Merrimack Mut. Fire Ins. Co. v. Batts

• Decision Date: 29 October 2001
• Parties: MERRIMACK MUTUAL FIRE INSURANCE COMPANY, v. Gloria C. BATTS.
• Court: Tennessee Court of Appeals

59 S.W.3d 142

MERRIMACK MUTUAL FIRE INSURANCE COMPANY, v. Gloria C. BATTS.

Court of Appeals of Tennessee, at Nashville.

May 15, 2001.

Permission to Appeal Denied October 29, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Raymond G. Prince, Nashville, TN, for appellant, Gloria C. Batts.

Parks T. Chastain, Nashville, TN, for appellee, Merrimack Mutual Fire Insurance Company.

Permission to Appeal Denied by Supreme Court October 29, 2001.

OPINION

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

This appeal involves a dispute between a homeowner and her insurance company regarding the damages to her house caused by the tornado that struck Nashville on April 16, 1998. When they could not agree on the amount of the loss, both parties invoked the insurance policy's provision for the appointment of appraisers. After the parties' two appraisers could not agree on the amount of the loss, the two appraisers selected a third appraiser who eventually agreed with the homeowner's appraiser regarding the amount of the loss. The insurance company filed suit in the Chancery Court for Davidson County, seeking a declaratory judgment that it was required to pay the homeowner less than one-half of the amount of the loss calculated by the two appraisers. Both parties filed motions for partial summary judgment. The trial court granted the insurance company's motion, concluding that the insurance policy's appraisal clause was not an agreement for binding arbitration and that the appraisers had not been empowered to determine whether parts of the claimed damage had been caused by a peril covered by the policy. The homeowner takes issue with both of the trial court's legal conclusions on this appeal. We have determined that the trial court interpreted the insurance policy correctly and, therefore, that the trial court properly concluded that the insurance company was entitled to a judgment as a matter of law.

Gloria Batts owns a two-story house in East Nashville. On April 16, 1998, her house was substantially damaged when a severe windstorm and accompanying tornado tore its way through Nashville. Ms. Batts notified Merrimack Mutual Fire Insurance Company ("Merrimack"), her homeowners casualty insurance company, that the tornado had damaged five bedrooms, the living room, a bathroom, a hallway, two porches, some fencing, and at least one outbuilding.

Although Merrimack's policy contemplated fairly prompt settlement of claims, Ms. Batts and Merrimack could not agree on the amount of her loss. The policy anticipated and provided a procedure for resolving just this kind of stalemate. Under a paragraph headed "Appraisal," the policy stated:

If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the "residence premises" is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.

In late June 1998, Ms. Batts retained George Keys of Howarth, Keys, Manley & Associates as her appraiser. Merrimack retained David Horton of Horton & Associates.

Mr. Keys placed the damage to Ms. Batts's property at $121,116.75. He characterized his appraisal as a "building estimate" that covered repair work, including replacing the hardwood floors, replacing windows, re-doing walls and ceilings, resetting bathroom fixtures, leveling the front porch, and replacing the chimneys, a sidewalk, and a paved driveway. Mr. Keys's estimate of the loss differed markedly from Mr. Horton's estimate. After deducting for depreciation of certain items, Mr. Horton determined that Ms. Batts's net loss was $11,457.28. This ten-fold difference between the two appraisers' opinions can be traced to the appraisers' differing views regarding the repairs that were traceable to the windstorm and tornado.

Because Mr. Keys and Mr. Horton were at an impasse, they appointed a third appraiser to act as the "umpire" envisioned by the appraisal clause in Ms. Batts's homeowners policy. At Mr. Horton's suggestion, they agreed on Alden Ward of MasterCraft MasterClean. Mr. Ward met with Messrs. Keys and Horton at Ms. Batts's house in late July 1998 to finalize the amount of Ms. Batts loss. The appraisers quickly fell to cross purposes. According to Mr. Horton, Messrs. Keys and Ward were attempting to decide whether the policy covered certain items of damage and whether Ms. Batts's claims might exceed the limits of her policy. Mr. Horton objected because he believed that their sole responsibility was to place a dollar amount on the property damage and that it was Merrimack's prerogative to determine which items of damage were covered by Ms. Batts's policy. Mr. Keys argued that the appraisers could not intelligently determine the amount of the damage without also determining whether the damage had been caused by the tornado. Mr. Ward sided with Mr. Keys.

