Leverette v. Tenn. Farmers
| Decision Date | 04 March 2013 |
| Docket Number | No. M2011-00264-COA-R3-CV,M2011-00264-COA-R3-CV |
| Parties | WENDY LEVERETTE, ET AL. v. TENNESSEE FARMERS MUTUAL INSURANCE COMPANY |
| Court | Tennessee Court of Appeals |
Appeal from the Circuit Court for Maury County
A woman who was severely injured in a collision with an automobile driven by an unlicensed minor filed suit against the minor. The minor's parents' insurance company denied coverage and refused to defend the suit on the basis of an exclusion in the insurance policy for damages caused by a party driving without permission of the owner or a person "in lawful possession" of the vehicle. No defense was offered, and the injured party obtained a $1 million default judgment against the minor driver. The injured party and the minor's parents then jointly filed suit against the insurance company, alleging that the insurance company was liable for breach of contract, bad faith, violation of the Tennessee Consumer Protection Act, and violation of the Unfair Claims Practices Act based upon its denial of coverage. The trial court ruled that, as a matter of law, the minor was entitled to insurance coverage under her parents' policy at the time of the accident. The remainder of the case was tried, and the plaintiffs were awarded compensatory and punitive damages on the bad faith claim. The jury also found the insurance company had violated the Tennessee Consumer Protection Act, and the trial court trebled the compensatory damages and awarded attorney fees under the Act. The insurance company has raised a number of issues in this appeal, inter alia, the grant of partial summary judgment to the plaintiffs on the question of coverage; the finding of liability for bad faith, the liability and enhanced penalty under the TCPA, and the requirement that plaintiffs should make an election between the punitive damages and the enhanced damages. We affirm the breach of contract holding, including the conclusion that the policy terms provided coverage. We reverse and vacate the holding of liability for bad faith, including the award of punitive damages thereunder, since the statutory cause of action was not plead. We also reverse the award of treble damages under the TCPA, but affirm the finding of a violation of the Act. We affirm as modified the award of attorneys' fees.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed in Part and Reversed in Part
Michael Ross Campbell, Lauren Michelle Rutherford, Chattanooga, Tennessee; Patrick Arnold Flynn, Seth Michael Lasater, Columbia, Tennessee, for the appellant, Tennessee Farmers Mutual Insurance Company.
Richard Thomas Matthews, Columbia, Tennessee, for the appellee, Wendy Leverette, et al.
Tennessee Farmers Mutual Insurance Company ("TFM") denied coverage under an automobile policy for damages sustained in an accident caused by the thirteen year old daughter of its insureds, Chad and Donna Sanders ("the Sanders"). The accident was caused by the unlicensed daughter, who was driving an uninsured automobile owned by a friend's mother.
In the resulting lawsuit, the trial court granted partial summary judgment to Plaintiffs prior to trial, declaring that the insurance contract provided coverage. At the close of the evidence, the trial court granted Plaintiffs a directed verdict for breach of contract and awarded the Plaintiffs damages for that breach. Then, the jury awarded compensatory damages on the bad faith claim and found the insurance company's acts of bad faith were committed intentionally and knowingly. After a hearing, the jury awarded punitive damages against the insurance company on the same claim. The trial court then determined that the Plaintiffs were entitled to treble damages and attorney fees under the TCPA. This appeal followed.
We begin with a description of the accident, the actions of the insureds and injured parties, and the actions of the insurance company.
The accident at the core of this dispute occurred in Bedford County on December 21, 2008, when Claire Sanders, an unlicensed thirteen year old driving a car owned by Tracy Neeley, tried to navigate a sharp curve on a narrow road and crossed into the opposing lane of traffic, colliding head-on with a car driven by Wendy Leverette. Tracy Neeley's daughter Beth Neeley was in the passenger seat of her m other's car.
Claire Sanders and another girl had been visiting the Neely house. When it was time for the other girl to leave, Tracy Neely asked her daughter Beth to drive the other girl home in Tracy's car. The three girls left. Claire wanted to drive, she got into the driver's seat, and they proceeded on until the accident.
