Robert F. Clark v. Tennessee Farmers Mutual Insurance Company

04/17/2020

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

January 21, 2020 Session

ROBERT F. CLARK v. TENNESSEE FARMERS MUTUAL INSURANCE

COMPANY

Appeal from the Chancery Court for Jefferson County

No. 16-CV-61 David R. Duggan, Judge

___________________________________

No. E2019-00746-COA-R3-CV

___________________________________

This appeal arises from an action filed by Robert F. Clark (“Plaintiff”), seeking a

declaratory judgment and damages against Tennessee Farmers Mutual Insurance

Company (“Tennessee Farmers”). Plaintiff applied for a homeowner’s insurance policy

with Tennessee Farmers upon his purchase of improved real property. The effective date

of the policy was to begin on May 29, 2013, the original date of the closing for the sale of

the property. The closing of the real property was rescheduled to an earlier date. A leak

occurred after the actual closing on the property but before the date of the original closing

and the stated effective date of the homeowner’s insurance policy. Determining that

Tennessee Farmers had not been notified of the change and that Plaintiff had signed an

authorization for work on the property, the Trial Court granted Tennessee Farmers’

motion for summary judgment. We affirm the Trial Court’s finding that the leak

occurred prior to the effective date of the policy. However, we reverse the Trial Court’s

grant of summary judgment upon our determination that genuine issues of material fact

exist to preclude summary judgment on other issues.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed in Part, Reversed in Part; Case Remanded

D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which JOHN W.

MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.

Douglas E. Taylor, Seymour, Tennessee, for the appellant, Robert F. Clark.

John T. Johnson, Jr., and Brandon L. Morrow, Knoxville, Tennessee, for the appellee,

Tennessee Farmers Mutual Insurance Company.

OPINION

Background

Plaintiff purchased improved real property in Jefferson County, Tennessee (“the

Property”). The closing date regarding the sale of the Property initially was scheduled

for May 29, 2013, but was rescheduled to May 24, 2013, at the request of the sellers.

Prior to the rescheduling of the closing on the Property, Plaintiff had applied for

homeowner’s insurance with Tennessee Farmers with the effective date for the policy to

begin on May 29, 2013. After the closing on May 24, 2013, but before the effective date

of insurance on May 29, 2013, the home had a water leak that caused damage to the

Property. On May 26, 2013, Plaintiff contracted with ServPro of Sevier, Jefferson, and

Cocke Counties (“ServPro”) to remove the water from the Property. This project was a

one-day job, and Plaintiff signed an authorization for the performance of this work.

Plaintiff filed an insurance claim with Tennessee Farmers. Plaintiff alleged that

following the claim, Tennessee Farmers authorized ServPro to return to the Property on

May 28, 2013, to begin demolition on the Property. Tennessee Farmers does not dispute

for purposes of its summary judgment motion that it authorized ServPro to perform work

on the Property. According to Plaintiff’s complaint, Plaintiff did not sign an

authorization regarding this work, and only the representative from Tennessee Farmers

authorized this work. Plaintiff argued that he had authorized only the initial water

removal from the Property. ServPro began demolition on the Property but ceased work

when notified by Tennessee Farmers that the insurance claim would not be covered by

insurance. Tennessee Farmers averred that Plaintiff’s insurance policy regarding the

Property began on the date of the original closing, which was days after the damage to

the Property occurred. The Property remained damaged, and ServPro issued an invoice

for the work completed before it was discontinued in the amount of $13,881.96.

In June 2016, Plaintiff filed a complaint for a declaratory judgment and damages

against Tennessee Farmers and First Tennessee Bank, alleging breach of contract;

misrepresentation; fraud; fraudulent concealment; bad faith refusal to pay a legitimate

insurance claim, pursuant to Tennessee Code Annotated § 56-7-105; deceptive and unfair

business practices in violation of the Tennessee Consumer Protection Act, and conspiracy

or constructive fraud. In his complaint, Plaintiff alleged that he had relied on the

representation of the First Tennessee Bank representative who had been responsible for

dispersing funds for the closing and had agreed to make any necessary administrative

changes to give full effect to the parties’ contract. According to the complaint, Tennessee

Farmers “avers it was not notified by the Bank, or more likely it simply failed to make

the changes requested, given that the settlement statement acknowledges payment to the

Insurance Company and a Policy Number issued.” Plaintiff stated that “[e]ither the

statements of the Bank were false or the Insurance Company failed to perform the

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requirements of the transaction.” Plaintiff further alleges that “payment of $839.00 was

issued to [Tennessee Farmers] for Policy Number HP44-08176, upon the actual closing

date of May 24, 2013 . . . and before the claim for damages to the house by the Plaintiff.”

