Heatherly v. Merrimack Mut. Fire Ins. Co.

• Decision Date: 09 April 2001
• Parties: Rickie L. HEATHERLY, et al. v. MERRIMACK MUTUAL FIRE INSURANCE COMPANY, et al.
• Court: Tennessee Court of Appeals

43 S.W.3d 911

Rickie L. HEATHERLY, et al. v. MERRIMACK MUTUAL FIRE INSURANCE COMPANY, et al.

Court of Appeals of Tennessee, at Nashville.

November 15, 2000.

Permission to Appeal Denied April 9, 2001.

John O. Threadgill, Knoxville, TN, and Parks T. Chastain, Nashville, TN, for appellants, Mutual Fire Insurance Association of New England, Inc.

David B. Scott, Nashville, TN, for appellant, The Professional Company Insurance Adjusters, Inc.

Joseph Y. Longmire, Hendersonville, TN, for appellees, Rickie L. Heatherly and Ronelle M. Heatherly.

Permission to Appeal Denied by Supreme Court April 9, 2001.

OPINION

KOCH, J., delivered the opinion of the court, in which CANTRELL, P.J., M.S., and CAIN, J., joined.

This extraordinary appeal involves a dispute between two homeowners whose house was damaged by fire and the two insurance adjusting companies hired by the homeowners' insurance carrier to investigate their claim. Believing that their claim had been fraudulently processed, the homeowners filed suit in the Circuit Court for Sumner County against their insurance carrier and the two adjusting companies. The three defendants moved to dismiss the complaint as to the adjusting companies. After the trial court denied the motions and declined to grant an interlocutory appeal, the two adjusting companies petitioned for a Tenn.R.App.P. 10 extraordinary appeal. We granted the application and now reverse the trial court's denial of the motion to dismiss because the homeowners have conceded that they have no breach of contract claim against the adjusting companies and because we have concluded that the homeowners' claims are barred by the statute of limitations.

On August 26, 1995, an accidental electrical fire caused extensive damage to a house in Hendersonville owned by Rickie and Ronelle Heatherly. The Heatherlys notified their homeowners insurance carrier, Merrimack Mutual Fire Insurance Company ("Merrimack") of the fire and later filed a timely claim for damages. Due to the damage to the house and its contents, the Heatherlys were forced to move into a rented apartment and even to rent furniture.

Merrimack did not employ its own adjusters in Nashville when it received the Heatherlys' claim. Instead, it hired two adjusting companies, Mutual Fire Insurance Company ("Mutual") and The Professional Company Insurance Adjuster, Inc. ("Professional") to investigate the Heatherlys' claim. Following the investigation, Merrimack offered to pay the Heatherlys $76,900.15 under "Coverage A" of their homeowners policy and submitted to the Heatherlys a completed proof of loss form prepared by Mutual for their signature.

The Heatherlys declined to accept Merrimack's settlement offer and, instead, provided Merrimack with a modified proof of loss form stating that their covered losses amounted to $88,551.19. Merrimack rejected the Heatherlys' claim on November 27, 1995, but tendered them $76,900.15, the amount it had originally offered in settlement of their Coverage A claim. Merrimack also requested the Heatherlys to fill out a proof of loss form for their claims under "Coverage C" of the policy. After they received the proof of loss form for their Coverage C claim, the Heatherlys retained counsel who promptly threatened to sue Merrimack, Mutual, and Professional if the Heatherlys' claims were not promptly settled. Eventually, Merrimack paid the Heatherlys the limits under each component of their homeowners policy, including $99,500 under Coverage A, $69,650 under Coverage C, and $15,373.52 under Coverage D.

On March 25, 1997, the Heatherlys filed suit against Merrimack, Mutual, and Professional in the Circuit Court for Sumner County, alleging breach of contract, negligence, and violation of the Tennessee Consumer Protection Act. They sought damages for, among other things, $27,502.10 in compensatory damages, the cost of debris removal, the twenty-five percent bad faith penalty under Tenn.Code Ann. § 56-7-105(a) (1994), treble damages, $1,000,000 in punitive damages, and attorney's fees. Merrimack, Mutual, and Professional filed a joint Tenn.R.Civ.P. 12.02(6) motion to dismiss the claims against Mutual and Professional. The trial court denied the motion and also denied the adjusting companies' separate motions for a Tenn.R.App.P. 9 interlocutory appeal. Thereafter, we granted Mutual's and Professional's petition for a Tenn.R.App.P. 10 extraordinary appeal.¹

I. THE SCOPE OF THIS EXTRAORDINARY APPEAL

As a threshold matter, we must determine which issues are properly before this court for decision. In their application for an extraordinary appeal, Mutual and Professional focused their argument on the trial court's refusal to deny their joint motion to dismiss the Heatherlys' contract claim. However, in their brief filed after this court granted the extraordinary appeal, Mutual and Professional have also taken issue with the trial court's denial of their motions to dismiss the Heatherlys' negligence and Tennessee Consumer Protection Act claims.

