Edward Martin v. Gregory Powers

IN THE SUPREME COURT OF TENNESSEE

AT NASHVILLE

February 10, 2016 Session

EDWARD MARTIN V. GREGORY POWERS ET AL.

Appeal by Permission from the Court of Appeals

Circuit Court for Williamson County

No. 2013-347 James G. Martin III, Judge

No. M2014-00647-SC-R11-CV – Filed October 24, 2016

This case arises out of an incident in which the Defendant, Gregory Powers, drove a car

he had rented from Enterprise Rent-A-Car (―Enterprise‖) into the Plaintiff, Edward

Martin. The Plaintiff sued the Defendant, the Defendant‘s automobile liability insurer,

and Enterprise. Additionally, the Plaintiff provided notice of the lawsuit to his own

automobile liability insurance carrier, IDS Property Casualty Insurance Company

(―IDS‖), in order to recover through the uninsured motorist coverage provision of the

Plaintiff‘s policy (―the Policy‖). IDS denied coverage and moved for summary

judgment, arguing that the rental car (―the Rental Car‖) did not qualify as an ―uninsured

motor vehicle‖ under the Policy. The trial court1 granted IDS‘s motion, and the Court of

Appeals affirmed. We granted review to determine whether the Rental Car qualified as

an ―uninsured motor vehicle‖ under the Policy. We hold that the Rental Car was an

―uninsured motor vehicle‖ under the Policy. Accordingly, we reverse the grant of

summary judgment to IDS and remand this matter for further proceedings.

Tenn. R. App. P. 11 Appeal by Permission; Judgment of the

Court of Appeals Reversed; Remanded

JEFFREY S. BIVINS, C.J., delivered the opinion of the Court, in which CORNELIA A. CLARK

and SHARON G. LEE, JJ., joined. HOLLY KIRBY, J., filed a dissenting opinion.

1

The order granting summary judgment to IDS on February 19, 2014, actually was entered by

Judge M. Keith Siskin. However, on March 5, 2014, Judge James G. Martin III entered the ―Agreed

Order Certifying as a Final Judgment the Court‘s Order Granting Defendant IDS[‘s] Motion for Summary

Judgment.‖ Accordingly, Judge Martin is listed as the trial judge in this matter.

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Patrick Shea Callahan, Cookeville, Tennessee (on appeal), and Matthew C. Hardin,

Nashville, Tennessee (at trial), for the appellant, Edward Martin.

W. Bryan Brooks and Amy V. Peters (on appeal), and Benjamin J. Miller (at trial and on

appeal), Nashville, Tennessee, for the appellee, IDS Property Casualty Insurance

Company.

OPINION

Factual and Procedural Background

On July 20, 2012, the Plaintiff, a bar owner in Franklin, Tennessee, refused to

serve alcohol to the Defendant, who appeared intoxicated, and asked the Defendant to

leave the bar. The Plaintiff followed the Defendant out to the parking lot and watched

him get into the driver‘s seat of the Rental Car, a Kia Sorento. The Defendant then drove

the Rental Car into the Plaintiff‘s knee. According to the Plaintiff‘s Complaint, the

Plaintiff incurred injuries and medical expenses from the collision.

At the time of this incident, the Plaintiff was insured under a policy of automobile

insurance issued by IDS, which provided uninsured/underinsured motorist coverage in

the amount of $250,000 per person or $500,000 per event. The Defendant had

automobile liability insurance through Mountain Laurel Assurance Company (―Mountain

Laurel‖). According to the Enterprise receipts submitted by the Plaintiff, there was no

indication that the Defendant purchased the optional automobile insurance through

Enterprise for the Rental Car.

The Plaintiff filed a complaint on July 18, 2013, against the Defendant, Mountain

Laurel, and Enterprise. The Plaintiff also served IDS2 with a copy of the summons and

complaint for the purpose of bringing a claim under his uninsured motorist coverage

policy.

2

The Plaintiff‘s complaint initially mistakenly named Ameriprise Insurance Company

(―Ameriprise‖) as his uninsured motorist insurer. IDS filed an answer to the Plaintiff‘s complaint, and the

trial court dismissed the suit against Ameriprise. No issue has been raised questioning IDS‘s status as the

Plaintiff‘s uninsured motorist carrier.

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On August 1, 2013, Mountain Laurel filed a motion to dismiss pursuant to Rule 12

of the Tennessee Rules of Civil Procedure. Mountain Laurel previously had filed a

complaint for a declaratory judgment requesting a judicial declaration that it had no

obligation to indemnify the Defendant against any claims asserted by Plaintiff because

the Defendant‘s act of striking the Plaintiff was intentional. Mountain Laurel was

granted summary judgment in the separate declaratory judgment proceeding on January

22, 2014. Thus, on April 15, 2014, the trial court dismissed without prejudice all claims

against Mountain Laurel in this case pursuant to Rule 41 of the Tennessee Rules of Civil

Procedure.

