Hurley v. Tennessee Farmers Mut. Ins. Co.

• Decision Date: 02 November 1995
• Citation: 922 S.W.2d 887
• Parties: Marvin Douglas HURLEY, Plaintiff-Appellee, v. TENNESSEE FARMERS MUTUAL INSURANCE CO., Defendant-Appellant.
• Court: Tennessee Court of Appeals

Page 887

922 S.W.2d 887

Marvin Douglas HURLEY, Plaintiff-Appellee, v. TENNESSEE FARMERS MUTUAL INSURANCE CO., Defendant-Appellant.

Court of Appeals of Tennessee Western Section, at Jackson.

Nov. 2, 1995.

Application for Permission to Appeal

Denied by Supreme Court

March 25, 1996.

James F. Eggleston, Memphis, for Plaintiff-Appellee.

Andrew Hume Owens of Law Office of Don Owens, P.A., Memphis, for Defendant-Appellant.

CRAWFORD, Presiding Judge (Western Section).

This is a suit against an insurer for a vehicle theft loss. It is admitted that plaintiff had a valid policy of insurance in effect at the time of the loss. The defendant, Tennessee Farmers Mutual Insurance Company, asserts that the policy is void, because plaintiff made material misrepresentations in the application for insurance that materially increased the risk of loss. Alternatively, defendant argues that plaintiff breached the insurance contract provisions by failing to cooperate with the insurer as required by the contract in question.

The judgment on the jury verdict provides in pertinent part:

The jury having heard all the evidence introduced at trial by the parties and having received the instructions of the Court, retired to consider their verdict. That the jury returned and stated in open court, in answer to questions submitted to them by the court, that they had found as follows: That the failure of the plaintiff to furnish the defendant with his income tax returns or checking or saving account records, as requested, was not an unreasonable failure to cooperate under his insurance policy so as to end the defendant's responsibility for the plaintiff's loss; that the plaintiff, Marvin Hurley, did not misrepresent facts contained in his Application for Insurance with the defendant, Tennessee Farmer's Mutual Insurance Company; that the plaintiff was entitled to receive the amount of $10,666.76 in actual damages under the terms of the insurance policy with the defendant; that the failure of the defendant to pay the said amount in damages to the plaintiff was not done in good faith; that the failure of the defendant to properly pay the plaintiff the amount owed in insurance coverage inflicted additional expenses, loss and injury upon the plaintiff; that using the additional expenses, loss and injury, found to have been suffered by the plaintiff, the plaintiff should be awarded additional damages of $1,800.

IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that judgment be, and the same is hereby, entered in favor of the plaintiff, Marvin Douglas Hurley, against the defendant, Tennessee Farmer's Mutual Insurance Company, in the amount of $12,466.76.

Defendant filed a motion for judgment notwithstanding the verdict or in the alternative for a new trial. The court granted the motion for judgment notwithstanding the verdict as to the $1,800.00 bad faith penalty and denied the motion in all other respects. The court approved the verdict of the jury in the amount of $10,666.76.

Defendant has appealed and in its brief presents three issues for review:

1. Whether the trial court erred in refusing to direct a verdict in favor of the defendant at the close of the proof on the issue of material misrepresentations in the application for insurance.

2. Whether the trial court erred in failing to direct a verdict at the close of the proof on the issue of the plaintiff's lack of cooperation concerning his refusal to provide three years of tax returns and one year of checking account records as requested by attorney for defendant, and in refusing to cooperate with an investigator with the defendant in the investigation of the claim.

3. Whether the trial court erred in failing to direct a verdict for the defendant on the cause of action of the plaintiff based on the homeowner's policy where there was no proof in the record as to the terms, conditions or provisions of said policy.

Plaintiff presents for review the additional issue of whether the trial court erred in granting judgment notwithstanding the verdict as to the bad faith penalty.