The scope of the issues raised on Tenn.R.App.P. 9 and 10 appeals differs from the scope of the issues that can be raised on appeals as of right under Tenn.R.App.P. 3. Subject to the limitations in Tenn.R.App.P. 3(e) and 13(b), both the appellant and the appellee have broad latitude with regard to the issues they can raise on a direct appeal. The same is not the case for interlocutory appeals under Tenn.R.App.P. 9 or extraordinary appeals under Tenn.R.App.P. 10. For interlocutory appeals, the only issues that can be raised are those certified in the trial court's order granting permission to seek an interlocutory appeal and in the appellate court's order granting the interlocutory appeal. Tennessee Dep't of Mental Health & Mental Retardation v. Hughes, 531 S.W.2d 299, 300 (Tenn.1975); Montcastle v. Baird, 723 S.W.2d 119, 122 (Tenn.Ct.App.1986); Pass v. Shelby Aviation, Inc., No. W1999-00018-COA-R9-CV, 2000 WL 388775, at *6 (Tenn.Ct. App.Apr.13, 2000) (No Tenn.R.App.P. 11 application filed). For extraordinary appeals, the issues are limited to those specified in this court's order granting the extraordinary appeal. Gibson v. Prokell, No. 02A01-9908-CH-00237, 1999 WL 1097848, at *1 (Tenn.Ct.App. Oct. 5, 1999) (No Tenn.R.App.P. 11 application filed).

The application for an extraordinary appeal filed by Mutual and Professional dealt exclusively with the trial court's refusal to dismiss the Heatherlys' breach of contract claim against them. However, in the statement of relief being sought, the two adjusting companies requested that this court "enter an opinion reversing the trial court's findings and dismissing the plaintiffs' causes of action against them on all counts." This court's order granting the extraordinary appeal did not specifically delineate the issues that would be addressed on appeal. Thereafter, Mutual and Professional filed a brief addressing not only the trial court's refusal to dismiss the breach of contract claim, but also the trial court's refusal to dismiss the negligence and Tennessee Consumer Protection Act claims. The Heatherlys did not object to the issues being raised by the adjusting companies and filed a brief responding to all these issues. We have determined that it is appropriate for this court to address all three issues briefed by Mutual and Professional because this court's order granting the interlocutory appeal did not set out the issues to be addressed and because the Heatherlys have filed a brief addressing these issues.

II. THE TENN.R.CIV.P. 12.02(6) MOTION TO DISMISS

All three defendants filed a joint Tenn.R.Civ.P. 12.02(6) motion to dismiss the Heatherlys' claims against Mutual and Professional. They argued that the complaint failed to state a claim upon which relief could be granted because the Heatherlys, by their own admission, did not have a contract with either Mutual or Professional and because Mutual and Professional were acting as agents for a disclosed principal. Accordingly, they argued that there could be no claim for breach of contract or a claim under the Tennessee Consumer Protection Act. They also argued that the lack of a contract doomed the Heatherlys' negligence claim because there was no other law in Tennessee imposing a duty to insureds on adjusting companies retained by an insurance carrier.

The motion to dismiss did not assert any sort of statute of limitations defense. However, each defendant's answer to the complaint contained an affirmative defense based on the statute of limitations with regard to the Heatherlys' negligence and Tennessee Consumer Protection Act claims. Two of these answers had been filed by the time the trial court conducted the hearing on the joint motion to dismiss, but there is no indication in this record that the trial court addressed the statute of limitations questions in the context of its consideration of the motion to dismiss. Accordingly, we must limit the scope of the motion to dismiss to the grounds specifically contained in the motion.

The Heatherlys have conceded in their appellate brief that their complaint fails to state a breach-of-contract claim against Mutual and Professional because their contract was with Merrimack. Accordingly, we need not address the breach of contract claim further. However, the absence of a contract does not necessarily defeat the Heatherlys' negligence and Tennessee Consumer Protection Act claims against Mutual and Professional. Privity of contract is not required for consumer protection act claims, see generally Maillet v. ATF-Davidson Co., 407 Mass. 185, 552 N.E.2d 95, 99 (1990) (stating that "nonprivity plaintiffs can also maintain an action in a products liability case."); Metropolitan Life Ins. Co. v. Haney, 987 S.W.2d 236, 242 (Tex.App.1999) (noting that "the plaintiff, however, need not establish contractual privity with the defendant."), and contracts are not the sole source of duty in negligence cases.² However, we have determined that this case...