On August 23, 2013, Enterprise filed an answer, asserting that, pursuant to 49

U.S.C. § 30106, it was not vicariously liable for any harm resulting from the use,

operation, or possession of any of its rental vehicles, and requested the complaint to be

dismissed with prejudice. The Plaintiff subsequently provided notice of his intent to

voluntarily dismiss with prejudice his claims against Enterprise pursuant to Rule 41.01 of

the Tennessee Rules of Civil Procedure. Accordingly, the trial court dismissed with

prejudice the Plaintiff‘s claims against Enterprise on October 10, 2013.

On November 14, 2013, IDS filed an answer to the Plaintiff‘s complaint. IDS

subsequently filed a motion for summary judgment pursuant to Rule 56 of the Tennessee

Rules of Civil Procedure. In its memorandum of law supporting its motion, IDS argued

that, because Enterprise is a self-insurer under the Tennessee Financial Responsibility

Act, Tenn. Code Ann. §§ 55-12-101 to -140 (2012) (―the FR Law‖), the Rental Car did

not qualify as an ―uninsured motor vehicle‖ under the Policy. As support, IDS provided

a copy of Enterprise‘s Certificate of Self-Insurance issued on March 8, 2013, by the

Director of Financial Responsibility for the Tennessee Department of Safety and

Homeland Security (―the Certificate‖).3 The Certificate provides as follows:

This certifies the company named herein has established self-insurance

with the Tennessee Department of Safety for all owned or leased vehicles,

pursuant to § 55-12-111, Tennessee Code Annotated. This certificate of

3

In his response to IDS‘s motion for summary judgment, the Plaintiff pointed out that the

Certificate was issued after the date on which the Defendant struck the Plaintiff with the Rental Car. In

his brief to this Court, however, the Plaintiff states that ―Enterprise had obtained a certificate of ‗self-

insurance‘ as of the time of the accident,‖ and the Plaintiff does not argue that Enterprise did not have a

certificate of self-insurance in effect on the date of the collision. Accordingly, the Plaintiff has waived

any issue regarding the effective date of the Certificate in this matter. See Tenn. R. App. P. 27(a)(7)

(requiring appellant‘s brief to contain argument on each issue raised); Banks v. Elks Club Pride of Tenn.

1102, 301 S.W.3d 214, 227 n.16 (Tenn. 2010) (treating issue as waived because party failed to brief and

argue the issue).

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self-insurance is valid until March 24, 2014, unless cancelled by the

Department. This certificate is sufficient to establish evidence of financial

responsibility as compliance with the Tennessee Financial Responsibility

Law of 1977.

IDS argued that, because the Plaintiff‘s alleged damages did not arise out of the

ownership or use of an uninsured motor vehicle, the Plaintiff could not recover from IDS

for this incident, and IDS was entitled to judgment as a matter of law.

The trial court held a hearing on IDS‘s motion for summary judgment, but that

transcript is not included in the record on appeal. The trial court granted IDS‘s motion

for summary judgment on February 19, 2014, and certified its judgment as final for

purposes of appeal on March 5, 2014. On appeal, the Court of Appeals affirmed the trial

court‘s grant of summary judgment. Martin v. Powers, No. M2014-00647-COA-R3-CV,

2015 WL 895336, at *6 (Tenn. Ct. App. Feb. 27, 2015), perm. appeal granted (Tenn.

Aug. 13, 2015). The Plaintiff then requested permission to appeal to this Court, which

we granted.

Analysis

Standard of Review

We review a trial court‘s decision on a motion for summary judgment de novo

with no presumption of correctness. Parker v. Holiday Hospitality Franchising, Inc., 446

S.W.3d 341, 346 (Tenn. 2014). A trial court should grant summary judgment only when

―the pleadings, depositions, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter of law.‖ Tenn. R. Civ. P.

56.04.

Was the Rental Car an “Uninsured

Motor Vehicle” as Defined in the Policy?

IDS has been granted summary judgment in this case based upon the lower courts‘

conclusion that the Rental Car does not meet the definition of an ―uninsured motor

vehicle‖ as that term is used in the Policy. The lower courts arrived at their conclusion

based on their construction of Tennessee Code Annotated section 55-12-111, a provision

of the FR Law. IDS maintains that the lower courts‘ conclusion was correct. The proper

interpretation of the relevant Policy language, as well as the proper construction and

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application of Tennessee Code Annotated section 55-12-111, are issues of first

impression before this Court.

We construe insurance policies ―using the same tenets that guide the construction

of any other contract.‖ Garrison v. Bickford, 377 S.W.3d 659, 664 (Tenn. 2012).

