Erie Ins. Exch. v. Maxwell
| Decision Date | 15 November 2017 |
| Docket Number | No. M2017-00193-COA-R9-CV,M2017-00193-COA-R9-CV |
| Parties | ERIE INSURANCE EXCHANGE v. GARY H. MAXWELL, ET AL. |
| Court | Court of Appeals of Tennessee |
Appeal from the Chancery Court for Putnam County
Ronald Thurman, Chancellor
Erie Insurance Exchange ("Erie") commenced this declaratory judgment action seeking a declaration that Erie has no duty to defend its insureds in a separate action because the policies of insurance issued to its insureds provided no coverage for the claims asserted in that action. The insureds are the defendants in a separate action in which the buyers of the insureds' home allege that the insureds made negligent misrepresentations concerning the property's propensity to flood. The buyers sought to recover damages they sustained from flooding that occurred after the sale. Following discovery, Erie filed a motion for summary judgment on the ground that the "negligence" and "negligent misrepresentation" claims asserted against its insureds do not contain any allegations that constitute an "occurrence" as that term is defined in the policies; therefore, there is no coverage and no duty to defend the insureds. The trial court denied the motion, and this appeal followed. We have determined that the "negligence" and "negligent misrepresentation" claims asserted against Erie's insureds do not arise from an "occurrence" as that term is defined in the insurance policies; therefore, there is no coverage, and Erie has no duty to defend the insureds in the other action. For these reasons, we reverse the judgment of the trial court and remand with instructions to enter summary judgment in favor of Erie.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded
Parks T. Chastain and Ashley E. Geno, Nashville, Tennessee, for the appellant, Erie Insurance Exchange.
Patrick Shea Callahan, Cookeville, Tennessee, for the appellees, Gary H. Maxwell and Lucretia H. Maxwell.
OPINIONOn January 25, 2016, Erie Insurance Exchange ("Erie") commenced this action for declaratory judgment that it has no duty to defend or indemnify Gary and Lucretia Maxwell in an action brought against the Maxwells by Paul and Barbara Chapman.
The dispute between the Maxwells and Chapmans arises from the Chapmans' purchase of the Maxwells' residential property on March 7, 2014. Prior to the sale, the Maxwells completed a residential property disclosure in which they allegedly misrepresented the propensity of the property to flood and the city's corrective action to mitigate that propensity. Five months after the Chapmans purchased the property from the Maxwells, the residence sustained damage as a result of two floods within three days. In the civil action that followed, the Chapmans alleged that they relied on the Maxwells' representations regarding the propensity for flooding and that they sustained property damage as a result of, inter alia, the Maxwells' negligence and negligent misrepresentations. The Chapmans asserted six claims but only two of those claims are at issue in this appeal, that of negligence and negligent misrepresentation.
The Chapmans' negligence claim against the Maxwells states:
The Chapmans' negligent misrepresentation claim against the Maxwells states:
The Maxwells notified Erie of the lawsuit and insisted that Erie had a duty to defend and indemnify them based on two policies Erie had issued to the Maxwells. Thereafter, Erie commenced this action in which they sought a declaratory judgment that the policies of insurance it issued to the Maxwells provided no coverage for the claims asserted in the lawsuit filed against them by the Chapmans in the Chancery Court for Putnam County, Tennessee;1 therefore, Erie has no duty to defend the Maxwells in that action.
Erie subsequently filed a Motion for Summary Judgment based on the ground that the undisputed facts established that neither policy provided any coverage for the allegations in the Chapman lawsuit. In pertinent part, Erie contended that none of the claims asserted in the Chapman Complaint contained an allegation constituting an "occurrence" as that term was defined by either policy or applicable law; therefore, the policies provided no coverage for the claims asserted.
The trial court agreed with Erie on four of the six claims that were at issue but denied the motion as it pertained to the claims based on negligence and negligent misrepresentation. The order that followed read in pertinent part:
Erie then filed a Motion for Permission to File an Interlocutory Appeal pursuant to Tenn. R. App. P. 9 to appeal the denial of its motion for summary judgment concerning the "negligence" and "negligent misrepresentation" claims. The trial court granted Erie's motion, and this court granted Erie's Application for Permission to Appeal.
This court reviews a trial court's decision on a motion for summary judgment de novo without a presumption of correctness. Rye v. Women's Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015) (citing Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997)). Accordingly, this court must make a fresh determination of whether the requirements of Tenn. R. Civ. P. 56 have been satisfied. Id.; Hunter v. Brown, 955 S.W.2d 49, 50-51 (Tenn. 1997). In so doing, we consider the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002).
Summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn. R. Civ. P. 56.04. In this case, there are no disputed facts. "[I]ssues regarding an insurer's duty to defend are matters of law." Travelers Indem. Co. of Am. v. Moore & Assocs., 216 S.W.3d 302, 305 (Tenn. 2007) (citing Standard Fire Ins. Co. v. Chester-O'Donley & Assocs. Inc., 972 S.W.2d 1, 6 (Tenn. Ct. App. 1998)). Our review of a trial court's determinations on issues of law is de novo, without any presumption of correctness. Lind v. Beaman Dodge, Inc., 356 S.W.3d 889, 895 (Tenn. 2011).
Erie raises two issues on appeal.2 We have determined that the dispositive issue is whether the Chapmans' claims against Erie's insureds for "negligence" and "negligent misrepresentation" arising from alleged misrepresentations made in the sale of a homestate a claim of "property damage caused by an occurrence," as those terms are defined in the insurance policies Erie issued to the Maxwells.
In determining whether an insurer has a duty to defend, we are to rely solely on the allegations contained in the underlying complaint. St. Paul Fire & Marine Co. v. Torpoco, 879 S.W.2d 831, 835 (Tenn. 1994) (citing American Policyholders' Ins. Co. v. Cumberland Cold Storage Co., 373 A.2d 247 (Me. 1977)). The insurer's duty to defend is triggered when the underlying complaint alleges damages that are within the risk covered by the insurance contract and for which there is a potential basis for recovery. Id. This duty "arises if even one of the allegations is covered by the policy." Travelers, 216 S.W.3d at 305 (Tenn. 2007). Furthermore, if there is any doubt as to whether the claimant has stated a cause of action within the coverage of the policy, it is resolved in favor of the insured. Id. (citing Dempster Bros., Inc. v. U....
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