On October 2, 1990, plaintiff applied for and obtained a policy of automobile insurance with defendant, Tennessee Farmers. At the time, plaintiff had a homeowners insurance policy with defendant and had also previously carried automobile insurance with defendant. The application form that plaintiff signed on October 2, 1990, had various questions to be answered yes or no by checking the appropriate box. According to the signed application introduced into evidence, the plaintiff answered the following questions as indicated:

(7) INSURED'S STATEMENT--HAS ANY DRIVER. (1-5)

(1) Had insurance cancelled or rejected? [answer no]

* * * * * *

(3) Had his driver's license revoked or suspended? [answer no]

(4) Ever had a vehicle that was stolen or burned? [answer no]

* * * * * *

(6) Been involved as a driver in an accident in last 3 years? [answer no]

The application also asked if the driver used the vehicle in his business to which the plaintiff answered "no."

In May of 1992, plaintiff's insured truck was stolen while he was inside Central Hardware in Memphis purchasing some fertilizer. An investigator with Tennessee Farmers became suspicious about the loss because of some of the statements that plaintiff made to him concerning the truck. Subsequently, pursuant to the terms of the insurance policy, Tennessee Farmers requested and obtained an examination under oath of both the plaintiff and his wife. During the course of Tennessee Farmers' investigation, it was determined that the above noted answers on the insurance application form were inaccurate, and that the correct answer should have been "yes" for each of the questions. Plaintiff's sworn statement was taken in August of 1992, and prior thereto plaintiff had been requested to provide the defendant insurer with his past three years tax returns and his checking and savings account statements from the previous year. Plaintiff refused to produce these documents, stating that the documents were "none of their business." Because of the untrue answers on the application and lack of plaintiff's cooperation, Tennessee Farmers denied plaintiff's theft claim, and this suit ensued.

The first issue for review is whether the trial court erred in denying defendant's motion for directed verdict based on its defense of material misrepresentation in procurement of the policy.

Plaintiff's contention at trial was that he made no false answers, that he was not asked any questions by anyone and that a Tennessee Farmers employee simply told him to sign the blank application form to put the policy in effect.

Defendant asserts that there is no proof in the record to support plaintiff's contention that plaintiff signed the application form in blank. Defendant conceded in the trial court and in this Court that if the application was signed in blank then there were no material misrepresentations made by plaintiff which would void the policy.

Early in his direct examination, plaintiff testified that he did not recall the circumstances surrounding the signing of the application and does not remember anything about its execution.

On cross examination, plaintiff testified:

Q. Well you signed it [the application]. Didn't you?

A. I remember signing a sheet of paper, but I never answered any questions. I was never asked any questions.

Q. Well, Mr. Hurley, without reference to whether or not you gave these answers, did you sign a document that looks like this?

A. I have been with Farm Bureau since 1975. I walked in there. I figured I could trust them. I signed a piece of paper. She walked out there and looked at my truck and said, okay. And that was it. I never was asked any questions. And I never answered any questions.

Plaintiff had previously filed an affidavit in connection with a motion for summary judgment in which he stated:

When I was directed to sign this application, the answers to the questions checked above my signature were either (1) checked by the agent without asking me these questions; (2) blank; (3) if I were asked these questions prior to my signature, in each instance in which the answer is incorrect, the information was incorrectly recorded by the agent.

Defendant introduced the testimony of Jennifer Altomare, the Tennessee Farmers' employee who took the application. She likewise testified that she had no specific recollection of Mr. Hurley applying for or signing the application, and that she does not remember whether she asked or he answered any questions. She stated that it was, however, her usual and customary practice to ask all the questions and note the answers before the application is signed. T.C.A. § 56-7-103 (1994) provides:

56-7-103. Misrepresentation or warranty will not avoid policy--Exceptions.--No written or oral misrepresentation or warranty herein made in the negotiations of a contract or policy of insurance, or in the application therefor, by the insured or in the insured's behalf, shall be deemed material or defeat or void the policy or prevent its attaching, unless such misrepresentation or warranty is made with actual intent to deceive, or unless the matter represented increases the risk of loss.

Whether the insured's answers to the questions on the application are true or untrue is to be determined by the trier of fact. Womack v. Blue Cross and Blue Shield, 593 S.W.2d 294, 295 (Tenn.1980). A determination of whether the false answers increase the risk of loss is a question of law for the court. Id. In the case before us, it is uncontroverted that the answers to the questions on the application set out above were false, but defendant's concession that if the application was signed in blank the false answers would not be a misrepresentation on the part of plaintiff raises the seminal question of whether the application was, in fact, signed in blank. Defendant argues that plaintiff's testimony provides no proof that the application was signed in...