there is no offer of proof
on a controverted issue.  Id. When the movant makes a prima facie
showing of entitlement, the respondent must meet proof with proof
by showing a genuine issue as to a material fact.  Id.
     The Schultzes rely on one of the policy's general conditions,
entitled "Changes."  This provision provides as follows:
A waiver or change of any provision of this policy must
be in writing by us and be shown on an endorsement or
successive declaration page to be valid.  If a premium
adjustment is necessary, we will make the adjustment as
of the effective date of the change.
According to the Schultzes, the mere deletion of the reference to
"FB-24" on the November 1, 1994, declarations page was not
sufficient to comply with this requirement.
     By its express terms, the vacancy permit was "continuous until
cancelled or until [the] policy expires, whichever occurs first." 
This language is plain and unambiguous.  Therefore, Farm Bureau
must have effectively cancelled the endorsement in order to
reinstate the policy's exclusion for vacancies of sixty days.  When
an otherwise valid endorsement is issued, it becomes a part of the
insurance contract as if it were actually incorporated therein. 
See 2 Couch on Insurance 3d 18:17 (1996).  Thus, the general
condition governing changes to the policy would appear applicable
to the vacancy permit as well.
     As stated above, any changes to the terms of the policy must
be in writing by Farm Bureau and must be shown on an endorsement or
subsequent declaration page.  The record reflects that in 1990, a
change-in-policy form was executed on the Schultzes' policy.  The
signatures of both Mary Schultz and a Farm Bureau agent appear at
the bottom of this form.  On this form was the handwritten
notation, "Please add vacant permit.  This dwelling is not rented
at this time."  On the row, "CHANGE APPLICABLE FORM NO(S) TO:" was
the handwritten notation "FB24."  This form also showed that the
annual premium for the policy was $273.00.  On the Schultzes'
declaration page issued in 1993, under the column, "DESCRIPTION AND
OCCUPANCY," the description "ON THE TENANT OCCUPIED DWELLING.  FB24
APPLIES," was conspicuously noted.  Under the heading "Subject to
Attached Form No.(s)," the sheet listed "FB24."  The annual premium
shown was $288.00.  Thus, by its express terms, the 1993
declaration page required that the insured property be a tenant-
occupied dwelling, but with the additional qualification that "FB-
24" applied to the property.
     In October of 1994, another change-in-policy form was executed
on the Schultzes' policy, and sent from the Marion County Farm
Bureau office to the Little Rock office.  The signatures of both
Mary Schultz and a Farm Bureau agent appear on this form.  The
description of the insured property provided on this form was "ON
THE TENANT OCCUPIED DWELLING.  FB24 APPLIES."  However, also on
this form was the handwritten notation, "Delete FB24."
     A new declaration page was issued on November 1, 1994.  Under
the column,  "DESCRIPTION AND OCCUPANCY," the description merely
provided "ON THE TENANT OCCUPIED DWELLING."  Likewise, the space
for "Subject to Attached Form No.(s)" omitted any reference to the
FB-24 vacancy permit.  The annual premium reflected for the policy
was $216.00.  
     In their response to Farm Bureau's motion for summary
judgment, the Schultzes offered no affidavits or other evidence to
suggest that they did not request that the vacancy permit be
cancelled or deleted.  Nonetheless, they argued that the policy's
general condition regarding "Changes" required that Farm Bureau
notify them of the change with a separate form, separate and
distinct from the mere omission contained on the declaration page. 
We agree with the Schultzes that the general condition's use of the
article "and" suggests that two writings must reflect any change in
the policy.  Not only must a waiver or change be shown in an
"endorsement or successive declaration page," it must also be noted
"in writing by us [Farm Bureau]."  Any other reading of the
condition would render the "writing" requirement superfluous, given
that an endorsement or declaration page would always be a
"writing."
     That being said, we find that the above-described documents
satisfied the policy's general condition regarding changes.  The
change was noted in writing by Farm Bureau.  Namely, on the 1994
change-in-policy form executed by Farm Bureau's agent and Mary
Schultz, which clearly noted the requested change, "Delete FB24,"
in writing.  Moreover, the cancellation was reflected on the 1994
declaration page, which conspicuously described coverage "ON THE
TENANT OCCUPIED DWELLING."  Without the prior "FB-24"
qualification, this description clearly references the policy's
general exclusion for unoccupied dwellings.  Additionally, the
evidence suggests that the Schultzes' premium was decreased
following the cancellation of the vacancy permit.  Thus, we affirm,
finding that the trial court correctly granted Farm Bureau's motion
for summary judgment.
               CONSTRUCTION OF ARK. R. CIV. P. 56.
     The Schultzes, for their second point, make a two-pronged
argument.  The first is that the trial court misconstrued Ark. R.
Civ. P. 56 in determining that there were no disputed facts based
on Farm Bureau's affidavits.  The second is that the trial court
erred in considering Shipman's affidavit because it contained
inadmissible evidence.  We need not reach the merits of these
arguments because, as discussed above, the trial court had an
adequate basis for granting summary judgment to Farm Bureau without
considering Farm Bureau's affidavits.
     Affirmed. 
     Brown, J. not particpating.
     Special Justice David B. Vandergriff joins in the opinion.