State Auto Ins. v. Bishop, 98-00900
| Decision Date | 16 March 2000 |
| Docket Number | 98-00900 |
| Parties | STATE AUTO INSURANCE COMPANY, Plaintiff/Appellee, v. RAYMOND L. BISHOP, Defendant/Appellant. AppealIN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Filed |
| Court | Tennessee Court of Appeals |
APPEAL FROM THE CHANCERY COURT FOR LAWRENCE COUNTY No. 8250-96
THE HONORABLE JIM T. HAMILTON
AFFIRMED AND REMANDED
MICHAEL P. MILLS, MILLS & COOPER, NASHVILLE, TENNESSEE,
ATTORNEY FOR PLAINTIFF/APPELLEE
TOM W. MOORE, JR., MOORE & PEDEN, P.C., COLUMBIA, TENNESSEE, ATTORNEY FOR DEFENDANT/APPELLANT
State Auto Insurance Company ("State Auto") commenced this declaratory judgment action against its insured, Raymond Bishop, to determine whether Mr. Bishop failed to comply with conditions precedent to his recovery under a homeowners policy. Mr. Bishop counterclaimed, seeking unpaid proceeds from the policy and bad faith penalties. After the trial court found for State Auto, Mr. Bishop commenced this appeal. For the following reasons, we affirm.
On May 18, 1995, a tornado which State Auto classified as catastrophic hit Lawrence County, Tennessee, damaging Mr. Bishop's dwelling, outbuildings, and personal property. After Mr. Bishop notified State Auto of the damage on or about May 19, a claims representative, Jeff Lewis, was assigned to handle the claim. Mr. Lewis maintained that he initially contacted the Bishops on May 19. Due to the number of claims arising from the storm, Mr. Lewis was unable to retain a contractor who could make immediate repairs. He arranged for Tarpley Construction Company ("Tarpley Construction") to begin repairs to Mr. Bishop's property in late May or early June. Tarpley Construction commenced repairs on or about May 26.
During a May 25 telephone conversation with Mary Bishop, Mr. Bishop's wife, Mr. Lewis asked her to compile a price list of the damaged property. The next day, according to Mr. Lewis, Mr. Bishop called, "yelling and cussing" that no one had contacted him. Mr. Bishop purportedly ordered Mr. Lewis to "come down with his checkbook."
On July 7, State Auto sent agent Jo Oldenski to inspect the premises and the progress of the repairs. She reported that several outbuildings had not yet been repaired, but the roof and windows of the house were almost complete. Interior repairs to the drywall, paneling, and floor were finished. She reported that Mr. Bishop was dissatisfied with the roof repairs because the shingles did not extend to the edge of the roof. She also noted that the paneling color and floor pattern did not match the originals.
On August 2, 1995, State Auto issued a $15,178.33 check to Mr. Bishop. As part of the documentation for this payment, Tarpley Construction submitted a list of contents damaged by the storm. The list was of items Tarpley Construction arranged to be cleaned or repaired. The check covered these expenses as well as the construction work.
State Auto subsequently sought this check's return, claiming it should have been issued to Tarpley Construction for the repairs it made to the Bishops' property rather than to Mr. Bishop alone. Both Mr. Lewis and his supervisor, Larry Winters, arranged to visit and inspect the Bishop property on August 31 while retrieving the check. At some unspecified later date, State Auto paid Tarpley Construction directly for repairing Mr. Bishop's home. On July 20, 1995, Mr. Bishop signed a Completion Certificate which stated that the work by Tarpley Construction was satisfactorily completed.
It was learned at trial that on August 12, 1995, Mr. Bishop held an auction of his personal property, including a couch, table, chairs, shop and welding equipment, a lathe, sheet metal tools, automobiles and car parts, bushhogs, and other equipment. He purportedly earned approximately $17,000 from the sale. It is undisputed that Mr. Bishop did not notify State Auto of this sale. At trial, Mr. Bishop admitted that he disposed of a lot of personal property at this sale, but provided only a few receipts.
