Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerLaws Regarding Using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For Stolen VehiclePayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSlower Traffic Keep RightSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-OP Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Percentage of Value: 70%
Damage to vehicle greater than 70% of fair retail value prior to damage or vehicle is water damaged. A.C.A. § 27-14-2301(6)(B)
Automobile: Pro-Rata. Ark. Admin. Code § 054.00.43-10(d). “Insurers shall include first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on proportionate basis with first-party claimant, unless deductible amount has been otherwise recovered. No deduction for expenses can be made from deductible recovery unless outside attorney is retained to collect such recovery. The deduction may then be for only pro-rata share of allocated loss adjustment expense.”
Deductible must be included in any subrogation demand.
Diminution of Value
First Party: Courts have stated that Arkansas has maintained that the “measure of damages to personal property is the difference in the fair market value of the property immediately before and immediately after the occurrence,” and that “the reasonable cost of repairs may be considered in determining this difference.” Daughhetee v. Shipley, 669 S.W.2d 886 (Ark. 1984).
Third Party: The measure of damages is the difference between the value of the vehicle immediately before and after the accident. However, when proving damages for a vehicle not a total loss, the difference in fair market value may be established by the reasonable cost of repairing the damaged property. Crooms v. Capps, 274 S.W.3d 364 (Ark. App. 2008). If repairs do not substantially restore vehicle to its former condition and value, the proper measure of damages is the difference in value before the accident and after the accident and repairs. MFA Ins. Co. v. Citizens Nat. Bank of Hope, 545 S.W.2d 70 (Ark. 1977).
Funeral Procession Traffic Laws
There are no state laws governing funeral processions.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Negligence of driver cannot be imputed to owner in owner’s suit for property damage resulting from collision with third party in which driver was contributorily negligent. Willingham v. S. Rendering Co., 394 S.W.2d 726 (Ark. 1965); Missouri Pac. R. Co. v. Boyce, 270 S.W. 519 (Ark. 1925).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
No Family Purpose Doctrine. Bieker v. Owens, 350 S.W.2d 522(Ark. 1961).
Sponsor Liability for Minor’s Driving: A.C.A. § 27-16-702: Parent or guardian who signs application for drivers’ license will be liable with the minor for any damages caused by the negligence or willful misconduct operation of motor vehicle.
If the statute is applicable, the parent is liable, regardless of whether he knew or consented to the use of the automobile. Ross v. Vaught, 246 Ark. 1002, 440 S.W.2d 540 (1969).
Person may also be vicariously liable if minor permitted to drive and the minor’s operation of a motion vehicle proximately caused damages. Ark. Model Jury Instr., Civil AMI 802 and 804; Garrison v. Funderbunk, 561 S.W.2d 73 (Ark. 1978).
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: No driver may operate a vehicle while using a hand-held wireless phone for wireless interactive communications, unless it is an emergency situation or if you are performing duties as certified emergency personnel. A.C.A. § 27-51-1504(a).
Drivers under the age of 18 may not use a wireless phone for wireless interactive communication while operating a motor vehicle, unless it is during an emergency. A.C.A. § 27-51-1603 (a).
Drivers under the age of 21, but older than 18, may not use a cell phone for texting, but may use a cell phone in a hands-free manner. A.C.A. § 27-51-1604(2).
No driver may use a hand-held wireless phone while in a school zone, or passing a school building with children present. A.C.A. § 27-51-1609(a).
No driver may use a hand-held wireless telephone when in a worker zone with workers present. A.C.A. § 27-51-1610 (a).
Other Prohibitions: No Applicable Laws
Comments: Any local laws regarding cell phone use are preempted by state law. A.C.A. § 27-51-1505. Texting means reading from or manually entering data into a wireless telecommunications device, including doing so for the purpose for short message service texting, emailing, instant messaging, or engaging in another form of electronic data retrieval or electronic data communication.” A.C.A. § 27-51-602 (2). “Wireless telecommunications device” does not include: (v) Hands-free wireless telephone or device; or (vi) Global positioning or navigation device system. A.C.A. § 27-51-602(4)(B).
Loss Of Use
Loss of Use: Yes. Loss of use is recoverable and can be determined by:
- The rental value or the amount which could have been realized by renting out the article during the period;
- The cost of hiring a substitute; or
- The ordinary profits that could have been made from the use of the vehicle.
Sharp v. Great S. Coaches, Inc., 510 S.W.2d 266, 267 (Ark. 1974). No direct authority exists as to business vehicles regarding whether a substitute must actually be rented. Arkansas does recognize that other states allow for this measure without actual rental, however, this may demonstrate a trend to do so in Arkansas as well. Stevens v. Mid-Continent Investments, Inc., 517 S.W.2d 208, 209 (Ark. 1974). Loss of use damages are not limited to vehicles which are only partially damaged, nor does the statute exclude recovery when a vehicle is totally destroyed. In the event of a totally destroyed vehicle, courts will apply the measure of loss of use to be the prior and subsequent value following the accident. Fryar v. Sanders, 784 S.W.2d 168, 170 (Ark. 1990).
Lost Profits: Yes. Ordinary profits that could have been realized is an option to recover loss of use. Sharp v. Great S. Coaches, Inc., supra.
