The opinion
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
______________________________________________
WILLIAM KENNETH SIMS and
wife EDNA W. SIMS,
Plaintiffs-Appellees,
Gibson Circuit No. 7177
Vs. C.A. No. W1998-00560-COA-R3-CV
EDDIE STEWART, JR. and
TENNESSEE FARMERS MUTUAL
FILED
INSURANCE COMPANY,
December 15, 1999
Defendants-Appellants.
Cecil Crowson, Jr.
____________________________________________________________________________
Appellate Court Clerk
FROM THE GIBSON COUNTY CIRCUIT COURT
THE HONORABLE DICK JERMAN, JR., JUDGE
T. J. Emison, Jr., of Alamo
For Plaintiffs-Appellees
Wesley A. Clayton, Greg A. Petrinjak;
Waldrop & Hall, P.A., of Jackson
For Appellant, Tennessee Farmers Mutual Insurance Company
AFFIRMED AS MODIFIED
Opinion filed:
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
ALAN E. HIGHERS, JUDGE
HOLLY KIRBY LILLARD, JUDGE
This case, which is before us a second time, involves a dispute concerning the amount
due under an uninsured/underinsured motorist insurance policy. Defendant/Appellant,
Tennessee Farmers Mutual Insurance Company, appeals the order of the trial court awarding
$198,046.43 in damages to the Plaintiff/Appellee, Kenneth Sims, and directing defendant to pay
plaintiff the sum of $61,862.57($100,000 policy limit minus $38,137.43 previously paid in
partial satisfaction of judgment.)
The circumstances leading to this appeal are set out in Sims v. Stewart, 973 S.W.2d 597
(Tenn. App.1998); therefore, a brief recitation of the facts will suffice. Kenneth Sims, while
engaged in the scope of his employment as a Deputy Sheriff, was injured when he was struck
by a car driven by Eddie Stewart. Sims’s complaint against Stewart sought $250,000.00 in
damages. Tennessee Farmers, the plaintiff’s uninsured motorist carrier, was named as a
defendant and served with a copy of the complaint. Tennessee Farmers’s answer asserted policy
limits of $100,000.00 per person and pled as a defense that it was entitled to a credit or reduction
of payment for any workers compensation benefits paid to plaintiff pursuant to the provision of
the Tennessee Farmers’s policy with plaintiff. The workers compensation insurer for Sims’s
employer paid benefits totaling $61,862.57.
Stewart’s liability carrier paid its coverage limit of $25,000.00 in settlement. The parties
stipulated, among other things, that Stewart would be released, the workers compensation carrier
would accept in full settlement of its subrogation claim the $25,000.00 paid by Stewart’s carrier,
and that Tennessee Farmers would pay its limits of uninsured motorist coverage less proper
credit for the workers compensation payment.
The issue for review in the first appeal was whether Tennessee Farmers should have a
credit for the total amount of the workers compensation benefits paid, or whether its credit
should be the amount of the workers compensation payments made, less the $25,000.00 received
by the workers compensation carrier. This Court concluded that Tennessee Farmers was entitled
to receive credit for the entire amount paid by the workers compensation carrier, but that under
the terms of the policy, the workers compensation benefits reduced the amount of damages
payable to the insured under the underinsured motorist coverage. Since the trial court did not
consider or make any finding as to the damages, this Court remanded the case to the trial court
in order to determine damages and, thus, reach a decision regarding the amount due the insured
under the underinsured motorist coverage.
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Upon remand, the trial court, after an evidentiary hearing, found plaintiff’s damages to
be $198,046.43. The Court further found that the amount of workers compensation benefits paid
to or on behalf of the plaintiff was $61,862.57. The Court then subtracted $61,862.57 from the
total damage award of $198,046.43 and found that the resulting amount exceeded Tennessee
Farmers’s policy limits of $100,000.00. Therefore, the Court found that Tennessee Farmers
would be responsible for paying a total judgment equal to its limits of $100,000.00.
Tennessee Farmers appeals the trial courts ruling and in its brief asks this Court to
consider three issues: (1) whether the trial court erred in its application of Tennessee law
regarding the workers compensation offset provision contained in the Tennessee Farmers’s
policy (2) whether the trial court erred in failing to properly apply stipulations entered into prior
to this trial and (3) whether the trial court’s finding of damages totaling $198,046.43 is supported
by a preponderance of the evidence.
Plaintiff asserts that the first two issues were resolved in the first appeal, and pursuant
to the ruling of this Court, is the law of the case. While we agree with plaintiff’s analysis of the
law of the case doctrine, we do not agree that it applies as argued by plaintiff. This Court
determined on the first appeal that the reduction for workers compensation benefits is applied
to damages and not to the coverage limit. The Court felt that a determination of damages was
essential considering the provisions of the insurance policy. The insurance company’s obligation
is premised upon damages, and it states:
We will pay only compensatory damages which a covered
person is legally entitled to recover from the owner or operator of
an uninsured motor vehicle. . . .