Accordingly, our primary goal is to ascertain and give effect to the parties‘ intent. Id. To

that end, we endeavor to give the terms used in an insurance policy their plain and

ordinary meaning. Id. ―The ordinary meaning envisioned is the meaning which the

average policy holder and insurer would attach to the policy language.‖ S. Trust Ins. Co.

v. Phillips, 474 S.W.3d 660, 667 (Tenn. Ct. App. 2015) (internal quotation marks

omitted). More precisely, ―[t]he language of an insurance contract ‗must be read as a

layman‘ would read it.‖ Id. (quoting Paul v. Ins. Co. of N. Am., 675 S.W.2d 481, 484

(Tenn. Ct. App. 1984)); see also Harrell v. Minnesota Mut. Life Ins. Co., 937 S.W.2d

809, 814 (Tenn. 1996) (stating that ―an insured should not have to consult a long line of

case law or law review articles and treatises to determine the coverage he or she is

purchasing under an insurance policy,‖ and considering what ―the average insured would

understand‖).

―The policy should be construed as a whole in a reasonable and logical manner,

and the language in dispute should be examined in the context of the entire agreement.‖

Garrison, 377 S.W.3d at 664 (citations and internal quotation marks omitted).

Importantly, however, ―contracts of insurance are strictly construed in favor of the

insured, and if the disputed provision is susceptible to more than one plausible meaning,

the meaning favorable to the insured controls.‖ Id.; see also Allstate Ins. Co. v. Watts,

811 S.W.2d 883, 886 (Tenn. 1991) (citing Travelers Ins. Co. v. Aetna Cas. & Sur. Co.,

491 S.W.2d 363, 367 (Tenn. 1973)) (emphasizing that ―exceptions, exclusions and

limitations in insurance policies must be construed against the insurance company and in

favor of the insured‖).

When construing a contract of insurance, we also must consider any relevant

statutes: ―any statute applicable to an insurance policy becomes part of the policy and

such statutory provisions override and supersede anything in the policy repugnant to the

provisions of the statute.‖ Hermitage Health & Life Ins. Co. v. Cagle, 420 S.W.2d 591,

594 (Tenn. Ct. App. 1967). The construction of a statute presents a question of law, and

this Court interprets statutes de novo with no presumption of correctness accorded to the

rulings of the courts below. Baker v. State, 417 S.W.3d 428, 433 (Tenn. 2013).

The foremost rule of statutory construction requires us to ascertain and effectuate

the Legislature‘s intent. Id. To that end, we begin with the actual words of the statute, to

which we accord their natural and ordinary meaning. Id. We endeavor to construe

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statutes in a reasonable manner which avoids statutory conflict. Id. We ―must presume

that the Legislature did not intend an absurdity and adopt, if possible, a reasonable

construction which provides for a harmonious operation of the laws.‖ Fletcher v. State,

951 S.W.2d 378, 382 (Tenn. 1997).

To begin our analysis, we recite the relevant Policy language contained in the

amendatory endorsement concerning the Plaintiff‘s uninsured motorist coverage:

We will pay compensatory damages which an insured person is

legally entitled to recover from the owner or operator of an uninsured motor

vehicle because of:

1. Bodily injury sustained by that person and caused by an accident;

and

2. Property damage caused by an accident if the declarations

indicates [sic] that both bodily injury and property damage

Uninsured Motorists Coverage applies.

We will pay damages for bodily injury an insured person suffers in a

car accident while occupying a private passenger car or utility car, or as a

pedestrian as a result of having been struck by an uninsured motor vehicle.

We will pay under this coverage only after any applicable bodily injury

liability bonds or policies have been exhausted by payment of judgements

[sic] or settlements.

The owner‘s or operator‘s liability for these damages must arise out

of the ownership, maintenance or use of the uninsured motor vehicle. . . .

....

Uninsured motor vehicle means a land motor vehicle or trailer of any

type which is:

a) not insured by a bodily injury liability bond or policy at the time

of the accident; or

b) insured by a liability or bond policy in which the sum of the

bodily injury liability limits available for payment under all policies,

bonds and securities at the time of the accident:

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i) is less than the minimum bodily injury liability limits for

this coverage; or

ii) has been reduced by payment to persons other than the

insured to an amount which is less than the limit of liability

for this coverage.

“Uninsured motor vehicle[”], does not mean a vehicle . . . owned or

operated by a self-insurer under any applicable motor vehicle law,

except a self-insurer which is or becomes insolvent[.]

(Emphasis added). Thus, we must determine whether the Rental Car is a vehicle ―owned

or operated by a self-insurer under any applicable motor vehicle law‖ such that it is

excluded from uninsured motorist coverage under the Policy.

