Recent Developments - Arkansas Law Review

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(16) RECENT DEVELOPMENTS.DOC 4/23/2010 3:08:33 PM 464 ARKANSAS LAW REVIEW [Vol. 63:449 result, the insurer need not show prejudice to avoid liability on the policy. On the other hand, when the requirement of notice is an ordinary contract promise, the insured’s noncompliance does not forfeit coverage under the policy unless the insurance company can demonstrate that it was prejudiced by the delay or lack of notice. The court noted, however, that an unreasonable delay in notice could in itself be prejudicial to the insurer. In reaching this conclusion, the court explicitly acknowledged that it was bucking the current trend toward requiring a showing of prejudice more frequently but felt compelled to reach its holding because “[i]n Arkansas, a condition precedent is still a condition precedent.” (citing Alcazar v. Hayes, 982 S.W.2d 845 (Tenn. 1998)). To reach its conclusion in this case, the court turned to its prior precedent on the subject. From its first case addressing the issue, the Arkansas Supreme Court had not required the insurer to show prejudice when notice of a claim was a condition precedent to recovery. (citing Teutonia Ins. Co. v. Johnson, 72 Ark. 484, 490, 82 S.W. 840, 842 (1903)). The court had not changed its position in subsequent cases. (citing Myers v. Mut. of Omaha Ins. Co., 253 Ark. 135, 136, 484 S.W.2d 879, 880 (1972); Am. Fid. & Cas. Co. v. Ne. Ark. Bus Lines, Inc., 201 Ark. 622, 623, 146 S.W.2d 165, 166 (1941); Pac. Mut. Life Ins. Co. v. Butler, 190 Ark. 282, 286, 78 S.W.2d 813, 815 (1935)). Further, the court had likewise required strict compliance from the insured when provisions other than notice were a condition precedent to coverage. (citing Vill. Mkt., Inc. v. State Farm Gen. Ins. Co., 333 Ark. 552, 557, 970 S.W.2d 243, 247 (1998)). On the other hand, the court had required a showing of prejudice on the part of the insurer when notice was not a condition precedent to coverage. (citing Home Indem. Co. v. Banfield Bros. Packing Co., 188 Ark. 683, 689, 67 S.W.2d 203, 206 (1934); Home Life & Acc. Co. v. Beckner, 168 Ark. 283, 288, 270 S.W. 529, 531 (1925); Hope Spoke Co. v. Md. Cas. Co., 102 Ark. 1, 8, 143 S.W. 85, 87 (1912)). As a result, the court held that whether the insurer must show prejudice turns on whether the clause in question was a condition precedent. The court acknowledged that the confusion in the Eighth Circuit over Arkansas law on this point arose from three cases, each of which had imposed liability when an insurer had failed
(16) RECENT DEVELOPMENTS.DOC 4/23/2010 3:08:33 PM 2010] RECENT DEVELOPMENTS 465 to show it was prejudiced by the insured’s failure to comply strictly with a notice requirement in the policy. (citing Members Mut. Ins. Co. v. Benefield, 255 Ark. 156, 158, 499 S.W.2d 608, 609 (1973); Kealy v. Lumberman’s Mut. Ins. Co., 239 Ark. 766, 767, 394 S.W.2d 629, 630 (1965); So. Farm Bur. Cas. Ins. Co v. Robinson, 236 Ark. 268, 274, 364 S.W.2d 454, 458 (1963)). As to two of these cases, the court held that they were in fact consistent with its current holding because the provisions in question in those cases did not make notice a condition precedent to coverage. (citing Kealy, 239 Ark. at 767, 294 S.W.2d at 630; Robinson, 236 Ark. at 274, 364 S.W.2d at 458). On the other hand, the court could not reconcile the third case with its holding and, accordingly, overruled it. (citing Benefield, 255 Ark. at 158, 499 S.W.2d at 609). Finally, the court turned to a case that it ultimately deemed to be irrelevant to the certified question before it. (citing M.F.A. Mut. Ins. Co. v. White, 232 Ark. 28, 334 S.W.2d 686 (1960)). In that case, like this one, the plaintiff in the underlying claim giving rise to the dispute over insurance coverage had voluntarily dismissed that claim. (citing id. at 29, 334 S.W.2d at 687). The White court held that the insured’s failure to comply with a notice condition as to the voluntarily dismissed suit did not give the insurance company a defense to coverage in a subsequent suit based on the same facts. (citing id. at 30, 334 S.W.2d at 687). While the court did not dispute that holding, it concluded it had no bearing on the certified question before it. Thus, while the dismissal of the suit does “essentially reset” the duty of the insured to provide notice of the claim against it, the insured still must strictly comply with any notice requirement as to a subsequent suit, if that notice requirement is a condition precedent to recovery. Ultimately, whether an insured must show prejudice from a failure of the insured to comply strictly with a notice requirement will depend on whether that notice requirement was a condition precedent to recovery. MICHAEL A. THOMPSON
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Recent Developments - Arkansas Law Review

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