Opinion ID: 1768051
Heading Depth: 1
Heading Rank: 2

Heading: Direct Action Statute

Text: We turn then to Rogers's sole point on appeal which is that the trial court misconstrued the Direct Action statute, Ark. Code Ann. § 23-79-210 (Repl.1992). We note initially that although Tudor Insurance moved to dismiss the case under Ark. R.Civ.P. 12(b)(6), the trial court treated the motion as one for summary judgment. This was correct because the court made its decision based in part on the language of the insurance policy which was attached to Tudor Insurance's reply to its motion to dismiss. See Ark.R.Civ.P. 12(b) and (c); see also Rankin v. Farmers Tractor & Equip. Co., 319 Ark. 26, 888 S.W.2d 657 (1994); Amalgamated Clothing & Textile Workers Int'l Union v. Earle Indus., Inc., 318 Ark. 524, 886 S.W.2d 594 (1994). As a consequence, we review the order as one for summary judgment though it is styled Order of Dismissal. The Direct Action statute reads in pertinent part: (a)(1) When liability insurance is carried by any cooperative nonprofit corporation, association, or organization, ... and if any person, firm, or corporation suffers injury or damage to person or property on account of the negligence or wrongful conduct of the organization, association, municipality or subdivision, its servants, agents, or employees acting within the scope of their employment or agency, then the person, firm, or corporation so injured or damaged shall have a direct cause of action against the insurer with which the liability insurance is carried to the extent of the amounts provided for in the insurance policy as would ordinarily be paid under the terms of the policy. (2) The insurer shall be directly liable to the injured person, firm, or corporation for damages to the extent of the coverage in the liability insurance policy, and the plaintiff may proceed directly against the insurer regardless of the fact that the actual tortfeasor may not be sued under the laws of the state. Ark.Code Ann. § 23-79-210 (Repl.1992). (Emphasis added.) Tudor Insurance contended, and the trial court agreed, that the Direct Action statute was inapplicable in this case because its liability policy covers wrongful acts of the officers and directors of PEOPL and not the wrongful acts of PEOPL itself. Rogers attached the Policy Declarations to her complaint to show that the liability policy was issued to PEOPL. However, the policy language substantiates the fact that the officers and directors are the named insureds under the policy and not the corporation: DIRECTORS AND OFFICERS LIABILITY The Insurer shall pay the Loss of each and every Director or Officer (hereinafter called the Insureds) arising from any claim first made against the Insureds and reported to the Insurer during the Policy Period by reason of any Wrongful Act. COMPANY REIMBURSEMENT The Insurer shall reimburse the Company for Loss arising from any claim first made against the Insureds and reported to the Insurer during the Policy Period by reason of any Wrongful Act but only when and to the extent the Company has indemnified the Insureds for such Loss pursuant to law, statutory or common, or pursuant to Charter or By-Laws of the Company. The insurance policy goes on to define Insureds as all persons who were, now are, or shall be duly elected or appointed Directors or Officers of the Company named in item 1 of the Declarations. The policy defines Wrongful Act as any actual or alleged breach of duty, neglect, error, misstatement, misleading statement or omission by the Insureds solely in the discharge of their duties in their capacity as Directors or Officers of the Company.... Our analysis then must focus on the Direct Action statute itself. The basic rule of statutory interpretation to which all other interpretative guides must yield is to give effect to the intent of the General Assembly. Pugh v. St. Paul Fire & Marine Ins. Co., 317 Ark. 304, 877 S.W.2d 577 (1994). In ascertaining legislative intent, we look to the statutory language, subject matter, object to be accomplished, purpose to be served, remedy provided, legislative history, and other appropriate matters. Omega Tube & Conduit Corp. v. Maples, 312 Ark. 489, 850 S.W.2d 317 (1993). Under the statute, the following elements must exist for it to apply: (1) 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. In this case, there is no dispute over the fact that PEOPL carried the liability insurance on its officers and directors. The issue is whether the General Assembly equated carrying liability insurance with covering the corporation itself. We decline to give this statute such a narrow interpretation. Direct action statutes are remedial in nature and are liberally construed for the benefit of injured parties and to effectuate the intended purposes. 12A Couch on Insurance 2d §§ 45:798, 45:800, pp. 455, 458 (1981). Furthermore, we have no hesitancy in holding that the officers and directors of PEOPL fall within the broad category of servants, agents, or employees of the nonprofit corporation under § 23-79-210. Certainly, officers and directors who are also employees of the nonprofit corporation qualify. Our statutes further make it clear that the powers of a nonprofit corporation are exercised through its directors. Ark.Code Ann. § 4-33-801(b) (Repl.1996). In addition, it is the officers of a nonprofit corporation who perform the duties fixed by the corporation's by-laws and prescribed by its directors. See generally Ark.Code Ann. § 4-27-841 (Repl.1996). Officers and directors routinely act as agents for a corporation. See 3 Fletcher Cyc. Corp. § 839, p. 211 (1994). Indeed, a corporate entity can only act through its directors and officers. See Madison Bank & Trust v. First Nat'l Bank of Huntsville, 276 Ark. 405, 635 S.W.2d 268 (1982); see also Vogel v. Simmons First Nat'l Bank of Pine Bluff, 15 Ark.App. 69, 689 S.W.2d 576 (1985); Hill v. State, 253 Ark. 512, 487 S.W.2d 624 (1972); see also 2 Fletcher Cyc. Corp. § 505, p. 601 (Perm. Ed.). In the case before us, it was the president and the treasurer of PEOPL who terminated Rogers, which gave rise to this litigation. Finally, the Direct Action statute does not require that the nonprofit corporation itself be the named insured under the policy. It would have been an easy matter for the General Assembly to have required this. But the Direct Action statute only mandates that the coverage be carried by the nonprofit corporation. PEOPL did carry the coverage in this case, and the corporation's officers and directors were the named insureds. We conclude that under these facts Tudor Insurance is subject to a direct cause of action. Motion of Tudor Insurance Company to dismiss the appeal is denied. Reversed and Remanded. DUDLEY, J., not participating. GLAZE and ROAF, JJ., dissent.