Med Pay/PIP Subrogation
Med Pay and PIP: Yes. A.C.A. § 23-89-207. Insurer has a lien, right of reimbursement and credit out of third-party recovery. Daves v. Hartford Acc. & Indem. Co., 788 S.W.2d 733 (Ark. 1990). “Medical/Hospital Benefits”, “Income Disability Benefits” and “Accidental Death Benefits” are paid under A.C.A. § 23-89-202. The three year personal injury statute of limitations runs from the date of the insured’s accident. A.C.A. § 16-56-105 (1987). A.C.A. § 23-89-207 also provides a right of subrogation subject to the Made Whole Doctrine. Ryder v. State Farm Mut. Auto. Ins. Co., 268 S.W.3d 298 (Ark. 2007). The general rule in Arkansas is that an insurer is not entitled to subrogation unless the insured has been made whole for his loss. There are only two ways to determine whether an insured has been made whole: (1) by a declaration in agreement between the insurer and insured that the latter had been made whole; (2) by a judicial determination. Riley v. State Farm Mut. Auto. Ins. Co., 381 S.W.3d 840 (Ark. 2011).”Add-On” PIP State. No significant limitations on third-party lawsuits.
Owner Liability For Stolen Vehicle
Key In The Ignition Statutes: A.C.A. § 27-51-1306.
Common Law Rule: The Supreme Court of Arkansas held that an insurer should not be liable to a thief or a person who has no permission to use a vehicle and who converts it to his or her own use. Commercial Union Ins. Co. v. Johnson, 745 S.W.2d 589, 594 (Ark. 1988).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: When the insurance policy provides for the adjustment and settlement of a first-party auto total loss, the insurer must either (1) offer a replacement auto with all applicable “taxes, license fees, and other fees” paid, or (2) make a cash settlement which includes all applicable taxes, license fees, and other fees. If the insurer deviates from the methods above, they must include an itemized list stating the amount of the claim attributable to the value of the auto and the amount attributable to the sales tax. Ark. Admin. Code § 054.00.43-10(A).
Third-Party Claims: Third-party insurers must follow the same rules as first-party insurers. Any deviation from those rules must be supported by documentation giving particulars of the vehicle’s condition, and all deviations must be “measurable, discernible, and itemized as to dollar amount.” Ark. Admin. Code § 054.00.43-10(A)(3).
Pedestrian and Crosswalk Laws
A.C.A. § 27-51-1202: Driver must yield to pedestrian in marked or unmarked crosswalk.
A.C.A. § 27-51-1204: Pedestrians crossing outside crosswalk must yield to vehicles. Vehicles must still exercise due care to avoid colliding with any pedestrian on a roadway. Upon seeing a child or disoriented person near roadway, driver must exercise proper pre-caution.
Summary: A driver seeing children ahead must exercise same level of care as a man of ordinary prudence would exercise under the circumstances. Self v. Kirkpatrick, 194 Ark. 1014, 110 S.W.2d 13, 16 (1937).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated. CDW which states that renter is responsible for part of the damage is enforceable.
Recovery From Third-Party: Case law and statutory law allow for owner of commercial vehicle to recovery loss of use damages (dump truck and tractor-trailer). Nothing specifically for rental cars. Where the owner and driver of a gravel truck involved in a collision brought an action against the owner and operator of other vehicle for loss of use during time the gravel truck was being repaired, the Arkansas Supreme Court held that loss of use of the truck was a compensable element of damages and that loss of profits could be included as an element in damages for loss of use. Sharp v. Great Southern Coaches, Inc., 510 S.W.2d 266 (Ark. 1974). The court recognized the following criteria for determining loss of use:
- The rental value or the amount which could have been realized by renting out the article during the period;
- The cost of hiring a substitute; and
- The ordinary profits that could have been made from the use of the vehicle.
In Jones v. Herrin, 481 S.W.2d 362 (Ark. 1974), the Supreme Court said no lost profit recovery allowed during repair period. However, in Stevens v. Mid-Continent Investments, Inc., 517 S.W.2d 208 (Ark. 1974), court reversed itself saying this was unjust when plaintiff uses the vehicle in its business and allowed income loss during repair period. It is allowed when vehicle is partially damaged (Sharp v. Great Southern Coaches, Inc. 510 S.W.2dd 266 (Ark 1974)) and then vehicle is completely destroyed (Stevens, supra.). Lost profits from a vehicle used in a business are compensable. Id. Statute specifically allows for third-party loss of use to owner’s vehicle. Ark. Stat. § 27-53-401.
Rental Car Company’s Liability Insurance Primary or Excess
Summary: Arkansas requires the liability policies of car rental companies to be excess. Ark. Code § 27-19-713(l). Every auto liability policy must “extend” primary liability coverage to temporary substitute vehicles rented or leased from a rental company as defined in § 23-64-202(d)(2)(C).
