Tenn. Farmers Mut. Ins. Co. v. Debruce
| Decision Date | 16 October 2019 |
| Docket Number | No. E2017-02078-SC-R11-CV,E2017-02078-SC-R11-CV |
| Parties | TENNESSEE FARMERS MUTUAL INSURANCE COMPANY v. Brandon DEBRUCE |
| Court | Tennessee Supreme Court |
Michael R. Campbell and Lauren M. Turner, Chattanooga, Tennessee, for the appellant, Tennessee Farmers Mutual Insurance Company.
R. Ethan Hargraves, Gary Massey, and Joshua R. Ward, Chattanooga, Tennessee, for the appellee, Christina Wright.
Kenneth W. Ward, Hannah S. Lowe, and Elijah T. Settlemyre, Knoxville, Tennessee, and Hal S. "Hank" Spragins, Jr., Memphis, Tennessee, for amicus curiae Tennessee Defense Lawyers Association.
OPINION
We granted review to determine whether a trial court had authority in a declaratory judgment action to resolve coverage issues between an insurance company and its insured when a claimant, who had sued the insured but did not have a judgment against him, was not a party to the action. Here, the claimant sued the insured for damages arising from an automobile accident. The insured did not cooperate with his insurance company. The insurance company sued its insured, seeking a declaratory judgment that the company did not have to provide liability coverage based on the insured’s lack of cooperation. The trial court awarded the insurance company a default judgment, holding that the company did not have to provide coverage under the policy. Nearly two years later, the claimant moved the trial court to set aside the default judgment and allow her to intervene, asserting that she was a necessary party. The trial court denied the motion. The Court of Appeals ruled that the trial court lacked jurisdiction over the declaratory judgment action because the claimant was a necessary party, and the insurance company had not joined the claimant in the action. We hold that the insurance company and its insured—not the claimant—were necessary parties to the declaratory judgment action. The trial court could decide the coverage dispute between the insurance company and its insured with finality and certainty without the claimant’s participation in the action. The claimant, who had no judgment against the insured and could not bring a direct action against the insurance company to collect any damages caused by the insured, had no interest affected by the dispute between the company and its insured. The trial court had authority to grant declaratory relief because all necessary parties were before the court.
A vehicle driven by Brandon DeBruce rear-ended a vehicle driven by Christina Wright on Interstate 24 in Hamilton County in December 2012. DeBruce was insured under an automobile liability insurance policy issued by Tennessee Farmers Mutual Insurance Company. DeBruce’s wife timely reported the accident to Tennessee Farmers. Tennessee Farmers paid DeBruce and Wright for their property damage under DeBruce’s insurance policy.
In December 2013, Wright sued DeBruce in the Circuit Court for Hamilton County, seeking compensation for her injuries arising out of the collision. In September 2014, DeBruce was served with a summons and a complaint. DeBruce did not notify Tennessee Farmers about the lawsuit even though the policy required him to send to Tennessee Farmers "at once ... every summons, legal process or other legal paper received."2 Tennessee Farmers learned about the lawsuit in January 2015 from Wright’s attorney.
DeBruce did not respond to telephone calls from Tennessee Farmers and twice failed to appear for an examination under oath. Under the policy, DeBruce had to cooperate with Tennessee Farmers in investigating and defending the claims asserted in the lawsuit.3
In March 2015, Tennessee Farmers filed this declaratory judgment action against DeBruce in the Bradley County Chancery Court under Tennessee’s Declaratory Judgments Act, Tennessee Code Annotated section 29-14-101 et seq. Tennessee Farmers asserted that DeBruce breached the insurance policy when he did not notify Tennessee Farmers of the lawsuit filed by Wright and failed to cooperate in the investigation of the accident. Tennessee Farmers sought a declaratory judgment that it did not have to provide a defense to DeBruce in the personal injury suit or indemnify him for any damages awarded to Wright. DeBruce did not respond. In June 2015, the trial court granted Tennessee Farmers' motion for default judgment, holding that it had no duty to defend or indemnify DeBruce in the personal injury lawsuit based on his breach of the insurance policy.
In March 2017, Wright moved to set aside the default judgment under Tennessee Rule of Civil Procedure 60.02 and allow her to intervene.4 Wright asserted that she was an indispensable party to the declaratory judgment action because she had a direct interest in the outcome of the case. In denying Wright’s motion, the trial court held that she was not a necessary party. The trial court found that Wright’s interest was insufficient to make her a necessary party because she was merely an incidental beneficiary of the insurance contract between Tennessee Farmers and DeBruce.
