Opinion ID: 2273826
Heading Depth: 1
Heading Rank: 2

Heading: Statutory Penalty and Attorney's Fees

Text: For its appeal, Primerica argues that the trial court erred in assessing a twelve-percent penalty and attorney's fees against it under section 23-79-208. Alternatively, it argues that the trial court erred in the amount of attorney's fees it awarded. Section 23-79-208 provides in pertinent part: (a)(1) In all cases in which loss occurs and the cargo, property, marine, casualty, fidelity, surety, cyclone, tornado, life, accident and health, medical, hospital, or surgical benefit insurance company and fraternal benefit society or farmers' mutual aid association or company liable therefor shall fail to pay the losses within the time specified in the policy after demand is made, the person, firm, corporation, or association shall be liable to pay the holder of the policy or his or her assigns, in addition to the amount of the loss, twelve percent (12%) damages upon the amount of the loss, together with all reasonable attorney's fees for the prosecution and collection of the loss. [Emphasis added.] This provision is penal in nature and is therefore strictly construed in favor of the party sought to be penalized. State Farm Mut. Auto. Ins. Co. v. Thomas, 316 Ark. 345, 871 S.W.2d 571 (1994); Clark Center, Inc. v. National Life & Accident Ins. Co., 245 Ark. 563, 433 S.W.2d 151 (1968). It should not be held to apply except in cases that come clearly within the statute. National Fire Ins. Co. v. Kight, 185 Ark. 386, 47 S.W.2d 576 (1932). The penal nature of the statute is directed against the unwarranted delaying tactics of insurers. Thomas, 316 Ark. 345, 871 S.W.2d 571; Simmons First Nat'l Bank v. Liberty Mut. Ins. Co., 282 Ark. 194, 667 S.W.2d 648 (1984). However, not every delay is an unwarranted delaying tactic. For example, this court has held that an insurer is allowed a reasonable time to investigate a claim where the insurer in good faith believes that an investigation is necessary before making payment. Clark Center, Inc., 245 Ark. 563, 433 S.W.2d 151. This court has also held that where there is a proper question as to the rightful beneficiary, which the parties cannot determine or settle among themselves, the insurer is not responsible for the statutory penalty and attorney's fees for the delay resulting from filing a complaint in interpleader. See Dennis v. Equitable Life Assur. Soc., 191 Ark. 825, 88 S.W.2d 76 (1935). Primerica urges that it did not engage in unwarranted delaying tactics in this case. It contends that it stood ready, willing, and able to pay the proceeds of the policy, but that when it was faced with claims from both Ronda and Mary Jane, it advised the two claimants that if they could not work out a settlement, it would file an action in interpleader and let the court determine who was the rightful beneficiary. It contends that both claims were legitimate, as Mary Jane was the beneficiary named in the policy, while Ronda was the deceased's widow. It contends that if it had paid one claimant to the exclusion of the other, it would have placed itself in the dangerous position of exposing itself to liability to both claimants. It contends further that by interpleading the parties and requesting that the funds be deposited into the registry of the court, it denied no one recovery. Rather, it merely took the position that it wanted to pay, but could not determine the rightful payee. We agree. Our holding in USAble Life v. Fow, 307 Ark. 379, 820 S.W.2d 453 (1991), is instructive. There, the insurer issued a group life insurance policy to the deceased, in which his wife was the named beneficiary. Prior to his death, the deceased executed a change of beneficiary form naming his daughters as his beneficiaries. Upon his death, the daughters submitted a written claim for the proceeds of the policy. The deceased's wife also made a claim for the proceeds. In a telephone call to the insurer, the wife threatened to institute a lawsuit if she did not receive the proceeds. The insurer requested the wife to provide documentation in support of her claim, but she failed to do so. Thereafter, the insurer filed a complaint in interpleader asking the trial court to determine the beneficiaries as among the two daughters and the wife. The daughters objected and counterclaimed against the insurer for the statutory penalty and attorney's fees. The trial court ruled in favor of the daughters. On appeal, the insurer argued that the fact that it never denied liability and promptly filed a complaint in interpleader absolved it of any liability for the statutory penalty or attorney's fees. This court disagreed, holding: In this case, USAble Life's policy provided that it had 90 days within which to pay claims after it had been notified of a loss. Although USAble Life has never denied liability for this claim, it is undisputed