Articles Posted in Insurance Litigation

Besides the statutes of limitations which have been enacted as laws by the Tennessee legislature, there is a second type of statutes of limitations.  Many insurance policies contain terms which require an insured or policy owner to file a lawsuit within a certain amount of time. Anyone with a breach of contract claim, or other claim, arising from an insurance policy must be very, very aware of the limitations periods for filing lawsuits which are contained in insurance policies and how they work.

In Tennessee, limitations periods clauses in insurance policies are valid and enforceable even though many such clauses will bar a lawsuit unless it is filed within a period of time which is substantially shorter than Tennessee law would otherwise require.  For example, in most insurance policy lawsuits, the main claim of the insured is that the insurance company is liable for breach of contract for not paying the claim.  Under Tennessee law, a person has a full six years to file a breach of contract lawsuit.  Many insurance policies, however, have provisions that essentially require a lawsuit to be filed within one year.

For either a statute of limitations made by state law or one made by an insurance company and placed in a policy, you need to know when the limitations period started.  The day when the limitations period started is referred to as the “accrual of the cause of action.” When courts and lawyers talk about the date the cause of action accrued, they are referring to the date that the limitations period began to run — the date when the clock began to tick.

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In many, if not most, of the cases in which I am involved, I end up explaining to clients what a summary judgment motion is and how a summary judgment might affect their case.  The concept of a summary judgment is a pretty simple thing.  If a summary judgment is entered by the judge, then, barring a reversal of that ruling, the case will never go to trial before a judge or jury.  A summary judgment ends the case.

Summary judgments (and summary judgment motions) fall into two broad categories: (1) Summary judgments (which are entered as the result of motions for summary judgment); and (2) partial summary judgments (which are entered as the result of motions for partial summary judgment).  With some frequency, parties to a lawsuit will file motions for partial summary judgments.  A motion for partial summary judgment requests that the judge end the case just as to some of the claims or causes of action by dismissing them, but not as to all of the claims or causes of action.  For example, if a plaintiff has filed a complaint with three causes of action like breach of contract; fraud; and intentional interference with contract, the defendant may file a motion for partial summary judgment asking the judge to dismiss the fraud and intentional interference claims, but not the breach of contract claim.  If the judge grants the motion for partial summary judgment and dismisses the fraud and intentional interference with contract claims, then only the breach of contract claim will proceed to trial.

It happens frequently that a party will file a motion for summary judgment on all claims, and the court will dismiss only some of the claims.  In my practice, which is typical of most Tennessee trial lawyers with whom I have spoken, summary judgment motions are filed most of the time by defendants seeking to dismiss claims filed against them or some of the claims filed against them.  However, plaintiffs (the parties who file lawsuits) may also file motions for summary judgment. I have been involved in quite a few cases where I represented a plaintiff, filed a motion for summary judgment, and the judge ruled that my client should be granted a summary judgment.

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Regardless of what unfounded promises and misrepresentations are made by insurance companies and their agents about the scope or type of coverage purchased, an insured may well be able to use the principles of waiver or estoppel to hold an insurance company to its promises.  This may be the case even if the loss in question is technically not covered by the insurance policy or even if it is expressly excluded.

In the watershed opinion of Bill Brown Construction v. Glen Falls Insurance Co., the Supreme Court of Tennessee held that an insured may use waiver or estoppel to void any provision in an insurance policy that would otherwise prevent the insured from being covered. In the Glen Falls case, the insured was a business (“Business”) which specialized in transporting cargos which were too big to be transported on conventional trailers.  The Business requested a “full coverage policy” from the Insurance Company.  In the process of obtaining the “full coverage policy” which it requested, the owner of the business showed pictures to the Insurance Company’s agent of the type of equipment which it hauled.  The pictures showed equipment which substantially exceeded the height of the tractor-trailers on which it was located.

The owner of the Business testified that the Insurance Company’s agent told him that his company “had full coverage.”  The Business was transporting an asphalt dryer on a tractor-trailer when the asphalt dryer hit an overpass near Nashville.  The asphalt dryer was knocked off of the trailer and badly damaged.  The tractor-trailer on which it was being hauled did not make contact with the overpass and was not damaged.

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Most business people I know are too busy to read their insurance policies.  So, they rely on their insurance agents to make sure that they buy the kind of insurance coverage which they need.  Insurance agents and insurance companies are quite capable of miscommunicating and making mistakes.  So, sometimes, insureds make claims only to be told by the insurance company that they did not purchase the type of coverage or amount of coverage which they thought that they had purchased.

Luckily for those who purchase insurance policies in Tennessee and don’t read them, Tennessee courts can step in and help an insured who thought it had purchased coverage which it needed when it turns out that it did not.  Two cases in which insurance companies were held liable to insureds even when the lack of coverage could have been discovered by the insureds had the insureds read their policies are Allstate Ins. Co. v. Tarrant (Tenn. 2012) and Cleveland Custom Stone v. Acuity Mutual Ins. Co. (Tenn. Ct. App. 2014).

In the Tarrant case, the insured told his agent to place his business vans under his commercial policy.  The agent goofed and added the vans to the insured’s personal policy which had lower limits.  The Supreme Court held that the insurance company was required to provide the higher limits of coverage under the commercial policy because the agent had made the mistake.  The insurance company argued, unsuccessfully, that the mistake of the agent could have been discovered by the insured if only the insured had read his policies.

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In a breach of contract case involving a subcontractor’s claim against a general contractor, Skelton v. Freese Const. Co., Inc., the Court of Appeals of Tennessee recently ruled that the general contractor did not waive its right to require that the case be arbitrated, and reversed the trial court on that issue. The trial court had ruled that the general contractor had waived its right to require arbitration by participating in the litigation in the trial court before filing a motion to compel arbitration.