Slower Traffic Keep Right
Statute: A.C.A. § 27-51-301 and A.C.A. § 27-51-306
Summary: Arkansas requires motorists to drive in the right lane, except when overtaking and passing another vehicle proceeding in the same direction; when the right lane is closed to traffic while under construction; when a roadway is divided into more than three marked traffic lanes; upon a roadway designated for one-way traffic; when the right half of the roadway is unsafe; or when a vehicle is preparing to exit the roadway on the left. Prohibited from using farthest left lane on designated six-lane interstate highways. All vehicles are prohibited from impeding traffic in the left lane of a multi-lane road. Vehicles with more than two axles. The driver of an overtaken vehicle shall yield to the right in favor of the overtaking vehicle. Motor vehicles shall not be operated continuously in the left lane of a multi-lane roadway whenever it impedes the flow of traffic. Vehicles must leave the left lane to let faster traffic pass.
Sudden Medical Emergencies While Driving
Unavoidable Accident Defense. A collision occurring without negligence on the part of either party. An unavoidable accident might occur because of an Act of God or when a driver with no previous coronary disease loses control of his car during a sudden heart attack. 1 Arkansas Law Of Damages § 27:1 (5th Ed.)
No cases using unavoidable accident defense where the driver suffered an Act of God, only cases of slick road conditions. Lewis v. Crockett, 420 S.W.2d 89 (Ark. 1967).
Suspension of Drivers’ Licenses
Administrative Suspension: If a driver is involved in an accident that involves an injury, death, or property damage of more than $1,000 to one person, he must complete the Motor Vehicle Accident Report (SR-1) and submit it along with proof of insurance. A.C.A. § 27-19-501. If a driver fails to file the SR-1, the Office of Driver Services can suspend the driver’s license until it is filed, and for a period not to exceed thirty (30) days. A.C.A. § 27-19-508.
Judgment: An order of suspension of a person’s driver’s license will be made within twenty (20) days after sending of the notice, unless that person deposits the security required by the notice. A.C.A. § 27-19-603. The suspension stays in effect until the person deposits the required security or one (1) year has elapsed and evidence has been filed showing that no action for damages has been instituted. A.C.A.§ 27-19-611.
Contact Information: Arkansas Department of Finance and Administration, Office of Driver Services, Safety Responsibility Section, P.O. Box 1272, Little Rock, AR 72203, (501) 371-5581, http://www.dfa.arkansas.gov/offices/driverServices/Pages/default.aspx.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: A.C.A. § 4-90-301 to 307.
Summary: Damaged parts under OEM warranty may only be repaired using OEM parts unless the owner gives written consent to use of non-OEM parts. Any non-OEM parts must be identified with a name or logo that should be left visible after their installation if at all practicable. If any non-OEM parts are used in the repair of the vehicle, that information must be disclosed to the insured with the written estimate. Insurers should disclose in their policy, or with an attached sticker, the insurer’s intent to specify the use of non-OEM parts or aftermarket parts. See Bulletin 13-97, 1997 WL 34584301 (AR INS. BUL.), 5.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Liability of State and Local Governments: Legislature abolished “governmental” vs. “proprietary” distinction. Ark. Code §§ 21-9-301 through 21-9-303 (1969).
Qualified Immunity: Municipal governments and political subdivisions immune except to extent covered by liability insurance.
Legislative Immunity: Massongill v. Cty. of Scott, 991 S.W.2d 105 (Ark. 1999).
Notice Deadlines: None
Claims/Actions Allowed: All political subdivisions must carry liability insurance on their motor vehicles. Ark. Code § 21-9-303(a). Direct action against municipal insurer allowed. Little Rock Port Auth. v. McCain, 752 S.W.2d 44 (Ark. 1988). Each county, municipal corporation, school district, special improvement district, or any other political subdivision is authorized to provide for hearing and settling tort claims against it. Ark. Code § 21-9-302.
Comments/Exceptions: Ark. Code § 21-9-301 extends immunity only for acts of negligence, but not for intentional torts. A failure to correct that negligence may be construed as intentional. Robinson v. City of Ashdown, 783 S.W.2d 53 (Ark. 1990). Unclear who has burden of proving liability insurance. Helena-West Helena School Dist. v. Monday, 204 S.W.3d 514 (Ark. 2005). No recovery for plaintiff covered under workers’ compensation. Helms v. Southern Farm Bureau Cas. Ins. Co., 664 S.W.2d 870 (Ark. 1984).
Damage Caps: No Punitive Damages. Mosier v. Robinson, 722 F. Supp. 555 (W.D. Ark. 1989). Municipal auto insurance must be at least $25,000 per person, $50,000 per occurrence, and $25,000 property damage. Ark. Code § 21-9-303. If no insurance, city is self-insurer. Ark. Code § 21-9-301
State Sovereign Immunity And Tort Liability
Tort Claims Act: No Tort Claims Act.
Arkansas shall never be made a defendant in any of her courts. (applies only to state) Ark. Const. Art. V, § 20. The Arkansas State Claims Commission shall have exclusive jurisdiction over all claims against the State of Arkansas and its several agencies. A.C.A. § 19-10-204.
Notice Deadlines: Claim must be filed with the Director of the Arkansas State Claims Commission within the period allowed by law for the same type of claim against a private person. A.C.A. § 19-10-209.
Claims/Actions Allowed: The State’s sovereign immunity is waived when:
(1) the State is the moving party seeking relief;
(2) an act of the legislature creates a specific waiver of immunity; and
(3) where a State agency’s actions are illegal, or when a public employee refuses to do a ministerial act required by statute.