that it had in its files the change of beneficiary form naming [the daughters] as current beneficiaries of [the deceased's] policy. Further, it is clear that USAble Life did not make an investigation as to the proper party for payment or make payment of the policy proceeds to [the daughters] as named beneficiaries, but chose instead to initiate an action for interpleader apparently based on [the wife's] verbal claims and the threat of a lawsuit. By doing so, USAble Life avoided what it considered to be a potential lawsuit by filing an action in interpleader, while at the same time placing the burden on [the daughters] to bear legal expenses in perfecting their claim to the monies that were rightfully theirs as current beneficiaries under the policy. Id. at 381-82, 820 S.W.2d at 455 (emphasis added). In the present case, unlike in Fow , the insurer, Primerica, did not deny payment to the named beneficiary based only on a verbal threat of lawsuit from another party. Although Ronda was later determined to be the rightful beneficiary, at the time of her claim, she was not the named beneficiary, Mary Jane was. Primerica viewed the policy-change application executed by Gary in August 1996 as only changing the name of the spouse and the spouse rider from Mary Jane to Ronda, but not changing the designation of Mary Jane as beneficiary. Once Mary Jane made a claim on the proceeds of the policy, Primerica decided to interplead the funds into the registry of the court and allow the court to determine the rightful beneficiary, unless Ronda and Mary Jane could work out a settlement. Upon being informed that the parties could not reach a settlement, Primerica obtained local counsel to file the complaint in interpleader. Before it could do so, however, Ronda filed suit against Primerica and Mary Jane. We do not view the actions taken by the insurer in this case as being tantamount to the kind of unwarranted delaying tactics envisioned by section 23-79-208. Nor do we agree with Ronda's suggestion that section 23-79-208 is triggered anytime a claimant has to file suit to recover the insurance proceeds, regardless of the factual circumstances. The statute contains no such language, and we will not read into it that which is not there. As stated above, section 23-79-208 is penal in nature and is therefore strictly construed by this court in favor of the party sought to be penalized. Strict construction means that nothing is taken as intended which is not clearly expressed. See Hunt v. State, 354 Ark. 682, 128 S.W.3d 820 (2003); Wilson v. Neal, 341 Ark. 282, 16 S.W.3d 228 (2000), cert. denied, 532 U.S. 919, 121 S.Ct. 1355, 149 L.Ed.2d 285 (2001). Finally, Ronda asserts that Primerica's claim that it could have been exposed to having to pay the claim twice had it not chosen to pursue interpleader is not valid. She asserts that Primerica could have paid the proceeds to her and then invoked the protection from double exposure provided in Ark.Code Ann. § 23-79-125 (Repl.2004). That section provides: (a) Whenever the proceeds of or payments under a life or accident and health insurance policy or annuity contract become payable in accordance with the terms of the policy or contract, or the exercise of any right or privilege thereunder, and the insurer makes payment of the amount in accordance with the terms of the policy or contract or in accordance with any written assignment thereof, the person then designated in the policy or contract or by the assignment as being entitled to the benefits shall be entitled to receive the proceeds or payments and to give full acquittance therefor. (b) The payments shall fully discharge the insurer from all claims under the policy or contract unless, before payment is made, the insurer has received at its home office written notice by or on behalf of some other person that the other person claims to be entitled to the payment or some interest in the policy or contract. [Emphasis added.] We agree with Primerica that the protection offered by subsection (b) is only available when the insurer pays the proceeds over to the person then designated in the policy . . . as being entitled to the benefits, as provided in subsection (a). In this case, it was Mary Jane, not Ronda, who was the person then designated in the policy as being entitled to receive the proceeds. Thus, contrary to Ronda's urging, Primerica's payment to Ronda would not have discharged it from having to pay a claim from Mary Jane. We thus reverse the trial court's award of a twelve-percent penalty and attorney's fees to Ronda, as we hold that the provisions of section 23-79-208 were not triggered by Primerica's actions. Accordingly, it is not necessary to address Primerica's alternative argument that the amount of attorney's fees was excessive. Affirmed in part; reversed in part. GLAZE, J., not participating in the opinion. DICKEY, J., not participating.