Plaintiff attached to his complaint the settlement statement from the closing on the

Property, which reflected a closing date of May 24, 2013, and a settlement charge for

homeowner’s insurance in the amount of $839.00 to Tennessee Farmers. The settlement

statement also provided as follows: “ You do not have a monthly escrow payment for

items such as property taxes and homeowner’s insurance. You must pay these items

directly yourself.”

Tennessee Farmers filed an answer denying any wrongdoing by Tennessee

Farmers and stated that neither the bank nor Plaintiff had informed it that the closing had

been rescheduled and that it did not receive the check for the premium until May 31,

2013. Tennessee Farmers presented as a defense that the water leak occurred on May 26,

2013, and there is no coverage for the loss because the coverage was not in effect at the

time of the damage to the Property.

Plaintiff filed a motion for summary judgment in December 2016, which included

substantially the same allegations as the complaint. The Trial Court subsequently denied

the motion through its order entered in February 2017. Additionally, Tennessee Farmers

filed its first motion for summary judgment, which the Trial Court then denied upon its

determination that an issue of material fact existed as to whether Plaintiff notified

Tennessee Farmers of the change in the closing date.

First Tennessee Bank filed a motion for summary judgment and memorandum of

law in support thereof, alleging that “it was Plaintiff’s responsibility – not First

Tennessee’s – to ensure the Property was covered against loss” and that Plaintiff’s

reliance on the bank’s “alleged (and vague) statement that ‘everything is taken care of’ in

connection with the rescheduled closing date was unreasonable as a matter of law.” The

Trial Court granted First Tennessee’s motion for summary judgment upon determining

that “First Tennessee acted as a lender only in connection with the purchase and sale

transaction that is the subject matter of this case” and that “[t]he loan documents are clear

that First Tennessee had no duty to purchase or maintain insurance on the Plaintiff’s

residence.”1

In June 2018, Tennessee Farmers filed their second motion for summary judgment

alleging that Plaintiff’s deposition testimony established that Plaintiff had not notified

Tennessee Farmers of the earlier closing date or asked Tennessee Farmers to change the

policy effective date from the original date of May 29, 2013. Although Plaintiff’s

1

The Trial Court’s order granting summary judgment in favor of First Tennessee Bank is not at issue in

this appeal.

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affidavit stated that he met with the insurance agent, David Haston, prior to the closing to

inquire whether any changes needed to be made since the closing date had been set,

Plaintiff’s deposition testimony reflected that he had not notified anyone at Tennessee

Farmers of the change in date for the closing. Plaintiff’s affidavit stated that a

representative from the bank showed Plaintiff a document reflecting that Tennessee

Farmers had been notified of the change.

In addition to its motion, Tennessee Farmers attached a memorandum of law in

support of its motion; statement of material facts; an affidavit of Joseph Brzozowski, the

Regional Claims Manager with Tennessee Farmers; the deposition testimony of Plaintiff;

the deposition testimony of Teresa Serdinsky, Plaintiff’s daughter; a declaration by David

Haston, a representative of Tennessee Farmers; and the transcript from the motion

hearing concerning Tennessee Farmers’ first summary judgment motion. In its

memorandum of law, Tennessee Farmers states as follows:

[A]ll claims against Tennessee Farmers fail for the same reason: Tennessee

Farmers was never put on notice, not by Plaintiff nor anyone else, that the

effective insurance policy date should be changed to match the earlier

closing date. Without this key fact, Plaintiff cannot establish that

[Tennessee Farmers] had any duty to Plaintiff, under either tort or contract,

to change the effective policy dates. [Tennessee Farmers] is entitled to

summary judgment.

(Internal citations omitted.)