State Office of Child Support Enf’t v. Mitchell, 954 S.W.2d 907 (1997); Travelers Cas. & Sur. Co. of Am. v. Arkansas State Highway Comm’n, 120 S.W.3d 50 (2003).
Comments/Exceptions: Few exceptions to immunity granted by Arkansas’ Constitution. State officials are not immune to the extent that they are covered by liability insurance. A.C.A. § 19-10-305. Arkansas requires all political subdivisions to carry the minimum amounts of motor vehicle liability coverage. Therefore, in the case of a car accident, all political subdivisions may be held liable up to the minimum limits. A.C.A. § 21-9-303.
Damage Caps: None.
No punitive damages against the State. A.C.A. § 21-9-203.
General Tort Laws/Statutes
Prohibits Broad Indemnity. Applies to Construction Contracts or Agreements. Ark. Code §§ 4-56-104, 22-9-214.
Applicable to contracts/agreements entered into after July 31, 2007.
Pure Several Liability.
As of March 25, 2003, defendants are severally – and not jointly – liable, and each defendant will only be liable for damages based on his percentage of fault. A.C.A. §§ 16-55-201 and 16-55-201(a)-(b)(1). Two exceptions: (1) Defendant more than 10% at fault and another defendant insolvent; and (2) Defendants act in “concert” or as “agent.” A.C.A. §§ 16-55-203(a)(1)-(5) and 16-55-205(a).
A joint tortfeasor’s failure to sue for contribution within the principal lawsuit does not impair the party’s ability to seek contribution in a separate action. A settling joint tortfeasor may not seek contribution against one whose liability to the claimant was not extinguished by settlement. A.C.A. § 16-61-203.
The statute of limitations is three (3) years from the date joint tortfeasor pays more than his pro-rata share of common liability. A.C.A. § 16-56-105.
Contributory Negligence/Comparative Fault
Modified Comparative Fault. Damaged party cannot recover if it is 50% or more at fault, but if it is 49% or less at fault, it can recover, although its recovery is reduced by its degree of fault. Plaintiff’s recovery will be barred if he is found 50% or more at fault. A.C.A. § 16-64-122.
Dog Bite Laws
No Dog Bite Statute. Negligence on the part of the owner will lead to liability and knowledge of dangerous propensities will lead to strict liability. Strange v. Stovall, 261 Ark. 53, 546 S.W.2d 421 (Ark. 1977).
Economic Loss Doctrine
Minority Rule. A recovery in tort/strict liability can be pursued even when the damages are solely to the product and are economic in nature. Farm Bureau Ins. Co. v. Case Corp., 878 S.W.2d 741 (Ark. 1994). The case of Berkeley Pump Co. v. Reed-Joseph Land Co., 653 S.W.2d 128 (Ark. 1983), held strict liability was not applicable and was ultimately decided on the basis that the defective product was not unreasonably dangerous. Alaskan Oil, Inc. v. Central Flying Services, Inc., 975 F.2d 553 (8th Cir. 1992); Bayer CropScience LP v. Schafer, 385 S.W.3d 822 (Ark. 2011); Farm Bureau Ins. Co. v. Case Corp., 878 S.W.2d 741 (Ark. 1994); Blagg v. Fred Hunt Co., 612 S.W.2d 321 (Ark. 1981).
Willful Misconduct. Liability is imposed on the parent when child maliciously or willfully destroys property of a person, village, school district, religious or charitable organization, municipal corporation, or association. A.C.A. § 9-25-102.
Minor Driving. Parent or guardian who signs application for drivers’ license will be liable with the minor for any damages caused by the negligence or willful misconduct operation of motor vehicle. A.C.A § 27-16-702.
Child must be under 18-years-old. Parent’s liability is limited to $5,000.
Definition: In Arkansas, spoliation is defined as “the intentional destruction of evidence and when it is established, [the] fact-finder may draw [an] inference that [the] evidence destroyed was unfavorable to [the] party responsible for its action.” Union Pacific R.R. Co. v. Barber, 356 Ark. 268, 298, 149 S.W.3d 325, 345 (Ark. 2004).
Adverse Inference Instruction: Spoliation is the intentional destruction of evidence; when it is established, the fact-finder may draw an inference that the evidence destroyed was unfavorable to the party responsible for its spoliation. Tomlin v. Wal-Mart Stores, Inc., 81 Ark. App. 198, 100 S.W.3d 57 (Ark. 2003). An aggrieved party can request that a jury be instructed to draw a negative inference against the spoliator. Id.; Superior Federal Bank v. Mackey, 84 Ark. App. 1, 25-26, 129 S.W.3d 324, 340 (Ark. 2003).
Sanctions: Arkansas rules of civil procedure, professional conduct and criminal code are also available as sanctions both against attorneys and others who engage in spoliation of evidence. Goff v. Harold Ives Trucking Co., Inc., 27 S.W.3d 387, 391 (Ark. 2000).