On August 31, before leaving for the previously arranged trip to the Bishops' house, Mr. Winters called to assure that the visit was convenient, to inform Mr. Bishop that he intended inspect anything Mr. Bishop desired, and to conclude the claim in its entirety. When Mr. Lewis and Mr. Winters arrived to retrieve the mistakenly issued check, Mr. Bishop refused to shake hands, to allow them to inspect the damage, to let them inside his home, to discuss the claim, or to return the check. When Mr. Winters asked for the list of damaged items, Mr. Bishop responded that it was not complete. The insurance men claimed Mr. Bishop cursed them, claimed to have cashed the check, and told them to leave.1 As they were leaving, they noticed a sign on the property which said "Ray's Machine Shop" or "Ray's Tool and Die." This raised a question about coverage because Mr. Bishop's policy did not cover outbuildings used in business.
Shortly thereafter, the Bishops sent State Auto a list of the property they lost in the tornado. On September 13, Mr. Winters responded by advising the Bishops that until they returned the $15,178.33 check, their claim would not be resolved. The letter also stated that upon receipt of the mistakenly issued check, they would be sent a $5,640 payment to cover damage to appurtenant structures. Mr. Winters's letter also informed the Bishops that:
The list of contents items you have submitted, will be in need of supporting documentation. For your convenience, we enclose an inventory form which will allow you to present additional information such as the date on which an item was purchased, the identity of the brand, make or model of the item involved, the original cost, and other information as is indicated on the form. It will also be necessary that you make each of these items available for inspection in order that we can determine the type and/or extent of damage sustained. It will also be required that you cooperate with us to provide information as to where these items were located when they were damaged as well as to identify the usage of these items as we request. We would also have questions regarding invoices from Ray's Machine and Tool Company. We would also have questions about charges you have shown for lodging. Especially we would question a charge on 5-2-95, when this loss occurred on 5-18-95. . . .
In separate correspondence that same day, State Auto notified the Bishops that it was canceling their insurance. State Auto issued a refund of $110. Mr. Lewis had recommended the cancellation of the Bishops' policy in an underwriting report in May, shortly after his first contact with Mr. Bishop. Mr. Lewis testified that Both Mr. Lewis and the contractor alleged that Mr. Bishop cursed them during almost every contact.
On September 20, 1995, Mr. Bishop responded to Mr. Winters's inquiry about the claim made for lodging charge on May 2, 1995. He stated that he written the wrong date on his claim and had incurred the motel bills in June, after the tornado.
On November 3, 1995, State Auto received the completed inventory form previously sent to the Bishops on September 13, which again listed their lost and damaged property. This second list included more items than the first list. In this second list, Mr. Bishop raised his estimate of the cost of some of the lost items included on the first list. For example, on the first list he valued a satellite system at $1,500. He increased his valuation to $2,500 on the second list and stated that the original cost was $3,500, although it was later learned that the system had been given to him. An entertainment center valued on the first list at $700 was estimated at $800 on the second. An air conditioner valued at $450 on the first list was listed as $650 on the second. In all, he increased the value of 25 items included on the second list. Virtually none of the items were reduced.
After hearing nothing from Mr. Bishop for several months, State Auto closed his file in February 1996. On March 6, 1996, Mr. Bishop sent State Auto the voided check for $15,178.33 which mistakenly had been issued to him. He testified that he held onto the check until it expired just to make his insurer wonder. State Auto never paid any remaining proceeds under the policy. Mr. Bishop subsequently retained counsel, who demanded payment on November 12, 1996.
State Auto filed the underlying declaratory judgment action on December 18, 1996, alleging that Mr. Bishop failed cooperate with the terms and conditions of the policy. Specifically, State Auto asserted that Mr. Bishop refused to meet with its agents to resolve the claim, failed to provide an inventory of items until November 3, 1995, and thereafter made no contact for over one (1) year. The complaint sought a declaration that Mr. Bishop was not entitled to receive any proceeds under the policy.
Mr. Bishop answered and counterclaimed, alleging fraud based upon State Auto's assertion that after the $15,178.33 check was returned, his claim would be processed. Mr. Bishop also alleged bad faith failure to pay.
At trial, Mr. Bishop admitted that he had submitted receipts from his business, Ray's Machine and Tool, to State Auto for "outside electrical work." The receipts, which totaled over $200, were for power poles and a security light, which he had on hand, and for labor, although he admitted that he incurred no labor costs. Mr. Bishop had not paid the amounts on the receipts. He also admitted that he sought his policy limits for additional living expenses without establishing that he actually spent that amount and that he listed $3,000 in debris removal, despite the fact that he only paid $100. He admitted that when he sent the list of allegedly damaged personal property to State Auto in November 1995,...
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