Morrison v. Allen, M2007-01244-SC-R11-CV
| Decision Date | 16 February 2011 |
| Docket Number | No. M2007-01244-SC-R11-CV,M2007-01244-SC-R11-CV |
| Parties | KRISTEN COX MORRISON v. PAUL ALLEN et al. |
| Court | Tennessee Supreme Court |
Appeal by Permission from the Court of Appeals, Middle Section
Chancery Court for Davidson County
Claudia Bonnyman, Chancellor
Insurance provides an important hedge against the uncertainties of life. It is a vital part of any individual's or family's financial planning because it provides a mechanism for spreading the risk of potential future losses. In most circumstances, persons seeking insurance coverage rely on the expertise of professional insurance agents to assist them in obtaining the desired and appropriate coverage. This appeal provides an opportunity for this Court to address and refine the principles applicable to claims against insurance agents for failure to obtain insurance coverage for their customers.
J. Howard Morrison and Kristen Cox Morrison were married in 1997. In March 2000, Mr. Morrison purchased a $300,000 term life insurance policy from First Colony Life Insurance Company. This policy, like most life insurance policies, contained a standard incontestability clause stating that the policy would not be contestable "[w]ith respect to statements made in the application" after the policy had "been in force during the Insured's lifetime for a period of two years beginning with the Date of Issue shown in the Schedule."
The Morrisons' son was born on March 18, 2002. The contestability period for Mr. Morrison's First Colony policy expired four days later on March 22, 2002. Later in 2002, Mr. Morrison was arrested and charged with driving while intoxicated. He pled guilty to driving while impaired in December 22, 2002 and was required to drive with a restricted license for one year.
Following the birth of their son, the Morrisons decided that they should prepare a financial plan to enable them to begin putting money aside for their son's college education and for their retirement. They eventually decided to obtain professional assistance from Jody Roberts, one of Mr. Morrison's golfing buddies, and Paul Allen. Messrs. Roberts and Allen worked for Wiley Bros.-Aintree Capital, LLC as financial planners and stockbrokers. They were also licensed life and health insurance agents, although neither of them had extensive experience selling life insurance.
Mr. Morrison met with Messrs. Roberts and Allen for the first time on January 29, 2004. At that time, Mr. Morrison discussed his family's goals and objectives with them and informed them that he had purchased a $300,000 term life insurance policy in 2000 and that he and his wife owned no other life insurance. Following this conversation, Messrs. Roberts and Allen told Mr. Morrison that they would present their recommendations to the Morrisons at a later meeting.
Mr. Roberts met with both Mr. Morrison and Ms. Morrison on February 10, 2004, to present the financial planning recommendations he and Mr. Allen had prepared. Among other things, he recommended that Mr. Morrison replace his $300,000 term life insurance policy with a $1,000,000 term life insurance policy from American General Life Insurance Company and that the Morrisons also obtain a $250,000 American General term life insurance policy on Ms. Morrison. The annual premiums for these two policies were approximately the same as the premiums Mr. Morrison had been paying for his existing $300,000 life insurance policy. Mr. Roberts cautioned Mr. Morrison against dropping his existing $300,000 life insurance policy until his new policy was issued.
The Morrisons decided to obtain the new American General life insurance policies. Even though Mr. Roberts did not have the applications for the new policies with him at the February 10, 2004 meeting, he obtained some of the basic information from the Morrisons that was needed to complete these applications. Mr. Roberts passed along this information to Mr. Allen who assumed the responsibility for completing the applications for the Morrisons' new life insurance policies. According to Mr. Allen, he had separate telephone conversations with Mr. Morrison and Ms. Morrison to obtain the additional information needed to complete the applications.