Statute of Limitations
Personal Property3 YearsA.C.A. § 16-116-103
Personal Injury/Death3 YearsA.C.A. § 16-116-103
Personal Injury/Medical Malpractice2 YearsA.C.A. § 16-114-203(a)
Breach of Contract/Written5 YearsA.C.A. § 16-56-111
Breach of Contract/Oral3 YearsA.C.A. § 16-56-105
Breach of Contract/U.C.C./Goods4 YearsA.C.A. § 4-2-725
Statute of Repose/ProductsN/AN/A
Statute of Repose/Real Property5 YearsA.C.A. § 16-56-112*
Breach of Warranty/Personal Injury3 YearsFollette v. Wal-Mart Stores, Inc., 41 F.3d 1234 (8th Cir. 1994).
Breach of Warranty/Property Damage4 YearsA.C.A. § 4-2-725
Workers’ Comp Third Party Case3 YearsA.C.A. § 11-9-410
Strict Product Liability3 YearsA.C.A. § 16-116-103
Statute of Limitations Exceptions
*4 Years from substantial completion of improvement to real property for tort or contract actions for personal injury or wrongful death, or 5 years for property damage. A.C.A. § 16-56-112.
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 3 Years. A.C.A. § 16-116-103. Medical Malpractice: 2 Years. A.C.A. § 16-114-203(a).
Subrogation of Medical and Disability Benefits are allowed. A.C.A. § 23-79-146(a)(1). Made-Whole and Common Fund apply. Franklin v. Healthsource of Arkansas, 328 Ark. 163, 168, 942 S.W.2d 837, 839 (1997); A.C.A. § 23-79-146 (a)(2).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: Farm Bureau Mut. Ins. Co. of Ark., Inc. v. Foote, 14 S.W.3d 512 (Ark. 2000).
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: No.
Failure To Disclose A basis For Bad Faith: In Arkansas, courts have held an insurer liable to its insured for any excess judgment of the insured’s policy limits if the failure to settle the claim by the insurer is due to fraud, bad faith, or negligence. See McCall v. Southern Farm Bureau Casualty Ins. Co., 255 Ark. 401, 501 S.W.2d 223 (1973); see also Members Mut. Ins. Co. v. Blissett, 254 Ark. 211, 492 S.W.2d 429 (1973) (Arkansas Supreme Court found insurer negligent for failing to settle within policy limits in).
One-Party Consent: An individual must have the consent of at least one party to a conversation, whether it is in person or electronic. Ark. Code Ann. § 5-60-120.
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 3 years for personal injury and wrongful death. A.C.A. § 16-116-103.
Liability Standards: Negligence, Strict Liability, Warranty.
Fault Allocations: Modified Comparative. A.C.A. § 16-64-122.
Non-Economic Caps/Limits On Actual Damages: No.
Punitive Y/N and Limits: Yes.
Heeding Presumption?: Yes. Bushong v. Garman Co., 843 S.W.2d 807, 811 (Ark. 1992).
Innocent Seller Statute: No.
Joint and Several Liability: No, unless “in concert”.
Available Defenses: Compliance With Government Standards; Government Contractor Defense; Learned Intermediary.
Restatement 2nd or 3rd?: Both.
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Condominium/Co-OP Waiver of Subrogation Laws
No language barring condo associations’ right to subrogation. A.C.A. § 18-13-117 of the Horizontal Property Act.
Damage to Property Without Market Value
Service Value: No Case Law
Intrinsic Value: “…the measure of damages for chattels possessed for the comfort and well-being of their owner is not based on value in a secondhand market but on the value of their use to the owner who suffers from their deprivation.” Cecil v. Headley, 373 S.W.2d 136 (Ark. 1963).
Sentimental Value: For the loss of property which had no market value, the measure of damages should be the value of the article to the plaintiff, and, in ascertaining this value, inquiry may be made into the constituent elements and the cost to the plaintiff of producing the article. St. Louis, I.M. & S. Ry. Co. v. Dague, 176 S.W. 138 (Ark. 1915).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment And Depreciation Of GCOP/Sales Tax: As recently as 2013, no caselaw existed which defined “actual cash value.” Costs of labor could not be depreciated when determining the ACV of a covered loss under homeowner’s indemnity insurance policies that did not define the term “actual cash value.” Adams v. Cameron Mut. Ins. Co., 430 S.W.3d 675 (Ark. 2013) (did not specifically address GCOP).
Arkansas has avoided per se rules and taken a more flexible case-by-case approach, holding that a tenant’s liability to the landlord’s insurer for negligently causing a fire will depend on the intent and reasonable expectations of the parties to the lease as ascertained from the lease as a whole. Page v. Scott, 567 S.W.2d 101, 103 (Ark. 1978).