The Trial Court heard the matter on two nonconsecutive days in August and

November 2018. Between the court hearings, both Plaintiff and Tennessee Farmers filed

supplemental briefs in support of their position regarding the pending summary judgment

motion. In its November 2018 order, the Trial Court granted Tennessee Farmers’ second

summary judgment motion and incorporated its findings of fact included in the hearing

transcript. During the November 2018 motion hearing, the Trial Court specifically found

the following findings of fact:

[Number 1:] Tennessee Farmers Mutual Insurance Company issued

a policy of insurance to Plaintiff for the subject improved real property

located at **** Lisa Circle, Strawberry Plains, Tennessee; 37871; bearing

policy number 44.08176.

Number 2: That policy did not take effect until May 29, 2013. This

effective date of coverage is listed on both the application for insurance

bearing the Plaintiff’s signature and the policy’s declarations page. In

finding that fact, it is noted that Plaintiff has denied that statement of fact.

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However, Plaintiff hasn’t really contested any of the facts as stated. What

Plaintiff has said is that Mr. Clark was allegedly shown a document

indicating that [Tennessee Farmers] was informed of an earlier closing date.

The Plaintiff, however, has been unable to offer any proof, including any

such document that would suggest that Tennessee Farmers was informed of

the earlier closing date. And, of course, Tennessee Farmers’ representative

in his affidavit says that they were not informed; and there is no evidence

before this Court that Tennessee Farmers was ever notified that the closing

had been moved up 5 days and that therefore the policy needed to have a

different revised effective date.

Number 3: The original closing date was scheduled for May 29,

2013.

Number 4: Plaintiff, however, actually closed on the subject

improved real property on May 24, 2013.

Number 5: Tennessee Farmers did not receive the premium payment

for Plaintiffs policy until May 31. Again, in finding that fact, Plaintiff

denies that statement of fact but in doing so says only that at that time, at

the time of the denial, a certain deposition had not yet been taken and they

wanted the opportunity to take that deposition. But there has been no proof

submitted to the Court of anything other than the fact that the premium

payment was not received until May 31, of 2013. Which would have been

consistent with Tennessee Farmers believing that the closing took place on

May 29.

Number 6: Plaintiff did not notify Tennessee Farmers of the earlier

May 24, 2013 closing date.

Number 7: Plaintiff’s daughter, Teresa Serdinsky, did not notify

Tennessee Farmers of the earlier May 24, 2013 closing date.

Number 8: Plaintiff does not believe that the agent, Mr. Haston, or

anyone at Tennessee Farmers provided him with false information

regarding his insurance claim.

Number 9: At no time was Mr. Haston notified by Mr. Clark or

anyone else that the closing on the property at **** Lisa Circle had been

moved from May 29, 2013 to May 24, 2013. Now, again, in finding that

fact it’s noted that the Plaintiff denies that statement of fact. However, the

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denial is once again based upon an allegation of allegedly being shown

some document which has not been provided to the Court.

Number 10: . . . At no time was Mr. Haston requested by Mr. Clark

or anyone else to change the beginning of the policy period from May 29,

2013 to another date.

The Court finds, Number 11, that no misrepresentations were made

by Tennessee Farmers. An unfortunate mistake was made. The Plaintiff

changed his closing date but unfortunately no one informed Tennessee

Farmers. Tennessee Farmers, in good faith, issued its policy effective the

only date it knew, May 29, 2013. And the loss for which a claim was later

made pre-dates the effective date of the policy by 5 days.

Number 12: As for the argument that Tennessee Farmers authorized

ServPro to do the work, Plaintiff signed an authorization to perform

services in direction of payment with ServPro which stated “It is fully

understood that customer and its agents, successors, assigns, and heirs are

personally responsible for any and all deductible and any costs not covered

by insurance. Customer agrees that provider is working for the customer

and not customer’s insurance company or any agent or adjuster.” And that

was agreed to in the deposition, and that language was referred to in the

Plaintiff’s deposition on page 41. And, apparently, it was Exhibit-3 to that

deposition.

***

[Number 13:] Teresa Serdinsky testified that she contacted ServPro

about performing the work before she ever spoke to anyone at Tennessee

Farmers.

