Adams v. Tennessee Farmers Mutual Insurance Company, No. W2009-00931-COA-R3-CV (Tenn. App. 4/13/2010), W2009-00931-COA-R3-CV.
| Decision Date | 13 April 2010 |
| Docket Number | No. W2009-00931-COA-R3-CV.,W2009-00931-COA-R3-CV. |
| Parties | JOSEPH KEVIN ADAMS, v. TENNESSEE FARMERS MUTUAL INSURANCE COMPANY. |
| Court | Tennessee Court of Appeals |
Charles L. Trotter, Jr., Huntingdon, Tennessee, for the appellant, Tennessee Farmers Mutual Insurance Company
J. Brandon McWherter, Clinton H. Scott, Jessica F. Salonus, Jackson, Tennessee, for the appellee, Joseph Kevin Adams
OPINION
The plaintiff made a claim under his homeowner's insurance policy after his house burned. The insurer denied the claim because, after the policy was issued, the plaintiff deeded the property to his sons so that it would pass to them if he died, and he did not notify the insurer. The plaintiff sued the insurer for breach of contract. The insurer claimed that the plaintiff had no insurable interest in the property, that he breached a "warranty of ownership" under the policy, that he had a duty to disclose the change of ownership after the policy issued, and that he violated a provision of the policy addressing concealment and fraud. The trial court ruled in favor of the plaintiff and ordered the insurer to pay him approximately $72,000 in accordance with the policy limits. The trial court also awarded discretionary costs to the plaintiff, but it denied the plaintiff's request for prejudgment interest. The insurer appeals, claiming that the plaintiff was not entitled to recover under the policy for various reasons, and that the trial court erred in awarding the plaintiff discretionary costs. The plaintiff contends that the trial court erred in declining to award prejudgment interest. We affirm the trial court's award pursuant to the insurance policy and its award of discretionary costs, and we vacate the portion of the judgment denying the request for prejudgment interest and remand for such an award.
In 1992, Joseph Kevin Adams ("Mr. Adams") purchased a house and land in Chester County, Tennessee. Although Mr. Adams paid the purchase price and planned to reside at the property, he had his oldest son's name placed on the deed instead of his own. According to Mr. Adams, he was living with a woman who had "problems," and he wanted to ensure that the property would pass to his sons if something happened to him because he did not have a will. Mr. Adams worked as a construction worker and pipe welder, and he had previously lost his legs in an accident at work and had seen several co-workers lose their lives.
When Mr. Adams went to apply for homeowner's insurance with Tennessee Farmers Mutual Insurance Company ("Tennessee Farmers"), he explained the situation with the deed to his insurance agent. Mr. Adams filled out the insurance application, which asked for the insured's name "as shown on trust or warranty deed," and accordingly, Mr. Adams listed his son as the insured. Mr. Adams paid the premium, and the policy issued.
The son whose name was on the deed, Shane Adams, was eighteen years old at the time and lived and worked in another state. Mr. Adams told Shane about the deed after the transaction had been completed. Mr. Adams' younger son, Dustin, resided with Mr. Adams in Chester County. When Dustin turned eighteen, Mr. Adams instructed Shane to execute a deed conveying a one-half interest in the property to Dustin. Shane executed the deed as instructed, and it was recorded. Mr. Adams then went to the office of Tennessee Farmers and instructed his agent to add Dustin as an additional insured on the policy issued to Shane, which the agent did. Dustin moved out of Mr. Adams' residence in 1998 or 1999.
In 2000, Mr. Adams moved to California for work, and he instructed his sons to deed the Chester County property back to him so that he could use it as collateral to secure a loan to purchase property in California. Shane and Dustin executed a warranty deed conveying the property to Mr. Adams as instructed, and the deed was recorded. No money changed hands with the transfer.
Mr. Adams arranged to have a house sitter for the Chester County property, but when he notified Tennessee Farmers of the situation, he was told that he could not allow other people to live there while he was away without changing the insurance policy. Mr. Adams then submitted an application for standard fire insurance with Tennessee Farmers, listing himself as the applicant "as shown on trust or warranty deed," and Tennessee Farmers issued the policy.
When Mr. Adams returned from California two years later and moved back into the Chester County residence, he submitted a new application for homeowner's insurance with Tennessee Farmers. This application did not contain the same language requesting the insured's name "as shown on trust or warranty deed." The new application stated, "Notice: Applicant(s) must have an ownership (and name all owners of record) or insurable interest in the property for which application is being made." Mr. Adams listed himself and his wife1 as the applicants, he paid the premium, and Tennessee Farmers issued a homeowner's insurance policy effective December 6, 2002. The policy was subsequently renewed on a yearly basis, with Mr. Adams paying the premiums.
On December 22, 2005, Mr. Adams conveyed the property back to Shane and Dustin by warranty deed, without consideration, and the deed was recorded. According to Mr. Adams, the property was supposed to be in his sons' names all along in case something happened to him. Mr. Adams subsequently instructed Dustin to convey his one-half interest in the property to Shane in case Shane needed to use the property as collateral to secure a loan. On May 30, 2006, Dustin executed a quitclaim deed, which was also recorded, conveying his interest in the property to Shane as instructed by Mr. Adams. However, Shane never used the property as collateral or for any other reason.
Regardless of the state of the record title over the years, Mr. Adams lived in the house, maintained the property, and treated it as his own. He paid the real estate taxes, insurance premiums, utility bills, costs of improving the house, and other expenses. Mr. Adams controlled who came on and off the property and what went on there. According to Shane and Dustin, they never claimed any ownership interest in the property, but considered it their father's.
On October 15, 2006, the dwelling and outbuildings on the property were totally destroyed by fire. Mr. Adams made a claim under his homeowner's policy, but Tennessee Farmers denied the claim upon discovering that Mr. Adams had executed the warranty deed conveying the property to his sons. Tennessee Farmers maintained that Mr. Adams had no insurable interest in the property at the time of the fire. Tennessee Farmers paid Mr. Adams' claim for the loss of his personal property in the residence, concluding that the deed had no effect on the personal property he owned.
Mr. Adams filed a complaint for breach of contract against Tennessee Farmers. Both parties moved for summary judgment. Tennessee Farmers contended that Mr. Adams had no insurable interest in the property, that he breached a warranty to Tennessee Farmers that he owned the property, that he breached a duty to Tennessee Farmers to notify it of matters material to the risk arising subsequent to the issuance of the policy, and that he violated the "Concealment or Fraud" provision of the policy. Mr. Adams asserted that he had an insurable interest in the property, that he had no duty to notify Tennessee Farmers of changes in the legal title to the property, and that he did not violate the "Concealment or Fraud" provision. Following a hearing, the trial court found as a matter of law that Mr. Adams made no warranty to Tennessee Farmers and therefore did not breach a warranty, that Mr. Adams had no duty to disclose the change in ownership, and that Mr. Adams did not conceal or misrepresent material facts in violation of the "Concealment or Fraud" provision of the policy. However, the court determined that there were genuine issues of material fact remaining as to whether Mr. Adams had an insurable interest in the property. Therefore, the court denied both parties' motions for summary judgment.
Following a bench trial, the trial court entered an order finding that Mr. Adams did have an insurable interest in the property, and the court ordered Tennessee Farmers to pay Mr. Adams $66,400 pursuant to the insurance policy. The court denied Mr. Adams' request for prejudgment interest. Tennessee Farmers filed a motion to alter or amend, or in the alternative, for a new trial, which was denied. Mr. Adams also filed a motion to alter or amend requesting that the court increase the judgment by $6,100 in accordance with the policy limits, which Tennessee Farmers agreed was proper based upon Tennessee's "valued policy statute." Mr. Adams filed a motion for discretionary costs, which the court granted in the amount of $2,933.20. The trial court entered an amended final judgment reflecting a total award to Mr. Adams of $75,473.20. Tennessee Farmers timely filed a notice of appeal.
Tennessee Farmers presents the following issues, as we perceive them, for review on appeal:
1. Whether the trial judge erred in concluding that Mr. Adams had an insurable interest in the property;
2. Whether the trial judge erred in failing to find that ownership was a warranty in the insurance policy under "Coverage A — Dwelling," which Mr. Adams breached;
3. Whether the trial judge erred in failing to find that Mr. Adams breached a duty owed to Tennessee Farmers to disclose a change of ownership after the issuance of the policy;
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