An insurance company may not subrogate against its own insured or a co-insured. However, when a party claiming to be a co-insured is merely a loss payee to which no liability coverage is afforded, subrogation is permissible. Dalrymple v. Royal-Globe Ins. Co., 659 S.W.2d 938 (Ark. 1983). A permissive vehicle user, who is a co-insured under the liability section of a policy, can still be subrogated against under the collision portion of a policy, depending on the exact terms of the policy. Gardner v. Baker, 1986 WL 1632 (Ark. App. 1986) (unpublished). Where an insured is required by contract or lease to carry insurance for the benefit of another, the other party may attain the status of co-insured such that no subrogation may be taken against that party. Page v. Scott, 567 S.W.2d 101 (1978). In Dalrymple, Dalrymple sold some apartments to Ross with the condition that Ross must obtain hazard insurance for the property and that Dalrymple must be listed as a loss payee on the insurance. Ross bought a hazard insurance policy from Royal-Globe Insurance. Faulty wiring caused a fire in one of the insured apartments and Royal-Globe paid Ross and Dalrymple for their loss. Royal-Globe initiated a subrogation action against Dalrymple on behalf of the tenants of the damaged apartment and Dalrymple argued that he was a co-insured under Ross’ hazard insurance policy and, therefore, he was protected by the ASR. The court ruled that the policy in no way afforded a loss-payee any liability protection and, therefore, although Dalrymple could collect for the loss, he could also be subrogated against for that same loss. In Gardner, Baker dropped off her car at a gas station so that it could be washed. Gardner offered to drive the car back to Baker’s home after the wash was completed and Baker agreed. Gardner crashed the car on the way to Baker’s home. Shelter Insurance Company, Baker’s car insurance company, sought to subrogate against Gardner for the damage done to Baker’s car. Gardner argued that he was protected by the ASR because as a permissive user of the vehicle, he was entitled to co-insured status under Baker’s auto insurance policy. The court reasoned that the term “insured” has no fixed meaning in the policy. Under the liability portion of the policy, a permissive user was an “insured.” However, under the collision portion, which protects the “insured vehicle”, there was no definition of “insured” because the focus is upon autos rather than persons. “You” and “your,” however, are defined as the “insured named in the Declaration,” which in this case was the owner/insured and not the permissive user and subrogation was allowed.
Under Arkansas statute, a court can order a defendant to pay criminal restitution, including amounts for the cost of medical treatment, lost income, physical therapy, and funeral costs. According to the same statute, a “victim” includes “any person, partnership, corporation, or governmental entity or agency that suffers property damage or loss, monetary expense, or physical injury or death as a direct or indirect result of the defendant’s offense or criminal episode.” A.C.A. § 5-4-205.
The Supreme Court of Arkansas has stated that an insurance company is a corporation that incurred monetary expense as an indirect result of the defendant’s criminal conduct when it compensates an insured for a loss suffered at the hands of the criminal defendant. They also determined that, according to the statute, an insurer is a “‘victim’ eligible for restitution” and “an ‘aggrieved party’ eligible for restitution for its loss caused by [the defendant’s] crime.” Therefore, an insurance company can be classified as a “victim” for purposes of criminal restitution. Singleton v. State, 357 S.W.3d 891 (Ark. 2009).
Made Whole Doctrine
Under Arkansas law, the Made Whole Doctrine is recognized and dictates whether an insurer has a subrogation right in settlement proceeds. An insurer’s subrogation right is secondary to the right of the insured. Green v. Ford Motor Co. 2011 WL 2666198 (W.D. Ark. 2011). An insured should not recover more than that which fully compensates him and an insurer should not recover any payments that should rightfully go to the insured so that he is fully compensated. Id. The general rule in Arkansas is that an insurer is not entitled to subrogation unless the insured has been made whole for his loss. Franklin v. Healthsource of Ark., 942 S.W.2d 837 (Ark. 1997); Shelter Mutual Ins. Co. v. Bough, 834 S.W.2d 637 (Ark. 1992); Riley v. State Farm Mutual Auto. Ins. Co., 2011 WL 2410521 (Ark. 2011). Arkansas courts are permitted to determine whether an insured has been made whole based upon the facts presented and the insured and insurer are not entitled to a trial by jury on this issue. Green, supra.
An insurer’s right to subrogation arises only in situations where the recovery by the insured exceeds his or his total amount of damages incurred. Shelter Mut. Ins. Co. v. Kennedy, 60 S.W.3d 458 (Ark. 2001), quoting Franklin, supra; Riley, supra. Arkansas applies the Made Whole Doctrine rather broadly. It follows something called the “Franklin Formula,” which says that the precise measure of an insurer’s reimbursement is the amount by which the amount of the sum received by the insured from the third party, together with the insurance proceeds, exceeds the loss sustained and the expense incurred by the insured in realizing on his claim. South Central Ark. Elec. Co-Op v. Buck, 117 S.W.3d 591 (Ark. 2003); Franklin, supra.
In Franklin, the Arkansas Supreme Court expanded the use of the Made Whole Doctrine and held that an insurer is not entitled to subrogation unless the insured has been fully made whole, regardless of whether the insurance contract between the insurer and insured expressly gave the insurer a right of subrogation for benefits paid. Franklin, supra. The right of an injured party to be made whole and an insurance carrier’s right to subrogation are both considered equitable principles in Arkansas. Despite the fact that its courts state that subrogation rights may also be delineated by contract, Arkansas law says that contract rights will not be enforced when this works an injustice. Conley Transp., Inc. v. Great Am. Ins. Co., 849 S.W.2d 494 (Ark. 1993). In fact, the Supreme Court has held that the Made Whole Doctrine applies not only to equitable and conventional rights as well as statutory rights, but also to statutory rights of subrogation provided under workers’ compensation statutes. General Accident Ins. Co. of Am. v. Jaynes, 33 S.W.3d 161 (Ark. 2000). It is advisable for auto carriers subrogating for property damage to intervene into their insured’s third-party action, because Arkansas does not approve of splitting of causes of action. Home Ins. Co. v. Dearing, 452 S.W.2d 852 (Ark. 1970).