The Trial Court continued with its legal analysis:

Turning to the law, of course, the 11th Circuit case that has been

cited is not binding upon the Court. But, apparently, we’ve been unable to

find any Tennessee law addressing the question of whether it makes any

difference that Tennessee Farmers authorized ServPro to go out and begin

the work prior to determining, or making a determination, that in fact the

loss preceded the date of the policy.

The Court considers this 11th Circuit case to be persuasive authority

for the propositions that mistaken representations about coverage by an

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agent of the insurance company did not prevent the insurer from applying

the clear terms of the policy to deny coverage. And in that 11th Circuit

case, the facts were even more egregious than here for several reasons. In

that case, Allstate’s representative made recommendations regarding the

necessary repair work, assured Plaintiff that Allstate would pay for the

repairs, and told Plaintiff’s representative to . . . deal with Allstate directly.

Plaintiff signed a form authorizing a remediation company to commence

repair work on the property, and to bill Allstate directly.

Now, that form had similar language to the one present here that

warned the customer that the customer would bear responsibility for all

charges not reimbursed by the insurance company. But in that case, in the

11th Circuit, after substantial repair work had been done on the house,

Plaintiff received a letter from Allstate advising that she would actually

receive a check for $42,366.00; the amount payable under the policy. It

was only then, apparently, that Allstate realized that they had a coverage

defense, and the next month Allstate informed Plaintiff that it would not

honor the claim based on the residence requirement in the policy. Now that

was a residency issue. It was not an effective date issue.

And I think the facts of that case present, as Defendant has argued,

even a more compelling case for coverage than we have here. Yet the 11th

Circuit applied the clear terms of the policy to deny coverage. I think it

also serves public policy that an insurance company, in an effort to try to

provide coverage when coverage is due and owed, to try to act quickly on

claims; and should not, when it’s acting in good faith, forfeit because it

tries to act quickly to help its insured from being able to say, “Wait a

minute, there’s no coverage here. We didn’t realize that at first, but this

loss pre-dates the date of the policy.”

In this case, Plaintiff was on notice, again as I’ve already said in the

Findings of Fact, that he might be responsible for the work performed by

ServPro by signing that authorization. And Teresa Serdinsky testified that

she contacted ServPro about performing the work before she ever spoke to

anyone at Tennessee Farmers. By the way, I’m going add that,

commenting on the law, I also want to add that as a 13th Finding of Fact.

Based on her deposition testimony that Teresa Serdinsky testified that she

contacted ServPro about performing the work before she ever spoke to

anyone at Tennessee Farmers.

I just don’t think that it is the case, and I agree with Defendant that a

mistake in authorization to perform repairs when made in good faith,

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somehow alters the unambiguous effective date of the insurance contract.

Here, once again, there was a very unfortunate mistake. Everybody thought

the closing was going to be on May 29. Tennessee Farmers was asked to

insure the property. They agreed to do that. They issued a policy in good

faith effective May 29, based upon the representations made to the

company about the date of the closing. And unfortunately two things

happened. Number 1, nobody notified Tennessee Farmers that the closing

was moved up 5 days to May 24. And Number 2, unfortunately the loss

pre-dated the effective date of the policy.

I believe that [Tennessee Farmers] has negated essential elements of

the Plaintiff’s claim and that the Plaintiff cannot prove the claim and that

there is no genuine issue of material fact. And, so, I’m going to grant

[Tennessee Farmers’] Motion for Summary Judgment.

In December 2018, Plaintiff filed a motion to alter, amend and/or reconsider the

Trial Court’s grant of summary judgment in favor of Tennessee Farmers. Thereafter, the

Trial Court entered an order in March 2019, awarding Tennessee Farmers discretionary

costs. Following a hearing on Plaintiff’s motion to alter, amend and/or reconsider

conducted in February 2019, the Trial Court entered an order in April 2019, denying

Plaintiff’s motion. In its April 2019 order, the Trial Court incorporated by reference the

oral ruling in the transcript from the February 2019 motion hearing. The transcript

provides the Trial Court’s ruling as follows:

Well, it remains my impression of this case that it’s the sad set of facts in

one respect. But the simple reality is that Tennessee Farmers agreed to

insure this property based on a closing dated of “X”. They were told,

Tennessee Farmers was told, that this closing was going to take place on a

certain date; and they agreed to insure the property as of that date. They

were paid for the insurance policy and they issued the policy. But it had an

effective date based on the closing date that was communicated to

Tennessee Farmers. And nobody bothered to tell Tennessee Farmers that

the closing date had changed. It’s not Tennessee Farmers fault. They

issued the policy in good faith, effective the date that they were told the

closing was going to take place. And the other parties, other than

Tennessee Farmers, decided to change the closing date but nobody

bothered to tell Tennessee Farmers. And, so, their policy was issued with

an effective date. And, unfortunately, the loss occurred prior to the

effective date. And, so, I just - it remains my position that Tennessee

Farmers has negated the essential element of the Plaintiff’s case, and that

the Plaintiff cannot prove its case, and that there’s no genuine issue of

material fact, and that Tennessee Farmers in entitled to a Summary

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Judgment. And the only other argument that was offered was, “Well, what

about the fact that Tennessee Farmers had asked this cleaning service to go

in and start cleaning up the damage?” Well, they did. But I think that was

without waiver of their right, once they discovered that the loss pre-dated

the effective date of the policy, to say “I’m sorry, hold on. We’re not going

to clean this after all.” And I still think that that case, that was not a

Tennessee case, but I think it was persuasive authority. Because there the

facts were even more egregious for the insurance company than anything

that happened in this case. And I just feel like I made the right decision the

first time. And, so, I’m going to respectfully deny the Motion to Alter, or

Amend or Reconsider.

Plaintiff timely appealed the Trial Court’s judgment to this Court.

Discussion

Although not stated exactly as such, Plaintiff raises four issues for our review on

appeal as follows: (1) whether the Trial Court erred by granting Tennessee Farmers’

motion for summary judgment despite a genuine issue of material fact existing due to

testimony that a representative of Tennessee Farmers authorized the work on the home,

(2) whether the Trial Court erred by denying Plaintiff’s motion to alter or amend upon its

determination that Tennessee Farmers was not estopped from denying responsibility

when a representative from Tennessee Farmers, and not Plaintiff, authorized the repair

work on the home, (3) whether the Trial Court erred by relying on an out-of-state court

decision as persuasive authority in this matter, and (4) whether the Trial Court erred by

determining that the insurance policy became effective on the initially scheduled closing

date instead of the actual date on which the closing occurred.

As our Supreme Court has instructed regarding the standard of review on motions

for summary judgment:

Summary judgment is appropriate 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. We review a trial court’s ruling on a motion for

summary judgment de novo, without a presumption of correctness. Bain v.

Wells, 936 S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist

Healthcare–Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing

so, we make a fresh determination of whether the requirements of Rule 56

of the Tennessee Rules of Civil Procedure have been satisfied. Estate of

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Brown, 402 S.W.3d 193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev.

Corp., 387 S.W.3d 453, 471 (Tenn. 2012)).

***

[I]n Tennessee, as in the federal system, when the moving party does not

bear the burden of proof at trial, the moving party may satisfy its burden of

production either (1) by affirmatively negating an essential element of the

nonmoving party’s claim or (2) by demonstrating that the nonmoving

party’s evidence at the summary judgment stage is insufficient to establish

the nonmoving party’s claim or defense. We reiterate that a moving party

seeking summary judgment by attacking the nonmoving party’s evidence

must do more than make a conclusory assertion that summary judgment is

appropriate on this basis. Rather, Tennessee Rule 56.03 requires the

moving party to support its motion with “a separate concise statement of

material facts as to which the moving party contends there is no genuine

issue for trial.” Tenn. R. Civ. P. 56.03. “Each fact is to be set forth in a

separate, numbered paragraph and supported by a specific citation to the

record.” Id. When such a motion is made, any party opposing summary

judgment must file a response to each fact set forth by the movant in the

manner provided in Tennessee Rule 56.03. “[W]hen a motion for summary

judgment is made [and] . . . supported as provided in [Tennessee Rule 56],”

to survive summary judgment, the nonmoving party “may not rest upon the

mere allegations or denials of [its] pleading,” but must respond, and by

affidavits or one of the other means provided in Tennessee Rule 56, “set

forth specific facts” at the summary judgment stage “showing that there is a

genuine issue for trial.” Tenn. R. Civ. P. 56.06. The nonmoving party

“must do more than simply show that there is some metaphysical doubt as

to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.