The Court of Appeals reversed, relying in part on our ruling in Commercial Casualty Insurance Co. v. Tri-State Transit Co. of Louisiana , 177 Tenn. 51, 146 S.W.2d 135 (1941). Tenn. Farmers Mut. Ins. Co. v. DeBruce , No. E2017-02078-COA-R3-CV, 2018 WL 3773912, at *8 (Tenn. Ct. App. Aug. 9, 2018). In Commercial Casualty , we held that parties injured in a bus accident who had obtained a judgment against the bus operator in an Arkansas state court were necessary parties in a Tennessee declaratory judgment action to resolve coverage issues between the bus operator and its insurance company. 146 S.W.2d at 136–37. Our ruling in Commercial Casualty was based, in part, on the assumption that the bus operator was subject to the Federal Motor Carrier Act and its mandatory insurance provisions. Id. Here, the Court of Appeals relied on Commercial Casualty, noting that drivers in Tennessee are subject to the mandatory provisions of the Tennessee Financial Responsibility Law of 1977, Tennessee Code Annotated section 55-12-101 et seq. Tenn. Farmers , 2018 WL 3773912, at *6. Under the rationale of Commercial Casualty , the Court of Appeals decided that Wright had a "sufficiently direct" interest in the coverage determination to make her a necessary party to the declaratory judgment action. Id. The Court of Appeals held that without joinder of a necessary party, the trial court lacked subject matter jurisdiction over the declaratory judgment action, and its judgment was void. Id. at *8–9.
We review the trial court’s ruling denying Wright’s Rule 60.02 motion to set aside the default judgment under an abuse of discretion standard. Henderson v. SAIA, Inc. , 318 S.W.3d 328, 335 (Tenn. 2010) ; Rogers v. Estate of Russell , 50 S.W.3d 441, 444 (Tenn. Ct. App. 2001). The determination that Wright was not a necessary party to the declaratory judgment action was also within the trial court’s discretion, and we will uphold the trial court’s decision unless we determine that the trial court abused its discretion. Timmins v. Lindsey , 310 S.W.3d 834, 839 (Tenn. Ct. App. 2009) (citations omitted).
"A trial court abuses its discretion when it causes an injustice by applying an incorrect legal standard, reaching an illogical decision, or by resolving the case ‘on a clearly erroneous assessment of the evidence.’ " Henderson , 318 S.W.3d at 335 (quoting Lee Med., Inc. v. Beecher , 312 S.W.3d 515, 524 (Tenn. 2010) ). We presume that the trial court’s discretionary decision is correct, and we review the evidence in the light most favorable to the trial court’s decision. Id. ().
Tennessee’s Declaratory Judgments Act and declaratory judgments acts in most states are based on the Uniform Declaratory Judgments Act of 1922.5 We can rely on other states' interpretations of similar provisions of the Uniform Act when interpreting our Declaratory Judgments Act. Kradel v. Piper Indus., Inc. , 60 S.W.3d 744, 751 n.2 (Tenn. 2001) (citing Holiday Inns, Inc. v. Olsen , 692 S.W.2d 850, 853 (Tenn. 1985) ; In re Estate of Opatz , 554 N.W.2d 813, 816 (N.D. 1996) ). Although the decisions of other jurisdictions are not binding on this Court, " ‘the objective of uniformity cannot be achieved by ignoring utterances of other jurisdictions.’ " T.R. Mills Contractors v. WRH Enters., LLC , 93 S.W.3d 861, 868 (Tenn. Ct. App. 2002) (quoting Holiday Inns , 692 S.W.2d at 853 ).
Under the Tennessee Declaratory Judgments Act, "[c]ourts ... have the power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Tenn. Code Ann. § 29-14-102(a) (2012). The Act states that "[w]hen declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceedings." Id. § 29-14-107(a) (2012).
We liberally construe the Act in favor of the person seeking relief "to the end that rights and interests be expeditiously determined." Tenn. Farmers Mut. Ins. Co. v. Hammond , 200 Tenn. 106, 290 S.W.2d 860, 862 (1956) (citing Johnson City v. Caplan , 194 Tenn. 496, 253 S.W.2d 725, 726 (1952) ; Cummings v. Beeler , 189 Tenn. 151, 223 S.W.2d 913, 917 (1949) ). The stated purpose of the Act is " ‘to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations[.]’ " Reed v. Town of Louisville , No E2006-01637-COA-R3-CV, 2007 WL 816521, at *2 (Tenn. Ct. App. Mar. 19, 2007) (quoting Tenn. Code Ann. § 29-14-113 ).
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