The 2011 decision of Riley announced new legal standards regarding when an insurance company’s right of subrogation is enforceable. In Riley, the Arkansas Supreme Court announced that no subrogation rights arise until there is a determination by a court (or through an agreement) that the injured party has been made whole. Riley, supra. Prior to the Riley decision, it was unclear whether the insured had the burden of proving he had been made whole, or the insurer seeking subrogation had the burden of proof. Eastwood v. S. Farm Bureau Cas. Ins. Co., 2012 WL 2952172 (W.D. Ark. 2012).
The Riley decision emphasizes the fact that simply sending notice of a subrogation interest is insufficient to create a lien or protect a carrier’s subrogation interests. Subrogated carriers should seek the assistance of qualified subrogation counsel to protect their interests in Arkansas. Riley stands for the proposition that the burden of proof is on the insurer to either make an agreement with insured as to the made whole issue, or, failing that, to seek a judicial determination that the insured has, in fact, been made whole. Id. An insurer cannot modify or contract around the Made Whole Doctrine within the terms of its insurance policy. Franklin, supra. The right of subrogation does not accrue until there has been a legal determination by a court that the insured has been made whole. Riley, supra. The Made Whole Doctrine applies even in cases of statutory reimbursement rights, such as PIP benefits under § 23-89-207. Ryder v. State Farm Mutual Auto. Ins. Co., 268 S.W.2d 298 (Ark. 2007). The subrogation lien cannot arise, or attach, until the insured has received the settlement proceeds or damage award and until there is a judicial determination that the insured has been made whole. Riley, supra.
The amount of damages necessary to make the insured whole does not have to be reduced because of the insured’s contributory negligence. Cunningham v. Loma Sys., 2012 WL 2569278 (E.D. Ark. 2012). In addition, the fact that a plaintiff settles his claim for less than the third-party policy limits is not relevant as to whether or not he has been made whole. Id.; Southern Farm Bur. Cas. Ins. Co. v. Tallant, 207 S.W.3d 468 (Ark. 2005). It should be noted that a federal district court in Arkansas has held that the issue of whether an insured has been made whole is not an appropriate part of a subrogation action filed by the subrogated carrier. Eastwood, supra. Absent an agreement with the insured, a determination as to whether he has been made whole is needed before an insurance company may obtain reimbursement out of a third-party recovery. Id. The mere act of filing a subrogation action constitutes “seeking” subrogation before such a made whole determination is made.
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Arkansas applies the common law version of the CSR. Montgomery Ward & Co., Inc. v. Anderson, 976 S.W.2d 382 (Ark. 1998). Court must “exclude evidence of payments received by an injured party from collateral sources such as private insurance or government benefits. Bell v. Estate of Bell, 885 S.W.2d 877 (Ark. 1994).
Recovery Of Medical Expenses Rule:
Section 16-55-212(b) limits the evidence of damages for costs of necessary medical care and treatment only to “those costs actually paid by, or on behalf of, the plaintiff or which remain unpaid for which the plaintiff or any third party shall be legally responsible.” However, it was declared unconstitutional. Johnson v. Rockwell Automation, Inc., 308 S.W.3d 135 (Ark. 2009); A.C.A. § 16-55-212. CSR applies unless proof of collateral sources is relevant for a purpose other than mitigating damages. Id.
Related Law/Comments: There are only four situations in which a collateral source may be introduced: (1) to rebut the plaintiff’s testimony that he was compelled by financial necessity to return to work prematurely or to forego additional medical care; (2) to show that the plaintiff had attributed his condition to some other cause, such as sickness; (3) to impeach the plaintiff’s testimony that he had paid his medical expenses himself; (4) to show that the plaintiff had actually continued to work instead of being out of work, as claimed. Evans v. Wilson, 650 S.W.2d 569 (Ark. 1983).
Employee Leasing Laws
In Arkansas, a specific statute governs Professional Employer Organizations (PEO). It provides that both the employer organization and its client are considered co-employers, and both may avail themselves of the immunity provided under the Exclusive Remedy Rule. A.C.A. § 23-92-409.
Hospital Lien Laws
Statute: A.C.A. §§ 18-46-101 – 117. Medical, Nursing, Hospital, and Ambulance Service Lien Act.
Perfecting Lien: In order to establish a lien in Arkansas, a practitioner, nurse, hospital, or ambulance service shall:
(1) Serve on the patient a written notice of claim or serve a copy on the tortfeasor or the insurer, if any, or at their discretion, serve notice on both. The notice shall also file a copy of the notice in the office of the county clerk of the circuit court where the services were rendered. The notice may be served and recorded at any time while services are being rendered and at any time after the discontinuance of serve so long as the claim of the provider is not barred by the statute of limitations. § 18-46-105(1)(A).