Ct. 1348. The nonmoving party must demonstrate the existence of specific

facts in the record which could lead a rational trier of fact to find in favor of

the nonmoving party. If a summary judgment motion is filed before

adequate time for discovery has been provided, the nonmoving party may

seek a continuance to engage in additional discovery as provided in

Tennessee Rule 56.07. However, after adequate time for discovery has

been provided, summary judgment should be granted if the nonmoving

party’s evidence at the summary judgment stage is insufficient to establish

the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P.

56.04, 56.06. The focus is on the evidence the nonmoving party comes

forward with at the summary judgment stage, not on hypothetical evidence

that theoretically could be adduced, despite the passage of discovery

deadlines, at a future trial.

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Rye v. Women’s Care Cntr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.

2015).

We first address whether the Trial Court erred in its determination that the policy

effective date was the date of the originally scheduled closing and not the actual closing

date. The initial closing date on Plaintiff’s purchase of the Property was May 29, 2013.

Plaintiff had contacted Tennessee Farmers to obtain a homeowner’s insurance policy

concerning the Property. The application for insurance reflected that the requested policy

would begin on May 29, 2013. Thereafter, the sellers of the Property requested to move

up the closing date to May 24, 2013. The closing date was, therefore, rescheduled to

May 24, 2013, five days earlier than previously scheduled.

Although Plaintiff executed an affidavit stating that he had been shown a

document reflecting that notice of the change in closing date had been provided to

Tennessee Farmers, the Trial Court found that Mr. Haston had not been provided notice

that the closing had been moved to an earlier date and that Plaintiff never requested that

Tennessee Farmers modify the effective date of the policy to the actual closing date. The

Trial Court acknowledged Plaintiff’s allegations that he had seen a document reflecting

that notice had been provided to Tennessee Farmers but found that Plaintiff had not

submitted any such documentation proving notice to the Trial Court. Pursuant to our

Supreme Court’s holding in Rye, 477 S.W.3d at 265, Plaintiff, as the non-moving party,

“must demonstrate the existence of specific facts in the record which could lead a rational

trier of fact to find in favor of the nonmoving party.” Without proof that Tennessee

Farmers had been notified that the closing had been moved to an earlier date, the Trial

Court did not err by finding that the effective date for the homeowner’s policy was the

original date of closing on May 29, 2013, and not on the actual closing date, which

occurred earlier in time.

We next address whether the Trial Court erred by granting Tennessee Farmers’

motion for summary judgment, denying Plaintiff’s motion to alter or amend, and relying

on persuasive authority. It is undisputed that on May 26, 2013, Plaintiff signed an

agreement with ServPro to perform work on the Property. According to Plaintiff’s

affidavit, the May 26, 2013 agreement with ServPro was for the sole purpose of allowing

ServPro to remove the accumulated water from the home. Plaintiff stated that it was a

one-day job and that ServPro left the Property upon completion of the job.

ServPro later returned to the home on May 28, 2013, to begin demolition on the

Property. However, there is at least a genuine question of who actually authorized the

work to be performed on Plaintiff’s home, which began on May 28, 2013. The Trial

Court found that Plaintiff had signed an authorization form authorizing ServPro to

perform work on the Property. The Trial Court further found that the authorization

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provided that Plaintiff would be responsible for costs not covered by insurance and that

the company is working for the customer, not the insurance company, agent, or adjuster.

However, Plaintiff argues that the initial authorization form to which the Trial Court

refers was for one day of work on May 26, 2013, which was completed; he did not sign

an additional authorization for the subsequent work; and the work that was authorized

and began on May 28, 2013, was authorized solely by a claims adjuster for Tennessee

Farmers, Quint Webster. Plaintiff further stated that Mr. Webster informed him that he

had authorized ServPro to place a dumpster on the Property to begin demolition on the

Property. According to Plaintiff, he relied on Mr. Webster’s representation and allowed

ServPro to begin demolition, believing that Tennessee Farmers would pay for the work.

