Case Name: John B. DALRYMPLE, Jr. and Barbara DALRYMPLE v. ROYAL-GLOBE INSURANCE COMPANY
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1983-11-07
Citations: 280 Ark. 514
Docket Number: 83-129
Parties: John B. DALRYMPLE, Jr. and Barbara DALRYMPLE v. ROYAL-GLOBE INSURANCE COMPANY
Judges: Adkisson, C.J., and Purtle, J., dissent.
Reporter: Arkansas Reports
Volume: 280
Pages: 514–518

Head Matter:
John B. DALRYMPLE, Jr. and Barbara DALRYMPLE v. ROYAL-GLOBE INSURANCE COMPANY
83-129
659 S.W.2d 938
Supreme Court of Arkansas
Opinion delivered November 7, 1983
[Rehearing denied December 5, 1983. ]
Jones i? Petty, for appellants.
Barber, McCaskill, Amsler, Jones ¿r Hale, for appellee.
Adkisson, C.J., and Purtle, J., would grant rehearing.

Opinion:
Darrell Hickman, Justice.
We are asked to decide if a mortgagee, that is named as a loss payee in a hazard insurance policy, is, as a matter of law, an "insured" and, consequently, immune from suit by the insurance company for negligence in causing damage to the property. The trial court found that the loss payee was not and, therefore, granted the appellee, Royal-Globe Insurance Company, summary judgment. We agree with that decision and affirm the trial court.
The facts are complicated. John Dalrymple, the plaintiff in this suit, designed and built some apartments in Pine Bluff, Arkansas, which he sold to Gary Ross on March 1, 1978. The contract of sale required that Ross obtain insurance on the property for "loss by fire and other hazards and contingencies." Royal-Globe wrote the policy and John B. Dalrymple was listed as the loss payee. A fire occurred on March 18, 1978, in one of the apartments rented by Rodney and Earlean Fields. Apparently the cause was defective wiring near the water heater. Royal-Globe paid Dalrymple and Ross for their loss, and that payment is in no way disputed. Royal-Globe sought reimbursement for the loss from Dalrymple in August, 1978, but he refused to pay Royal-Globe.
The Fields sued Ross in October of 1979, and Ross, who was actually acting for the insurance company under its right of subrogation, filed a third party complaint in February of 1980, against the Dalrymples. (Ross had a claim for $100, which was the deductible.) Later the Fields amended their complaint to seek punitive damages against Dalrymple. A Jefferson County jury awarded the Fields $6,000 compensatory damages and $7,500 punitive damages, finding 15% attributable to Ross and 85% to Dalrymple. The jury also awarded Ross $10,000 in compensatory damages against Dalrymple, but no punitive damages. Dalrymple v. Fields, 276 Ark. 185, 633 S.W.2d 363 (1982). That case is still pending in Jefferson County Circuit Court. In May of 1981, Dalrymple filed this damage suit against Royal-Globe for failing to defend him in the other lawsuit and for suing him in violation of its contractual duty. Royal-Globe moved for summary judgment and it was granted, the judge finding that as a matter of law Dalrymple did not have any liability insurance under the policy which Ross purchased.
The appellant makes several arguments on appeal but essentially it is argued that Dalrymple was an "insured" and that Royal-Globe cannot sue its own "insured" to recover for a loss. That is undisputedly a correct statement of law. 5A Appleman on Insurance, § 4055 (1972). The problem is that Dalrymple was not an "insured" in every sense under the policy. He did not buy the insurance, he was simply a named loss payee, and there is no provision in the policy that provides that a loss payee is given any liability protection. The policy is a standard one. 5A J. Appleman, supra, § 5401 (1970), states that when a policy contains a standard mortgage clause it is considered that, "the insurer has entered into a separate contract with mortgagee just as if the latter had applied for insurance entirely independent of the mortgagor." But there is no authority for the proposition that a loss payee is an insured for all purposes. A loss payee is entitled to enforce his right to payment for property loss against the insurer, but there the right ends; it does not grant immunity to a loss payee that causes the loss.
The appellants cite Federal Ins. Co. v. Tamiami Trail Tours, Inc., 117 F.2d 794 (5th Cir. 1941), as a case in point. Tamiami bought a bus from White Motor Company and insured it with Federal Insurance Company with a standard loss payee designation to White Motor Company and a financial institution. The bus burned because of a defect in the construction of the bus. The Court held that White Motor Company was an "insured" under the policy and entitled to the benefits of that relationship and in the absence of fraud or gross negligence could not be denied recovery. That was essentially an extension of the public policy that no right of subrogation exists by an insurer against its own insured. Otherwise, most policies of insurance would not be paid. It is our judgment that the reasoning of the Court in Tamiami should not be followed. A loss payee is not an insured in the usual sense of the word but simply a loss payee who is entitled to payment for loss of his property interest; there is no immunity from liability for negligence. A loss payee seeking the benefit of liability protection should pay for it.
It is also argued that summary judgment should not have been granted because it is a disputed fact whether Ross was actually supposed to secure an insurance policy that provided Dalrymple with liability insurance. United States Fidelity and Guaranty Co. v. Aetna Casualty & Surety Co., 418 F.2d 953 (8th Cir. 1969), is cited for the proposition that where a buyer and seller mutually agree that the buyer will obtain liability insurance for the property, then the insurer cannot be subrogated against one of those parties. That is not a question in this suit between Dalrymple and Royal-Globe in which Ross is not a party. Essentially there are no substantial disputed facts and the court was correct in entering the summary judgment.
Affirmed.
Adkisson, C.J., and Purtle, J., dissent.