Both drivers were seriously injured. Claire Sanders suffered bruises and a broken ankle, resulting in two surgeries and medical expenses of over $14,000. Wendy Leverette's injuries were even more severe, ultimately leading to amputation of her foot.
Tracy Neeley had no automobile liability insurance at the time of the accident. However, Claire Sanders fell within the definition of "a covered person" under the terms of an automobile liability insurance policy owned by her parents and underwritten by TFM. The policy provided liability coverage of $50,000 per person for personal injury and up to $50,000 for property damage, as well as medical payments coverage in the amount of $5,000 per person.
Donna Sanders called TFM's Shelbyville office to report the accident two days after it occurred and was instructed to call the company's 800 number. The claims adjuster took statements from Claire Sanders and Tracy Neeley over the phone and prepared a claims form stating that Claire "did not have permission to drive vehicle."
However, the adjuster did not make any attempt to speak to Beth Neeley to better understand the circumstances that led to Claire Sanders' appearance behind the wheel of Tracy Neeley's car. Nor did he contact the State Trooper who had written up the accident report and who had issued citations to Claire Sanders and Tracy Neeley. He did not make any attempt to ascertain the extent of Wendy Leverette's injuries.
On February 4, 2009, TFM sent the Sanders a letter stating that its investigation showed that Tracy Neeley did not give Claire Sanders permission to drive the car and that she did not authorize Beth Neeley to give such permission. The letter then declared that Claire Sanders was not entitled to insurance coverage because of an exclusion in its policy that eliminated coverage for an auto not owned by the policyholders to the use, operation, or occupancy "without the permission of the owner or person or entity in lawful possession of the auto."
On February 13, 2009, counsel for Ms. Leverette and her husband Jason ("the Leverettes") sent a letter to the Sanders and to TFM's senior claims adjuster, Frank Smith, together with a then-unfiled complaint for damages against Claire Sanders. After stating that the Leverettes were reluctant to file a lawsuit against a minor child, the letter explained thatthe exclusion the insurance company was relying on was inapplicable because Claire Sanders was operating the vehicle "with the knowledge and permission of the owner's daughter, who was present in the car at the time of the collision." The letter also stated that if TFM did not respond, the complaint would be filed on March 2, 2009, and it demanded that the company pay the policy limits of its liability coverage. The proof showed that all the parties understood that the demand amounted to an offer to settle for the policy limits. Mr. Smith did not reply to the letter, nor did he forward the letter to TFM's lawyers, and TFM made no attempt to settle the claim.1
The Leverettes' complaint against Claire Sanders was filed on March 5, 2009 in the Bedford County Circuit Court. No answer was filed. The Leverettes filed a motion for default judgment and for a hearing on damages. Their counsel sent a copy of the default judgment motion to TFM, along with a letter stating that "I want to give Tennessee Farm Bureau one more opportunity to enter an appearance and defend your insured in this case."
Meanwhile, the Sanders had consulted with an attorney. He sent a letter to the Leverettes explaining that because Claire Sanders had no assets and no means to afford legal representation, and because her parents did not have adequate funds to afford legal counsel for their daughter, the attorney would not be defending the lawsuit. The attorney sent a copy of the letter and another copy of the complaint to TFM. Again, the insurance company did not respond.
The trial court conducted a hearing on the default judgment motion. The Sanders were subpoenaed, and they made a general appearance before the court, but did not offer a defense.2 The court heard evidence about Wendy Leverette's damages, including her testimony and that of her husband, and it examined deposition testimony from Ms.Leverette's doctor and documentary evidence in support of the Leverettes' claim. The court then entered a judgment against Claire Sanders in the total amount of $1 million.
On the same day that judgment was entered against Claire Sanders, her parents teamed up with the Leverettes by entering into a written agreement designed to vindicate the rights of both parties against the insurance company. The agreement provided that the two couples would cooperate with each other in any future proceedings against TFM for breach of contract or bad faith. The Leverettes agreed to pay all costs of litigation, to hold the Sanders harmless for any such costs, and not to sue the Sanders or to attempt to execute on the ...
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