This issue contains two sub-issues. First, what is a ―self-insurer‖? The Policy

does not define this term. However, the basic concept of insurance involves an insurer

who, in exchange for a premium, ―‗assumes certain risks that otherwise would be the

obligation of the insured.‘‖ Allen v. Burnet Realty, LLC, 801 N.W.2d 153, 158 (Minn.

2011) (quoting Knutson Constr. Co. v. St. Paul Fire & Marine Ins. Co., 396 N.W.2d 229,

233 (Minn. 1986)). If the insured suffers a loss, or is adjudged liable for a loss, that

resulted from a covered risk, the insurer is obligated to assume the financial burden of the

loss or liability, up to the limits of coverage. Thus, a motorist may purchase a policy of

liability insurance that covers the risk of the motorist negligently causing an accident that

results in the motorist being liable for damages. It is this risk of liability for damages that

the motorist is insuring himself against.

If the risk is not undertaken to be covered by the insurer, however, the motorist

will be uninsured as to the damages he caused. Indeed, in this case, the Defendant has

been declared uninsured under his own liability policy with Mountain Laurel because

Mountain Laurel did not undertake the risk of the Defendant injuring someone

intentionally. Similarly, if a motorist is for some reason immune from liability for

damages he causes while driving, he has no risk to insure against. It is a basic precept of

insurance that, ―‗[i]f there is no risk, . . . there can be [no] insurance.‘‖ Interstate Fire &

Cas. Co. v. Abernathy, 93 So. 3d 352, 359 (Fla. Dist. Ct. App. 2012) (quoting Jordan v.

Group Health Ass‘n, 107 F.2d 239, 245 (D.C. Cir. 1939) (alterations in original)).

In light of the Policy‘s failure to define the term ―self-insurer,‖ and in light of

these general principles of insurance, a reasonable person insured under an insurance

policy containing the language at issue in this case would conclude that the term ―self-

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insurer‖ is a person or entity able to cover the risk of a liability through their own assets.

See, e.g., Am. Nurses Ass‘n v. Passaic Gen. Hosp., 471 A.2d 66, 69 (N.J. Super. Ct. App.

Div. 1984) (recognizing that ―[t]he essence of self-insurance, a term of colloquial

currency rather than of precise legal meaning, is the retention of the risk of loss by the

one upon whom it is directly imposed by law or contract‖), aff‘d in part, rev‘d in part on

other grounds, 484 A.2d 670 (N.J. 1984); see also Bethke v. Auto-Owners Ins. Co., 825

N.W.2d 482, 488 n.8 (Wis. 2013) (―Broadly stated, a self-insurer generally elects to take

on the risk of paying claims by itself rather than purchasing a separate policy from an

insurance company. An entity of sufficient size such as a corporation or governmental

agency might elect to handle the risk of becoming liable to an injured party by setting

aside assets. The entity then uses its own assets to pay claims.‖ (citations omitted)). That

is, if the entity were declared liable for a loss and a judgment was rendered against the

entity to compensate for that loss, the entity would have sufficient assets to pay the

judgment. Indeed, a leading treatise on insurance law recognizes that there are ―many

formal procedures . . . whereby an entity can become recognized as a self-insurer. This is

most commonly accomplished by filing a bond or furnishing another form of proof of the

ability to pay amounts for which the self-insurer may become liable.‖ 1A Steven Plitt et

al., Couch on Insurance § 10:1 (Monique Leahy ed., 3d ed. 2010 & June 2016 Update)

(emphasis added). Again, the focus is on the entity‘s potential liability for damages. As

Virginia‘s supreme court has recognized, ―self-insurance operates as ‗assurance‘ that

judgments will be paid.‖ Farmers Ins. Exch. v. Enter. Leasing Co., 708 S.E.2d 852, 857

(Va. 2011) (quoting N. Ind. Pub. Serv. Co. v. Bloom, 847 N.E.2d 175, 185 (Ind. 2006)).

As with a policy of insurance, however, if the entity is immune from judgments for a

particular liability, there is no cause to prove an ability to pay and no reason to be

considered ―self-insured.‖ Again, one cannot insure against a non-existent risk.

Although the Policy does not define the term ―self-insurer,‖ the Policy‘s exclusion

of vehicles owned by a self-insurer from the definition of uninsured motor vehicle does

not apply when the self-insurer ―is or becomes insolvent.‖ This language reflects the

underlying purpose of uninsured motorist coverage, which is to pay compensation to the

insured policy owner when the liable third party is unable to do so. In light of the

underlying recognition that one who qualifies as a ―self-insurer‖ is able to pay assessed

liabilities, the Policy language acknowledges that a self-insurer who is insolvent is, in

actual fact and operation, not a self-insurer at all. Accordingly, the Policy itself limits the

exclusion of motor vehicles owned by self-insurers to those vehicles owned by self-

insurers who are capable of paying damages assessed against them. If the self-insured

owner is insolvent, the vehicle is considered uninsured under the terms of the Policy

itself.