Thus, to determine an obligation on the part of Tennessee Farmers to pay under its policy, there
must be a finding that the Tennessee Farmers’s insured is legally entitled to recover damages.
Under the policy, Tennessee Farmers’s payment responsibility is determined by the amount of
damages assessed, either by way of settlement or by court award. In the instant case, the trial
court assessed damages at more than the policy limit of $100,000.00, and after deducting the
workers compensation benefits paid in the amount of $61,862.57, the Court concluded that
Tennessee Farmers was obligated to pay the policy limits of $100,000.00. Therefore, we must
determine if the trial court’s conclusion is consistent with the policy provisions that govern the
amount to be paid by Tennessee Farmers.
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In construing contracts, the words expressing the parties' intentions should be given the
usual, natural, and ordinary meaning, and in the absence of fraud or mistake, a contract must be
interpreted and enforced as written, even though it contains terms that may be thought harsh and
unjust. Ballard v. North American Life & Casualty Co., 667 S.W.2d 79, 82 (Tenn. App. 1983).
In Blaylock & Brown Construction, Inc. v. AIU Insurance Co., 796 S.W.2d 146 (Tenn.
App.1990), this Court discussed the interpretation of insurance contracts:
Insurance contracts like other contracts should be construed so as
to give effect to the intention and express language of the parties.
(citations omitted). In construing and applying insurance
policies, the apparent object and intent of the parties must be kept
in mind. (citations omitted). Language in a contract which
happens to be technical or complex to the layman, does not render
it ambiguous, (citations omitted) and where there is no ambiguity
it is the duty of the court to apply to the words used their usual,
natural and ordinary meaning. (citations omitted). The court
cannot, under the guise of construction, make a new and different
contract for the parties. (citations omitted).
Id. at 149.
The interpretation of a written instrument is a question of law. Provident Washington
Ins. Co. v. Reese, 213 Tenn. 355, 373 S.W.2d 613 (1963).
Tennessee Farmers' Uninsured Motorist policy, which is at issue in this case, contains
the following, relevant language:
Our limit of liability for this Uninsured Motorist Coverage shall
be reduced by the sum of the limits payable under all liability
and/or primary uninsured motorist insurance policies, bonds, and
securities applicable to the bodily injury or death of the covered
person.
Damages payable under this coverage to or for a covered
person shall be reduced by:
1. the amount paid under the Liability and Medical Payments
Coverages of this policy or any other automobile insurance
policy;
2. the amount paid or payable under any workers' compensation
law, disability benefits law or any similar law;
3. a payment made by or on behalf of the owner or operator of the
uninsured motor vehicle, or by or on behalf of the person or entity
who may be legally liable.
(Emphasis added).
Tennessee Farmers asserts that the trial court erred in finding as a matter of law that the
total damages should be reduced by the workers compensation benefits. Tennessee Farmers
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argues that the policy language, “damages payable under this coverage,” limits any payments
by Tennessee Farmers to the $100,000 policy limit.
Although this precise language has not been interpreted by our Court, similar policy
provisions with essentially the same meaning have been considered. In Hudson v. Hudson
Municipal Contractor, 898 S.W.2d 187 (Tenn. 1995), our Supreme Court had before it the issue
of “whether the workers compensation insurance carrier is entitled to an award against the
proceeds of a settlement between the worker’s personal representative and the uninsured motorist
insurer.” Id. at 189. In reaching its conclusion that the workers compensation carrier is not
entitled to the award, the Court discussed the reduction provision of the insurance policy
involved. The policy stated:
Limits of Liability. Regardless of the number of insureds
under this policy, the company’s liability is limited as follows:
(a) . . .
(b) Any amount payable under the terms of this insurance because
of bodily injury sustained in an accident by a person who is an
insured under this coverage shall be reduced by . . . the amount
paid and the present value of all amounts payable on account of
such bodily injury under any workers’ compensation law,
disability benefits law or any similar law.
Id. at 188.
In reaching its decision, the Court discussed two cases - Terry v. Aetna Casualty & Sur.
Co., 510 S.W.2d 509 (Tenn. 1974) and Dwight v. Tennessee Farmers Mut. Ins. Co., 701
S.W.2d 621 (Tenn. App. 1985). In Terry, the worker, in the course and scope of his
employment, was killed, and workers compensation benefits were paid. The worker had
uninsured motorist coverage with Aetna which contained an offset provision identical to the
provision in the Hudson case. Workers compensation benefits in the amount of $10,080.26 were
paid. As a result of the accident, the widow of the deceased worker recovered a judgment
against the uninsured motorist in the amount of $100,000.00. The widow sued Aetna to recover
the $10,000.00 uninsured motorist coverage. The Court held that since the workers
compensation carrier had paid $10,080.26, and the policy limit for recovery under the uninsured
motorist policy was $10,000.00, the insured had already received more than $10,000.00 paid
under the workers compensation law and was therefore entitled to nothing. The Supreme Court,
in discussing the case in Hudson, referred to the fact that the Terry Court held that the “insured’s
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right of recovery” against the uninsured motorist carrier was reduced by the amount that had
been received under the workers compensation law. 898 S.W.2d at 189. (Emphasis added). The
“right of recovery” seems to refer to the damages recoverable under the policy. The Hudson
Court considered the setoff provision in Dwight as identical to the provision in the Hudson case.