Alicia Burch, an employee of ServPro, executed an affidavit stating that she had

corresponded with Quint Webster on May 28, 2013, concerning “the mitigation and tear

out only” and that Mr. Webster had authorized ServPro to perform work on the Property.

Ms. Burch also stated that ServPro performed work on the Property for approximately

three weeks under the authorization of Mr. Webster and then ceased work on the Property

at the direction of Tennessee Farmers.

Freda Green, also an employee of ServPro, executed an affidavit stating that she

had “worked on the emails on May 28, 2013, concerning the mitigation/tear-out” to the

Property. According to Ms. Green’s affidavit, Mr. Webster, an employee of Tennessee

Farmers, authorized ServPro to perform work on the Property on May 28, 2013.

According to Ms. Green’s affidavit, ServPro performed three weeks of work on the

Property, upon the authorization of Mr. Webster, before being instructed to stop work on

the Property by Tennessee Farmers. An email message from Ms. Green to Mr. Webster

provided as follows:

I’m in accounting at Servpro and I have been [in] a few discussions with

the Clark’s attorney regarding payment to Servpro.

As you know, Servpro was called out by our corporate office on May 26,

2013 at 5:25 PM. Teresa Clark called our corporate office and requested

Servpro’s service for her father’s (Robert Clark) water damage (not sure

how Ms. Clark knew to call Servpro.)

On 5-28-13 Alicia Burch talked to you and you ok’d for a dumpster to be

put on job site. On 5-31-13, again, you approved for a second dumpster to

be placed on job site. Servpro worked on this property for three weeks,

gutted the house and then on 6-18-13, Servpro gets the news there’s a

problem with coverage on this claim and from that point on Servpro was

forgotten about.

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Can you let us know if and when Servpro can get paid? Our total bill for

our services is $13,881.96. If you need a copy of our estimate I will be

happy to provide. Any help you can provide will be much appreciated.

A hand-written notation was on the email printout, which read: “It appears Mr. Clark’s

Escrow company is the issue. Don’t know who that is but we were told Mr. Clark’s

insurance didn’t get paid.”

Plaintiff argues that the Trial Court erred by relying on a federal appellate court

case as persuasive authority in this matter. Upon its statement that it had been unable to

find controlling authority, the Trial Court relied on the 11th Circuit Court of Appeals case

of Mahens v. Allstate Ins. Co., 447 Fed. Appx. 51, 56 (11th Cir. 2011). The Trial Court

recognized that the federal case, which was analyzing Georgia law, was not controlling

but considered it to be persuasive in this matter. Trial courts may rely on persuasive

authority in the absence of Tennessee authority on point. See Ottinger v. Stooksbury, 206

S.W.3d 73, 79 (Tenn. Ct. App. 2006).

However, we find the Mahens case to be distinguishable from the case before us.

In Mahens, the agent for the insurance company did not authorize the company to

perform work on the plaintiff’s property. Instead, the plaintiff in Mahens personally

authorized the work to be performed on his property. In the present case, Plaintiff

presented proof that he did not authorize the demolition work performed by ServPro but

that Mr. Webster, an agent for Tennessee Farmers, solely had authorized the work.

Therefore, we find the Mahens case distinguishable from the current case.

The issue before us of whether summary judgment was appropriate turns on the

existence of genuine issues of material fact, i.e., whether Mr. Webster, while acting as an

agent for Tennessee Farmers, authorized the work performed on the Property by ServPro

and whether the scope of work authorized by Plaintiff included the work that was

authorized and began on May 28, 2013. If Mr. Webster was acting as an agent of

Tennessee Farmers and authorized the work on the Property, Mr. Webster’s actions may

be binding on Tennessee Farmers, and therefore, Tennessee Farmers could be estopped to

deny responsibility to pay for the work it authorized through its agent, Mr. Webster, and

actually performed by ServPro beginning on May 28, 2013.

This Court has held that if an agency relationship exists, “[a] principal is bound by

contracts made by its agent, provided the agent is acting within the scope of his actual or

apparent authority.” S. Rehab. Specialists, Inc. v. Ashland Health Care Ctr., Inc., No.