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The Policy excludes motor vehicles owned by solvent self-insurers because those

vehicles are, in actual operation and effect, insured. They are simply insured through the

assets of the owner rather than through a policy of insurance issued to the owner by an

insurance company. There is no reason for such vehicles to be considered ―uninsured‖

because they are insured. As recognized by the United States District Court for the

Eastern District of Tennessee, which was considering a similar uninsured motorist policy

provision under Arkansas law,4

[i]t appears that the purpose of the self-insurer language of the policy, in the

first instance, was to assure that a self-insured vehicle could not

automatically be considered uninsured simply because the self-insurer was

not an insurance company and no insurance policy had been issued for the

vehicle. No reason exists to treat a vehicle covered by a policy of insurance

issued by an insurance company differently from a vehicle which is self-

insured for the purpose of determining its status as an uninsured motor

vehicle.

Hensley v. Miles, No. 2:01CV142, 2005 WL 1182528, at *6 n.4 (E.D. Tenn. May 18,

2005) (construing Arkansas law). We emphasize, however, that the very concept of

insurance, regardless of whether the insurance exists by way of owner assets or by way of

an insurance policy, is inextricably tied to the risks of liability that are insured against.

The second sub-issue presented by the Policy language under consideration is the

identification of the ―applicable motor vehicle law[s].‖ The Policy does not identify any

particular law(s) that might apply. Indeed, the Policy language is so broad and vague as

to encompass both Tennessee and federal law, and both statutory and common law.

Given the large number of both federal and state statutes, as well as common law

decisions, that could fit within the description ―applicable motor vehicle law,‖ it is

unreasonable to expect an insured to discern the meaning of the Policy language at issue.

The Policy‘s failure to define ―self-insurer‖ and its broad reference to ―any

applicable motor vehicle law‖ renders the provision under consideration both vague and

indefinite. Relying on the Policy alone, it would be impossible for an insured to

understand the precise meaning or scope of this exclusion from uninsured motorist

coverage. Accordingly, we hold that the provision at issue is ambiguous. ―Where

4

The policy under consideration provided that ―‗uninsured motor vehicle‘ does not include any

vehicle . . . [o]wned or operated by a self insurer under any applicable motor vehicle law, except a self

insurer who is or becomes insolvent and cannot provide the amounts required by that motor vehicle law.‖

Hensley v. Miles, No. 2:01CV142, 2005 WL 1182528, at *2 (E.D. Tenn. May 18, 2005).

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provisions that purport to limit insurance are ambiguous, . . . they must be construed

against the insurance company and in favor of the insured.‖ Osborne v. Mountain Life

Ins. Co., 130 S.W.3d 769, 773 (Tenn. 2004).

Other courts considering a similar uninsured motorist provision have also

concluded that it was ambiguous. For instance, in Bethke v. Auto-Owners Ins. Co., the

Wisconsin Supreme Court considered a claim for underinsured motorist coverage after an

allegedly negligent driver of a rental car caused an accident that killed one person and

seriously injured another. 825 N.W.2d 482, 484 (Wis. 2013). The insurer contended that

the rental vehicle was not an ―underinsured vehicle‖ under the terms of the policy

because the rental car company was a self-insurer. Id. The policy provided that

―[u]nderinsured automobile does not include an automobile . . . owned or operated by a

self-insurer under any automobile law.‖ Id. at 485-86. The policy did not define the

term ―self-insurer.‖ Id. at 489. Noting that ―[t]he term ‗self-insurance‘ often gives rise to

interpretation issues,‖ id. at 488, the court held that, ―as applied, the policy term ‗self-

insurer‘ is ambiguous because it is unclear whether a reasonable insured would

understand that a car rental company which is statutorily liable [under a Wisconsin

statute] is a ‗self-insurer‘ under the policy,‖ id. at 493; see also Hensley v. Miles, No.

2:01CV142, 2004 WL 3335449, at *5 (E.D. Tenn. Dec. 7, 2004) (in considering an

exclusion from uninsured motorist coverage similar to the exclusion at issue in the instant

case, holding that ―[t]he policy‘s language that seemingly excludes a self-insured vehicle

from the definition of an uninsured motorist vehicle simply makes no sense when read in

light of the policy‘s other language regarding insolvency of a liability insurance carrier,

or the insolvency of a self-insurer, or the unavailability of liability insurance due to a

denial of coverage‖), adopted by Hensley v. Miles, No. 2:01CV142, 2005 WL 1182528,

at *1 (E.D. Tenn. May 18, 2005).

Our conclusion that the Policy is ambiguous does not end our analysis, however.