In late February 2004, Mr. Allen mailed a packet of documents to the Morrisions containing the completed life insurance applications and a "Notice Regarding Replacement." Each application contained an adhesive message flag indicating where the Morrisions were to sign their applications. Ms. Morrison estimated that she and her husband received these documents between February 23 and February 25, 2004. Ms. Morrison also testified that sheand Mr. Morrison signed their applications for insurance on February 27, 2004, without reading or even scanning the applications or the accompanying documents.1
M essrs. Roberts and Allen obtained the signed applications for insurance and forwarded them to American General Life Insurance Company. Unfortunately, Mr. Morrison's application contained a significant error. Despite the fact that Mr. Morrison had been convicted of driving while impaired on December 22, 2002, his application stated that he had not been charged with or convicted of driving under the influence of alcohol or drugs or had any driving violations within the past five years.2
On May 7, 2004, the Morrisions met with a nurse who had been retained by American General to obtain their personal health information and to collect samples of bodily fluids to complete Part B of their application for insurance. Part of this process included the completion of a Clinical Reference Laboratory form.3 In his answer to one of the questions on this form, Mr. Morrison stated that his driver's license had been restricted within the past five years.4 The record does not contain evidence regarding the ultimate disposition of this form once it was signed by Mr. Morrison and the examining nurse.
The Morrisons' new life insurance coverage with American General became effective on May 11, 2004. On June 8, 2004, the Morrisons acknowledged in writing that they had received copies of their new American General policies. On June 14, 2004, Mr. Allenforwarded to American General the Morrisons' check for the first year's premiums for both policies. The Morrisions did not read or review their new policies after they received them. Both of these policies contained a standard clause relating to contestability that stated: "Except for nonpayment of premiums, we will not contest this policy after it has been in force during the lifetime of the insured for two years from the date of issue."
Mr. Morrison was seriously injured in a single vehicle accident on July 11, 2004, little more than one month after receiving his new American General life insurance policy. He died on July 12, 2004. Messrs. Roberts and Allen assisted Ms. Morrison in filing a claim for benefits with American General. On October 28, 2004, after investigating the claim, American General informed Ms. Morrison that it had rescinded Mr. Morrison's policy because he had stated on his application for insurance that he had not been charged with or convicted of driving under the influence of alcohol or drugs or that he had any driving violations within the past five years, even though he had been convicted of driving while intoxicated in December 2002.
On June 9, 2005, Ms. Morrison filed suit in the Chancery Court for Davidson County against Messrs. Roberts and Allen, American General, and Wiley Bros.-Aintree Capital, LLC. She filed an amended complaint on June 21, 2005 and a second amended complaint on March 16, 2006. These complaints asserted claims sounding in negligence, negligent misrepresentation, breach of contract, breach of fiduciary duty, and violation of the Tennessee Consumer Protection Act and sought the recovery of $1,000,000-the amount of coverage under Mr. Morrison's American General life insurance policy-and treble damages and attorney's fees under the Tennessee Consumer Protection Act.
In relatively short order, Ms. Morrison agreed to settle all her claims against American General in return for a payment of $900,000. Ms. Morrison signed a general release on May 2, 2006. On May 17, 2006, the trial court entered an agreed order dismissing all of Ms. Morrison's claims against American General with prejudice.
The claims against Messrs. Roberts and Allen and the remaining defendants5 were tried without a jury from January 29 through January 31, 2007. The trial court ruled from the bench shortly after the close of the proof and the arguments of counsel. The court concluded that the defendants breached their contract with the Morrisons by failing to procure an enforceable $1,000,000 life insurance policy on the life of Mr. Morrison. Accordingly, the court awarded Ms. Morrison $1,000,000 plus prejudgment interest. The trial court also concluded that the defendants were liable to Ms. Morrison for breach of fiduciary duty, negligence and misrepresentation for the loss of the coverage under Mr. Morrison's $300,000First Colony life insurance policy. Accordingly, the court awarded Ms. Morrison an additional $300,000. Finally, the trial court determined that the defendants violated the Tennessee Consumer Protection Act and acted recklessly by submitting "faulty information" to American General on behalf of the Morrisons. Based on this finding, the trial court awarded Ms. Morrison her attorney's fees and doubled6 her recovery for the loss of the coverage provided by Mr. Morrison's $300,000 First Colony life insurance policy.
On March 8, 2007, the trial court entered a final judgment for Ms. Morrison in the amount of $2,119,541.17. With regard to the breach of contract claim, the trial court awarded Ms. Morrison $ 1,000,000-the amount of coverage that would have been provided under Mr. Morrison's American General life insurance policy-and $247,120.94 in...
To continue reading
Request your trial