Opinion ID: 1781291
Heading Depth: 2
Heading Rank: 1

Heading: The City's Immunity

Text: 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.