We turn now to several statutes that also impact our decision. We begin with a brief

review of Tennessee‘s Uninsured Motorist Act, Tenn. Code Ann. §§ 56-7-1201 to -1206

(2008) (―the UM Act‖). The first section of the UM Act provides as follows:

Every automobile liability insurance policy delivered, issued for

delivery or renewed in this state, covering liability arising out of the

ownership, maintenance, or use of any motor vehicle . . . shall include

uninsured motorist coverage, subject to provisions filed with and approved

by the commissioner,5 for the protection of persons insured under the policy

5

The ―commissioner‖ is the Commissioner of Commerce and Insurance. Tenn. Code Ann. § 56-

1-102(1) (2008).

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who are legally entitled to recover compensatory damages from owners or

operators of uninsured motor vehicles because of bodily injury, sickness or

disease, including death, resulting from injury, sickness or disease.

Tenn. Code Ann. § 56-7-1201(a) (footnote added). Our legislature enacted this statute

out of ―‗public concern over the increasing problem arising from property and personal

injury damage inflicted by uninsured and financially irresponsible motorists.‘‖ Garrison,

377 S.W.3d at 665 (quoting Shoffner v. State Farm Mut. Auto Ins. Co., 494 S.W.2d 756,

758 (Tenn. 1972)). Thus, the purpose of the UM Act ―‗is to provide, within fixed limits,

some recompense to innocent persons who receive bodily injury or property damage

through the conduct of an uninsured motorist who cannot respond in damages.‘‖ Id. at

665-66 (quoting Shoffner, 494 S.W.2d at 758).

Furthermore, ―‗[t]he intent and purpose of the Uninsured Motorist Act is to

provide protection by making the insurance carrier stand as the insurer of the uninsured

motorist.‘‖ Id. at 666 (quoting Stallcup v. Duncan, 684 S.W.2d 643, 646 (Tenn. Ct. App.

1984)). ―‗Thus, the insured is allowed to purchase uninsured motorist coverage for the

protection that he would have had if the alleged tortfeasor had assumed his own financial

responsibility by purchasing liability insurance.‘‖ Id. (quoting Stallcup, 684 S.W.2d at

646). ―In other words, ‗uninsured motorist insurance does not actually insure the

uninsured motorist. It insures the insured and assures him of some recovery when the

other parties do not have liability insurance.‘‖ Id. (quoting Thompson v. Parker, 606

S.W.2d 538, 540 (Tenn. Ct. App. 1980)). ―In short, the purpose of section 56-7-1201(a)

is to protect those who purchase motor vehicle liability insurance from those who do

not.‖ Id. As stated by the Florida Supreme Court in construing Florida‘s uninsured

motorist legislation, ―‗[t]he statute is designed for the protection of injured persons, not

for the benefit of insurance companies or motorists who cause damage to others.‘‖

Young v. Progressive Se. Ins. Co., 753 So. 2d 80, 83 (Fla. 2000) (emphasis omitted)

(quoting Brown v. Progressive Mut. Ins. Co., 249 So. 2d 429, 430 (Fla. 1971)).

Similarly to the Policy, the UM Act defines an uninsured motor vehicle as not

including ―a motor vehicle [that is] [s]elf-insured within the meaning of the Tennessee

Financial Responsibility Law, compiled in title 55, chapter 12, or any similar state or

federal law.‖ Tenn. Code Ann. § 56-7-1202(a)(2)(C) (2008). This provision is less

ambiguous than the Policy language under consideration because it makes specific

reference to a particular piece of legislation. Indeed, IDS relies upon one particular

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section of the FR Law6 as rendering the Rental Car not an uninsured motor vehicle. We

turn, then, to that statute.

Tennessee Code Annotated section 55-12-111 provides as follows:

(a) Any person in whose name more than twenty-five (25) vehicles

are registered may qualify as a self-insurer by obtaining a certificate of self-

insurance from the commissioner as provided in subsection (c).

....

(c) The commissioner has the discretion, upon the application of the

person . . ., to issue a certificate of self-insurance when satisfied that the

person . . . is possessed and will continue to be possessed of an ability to

pay any judgments that might be rendered against the person . . . .

Tenn. Code Ann. § 55-12-111 (emphasis added). Thus, a certificate of self-insurance

issued pursuant to the FR Law establishes that the applying entity has demonstrated its

financial ability to satisfy pecuniary judgments that may be rendered against it. A

certificate of self-insurance also excepts a vehicle owner from the FR Law‘s

―requirements of security and revocation.‖ Id. § 55-12-106(4).

