In 2004, the AQ Chicken restaurant in Bentonville, Arkansas , was destroyed by a fire; Bradley Ventures suffered property damage, loss of income, and other consequential damages. Joseph James Trybulec, Jr., was charged with arson. The Benton County prosecutor negotiated a plea agreement in exchange for a reduction from the charge of arson; Trybulec pled guilty to reckless burning. At the time of the fire, Trybulec lived with his parents who held a homeowners policy with Farm Bureau that carried a $100,000 personal liability limit. The policy excluded coverage for bodily injury or property damage caused by intentional acts or arising from activities involving illegal purposes.
Bradley Ventures filed a lawsuit against Trybulec and Farm Bureau filed for a declaratory judgment that it had no duty to defend or pay benefits under the homeowners' policy for: (1) the intentional acts; (2) activities involving an illegal purpose; or (3) punitive-damage claims. The insurer claimed that there were no material issues of fact in dispute and asked for a judgment based upon the plea of guilty to reckless burning. Farm Bureau argued that because these actions were intentional it owed no duty to defend and indemnify Trybulec under the homeowners' policy. The circuit court ruled in favor of Farm Bureau.
On appeal to the Arkansas Supreme Court, Bradley Ventures argued that a genuine issue of material fact still remained as to whether Trybulec intentionally started the fire or whether the fire was caused by activity involving an illegal purpose. The argument was that those issues were not “actually litigated” simply because a plea agreement was reached; the contention was that even though Trybulec pleaded guilty to a lesser crime, the elements of his intent and his purpose were not litigated.
The Supreme Court held that a guilty plea is not equivalent to a criminal conviction that has been “actually litigated.” The issue of intent was not litigated. A genuine issue of material fact remained as to whether the fire was started intentionally. The Court further found that even though Trybulec did not have permission to be on the premises at the time of the fire, that was not analogous to trespass or other illegal purpose having been actually litigated. The plea to reckless burning was not a final and valid judgment on the issues of trespass or illegal purpose, nor were those issues essential to that plea. As a result, a genuine issue of material fact remained as to whether the fire arose from an activity involving an illegal purpose because that issue was never litigated.
Bradley Ventures had also insisted that the circuit court's summary judgment should not be affirmed regardless of Farm Bureau's assertion that it owed no duty to defend Trybulec because the original complaint contained pleadings for punitive damages. Bradley argued that Arkansas law provides a duty to defend even if ultimately there may not be a duty to indemnify. Farm Bureau claimed that since punitive damages were excluded by the policy, it owed no duty to defend such a claim.
The Court decided that an insurer should not be allowed to escape its responsibility to defend on a mere technicality based on the type of relief prayed for by a plaintiff. Farm Bureau was not allowed to escape its duty to defend simply because punitive damages were alleged in the original complaint.
The ruling of the circuit court was reversed and the case remanded. This case is Bradley Ventures, Inc. v. Farm Bureau Mutual Insurance Company of Arkansas, 2007 WL 2874792 ( Ark. ).