The Supreme Court referring to the Dwight case, stated:
The Court of Appeals held that the insured’s right to recover
under the uninsured motorist policy was reduced by the amount
the insured could have recovered under the Workers’
Compensation Law.
898 S.W.2d at 189. Significantly, the Supreme Court, in discussing this case, used the term
“right to recover” indicating once again that the term is analogous to damages recoverable.
Courts in other jurisdictions have reached different results. Some courts have held that
under a policy provision reducing the amount due under an uninsured and underinsured policy
by the amount of workers compensation benefits paid, the setoff is against the total amount of
damages awarded, rather than against a damage award within the policy coverage. See
American Ins. Co. v. Tutt, 314 A.2d 481 (Dist. Col. App. 1974); McClure v. Northland Ins.
Co., 424 N.W.2d 448 (Iowa 1988); Kilner v. State Farm Mut. & Auto Ins. Co., 252 Kansas 675,
847 P.2d 1292 (1993). Other courts have held that the reduction was to be set off against the
amount due as damages payable under the policy rather than against the total damages. See
Edmundson v. Commercial Union Ins. Co., 249 Ark. 350, 459 S.W.2d 112 (1970); Jarrett v.
Allstate Ins. Co., 409 Cal. App. 2d 804, 26 Cal.Rptr. 231 (1962); State Farm Mut. Auto Ins.
Co. v. Murphy, 263 Ill. App. 3d 100, 100 Ill. Dec. 190, 635 N.E.2d 533 (1994).
In Hudson, our Supreme Court in its interpretation of Terry and Dwight stated:
Under the holdings in Terry v. Aetna Casualty & Sur. Co.
and Dwight v. Tennessee Farmers Mut. Ins. Co., it is clear that
an insured party’s right to recover under an uninsured motorist
policy that contains a setoff provision such as the one involved in
this case may be reduced by the amount that the insured has
collected, or could collect, under the Workers’ Compensation
Law.
898 S.W.2d at 189 (emphasis added).
It is our opinion that the “right to recover” referred to by the Supreme Court in Hudson
is based upon the policy language which declares that the insurance company will pay to the
insured such sums as the insured is legally entitled to recover from the uninsured motorist.
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Considering this policy provision together with the policy provision that “damages payable
under this coverage . . . shall be reduced” causes us to conclude that “damages payable under this
coverage” is limited to the maximum of $100,000.00. Thus, Stewart’s recovery in the instant
case, or the “right to recovery,” as referred to by the Supreme Court in Hudson, is $100,000.00,
less the workers compensation benefits paid.
Tennessee Farmers’s last issue on appeal is whether the trial court’s finding of damages
totaling $198,046.43 is supported by a preponderance of the evidence. Since this case was tried
by the court sitting without a jury, we review the case de novo upon the record with a
presumption of correctness of the findings of fact by the trial court. Unless the evidence
preponderates against the findings, we must affirm, absent error of law. T.R.A.P. 13(d).
The trial court found that Sims should recover damages as follows: Medical bills,
$30,046.43; for pain and suffering, past and future, $127,000; for permanent disability to his left
leg $41,000.00; a total of $198,046.43. Considering the entire body of proof, we cannot say that
the evidence preponderates against the trial court’s award. Sims sustained compound fractures
of his left tibia and fibula, lacerations to his head and avulsion of his fingernails. As a result of
the accident, Sims walked on crutches for almost a year, missed approximately eight months of
work, and upon his return to work, worked on light duty for six months. Sims has undergone
three surgeries on his leg. The first plate and screws that were placed in his leg were
unsuccessful and had to be removed. Subsequently, he had a bone graft from his hip and now
has a metal rod in his tibia. Further, the orthopedic surgeon testified that Mr. Sims has a 10%
impairment to his left leg. Based on the foregoing, we conclude that the evidence does not
preponderate against the findings of the trial court. T.R.A.P. 13(d).
Therefore, the judgment of the trial court is modified to award damages against
Tennessee Farmers in the amount of $100,000.00 to be reduced by the sum of $61,862.57 for the
workers compensation benefits paid. Tennessee Farmers is to be given credit for any amounts
heretofore paid in partial satisfaction of the judgment. Costs of the appeal are assessed one-half
to appellant and one-half to appellee. The case is remanded to the trial court for such further
proceedings as may be necessary.
_________________________________
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
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CONCUR:
____________________________________
ALAN E. HIGHERS, JUDGE
____________________________________
HOLLY KIRBY LILLARD, JUDGE
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