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Parties in negotiations sometimes make offers and counter-offers, but do not specify by when their offers must be accepted by the other party. When that happens, one party might accept an outstanding offer and then be told by the other party that the acceptance was too late to be effective. If the party who accepted the offer files a breach of contract lawsuit, how will a court in Tennessee determine how long the offer remained open for acceptance?

In Tennessee breach of contract cases involving offers that did not specify how long they were open for acceptance, Tennessee courts will apply the rule of reasonableness. Under that rule, an offer that did not specify for how long it remained open will be deemed to have remained open for a reasonable period of time. That guideline begs the question that is so often begged in legal matters: What is reasonable?

Under Tennessee law, to determine the reasonable period of time that the offer should be deemed to have stayed open, a court must look at the situation and circumstances involved in the case. Since every breach of contract case filed in a Tennessee court has unique facts and circumstances, what was a reasonable period of time for acceptance will vary from case to case. Here are three Tennessee cases which provide some insight into what facts and circumstances a court might consider in determining the period of time for which an offer remained open.

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In a recent breach of contract case and fraud case arising out of a commercial lease for a doggy day care facility in Nashville (Dog House Investments, LLC v. Teal Properties, Inc.), the Court of Appeals of Tennessee discussed several areas of Tennessee law including: (1) The law related to piercing the corporate veil; (2) the law of breach of contract in commercial lease cases; (3) fraud; and, (4) the award of punitive damages in commercial disputes. For Tennessee lawyers who handle breach of contract cases and piercing the veil cases, the opinion is a worthwhile read.

Here are the facts of the case:
• An individual named Jerry Teal (“Teal”) owned a commercial building in Nashville, Tennessee
• Although Jerry Teal owned the building, he leased it through a corporation of which he was the sole owner (“Corporation”)
• The tenant (“Tenant”) which signed the lease with Corporation for the building was an LLC
• The lease agreement between Tenant and Corporation required Corporation to make all repairs to the building
• The May 2010 flood in Nashville caused substantial flooding and damage to the building
• Tenant immediately notified Teal of the damage
• Because it was critical to Tenant’s business that the water removal and repairs be done quickly, Tenant began handling the water removal and repairs with the knowledge and consent of Teal
• Teal informed Tenant that the building was covered by insurance
• Teal engaged in a series of conduct that unquestionably led Tenant to believe that Teal would submit a claim to the insurance company for repairs made by Tenant and that Tenant would be reimbursed
• Tenant paid for $39,000 in repairs and submitted documentation to Teal so that he could submit a claim to the insurance company
• Teal submitted a claim to the insurance company and Corporation received over $40,000 from it
• Teal never paid Tenant any money and concealed that the insurance company had paid Corporation anything
• The insurance money paid to Corporation was used by Teal for his individual purposes

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Whether you are involved with a breach of contract case, will dispute case, real estate case or any type of commercial litigation case in a Tennessee court, you can help yourself by knowing a little about the basic rules of evidence that apply in Tennessee state court cases. In my experience, many clients assume that some piece of evidence will be admissible at trial when it will not be admissible.

The Tennessee Rules of Evidence act like a filter. While there may be all kinds of statements and documents related to a dispute, the odds are that some, even many of those statements and documents, will not be admissible at trial. They get “filtered” from the courtroom by the Tennessee Rules of Evidence. Here are a few basic rules of evidence in Tennessee of which it would behoove any party to have at least passing knowledge.

FIRST-HAND KNOWLEDGE: In order to be allowed to testify about a matter, a witness must have first-hand knowledge of the matter. Let’s assume there is a breach of contract case in Tennessee in which Defendant contracted to provide computer programmers to Plaintiff for work on a project which was the subject of a separate contract between Plaintiff and its client (“Client”). The programmers worked on-site with Client and directly under Client’s supervision. The programmers, according to Client, did not have adequate experience or skills and performed inadequately. Because of that, Client cancelled the contract between it and Plaintiff which resulted in Plaintiff losing substantial profits.

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A jury in Bradley County, Tennessee handed down substantial punitive damages award and compensatory damages award against Erie Insurance Exchange (“Erie”) in a case involving its failure to pay a claim for losses arising from vandalism and theft at apartment units which it insured. The case is a must read for lawyers who handle insurance policy cases and bad faith failure to pay cases. Why? First, the case is highly unusual because the jury in the case awarded punitive damages on a breach of contract claim.

In my experience, punitive damages are rarely, if ever, awarded by Tennessee juries merely for a party’s breach of a contract. In fact, for better or for worse, they are awarded much less often, even in cases involving fraud and intentional torts, than most lay people would expect.

The case is also important because it is sound authority for the position that an insured can receive more in compensatory damages for an insurance company’s failure to pay a claim than just the amount of the amount of the claim made by the insured, but not paid, plus the statutory 25% percent penalty for bad faith failure to pay.

The Court of Appeals of Tennessee, in a case involving the litigation of a commercial general liability policy (“CGL policy”), issued an opinion that is helpful for those trying to understand the coverage parameters of commercial general liability policies. Commercial general liability policies are perhaps the most prevalent and common type of policies carried by businesses, but they provide markedly different coverage and protection than do errors and omissions policies (“E & O” policies).

The case involved a financial advisor who had advised some clients to invest in promissory notes. The promissory notes became worthless. The investors sued the estate of the financial advisor (who had passed away by the time the lawsuit was filed). The investment advisor’s business had been covered by a commercial general liability policy issued by Nationwide.

The personal representative of the estate of the investment advisor made a claim against the Nationwide CGL policy. As frequently happens in insurance policy litigation, Nationwide filed a declaratory judgment action in Chancery Court. Nationwide argued that it had no duty to defend the estate of the investment advisor or to provide any coverage for the claimed losses.

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