Mr. Ward eventually submitted a property damage estimate to Merrimack stating that the "amount of loss due" under Ms. Batts's policy was $45,622.95. Mr. Keys agreed with Mr. Ward's estimate, but Mr. Horton did not. On November 9, 1998, Merrimack forwarded Ms. Batts checks totaling $21,070.85 to settle her claim. In an accompanying cover letter, Merrimack explained that it was not paying the full amount of Mr. Ward's appraisal because Mr. Ward's responsibility was limited to determining the amount of the loss and did not extend to deciding coverage questions. The letter also stated that Merrimack had reduced Mr. Ward's appraisal because (1) it included several items that had not, in Merrimack's opinion, been damaged by the tornado, (2) it included the replacement cost, rather than the actual cash value, of several items that had not been repaired, and (3) it had allocated $12,666.98 for items that had already been repaired for $7,045.90.

Ms. Batts declined to accept Merrimack's settlement checks because she believed she was entitled to the full amount of Mr. Ward's appraisal. On November 10, 1998, Merrimack filed suit in the Chancery Court for Davidson County seeking a declaratory judgment that its liability to Ms. Batts was limited to $21,070.85. Both parties filed motions for partial summary judgment on the coverage issues. On March 3, 1999, the trial court entered an order granting Merrimack's motion for partial summary judgment. The court rejected Ms. Batts's argument that Merrimack was bound by Mr. Ward's appraisal and held that Merrimack reserved the right under the policy to decide coverage questions after receiving the appraisal of the loss. The court also concluded that Merrimack was not obligated to pay the replacement cost of items that had not been repaired or replaced and that Merrimack was also entitled to reject the portions of Mr. Ward's appraisal that exceeded the amount actually spent to repair or replace the damage. Finally, the trial court certified its order as final under Tenn.R.Civ.P. 54.02 because it had not yet addressed the parties' dispute concerning whether the tornado had caused several of the claimed items of damage. Ms. Batts has appealed from this order.

I. THE STANDARD OF REVIEW

Summary judgments are proper in virtually any civil case that can be resolved on the basis of legal issues alone. Fruge v. Doe, 952 S.W.2d 408, 410 (Tenn.1997); Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn.1993); Church v. Perales, 39 S.W.3d 149, 156 (Tenn.Ct.App.2000). They are not, however, appropriate when genuine disputes regarding material facts exist. Tenn.R.Civ.P. 56.04. Thus, a summary judgment should be granted only when the undisputed facts, and the inferences reasonably drawn from the undisputed facts, support one conclusion-that the party seeking the summary judgment is entitled to a judgment as a matter of law. Goodloe v. State, 36 S.W.3d 62, 65 (Tenn.2001); Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 88 (Tenn.2000); White v. Lawrence, 975 S.W.2d 525, 529-30 (Tenn.1998).

Summary judgments enjoy no presumption of correctness on appeal. Penley v. Honda Motor Co., 31 S.W.3d 181, 183 (Tenn.2000); Burress v. Sanders, 31 S.W.3d 259, 262 (Tenn.Ct.App.2000). Accordingly, appellate courts must make a fresh determination that the requirements of Tenn.R.Civ.P. 56 have been satisfied. Hunter v. Brown, 955 S.W.2d 49, 50-51 (Tenn.1997); Mason v. Seaton, 942 S.W.2d 470, 472 (Tenn.1997). We must consider the evidence in the light most favorable to the non-moving party, and we must resolve all inferences in the non-moving party's favor. Memphis Hous. Auth. v. Thompson, 38 S.W.3d 504, 507 (Tenn.2001); Terry v. Niblack, 979 S.W.2d 583, 585 (Tenn.1998); Tamco Supply v. Pollard, 37 S.W.3d 905, 908 (Tenn.Ct.App.2000).

Questions relating to the interpretation of written contracts involve legal rather than factual issues. Brandt v. Bib Enters., Ltd., 986 S.W.2d 586, 592 (Tenn.Ct.App.1998); Rapp Constr. Co. v. Jay Realty Co., 809 S.W.2d 490, 491 (Tenn.Ct.App.1991). Insurance policies are contracts, and thus scope of coverage issues present questions of law. Pile v. Carpenter, 118 Tenn. 288, 296, 99 S.W. 360, 362 (1907); Pennsylvania Lumbermens Mut. Fire Ins. Co. v. Holt, 32 Tenn.App. 559, 566, 223 S.W.2d 203, 206 (1949). A declaratory judgment proceeding is an appropriate vehicle for deciding coverage questions, Standard Fire Ins. Co. v. Chester-O'Donley & Assocs., Inc., 972 S.W.2d 1, 5 (Tenn.Ct.App.1998), and, when the relevant facts are not in dispute, the legal issues...