(2) If the provider has knowledge of a suit by the patient against a tortfeasor or insurer, the provider must file notice, under oath, of the claim in the court where the action is pending. The filing of this notice shall be notice to all parties to the action, without further need to record the lien in the office of the clerk of the circuit court. § 18-46-105(1)(B).
(3) The notice must contain: name and address of tortfeasor, and if a lien is asserted against an insurer, name and address of insurer; name and address of patient; name and address of person claiming the lien, and their role as a provider; time, place, and circumstances under which the tortfeasor caused the injuries and nature of the injuries; if the services have been completed, amount being claimed. § 18-46-105(2)(A).
(4) The notice shall be supported by affidavit. § 18-46-105(2)(B).
(5) If the services have not been completed when the lien is served, the provider must serve a supplemental notice within 60 days of termination of service. § 18-46-105(1)(C).
(6) Notice must be served by personal service or left with someone of mature years at their usual abode or place of employment or; delivered by registered mail to the last known address of the person to be notified, which must then be supported by affidavit. § 18-46-105(3)(A-B).
Comments: If after 180 days following the most recent notice of lien, the lien remains unsatisfied and no suit has been filed by the provider, the lien becomes invalid. § 18-46-106. A tortfeasor may not settle the third-party claim within 60 days of receiving notice of the lien, nor at any time after the lien has been recorded, unless the lien has been paid to the provider or has received written notice of a release of the lien. § 18-46-112. When a lien has been satisfied, a provider must give written release following a written demand. § 18-46-114.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP.
Statutory Employer Law: Arkansas law requires a general contractor (prime contractor) to be liable for workers’ compensation benefits to the employee of a subcontractor, where the subcontractor fails to secure such workers’ compensation coverage. A.C.A. § 11-9-402(a). Section 11-9-402 provides an exception to this rule. The “prime contractor” will not be liable for compensation benefits to the employees of the subcontractor where there is an “intermediate contractor” who has workers’ compensation coverage. Any prime contractor or intermediate contractor who becomes liable for compensation benefits may recover such benefits from the subcontractor, and any such claim for reimbursement constitutes a lien against any amount due in owing to the subcontractor from the prime contractor. A.C.A. § 11-9-402(b)(2). While a general contractor may be sued directly by an injured employee of a subcontractor, in 1993 the Arkansas General Assembly amended § 11-9-105, clearly intending to extend tort immunity to a contractor regardless of whether the subcontractor had paid workers’ compensation benefits to its injured employee.
Comments: “Statutory employer” likely entitled to immunity only if actual employer fails to provide the statutory employee with benefits and the statutory employer does provide benefits. Stapleton v. M.D. Limbaugh Constr. Co., 969 S.W.2d 648 (Ark. 1998).
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? Undecided.
Statute/Case Law: None.
Rule Summary: There is no authority or precedent allowing or prohibiting the attempted recovery of damages for increased workers’ compensation insurance premiums by an employer from a third-party tortfeasor.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
No statute, regulation, or case decision on point. Section 11-9-410(a)(B) provides that the carrier is entitled to reimbursement of “the amount paid and to be paid by them as compensation to the injured employee or his or her dependents.”
“Compensation” means the money allowance payable to the employee or to his or her dependents and includes the allowances provided for in § 11-9-509 and funeral expenses. A.C.A. § 11-9-102(4(F)(5).
Section 11-9-5-9 provides for payment of “authorized medical, hospital, and other services and treatment furnished under §§ 11-9-508 — 11-9-516.”
Section 11-9-508, in turn provides for the employer to “promptly provide for an injured employee such medical, surgical, hospital, chiropractic, optometric, podiatric, and nursing services and medicine, crutches, ambulatory devices, artificial limbs, eyeglasses, contact lenses, hearing aids, and other apparatus as may be reasonably necessary in connection with the injury received by the employee.”
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: A.C.A. § 11-9-410
Waiver Allowed? Nothing in the Arkansas Workers’ Compensation Act or applicable case law prohibits the use or efficacy of a waiver of subrogation.
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: The effect of a waiver of subrogation on the carrier’s rights, including its right to enforce its statutory lien, has not yet been decided. However, courts have distinguished subrogation and reimbursement. Provident Life & Acc. Ins. Co. v. Williams, 858 F. Supp. 907 (W.D. Ark. 1994).
Other Applicable Law: None.
Statute of Limitations: 3 Years. A.C.A. § 11-9-410.
Can Carrier Sue Third Party Directly: Yes, the party must give 3 days notice of settling.
Right to Intervene: A party must intervene in reasonable time after notice.
Recovery from UM/UIM Benefits: Employer’s Policy Only.
Subrogation Against Medical Malpractice: Undecided.
Subrogation Against Legal Malpractice: Undecided.
Recovery Allocation/Equitable Limitations: (1) Costs/Fees; (2) 1/3 to Worker; (3) 2/3 to Carrier; and (4) Rest to Plaintiff. (Made Whole Applies)
Employer Contribution/Negligence: No.
Attorney’s Fees/Costs: Pro-Rata.
Future Credit: Yes.
Auto No-Fault: No.
Workers’ Compensation Claims by Undocumented Employees
Statute: The term “employee” includes “aliens.” Ark. Code § 11-9-102(9)(A).
Case Law: Undecided.