To understand the significance of a certificate of insurance issued to a rental car

company, it is necessary to recognize the significance of a piece of federal legislation

known as the Graves Amendment. That federal statute provides as follows:

(a) In general. – An owner of a motor vehicle that rents or leases the

vehicle to a person (or an affiliate of the owner) shall not be liable under the

6

The FR Law generally ―requires motorists who have been involved in an accident where anyone

is killed or injured, or an accident resulting in more than $400 in damage to the property of any one

person, to show proof of financial responsibility.‖ Purkey v. Am. Home Assurance Co., 173 S.W.3d 703,

706 (Tenn. 2005) (citing Tenn. Code Ann. §§ 55-12-105, -139). ―The purpose of Tennessee‘s Financial

Responsibility Law is to protect innocent members of the public from the negligence of motorists

on the roads and highways.‖ Id. If the commissioner of safety receives a report indicating an

accident resulting in injury or property damage totaling more than $400, the commissioner will

seek to have the motor vehicle owner‘s registration revoked unless the owner establishes

financial security sufficient to satisfy a judgment. Tenn. Code Ann. § 55-12-105(a). In the case

of a rental car, the owner is the rental car agency.

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law of any State or political subdivision thereof, by reason of being the

owner of the vehicle (or an affiliate of the owner), for harm to persons or

property that results or arises out of the use, operation, or possession of the

vehicle during the period of the rental or lease, if –

(1) the owner (or an affiliate of the owner) is engaged in the

trade or business of renting or leasing motor vehicles; and

(2) there is no negligence or criminal wrongdoing on the part

of the owner (or an affiliate of the owner).

49 U.S.C. § 30106 (2006) (―the Graves Amendment‖). The Graves Amendment was

intended to stop states from imposing vicarious liability on a car rental company arising

from the operation of its vehicles by its rental customers. See Flagler v. Budget Rent A

Car System, Inc., 538 F. Supp. 2d 557, 558 (E.D.N.Y. 2008) (citing United States v.

Locke, 529 U.S. 89, 109 (2000)) (―There is no question but that the Graves Amendment

preempts state laws that impose vicarious liability on businesses that rent or lease motor

vehicles.‖). Although our research has located no Tennessee statute or reported appellate

decision imposing vicarious liability on a car rental company arising out of the operation

of its vehicles by a rental customer, the Graves Amendment would preempt any such

statute or decision.

The Graves Amendment was passed in 2005 and applies to causes of action

commenced after August 10, 2005. 49 U.S.C. § 30106(c). Accordingly, Enterprise was

not subject to vicarious liability for the actions of its rental customers at the time the

commissioner was considering whether to issue the certificate of self-insurance that

pertains to this case. That is, at the time Enterprise applied for the certificate of self-

insurance under consideration, it was not subject to judgments based on vicarious liability

arising from the operation of its cars by its rental customers. We presume that the

commissioner was aware of the state of the law at the time he issued the Certificate. See

State ex rel. Witcher v. Bilbrey, 878 S.W.2d 567, 576 (Tenn. Ct. App. 1994) (stating that

public officials are presumed to know and act in accordance with the law). Accordingly,

we conclude that, by issuing the Certificate, the commissioner was satisfied that

Enterprise had the ability to pay ―any judgments that might be rendered against‖ it, Tenn.

Code Ann. § 55-12-111(c), which did not—indeed, could not—include judgments based

on vicarious liability for the actions of Enterprise‘s rental customers. More to the point,

the Certificate does not establish that Enterprise was self-insured as to vicarious liability

arising from the operation of its vehicles by its rental customers because the

commissioner was not considering Enterprise‘s ability to pay judgments from which it

was statutorily immune when deciding whether to issue the Certificate.

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Our conclusion that the Certificate was issued without consideration of

Enterprise‘s ability to pay judgments based on its vicarious liability for its rental

customers is bolstered by another provision of the FR Law, Tennessee Code Annotated

section 55-12-106(10). That provision states as follows:

Any person licensed and engaged in the business of renting or

leasing motor vehicles to be operated on the public highways shall be

required only to furnish proof of financial ability to satisfy any judgment or

judgments rendered against the person in the person‘s capacity as owner of

the motor vehicle, and shall not be required to furnish proof of its financial

ability to satisfy any judgment or judgments rendered against the person to

whom the motor vehicle was rented or leased at the time of the accident[.]

Tenn. Code Ann. § 55-12-106(10) (emphases added). This provision of the FR Law

exempts specifically car rental companies such as Enterprise from having to meet its

security and revocation requirements with respect to accidents caused by rental

customers. We note that specific statutory provisions control over general provisions.

Lovelace v. Copley, 418 S.W.3d 1, 20 (Tenn. 2013).

Section 55-12-106(10) recognizes that a car rental company such as Enterprise

faces two distinct classes of risks arising from the operation of its fleet of rental vehicles.

