Craig v. Loving, No. M2005-02216-COA-R3-CV (Tenn. App. 3/13/2007), M2005-02216-COA-R3-CV.

CourtCourt of Appeals of Tennessee
Docket NumberNo. M2005-02216-COA-R3-CV.,M2005-02216-COA-R3-CV.
Decision Date13 March 2007

Appeal from the Circuit Court for Wilson County; No. 13021; Clara Byrd, Judge.

Judgment of the Circuit Court Affirmed in Part, Reversed in Part and Remanded.

John Thomas Feeney, Nashville, Tennessee, for the appellant, Mountain Laurel Assurance Company.

William Kennerly Burger, Murfreesboro, Tennessee, for the appellee, Douglas Craig.

Mark W. Henderson, Lebanon, Tennessee, for the appellees, Findley and Nelle Mahaffey d/b/a Sunshine Transport.

William B. Cain, J., delivered the opinion of the court, in which William C. Koch, Jr., P.J., M.S., and Patricia J. Cottrell, J., joined.



Findley and Nelle Mahaffey were owners of Sunshine Transport, which provided transportation to TennCare patients. They employed roughly twenty drivers and carried no workers' compensation insurance, but obtained a policy of automobile insurance from Mountain Laurel Assurance Company with uninsured-underinsured motorist coverage of $1,000,000. Douglas Craig was a driver for Sunshine Transport, and on January 13, 2003, while driving in the course of his employment, was injured in a collision with an automobile driven by Lindsey Loving, minor step-daughter of Thomas Thompson. Craig recovered a workers' compensation judgment against the Mahaffeys in the amount of $189,494.77, on which judgment the Mahaffeys paid a total of $50,000. Craig filed suit against Loving and Thompson, recovering a judgment against them for $375,293.46. The liability carrier for Loving and Thompson paid into court its $50,000 policy limit. The Mahaffeys intervened asserting subrogation interests for the workers' compensation judgment entered against them. Mountain Laurel sought offsets under its underinsured motorist policy for the $50,000 policy limit paid by Thompson and Loving together with the $189,494.77 workers' compensation judgment. The trial court determined that Mountain Laurel was entitled to a $50,000 offset for the payments made on behalf of Loving and Thompson and also credit for the $50,000 actually paid by the Mahaffeys but not for the remainder of the unpaid workers' compensation benefits. The trial court further held that the Mahaffeys were not entitled to any subrogation interests. Mountain Laurel and the Mahaffeys appeal. The judgment of the trial court relative to the Mahaffeys is affirmed. The judgment of the trial court as to Mountain Laurel is reversed, and the case is remanded to the trial court for such further proceedings as may be necessary.


Lindsay Loving ("Loving") is the minor stepdaughter of Thomas Thompson ("Thompson"). On January 13, 2003, the vehicle Loving was driving, which was owned by Thompson, struck the vehicle driven by Douglas Craig ("Craig"). At the time of the accident, Craig was employed as a van driver by Sunshine Transport, a company owned wholly by Findley and Nelle Mahaffey (collectively "the Mahaffeys"). His duties involved the transportation of TennCare patients to medical appointments. At the time that Craig worked for Sunshine Transport, the company employed roughly twenty drivers. When the accident occurred, Craig was within the scope of employment. In the accident, Craig sustained numerous injuries resulting in the accrual of medical expenses. Also injured in the accident was Howard Anderson ("Anderson"), a passenger in Craig's van. Anderson maintained his own action against Loving, Thompson, Craig, the Mahaffeys, and Sunshine Transport.

At the time of the accident, Thompson maintained a personal automobile policy covering Loving. The policy had a coverage limit of $50,000 for each person for bodily injury. The Mahaffeys maintained an automobile insurance policy with Mountain Laurel Assurance Company ("Mountain Laurel"), a Progressive Insurance company and often referred to as Progressive Insurance Company in the lower court proceedings. The policy had an uninsured-underinsured motorist coverage limit of $1,000,000.

Following the accident, Craig filed a Workers' Compensation claim against the Mahaffeys, who did not maintain workers' compensation insurance to cover Sunshine Transport's drivers. The Final Order in the workers' compensation case was entered on September 20, 2004. Craig received a default judgment in the amount of $189,494.77, comprised of $8,345.51 for temporary total disability, $53,420.80 for permanent partial disability, $127,293.46 for accrued medical expenses, and $435.00 for discretionary costs. At the time of trial in the case at bar, the Mahaffeys had paid $50,000 toward their workers' compensation obligation to Craig.

