Opinion ID: 1781291
Heading Depth: 1
Heading Rank: 3

Heading: Direct Action Against the Employer's Insurance Carrier as the Insurer of the City.

Text: Prior to this lawsuit, Cherry attempted to sue the City of Fort Smith for the wrongful death of David Cherry; however, the case was dismissed because the City of Fort Smith is immune from tort liability under Ark.Code Ann. § 21-9-301 (Repl.1996). Although it is not clear from the record, it appears that the City of Fort Smith did not obtain an insurance contract, and thus Cherry could not avoid the City's immunity by proceeding directly against the City's insurance carrier as provided by Ark.Code Ann. § 23-79-210 (Repl.1992). Hence, Cherry sued Transcontinental which is the insurance carrier for Tanda, not the City. As mentioned previously, the trial court dismissed this action on summary judgment. On appeal, Cherry raises two arguments as to why it may proceed directly against Transcontinental. We find no merit to either argument.
First, Cherry argues that it may proceed against Transcontinental as a quasi-insurer of the City, which is clearly immune from suit under Ark.Code Ann. § 21-9-301 (Repl.1996). More specifically, Cherry argues that by virtue of the indemnity agreement between Tanda and the City, Transcontinental agreed to pay for the City's negligence. This argument is clearly against the policy of the direct-action statute, and established caselaw. In Rogers v. Tudor Ins. Co., 325 Ark. 226, 925 S.W.2d 395 (1996), we recently held that in order for the direct-action statute to apply the following elements must exist: (1) the liability insurance must be carried by a nonprofit corporation; (2) a person must suffer injury or damage on account of negligence or wrongful conduct; and (3) the damage or injury must be on account of the negligence or wrongful conduct of servants, agents, or employees of the nonprofit corporation acting within the scope of their agency or employment. (Emphasis added.) In this case, the Transcontinental insurance contract was carried by Tanda, not the immune City. Thus, Cherry fails to establish the first element of the statute. Furthermore, rejection of Cherry's argument is consistent with a federal decision on virtually identical facts. As in this case, in Lacey v. Bekaert Steel Wire Corp., 799 F.2d 434 (8th Cir.1986), the Bekaert Steel Wire Corp. (Bekaert) entered into a contract with the City of Van Buren, and pursuant to that contract Bekaert agreed to indemnify the City and to obtain an insurance contract which it subsequently obtained from CNA Insurance. Several years later, Rebecca Lacey was killed on the Bekaert property, and her estate sued the City, Bekaert, and CNA insurance. Id. The trial court found that the City was immune from liability and dismissed Lacey's action against it. Id. As in this case, Lacey argued that it could directly sue CNA Insurance for the City's negligence even though the listed insured was Bekaert. Id. The Eighth Circuit rejected Lacey's argument and held that: the narrow purpose of the statute serves only to permit direct action against insurance carriers issuing policies to enumerated immune organizations. (Emphasis added). Hence, the court affirmed the district court's dismissal of Lacey's direct action against CNA Insurance. As in Lacey , Cherry attempts to circumvent the immunity provision by directly suing an insurance company for acts done by an entity other than the named insured. Surely, the drafters of the Ark.Code Ann. § 23-79-210 (Repl.1992) never intended to hold an insurance company directly liable for actions of a person or entity the insurance company never agreed to insure. Therefore, we adopt the Eighth Circuit's holding in Lacey and reject Cherry's argument for reversal.
Finally, Cherry alleges that pursuant to Ark.Code Ann. § 23-79-210 (Repl. 1992), it may directly sue Transcontinental because the exclusive remedy provision found at Ark.Code Ann. § 11-9-105 (Supp.1995) makes Tanda immune from tort liability. As with Cherry's other points on appeal, this argument has no merit. In Helms v. Southern Farm Bureau Casualty Ins., 281 Ark. 450, 664 S.W.2d 870 (1984), this court said that: other statutes must yield to the Workers' Compensation Act because it is in the interest of the public policy to give that act priority as an exclusive remedy. Thus, in Helms this court held that the exclusive remedy prevented injured teachers from recovering under the school district's automobile insurance agreement which it was required by statute to maintain as an exception to the immunity doctrine. Moreover, in Burkett v. PPG Indus. Inc., 294 Ark. 50, 740 S.W.2d 621 (1987), this court specifically held that the exclusive remedy provision also applied to insulate the employer's insurance carrier from tort liability. Hence, under these two decisions, Cherry may not maintain a direct action against Transcontinental as Tanda's insurance carrier. Affirmed.