The first class of risks, which we shall refer to as ―Owner Risks,‖ includes those

accidents that may occur from the operation of an Enterprise vehicle by an Enterprise

employee while in the course of her employment, or that may occur from the negligent

maintenance of its vehicles. As to Owner Risks, the FR Law contemplates that

Enterprise may be liable in its capacity as the owner of the car involved in such an

accident. Accordingly, as to Owner Risks, the FR Law requires Enterprise to provide

proof of financial security. Enterprise may satisfy this FR Law requirement in any of

four methods. See Tenn. Code Ann. § 55-12-105(b). Alternatively, Enterprise may

except itself from this requirement as to Owner Risks by qualifying as a ―self-insurer.‖

See Tenn. Code Ann. § 55-12-106(4) (exempting owners that qualify as self-insurers

from the FR Law‘s ―requirements of security and revocation‖). Indeed, that is what

Enterprise has done, as demonstrated by the Certificate of Self-Insurance adduced by IDS

in the trial court. Accordingly, the record demonstrates that Enterprise qualified as a self-

insurer with respect to Owner Risks, and we are justified in concluding that the

commissioner was satisfied that Enterprise would be able to pay ―any judgments that

might be rendered against‖ it. Tenn. Code Ann. § 55-12-111(c).

The second class of risks, which we shall refer to as ―Renter Risks,‖ includes those

accidents that may arise from the operation of one of Enterprise‘s vehicles by one of its

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rental customers. As to Renter Risks, section 55-12-106(10) of the FR Law specifically

exempts Enterprise from demonstrating proof of financial security. This makes sense

because there is simply no legitimate reason to require proof of financial security for

potential liabilities that are, in fact, non-existent. See the Graves Amendment.

Accordingly, Enterprise need not provide any of the documentation required by section

55-12-105(b) as to Renter Risks. More crucially for this case, as to Renter Risks,

Enterprise need not avail itself of the designation of self-insurer in order to avoid the

requirements of section 55-12-105(b). Indeed, the designation of ―self-insurer‖ is

nonsensical when applied to a class of risks from which Enterprise is statutorily exempt.

We reiterate that the very concept of insurance, self or otherwise, applies to risks of loss

to which the insured person or entity is subject. Enterprise is not self-insured with

respect to Renter Risks because federal law exempts it from vicarious liability for such

risks.

We also reiterate our obligation to construe statutes in a manner that ―provides for

a harmonious operation of the laws‖ and which avoids an absurd result. Fletcher, 951

S.W.2d at 382. Taking into account the various applicable provisions of state and federal

law, and considering the purposes sought to be achieved by those provisions, we hold that

the second clause of Tennessee Code Annotated section 55-12-106(10) renders

inapplicable the self-insurer provisions of section 55-12-111 of the FR Law as to Renter

Risks. Accordingly, we hold that Enterprise is not a self-insurer within the context of

section 55-12-111 of the FR Law with respect to Renter Risks.7

The instant lawsuit arose from the Defendant‘s actions while driving a car he

rented from Enterprise. The Plaintiff is not asserting a claim of direct liability against

Enterprise.8 Rather, the instant lawsuit involves a liability arising out of a Renter Risk.

7

We also note that section 55-12-106(4) exempts not only owners that qualify as self-insurers

from the FR Law‘s security and revocation requirements, but additionally exempts ―any operator of a

vehicle owned by a person qualifying as a self-insurer‖ from those requirements. Tenn. Code Ann. § 55-

12-106(4). If Enterprise qualifies as a self-insurer with respect to Renter Risks, then any of Enterprise‘s

rental customers would also be exempt from the security and revocation requirements of the FR Law.

This construction of the FR Law would mean that car rental customers could drive on Tennessee‘s

highways with impunity insofar as our FR Law was concerned. We are confident that our Legislature did

not intend that rental cars operated in Tennessee could be simultaneously uninsured, yet not meet the

statutory definition of uninsured, all while considered self-insured by the rental company‘s assets to

which the injured victim would have no recourse.

8

The Plaintiff‘s original complaint named Enterprise as a defendant and alleged that Enterprise

(1) negligently entrusted the Rental Car to the Defendant and (2) failed to verify that the Defendant‘s

personal insurance would cover injuries or damages caused by the Defendant while driving the Rental

Car. The Plaintiff subsequently voluntarily dismissed with prejudice his claims against Enterprise.

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As explained above, Enterprise is not a self-insurer under section 55-12-111 as to Renter

Risks. Section 55-12-111 simply has no applicability to Enterprise in this context.

Accordingly, the Rental Car was not owned ―by a self-insurer under any applicable motor

vehicle law‖ and, therefore, meets the definition of an uninsured motor vehicle under the

Policy.

Conclusion

We hold that IDS is not entitled to summary judgment on the basis that the Rental

Vehicle was not an uninsured motor vehicle as defined in the Policy. Accordingly, we

reverse the judgment of the Court of Appeals and remand this matter to the trial court for

further proceedings consistent herewith. Costs of this appeal are assessed to IDS and its

surety, for which execution may issue if necessary.

_________________________________

JEFFREY S. BIVINS, CHIEF JUSTICE

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