Craig filed suit against Loving and Thompson, seeking damages for his injuries, on November 3, 2003. On January 6, 2005, the Mahaffeys filed a Motion to Intervene as of Right pursuant to T.C.A. 50-6-112(c)(1)1 "for the purpose of protecting and enforcing their statutory lien for workers' compensation benefits that they have paid to Plaintiff, as a proximate result of the automobile accident herein." A week later, the Mahaffeys amended their Motion to include a copy of the workers' compensation order detailing the benefits to Craig, "for which the movants claim a subrogation interest against any judgement awarded [Craig] in the instant case." The court granted the Mahaffeys' Motion to Intervene on January 21, 2005. In the Mahaffeys' Interveners' Complaint, they prayed that the court grant "an order imposing a statutory lien for workers' compensation benefits in the amount of $189,494.77, against any judgment rendered herein in favor of Plaintiff Douglas Craig."

On February 7, 2005, Craig answered the Mahaffeys' Interveners' Complaint, responding as follows:

It is denied that the Mahaffeys have paid workers' compensation benefits in the amount of ($189,497.77), or that the Mahaffeys have paid full statutory benefits required by law, which is necessary to trigger the entitlement to the statutory subrogation right. Responding affirmatively, Plaintiff Craig asserts that Mr. and Mrs. Mahaffey willfully failed to provide workers' compensation coverage for their employees for a period of several consecutive years, contrary to the requirements of the Tennessee Workers' Compensation statute. A deduction from the single limits UM policy (available to employee Douglas Craig) would have the legal effect of requiring the employee (and the remaining, non-employee claimant, Anderson,) to subsidize the statutory default wilfully caused by Mr. and Mrs. Mahaffey. Based upon the authorities which will be submitted in a separate legal memorandum, it is contended that no statutory subrogation lien has arisen in the case, and that no portion of any sums paid by the Mahaffeys (or obligated under any order) should be subsidized from the single limits UM policy. That policy will be inadequate to pay for the entire damages experienced by both Craig and Anderson. Application of the subrogation statute would be inequitable, and would provide an unjust benefit to the wilfully defaulting employer, to the financial detriment of the innocent employee and a non-employee injured victim.

On January 20, 2005, Mountain Laurel filed the following Motion to Confirm Offset Amount:

Comes now Progressive Insurance Company, through counsel, and submits this motion seeking an Order confirming the amount of any offset it will be entitled to as a result of the terms of its uninsured motorist insurance policy and the resolution of the workers' compensation claim pursued by Plaintiff. It is the position of Progressive Insurance Company that any judgment obtained by Mr. Craig in this matter, for the purposes of calculating Progressive's uninsured motorist insurance liability, should be reduced by the sum of $127,293.46 representing medical expenses, $ 53,420.80 representing permanent partial disability benefits, plus temporary total disability benefits in the amount of $8,345.51 for a total offset of $189,059.772.

On March 15, 2005, the trial court issued its Judgment on the matter, granting Craig a $375,293.46 judgment against Loving. Also, the court reserved three issues for further determination. On August 16, 2005, the trial court issued the following post-trial Order on Reserved Legal Issues:

1. Judgment in the above-captioned matter was entered by the court on March 15, 2005, but reserved three (3) legal issues stipulated by the parties to be proper for the court's determination rather than a decision for the jury. The legal issues for the court's post-trial consideration are as follows:

(1) The legal effect of the signature of Thomas Thompson on the financial responsibility documents executed prior to the issuance of the drivers' license for Lindsey Loving; and

(2) The effect and application of the claim [for] set off which is asserted on behalf of the uninsured motorist carrier, Progressive Insurance Company; and

(3) The legal claims raised in behalf of the Plaintiff's employer (Intervening Petitioners Findley Mahaffey and wife Nelle Mahaffey, D/B/A/ Sunshine Transport) for the recovery by subrogation of sums paid pursuant to the Tennessee Workers' Compensation statute.

2. Having considered the parties' respective briefs and legal arguments on each of the foregoing points, the court finds as follows:

a. The signature of Thomas Thompson, as step-father for Lindsey Jeanne Loving on the document entitled "State of Tennessee Minor/Teenage Affidavit and Cancellation", establishes joint and several liability for any negligence or willful misconduct of the driving applicant (Lindsey Loving), and that, accordingly, the judgment granted by the jury in favor of Douglas Craig, in the amount of three hundred, seventy-five thousand, two hundred, ninety-three dollars and 46/100 ($375,293.46) is effective, and granted, upon the joint and several liability provisions of ...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT