# Manley v. Automobile Insurance Co. of Hartford

> Court of Appeals of Tennessee · April 22, 2005 · 169 S.W.3d 207

URL: https://www.frixlaw.com/law-library/cases/1054431

## Case

- **Full name:** Clay MANLEY v. THE AUTOMOBILE INSURANCE COMPANY OF HARTFORD, CONNECTICUT
- **Court:** Court of Appeals of Tennessee
- **Decided:** April 22, 2005
- **Citations:** 169 S.W.3d 207; 2005 Tenn. App. LEXIS 237; 2005 WL 941180
- **Precedential status:** Published
- **Opinion:** Opinion by Farmer
- **Judges:** Judge David R. Farmer
- **Cited by:** 3 later opinions in the Frix Law Library

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## Opinion text

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
March 3, 2005 Session

CLAY MANLEY v. THE AUTOMOBILE INSURANCE COMPANY OF
HARTFORD, CONNECTICUT

Direct Appeal from the Circuit Court for Davidson County
No. 00C-624 Carol Soloman, Judge

No. M2003-02654-COA-R3-CV - Filed April 22, 2005

This appeal arises from a claim for homeowner’s insurance benefits. In 1998, a tornado damaged
a home in East Nashville. The owner of the home held an insurance policy that provided coverage
for guaranteed replacement cost above the policy limit, once repairs had been completed. After the
insurer had paid the owner the actual cash value of the damage, the owner sold the home to the
plaintiff for $80,000. Along with the sale, the owner assigned to the plaintiff the rights to any claims
or proceeds under the insurance policy. The plaintiff, without making any repairs, began a process
of attempting to collect supplemental proceeds under the policy. After the insurer failed to respond
to the plaintiff’s demand for an appraisal, the plaintiff submitted two sworn statements in proof of
loss, claiming a total of $405,072.93 in replacement costs. The insurer rejected the plaintiff’s proofs
of loss, and this suit followed. Following a jury trial, the trial court entered judgment in favor of the
plaintiff for $405,072.93, in addition to $35,000 in damages for bad faith. Because we find that the
judgment entered by the trial court was the product of an inconsistent jury verdict, we vacate and
remand.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated; and
Remanded

DAVID R. FARMER , J., delivered the opinion of the court, in which ALAN E. HIGHERS, J. and HOLLY
M. KIRBY , J., joined.

Arthur E. McClellan, Gallatin, Tennessee, for the appellant, The Automobile Insurance Company
of Hartford, Connecticut.

John R. Jacobson and William D. Martin, Nashville, Tennessee, and Taylor A. Cates, Memphis,
Tennessee, for the appellee, Clay Manley.
OPINION

I. FACTS AND PROCEDURAL BACKGROUND

On April 16, 1998, a tornado passed through Nashville, Tennessee damaging a home owned
by Robert and Mary Faye Holt (collectively the “Holts”), located at 1715 Eastland Avenue in East
Nashville. The Holts maintained a homeowners’ insurance policy (the “Policy”) for their residence
(the “Property”) with the Appellant, The Automobile Insurance Company of Hartford, Connecticut
(“Hartford”). Although the Policy provided a coverage limit of $93,000 for the “dwelling,” the
Policy also contained a “Home Replacement Cost Guarantee” endorsement,1 which allowed the
insured to recover the full amount required to repair or replace the loss, once repairs were completed.

Soon after the tornado struck, the Holts retained a public insurance adjuster, Phil Breeden
& Associates (“Breeden”), to assist them in the preparation and presentation of their claim to
Hartford. By letter dated April 27, 1998, Breeden notified Hartford that the Holts had retained
Breeden and requested that Hartford direct further correspondence directly to him. Included with
the letter was a “Notice of Loss,” accompanied by a “Public Adjusters Notice and Loss Payable
Endorsement.”2 On July 23, 1998, in what represented the actual cash value payment of the Holts’
loss, Hartford issued two checks to the Holts. One check in the amount of $15,149.59 represented
the personal property loss, and a check in the amount of $34,544.07 represented the damage to the
dwelling. Hartford did not obtain a full release under the policy as a condition for these payments.
Although Hartford issued a $34,544.07 check for the depreciated value of the property damage,
Breeden stated in his testimony that he and Hartford negotiated replacement costs of $40,946.40.
In its letter which accompanied the actual cash value payment to the Holts, Hartford stated that
depreciation was recoverable upon completion of repairs and presentation of receipts. Besides
replacing windows and covering the damaged roof with a tarp, the Holts never made any substantial
repairs to the Property.

1
In a letter attached to the Policy, the Holts’ local insurance agent explained the “Home Replacement Cost
Guarantee” as follows:

You have chosen to insure your home for its full replacement costs. You’re covered if your home is
completely destroyed by any covered loss (even if the cost to rebuild is greater than the amount of
Coverage A shown on your policy). For more information and your obligations, please refer to this
endorsement in your policy.

In summary, the Home Replacement Cost Guarantee provided that Hartford would pay no more than the actual
cash value of the damage, which represents the depreciated value of the property, until actual repair or replacement was
complete. Once repair was complete, Hartford would pay no more than the smaller of the following: (1) the replacement
cost, without deduction for depreciation of all or part of the dwelling with the same type of construction and like kind
and quality materials at the same location; or (2) the amount actually and necessarily spent to repair or replace the
damaged building.

2
The “Public Adjusters Notice” served to notify Hartford that Breeden was representing the Holts and requested
Hartford to direct all correspondence to Breeden, rather than the Holts. The “Loss Payable Endorsement” directed
Hartford to include Breeden’s name on all payments issued in conjunction with the claim.

-2-
During the summer of 1998, the Appellee, Clay Manley (“Mr. Manley”), approached Mr.
Holt and spoke with him about representing the Holts with their insurance claim on the Property.
At the time, Mr. Manley was a principal in Howarth, Keys & Manley, Inc. (“HKM”), a firm of public
insurance adjusters. Mr. Holt informed Mr. Manley that the Holts were not interested in his services
because the Holts had retained Breeden to assist them with their claim. At some point thereafter,
the Holts contacted a real estate agent about selling the Property. Mr. Manley then expressed interest
in purchasing the Property, and Mr. Holt quoted him a selling price of $60,000. After reviewing the
Policy and discovering that it provided guaranteed replacement cost coverage, Mr. Manley offered
Mr. Holt $80,000 for the Property. On August 12, 1998, Mr. Manley and the Holts entered into an
“as is” contract for the sale of the Property with a purchase price of $80,000. In a separate document
(the “Assignment”) executed along with the sale, the Holts assigned to Manley their rights and
interests to any claims or proceeds under the Policy. Closing took place on August 28, 1998, and
the Holts conveyed the Property by warranty deed to Mr. Manley.

Shortly after he purchased the Property, Mr. Manley enlisted HKM to represent him in
making a supplemental claim on the Policy. By letter dated September 1, 1998 and an attached
“appraisal notice,” HKM notified Hartford that Mr. Manley was “invok[ing] the appraisal provision
of the policy.”3 In the September 1, 1998 letter, HKM also made the following request:

Your insured has requested that I immediately ask you to issue payment for the
amount, which you have offered them on this loss, which represents the undisputed
portion of the claim. Please forward payment directly to your insured immediately,
inasmuch as they need the funds to continue to mitigate their damages and to pay for
some of the numerous expenses they have incurred since the date of the loss.

This letter marks the first correspondence between Mr. Manley and Hartford related to the Property.
Prior to this point in time, the parties had not communicated regarding the Property, and,
consequently, there had been no disputes regarding any amount of loss. Hartford apparently neither
acknowledged Mr. Manley’s demand to invoke the “appraisal provision” of the Policy, nor did it
“issue payment for the amount, . . . which represent[ed] the undisputed portion of the claim.”

3
The “appraisal provision” of the Policy provides as follows:

If you and we fail to agree on the amount of loss, either one can demand that the amount of loss be set
by appraisal. If either makes a written demand for appraisal, each shall select a competent,
independent appraiser and notify the other of the appraiser’s identity within 20 days of receipt of the
written demand. The two appraisers shall then select a competent, impartial umpire. If the two
appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court
of record in the state where the residence premises is located to select an umpire. The appraisers shall
then set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount
agreed upon shall be the amount of loss. If the appraisers fail to agree within a reasonable time, they
shall submit their differences to the umpire. W ritten agreement signed by any of two of the three shall
set the amount of loss. Each appraiser shall be paid by the party selecting the appraiser. Other
expenses of the appraisal and the compensation of the umpire shall be paid equally by you and us.

-3-
Having received no response from Hartford, on October 6, 1998, HKM submitted two Sworn
Statements in Proof of Loss (“Proof(s) of Loss”) to Hartford, one for physical property damage and
another for loss of rental use. In the Proof of Loss for the “Dwelling and APS only,” Mr. Manley
attested that the Property had sustained damage in the amount of $383,472.93. Attached to the Proof
of Loss for the Property, HKM included an itemized, room-by-room estimate of the damage,
prepared by an adjuster who did not work for HKM. In the Proof of Loss submitted for loss of rental
use, Mr. Manley claimed the loss of the fair rental value of the Property for one year in the estimated
amount of $21,600. Interestingly, on October 6, 1998, in addition to submitting the two Proofs of
Loss, Mr. Manley entered into an agreement that granted HKM an option to purchase the Property
for the sum of ten ($10) dollars. However, just prior to the trial in this case, on April 21, 2003, Mr.
Manley sold the Property to Michael L. Lajoie for $110,000. Throughout the time he owned the
Property during the course of this dispute, Mr. Manley never made repairs to the Property.

On December 3, 1998, Hartford notified Mr. Manley in writing that it was rejecting both
Proofs of Loss because they failed to comply with the terms and conditions of the Policy, in as much
as the Proofs of Loss were not sworn to by the named insureds, i.e. the Holts. Hartford further
asserted that it had “fully compromised and settled” the claim by paying the Holts the sum of
$34,644.07. Additionally, the letter noted that Mr. Manley had misstated the amount of coverage
under the Policy, and Mr. Manley was not the owner of the Property on the date of the loss in
question.

On December 3, 1998, the same day that Hartford rejected Mr. Manley’s Proofs of Loss,
Hartford mailed, by certified mail with return receipt requested, a letter addressed to the Holts at
their former address, 1715 Eastland Avenue. In this letter, Hartford invited the Holts to file a
supplemental claim and return the attached blank Proof of Loss in accordance with the terms and
conditions of the Policy. On March 3, 1999, after the Holts had not returned a completed Proof of
Loss, Hartford mailed another letter, also by certified mail with return receipt requested, addressed
to the Holts at the 1715 Eastland Avenue address. In this second letter, Hartford informed the Holts
that they had failed to comply with the conditions provided under the Policy for filing a supplemental
claim, and, therefore, Hartford was taking the position that “any and all supplemental claims you
may have had . . . are herein denied.” The record reflects signed return receipts for both of these
letters, however, neither of the signatures are legible, and the printed name below the signatures
appears to read “P. Potter.”

After voluntarily dismissing the initial action brought in chancery court, Mr. Manley filed
a second complaint against Hartford in Davidson County Circuit Court on March 1, 2000. In his
complaint, Mr. Manley sought to enforce the arbitration and appraisal provision of the policy and
averred that Hartford’s refusal to participate in the appraisal process was in bad faith. Hartford
subsequently filed its answer denying that it owed any obligation to Mr. Manley under the Policy.
After the trial court denied Mr. Manley’s motion for partial summary judgment, Mr. Manley filed
his Rule 56.05 Motion For Entry of Findings. On December 17, 2002, the trial court entered an
order granting in part Mr. Manley’s motion. In that order, which purportedly narrowed the issues
for trial, the trial court entered the following findings:

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1. Defendant did not settle this claim upon its payment to the original insureds,
Mr. and Mrs. Robert Holt;

2. The amount set forth in Plaintiff’s Proofs of Loss ($405, 072.93) is
determined to be an accurate estimate of the amount of loss[;]

3. The primary issues remaining in this case are (1) whether Mr. Manley is the
proper party to bring a supplemental claim against the policy at issue in this
case . . .; and (2) if Mr. Manley is determined to be the proper party, the
timing of the payment [Hartford] must make to Mr. Manley.

Subsequently, Hartford filed a motion to alter or amend, asserting that the foregoing order was totally
erroneous in that it set forth findings that were never discussed. By agreed order entered February
24, 2003, a jury trial was set for June 16, 2003, and the issues raised in Hartford’s motion to alter
or amend were to be resolved by mutual agreement. However, if counsel for the parties were unable
to resolve the dispute, the agreed order provided that each would submit opposing briefs on the
disputed issues prior to the pre-trial conference, set for June 5, 2003, and the matter would be
resolved by the trial court at the pre-trial conference.

At the pre-trial conference, counsel for Hartford stated to the trial court that the issues raised
in its motion to alter or amend, including the issue of damages, had not been resolved. The trial
court, however, refused to entertain argument on these issues and ordered that the amount of
damages was set at $405,072.93. Just prior to trial, Hartford filed several motions, all of which were
denied by the trial court as being untimely filed.4

Following a two day jury trial, the jury returned its “Jury Verdict Form,” which responded
to a set of special interrogatories as follows:

QUESTION 1: Was the Automobile Insurance Company required to pay Clay
Manley’s supplemental claim?

Yes X No

If your answer to Question 1 is “No,” then you have found for the Automobile
Insurance Company and you should sign this form on the last page and return it to the
court. If your answer to Question 1 is “Yes,” then please answer Question 2.

4
It appears from the record that counsel for Hartford sent three motions by Federal Express overnight delivery
on June 12, 2003. However, the motions were not delivered and filed until the day of trial, June 16, 2003, after the trial
had begun. Therefore, the motions were not before the court when counsel attempted to argue the motions immediately
prior to trial.

-5-
QUESTION 2: Was the Automobile Insurance Company required to pay Clay
Manley the amount set forth in the proof of loss before the repairs were made to the
property or were they allowed to wait until after the repairs had been completed to
pay the cost of repairs?

Required to pay BEFORE repairs were made to property
X Required to pay only AFTER the repairs were completed

If your answer to Question 2 is “Before,” then you should skip directly to
Question 4. If your answer to Question 2 is “After,” please answer Question 3.

QUESTION 3: Did the Automobile Insurance Company waive any right it may have
had to require Mr. Manley to make repairs to the property before it paid the claim?

Yes No X

If your answer to Question 3 is “No,” then you have found for the Automobile
Insurance Company, and you should sign this form on the last page and return it to
the court. (emphasis added). If your answer to Question 3 is “Yes,” please answer
Question 4.

QUESTION 4: Did the Automobile Insurance Company engage in unfair or
deceptive acts or practices toward Clay Manley by refusing to pay for the cost of
repairs?

Yes X No

If your answer to Question 4 is “No,” then please skip directly to Question 7.
If your answer to Question 4 is “Yes,” then please answer Question 5.

QUESTION 5: Did Clay Manley suffer damages as a result of the Automobile
Insurance Company’s unfair or deceptive acts or practices?

Yes No X

If your answer to Question 5 is “No,” then skip directly to Question 7. If your
answer to Question 5 is “Yes,” then please answer Question 6.

QUESTION 6: What amount, if any, is Clay Manley entitled to recover from the
Automobile Insurance Company as damages resulting from the Automobile
Insurance Company’s unfair or deceptive acts or practices?

ANSWER: $

-6-
Please answer Question 7.

QUESTION 7: Was the Automobile Insurance Company’s failure to pay Clay
Manley for his loss done in bad faith?

Yes X No

If your answer to Question 7 is “No,” you should sign this form on the last
page and return it to the court. If your answer to Question 7 is “Yes,” then please
answer Question 8.

QUESTION 8: Did the Automobile Insurance Company’s failure to pay cause
additional expense, loss, or injury, including attorney fees upon Clay Manley?

Yes X No

If your answer to Question 8 is “No,” then you should sign this form on the
last page and return it to the court. If your answer to Question 8 is “Yes,” then please
answer Question 9.

QUESTION 9: What amount, if any, is Clay Manley entitled to recover from the
Automobile Insurance Company as damages for their bad-faith refusal to pay the
amount of Mr. Manley’s loss? This amount cannot exceed 25% of the amount of
loss, which is $101,268.23.

ANSWER: $ 35,000.00

On July 2, 2003, the trial court entered an order awarding Mr. Manley $405,072.93 in
damages for Hartford’s breach of contract and $35,000 in damages for bad faith. Subsequently, the
trial court awarded Mr. Manley $185,558.56 in prejudgment interest and $2,918.75 in discretionary
costs. Hartford filed a motion for new trial on July 31, 2003 and an amended motion for new trial
on September 17, 2003. The trial court denied both motions, and Hartford timely filed its notice of
appeal.

II. ISSUES

On appeal, Hartford raises twelve issues:

(1) Whether the trial court erred in not entering a judgment in favor of
[Hartford];

(2) Whether the trial court erred in entering a judgment against [Hartford] for
statutory bad faith;

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(3) Whether the trial court erred in determining general damages as a matter of
law and entering a judgment thereon;

(4) Whether the trial court’s misconduct during the trial demands a new trial;

(5) Whether the trial court erred in not hearing and not granting [Hartford’s] Rule
56 motion for summary judgment;

(6) Whether the trial court erred in denying [Hartford’s] motion for a dismissal
at the conclusion of Manley’s case in chief and at the end of the trial;

(7) Whether the trial court erred in granting Manley’s motion to dismiss
[Hartford’s] counter complaint;

(8) Whether the trial court erred in not permitting [Hartford] to amend its
affirmative defenses;

(9) Whether the trial court erred in not permitting [Hartford] to use party
depositions, party interrogatories and photographs in its case in chief;

(10) Whether the trial court erred in ruling Phil Breeden was not an indispensable
party and/or in failing to dismiss;

(11) Whether the trial court erred in ruling, as a matter of law, that no
settlement/accord and satisfaction took place and in failing to charge that
defense; and

(12) Whether the trial court erred in instructing the jury.

III. DISCUSSION

At the outset of its argument that the trial court erred in not entering judgment in its favor,
Hartford contests the validity of the Assignment between the Holts and Mr. Manley. In this case,
the Policy contained an anti-assignment clause, which prohibited the assignment of the Policy
without the consent of Hartford. Hartford essentially concedes that, despite an anti-assignment
provision, Tennessee law allows for an insured to assign the cause of action or proceeds payable
under an insurance policy, where the underlying loss that gives rise to the insurer’s liability has
previously occurred. See Ford v. Robertson, 739 S.W.2d 3, 5 (Tenn. Ct. App. 1987). However,
Hartford argues that, although the proceeds of the contract may be assignable, the contractual duties
and conditions between the insurer, Hartford, and the named insureds, the Holts, are not assignable.
Hartford contends that, despite the Assignment, the duty of the insured to meet the conditions for
coverage continued. Thus, in this case, Hartford argues that, because the Holts failed to file a

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supplemental claim or comply with the conditions for further payment, such as completing repairs,
Hartford was not under a duty to pay either the Holts or Mr. Manley.

We believe it is fairly well-settled that, in Tennessee, an insured may assign an insurance
policy after a loss has occurred, despite an anti-assignment clause purportedly prohibiting
assignments without the consent of the insurer. Zaharius v. Vassis, 789 S.W.2d 906, 910 (Tenn. Ct.
App. 1989); Ford, 739 S.W.2d at 5; Metro. Life Ins. Co. v. Brown, 160 S.W.2d 434, 437–38 (Tenn.
Ct. App. 1941). However, the assignee of the policy “stands in the shoes” of the assignor and
receives nothing more than what the assignor held. See Zaharius, 789 S.W.2d at 910–11. Although,
in this case, the Assignment was valid, Mr. Manley was still bound to meet the conditions for
coverage that existed under the Policy.

Turning now to the judgment entered on the jury verdict, it is necessary to detail some of the
events that transpired while the jury was deliberating. During its deliberations, the jury twice
announced that it was deadlocked, apparently as a result of “Question 3” of the verdict form. Over
Hartford’s objection and request for a mistrial, the trial court instructed the jury to proceed with the
rest of the special interrogatories and return to “Question 3” later. Accordingly, the record reflects
that the jury proceeded to answer the remaining questions, which involved Mr. Manley’s Tennessee
Consumer Protection Act and bad faith claims. In looking at the verdict form, the instruction which
follows “Question 3” clearly states that a “No” answer should lead to a finding for Hartford. The
instruction further provides that, if the jury answered “No” to “Question 3,” then it should sign the
form and return it to the court without answering the remaining questions. Here, the jury answered
“No” to “Question 3.” However, guided by the trial court’s instructions, the jury proceeded to
answer the remaining questions and, in doing so, we believe, reached an inconsistent verdict.
Illustrative of its confusion, upon reading its verdict in open court and after answering “No” to
“Question 3,” the jury foreperson asked the trial court, “do I continue,” to which the trial court
responded, “Yes.”

In the case of Concrete Spaces, Inc. v. Sender, 2 S.W.3d 901 (Tenn. 1999), the Tennessee
Supreme Court restated the law regarding defective verdicts:

Tennessee law is well-established that litigants are entitled to have their rights
settled by a consistent and intelligible verdict and that verdicts that are inconsistent
and irreconcilable cannot stand. See Milliken v. Smith, 218 Tenn. 665, 668, 405
S.W.2d 475, 476 (1966); Alabama Highway Express, Inc. v. Luster, 51 Tenn.App.
691, 696, 371 S.W.2d 182, 183 (1963); Penley v. Glover, 30 Tenn.App. 289, 292,
205 S.W.2d 757, 759 (1947). Where a judgment is based upon inconsistent findings
by a jury it is the duty of the appellate court to reverse and remand the case for a new
trial. [See McInturff v. White, 565 S.W.2d 478, 482]; Berry v. Foster, 199 Tenn. 352,
356, 287 S.W.2d 16, 18 (1955); Penley, 30 Tenn.App. at 292, 205 S.W.2d at 759.

A new trial is also warranted when verdict forms are composed in such a
faulty fashion that they do not address each of the plaintiffs’ theories of recovery and

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do not allow the jury to adequately respond to each claim. Well-settled law requires
courts to construe the terms of a verdict in a manner that upholds the jury’s findings,
if it is able to do so. See Briscoe v. Allison, 200 Tenn. 115, 125–26, 290 S.W.2d 864,
868 (1956). Even if a verdict is defective in form, it is to be enforced if it sufficiently
defines an issue in such a way as to enable the court to intelligently articulate a
judgment. See Arcata Graphics Co. v. Heidelberg Harris, Inc., 874 S.W.2d 15, 22,
27 (Tenn. App.1993).

Id. at 911.

After reviewing the verdict in this case, we can see no way that the trial court could have
intelligently articulated a judgment therefrom. Although Question “2” involves the interpretation
of the insurance policy and is, therefore, a question of law, State ex rel. Pope v. U.S. Fire Ins. Co.,
145 S.W.3d 529, 533 (Tenn. 2004), we believe that the jury correctly decided Question “2” in favor
of Hartford. The insurance policy at issue here provides a “Home Replacement Cost Guarantee,”
but the Policy is clear that the insurer is not under a duty to pay until after repairs have been
completed. In this case, it is undisputed that Mr. Manley never made the first repair, and the jury
reflected this finding in its verdict. Additionally, in answering “No” to Question “3,” the jury found
that Hartford had not waived any right it may have had to require Mr. Manley to make repairs before
it paid the claim. This finding is supported by the record as well, as there is nothing in the record
to suggest otherwise. Therefore, we believe that, at the point the jury answered “No” to “Question
3,” its job was finished. However, because the jury was instructed to complete the remaining
interrogatories, it reached an internally inconsistent result. In the remainder of its verdict, the jury
found that Hartford had engaged in unfair or deceptive practices by refusing to pay for the cost of
repairs, but Mr. Manley had suffered no damages as a result. Finally, the jury found that, despite its
finding that Hartford was not obligated to pay until after Mr. Manley had completed repairs,
Hartford’s failure to pay was done in bad faith. The jury then awarded Mr. Manley $35,000 in bad
faith damages. Here, the jury’s findings — that Hartford was, on one hand, not required to pay the
loss but, at the same time, acting in bad faith in failing to pay — are irreconcilable.

We do not believe that, in rendering a judgment for Mr. Manley, the trial court intended to
ignore the jury’s findings with regard to its answer to “Question 3.” Rather, from a review of the
record, it is apparent that there was considerable confusion among all parties throughout the course
of this trial, which led to the inconsistent verdict. As such, we are of the opinion that the verdict
from which the trial court entered its judgment was fatally defective, and the trial court’s judgment
rendered thereupon is likewise invalid. Accordingly, we vacate the judgment of the trial court and
remand this matter for a new trial.

In view of the foregoing conclusion, it would generally be unnecessary for us to address the
remaining issues presented by Hartford, as they would be pretermitted. However, we feel it is
important to address the issue of damages in this case in order to clarify this issue for purposes of
remand. As previously mentioned, during the pre-trial conference, the trial court ruled that Hartford
would not be allowed to contest the amount of damages at trial. Although it is certainly not clear

-10-
from the record exactly how the trial court arrived at this determination, we will nevertheless make
an attempt to interpret the proceedings below.

In his complaint, Mr. Manley never actually sought general damages, but rather sought to
enforce the appraisal provision of the Policy. In October of 2000, he filed a motion for summary
judgment, which was denied on November 12, 2002. Two days later, Mr. Manley filed a motion that
sought the entry of undisputed facts, and a hearing on this motion for the entry of findings was
scheduled to be heard on December 6, 2002. Exactly what took place on December 6, 2002 is not
clear, as there is no transcript and the record reflects that the attorneys for the respective parties have
conflicting accounts as to what was determined in that “hearing.”5 Regardless, on December 17,
2002, the trial court entered an order, which, among other things, established that “[t]he amount set
forth in [Mr. Manley’s] Proofs of Loss ($405,072.93) [was] determined to be an accurate estimate
of the amount of loss.” Following the entry of this order, Hartford filed a motion to alter or amend
the order, arguing that the order was completely erroneous and set forth findings that had never been
discussed. Hartford’s motion was heard on February 7, 2003, and by an agreed order entered
February 24, 2003, it was established that, among other things:

the issues raised in [Hartford’s] Motion to Alter and Amend shall be discussed by the
parties in an effort to resolve the disputes. However, in the event the disputes cannot
be resolved by the mutual agreement of the parties, [the parties shall submit briefs to
the Court on all unresolved issues before the pre-trial conference]. All matters not
otherwise resolved by agreement shall be resolved and determined by the Court at the
Pre Trial Conference which is scheduled for the 5th day of June, 2003.

When counsel for the parties appeared at the pre-trial conference, it was clear that the parties had not
reached any agreement that settled the amount of damages. Notwithstanding Hartford’s position,
the trial court ruled that the amount of damages set forth in its December 17, 2002, order was the law
of the case, and damages were no longer at issue for purposes of the trial. At the pre-trial
conference, counsel for Hartford and the trial court had the following exchange regarding the issue
of damages:

THE COURT: . . . . So, it looks like from that order the issues are pretty clear. Do
you have any - - do you want to respond to that?

ATTORNEY: Well, damages is one of the issues. The damages was never resolved
and has not been resolved.

5
Counsel for Hartford insists that, although argument on Mr. Manley’s motion was scheduled for December
6, 2002, the argument did not occur. Rather, when the case was called, the trial judge asked both attorneys to retire to
her chambers. At that point, counsel for Hartford contends that the trial judge and the attorneys merely discussed the
future handling of the case, and there was no argument or ruling on M r. Manley’s motion for entry of findings.

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THE COURT: Not the - - the amount is clear, it’s just if the damages are owed, if
that amount is owed.

ATTORNEY: No, ma’am, I disagree with that.

THE COURT: You can disagree all day long, that’s what the order says.

ATTORNEY: You’re ordering - -

THE COURT: That the jury will determine if they’re entitled to anything, and at what
value, is it before or after repair - - do they have to repair it to get it. But the amount
is not in dispute. It’s just are those the damages?

ATTORNEY: That’s my point, Your Honor, the amount is in dispute.

THE COURT: Well then, we’ll grant you an appeal at the end, but my judgment
stands. . . .

In his brief to this Court, Mr. Manley cites to Bard’s Apparel Mfg., Inc. v. Bituminous Fire
& Marine Ins. Co., 849 F.2d 245, 249 (6th Cir. 1988) for the proposition that, by refusing to
participate in the appraisal process throughout the course of this litigation, Hartford has waived its
right to contest the amount of the alleged loss. Bard’s Apparel and the other cases cited by Mr.
Manley are clearly distinguishable from this case for a number of reasons. In Bard’s Apparel, the
insurer and the insured had spent months in open negotiations over the adjustment of the loss.
Bard’s Apparel, 849 F.2d at 249. It was only after the insured gave notice of its intention to file suit
that the insurer attempted to invoke the appraisal process. Id. In the policy at issue in Bard’s
Apparel, an appraisal was a condition precedent to filing suit. Id. (emphasis added). The Court of
Appeals for the Sixth Circuit agreed with the district court and concluded that, under the
circumstances, the insurance company “not only waived its right to an appraisal as a condition
precedent to suit, but also waited an unreasonable length of time to the prejudice of Bard’s before
demanding an appraisal.” Id. (emphasis added). In the present case, the facts are completely reverse
to those in Bard’s Apparel. Here, the insured sought to invoke the appraisal provision at the outset
of his involvement with the insurer, long before there was any dispute or disagreement over the
amount of a loss. Moreover, the appraisal provision under the Policy in this case does not operate
as a condition precedent to suit. Therefore, we conclude that Bard’s Apparel and the other cases
cited by Mr. Manley are not applicable to the facts of this case.

After a thorough review of the record, we believe that the trial court erroneously set damages
as a matter of law in the amount estimated in Mr. Manley’s Proofs of Loss. The record reflects that
Hartford contested the trial court’s rulings on this matter, but, for some reason not wholly apparent
from the record, Hartford’s pleas were to no avail. The issue of damages in this case is a disputed,
factual issue that is material to the ultimate outcome of the case. Accordingly, we conclude that it
was error for the trial court to summarily determine that the amount of damages was not in dispute.

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Finally, we wish to address the trial court’s ex parte communication with the jury. Because
of the trial court’s order setting damages, there was little evidence of damages presented at trial.6
The jury was instructed that the amount of damages had been set pursuant to the trial court’s
December 17, 2002 order. Evidently, this establishment of damages concerned the jury. During its
deliberations, the jury specifically asked the trial court to change its ruling, and the trial court and
the jury discussed the issue of damages outside the presence of the parties or their attorneys. During
the deliberations, the trial court stated for the record the following ex parte communication, which
took place between the trial court and the jury:

The jury asked me if the damage award is set in stone. And I said, Yes, it
was. And they said, Could you change it? I said, I’m the only person that can change
it. Anything is a possibility. Just resolve this case and then leave that to us. So, I
wanted you to know that I said that, which is really strange.
They came back and said they were hopelessly deadlocked. . . .

Certainly, ex parte communication between the trial court and the jury is not favored. Holt
v. Parton, No. E2000-02695-COA-R3-CV, 2001 WL 987230, at *8 (Tenn. Ct. App. Aug. 29, 2001)
(no perm. app. filed). As the Holt court explained, however, every ex parte communication between
the trial judge and the jury is not reversible error. Id. at *8 (citing Spencer v. A-1 Crane Servs., 880
S.W.2d 938, 941 (Tenn. 1994)). However, “reversal is required where a timely complaining party
shows specific prejudice or where, owing to the nature of the ex parte communication, the reviewing
court is unable to determine whether the action was actually harmless.” Id. (emphasis in original)
(quoting Spencer, 880 S.W.2d at 941). In this case, we cannot make a determination from the record
whether the jury was influenced by the trial court’s response to its question regarding changing the
amount of damages. Therefore, we are unable “to determine whether the action was actually
harmless.” Spencer, 880 S.W.2d at 942. Thus, taken in combination with the confusing nature of
the verdict form and the trial court’s instructions to complete the interrogatories despite a finding
that Hartford was not required to pay Mr. Manley, we conclude that the ex parte communications
constitute reversible error.

IV. CONCLUSION

For the foregoing reasons, we vacate the judgment of the trial court and remand this matter
for further proceedings consistent with this opinion. Costs of this appeal are taxed to the Appellee,
Clay Manley, for which execution may issue if necessary.

___________________________________
DAVID R. FARMER, JUDGE

6
Although the trial court’s order eliminated damages as a contested issue, on two separate occasions during trial,
witnesses testified indirectly that the replacement cost for the Property would fall in the range of approximately $30,000
to $41,000.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1054431. Public record. Not legal advice.