01A01-9607-CH-00345, 1997 WL 203607, at *4 (Tenn. Ct. App. Apr. 28, 1997) (citing

Bells Banking Co. v. Jackson Centre, Inc., 938 S.W.2d 421, 424 (Tenn. Ct. App. 1996));

see also Johnson v. LeBonheur Children’s Med. Ctr., 74 S.W.3d 338, 343 (Tenn. 2002)

(“When an agency relationship exists, the principal may be bound by the acts of the agent

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performed on the principal’s behalf and within the actual or apparent scope of the

agency.”); Batey v. D. H. Overmyer Warehouse Co., 446 S.W.2d 686, 694 (Tenn. Ct.

App. 1969) (“All corporate organizations act by and through boards, commissions,

officers and employees, and if they act within the apparent scope of their authority, their

actions are those of the corporation.” (citing Whitehaven Utility Dist. of Shelby County v.

Ramsay, 387 S.W.2d 351 (Tenn. 1964))). Additionally, “an agent acting within the

general scope of his apparent authority, though exceeding his authority, binds his

principal.” Indus. Life & Health Ins. Co. v. Trinkle, 206 S.W.2d 414, 415 (Tenn. 1947).

Concerning insurance companies, the Supreme Court has stated that “[a]s in the case of

agencies in general an insurance company is bound by all acts, contracts, or

representations of its agent, whether general or special, which are within the scope of his

real or apparent authority.” Bill Brown Const. Co., Inc. v. Glens Falls Ins. Co., 818

S.W.2d 1, 4 (Tenn. 1991).

In Bill Brown Const. Co., Inc., the plaintiff requested a “full coverage policy” on

the cargo transported in his business from the defendant insurer. Id. at 1. The plaintiff

showed the insurance agent photos of the oversized cargo hauled in his business. Id. at 1-

2. The insurance agent responded: “That’s no problem, you’ve got full coverage.” Id. at

2. An accident subsequently occurred where the cargo on the plaintiff’s trailer struck an

overhead bridge, damaging the cargo. Id. at 2. The insurer denied coverage because the

tractor trailer had not collided with the bridge or been damaged in the accident. Id. at 2.

According to the insurer, the policy provided coverage only if the cargo was damaged as

a result of a collision involving the vehicle. Id. at 2. The Supreme Court ultimately held

in Bill Brown Const. Co., Inc. that “an insurer may be estopped to deny coverage for any

loss by the misrepresentations of its agent upon which the insured reasonably relies.” Id.

at 12. The Court further held that insurance companies have no “immunity from legal

liability for express commitments made by his direct employee acting strictly in

accordance with his authority.” Id. at 13 (internal citation omitted).

Following the Court’s opinion in Bill Brown Const. Co., Inc., our Supreme Court

held in Allstate Ins. Co. v. Tarrant, 363 S.W.3d 508, 519-20 (Tenn. 2012), that “[a]n

insurance company is generally deemed estopped to deny policy liability on a matter

arising out of the negligence or mistake of its agent, and if either party has to suffer from

an insurance agent’s mistake, it must be the insurance company.” (Internal citations

omitted.) In Tarrant, the insured requested that a van be covered under the insured’s

commercial insurance policy, and not his personal policy. The agent assured the insured

that his request would be complied with. The insured relied on the agent to provide the

requested insurance coverage. However, due to a mistake by the agent, the van was

placed on the personal policy. Our Supreme Court held that although insurance policies

are generally controlled by basic contract principles, “as to the specific matter of a

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mistake by an insurance agent as occurred in this case, the common law clearly dictates

that the insurer is estopped to deny coverage.” 2 Id. at 521.

Although Bill Brown Const. Co., Inc. and Tarrant involved insurance agents

procuring insurance policies on behalf of their clients, we believe the Supreme Court’s

holdings would apply to a misrepresentation or a mistake made by an insurance adjuster.

Such a mistake as apparently made here by Mr. Webster in authorizing ServPro’s

additional work, is not covered by Tennessee Code Annotated § 56-7-135. See Johnson,

74 S.W.3d at 343 (“When an agency relationship exists, the principal may be bound by

the acts of the agent performed on the principal’s behalf and within the actual or apparent

scope of the agency.”). If such insurance adjuster, acting as an agent on behalf of the

insurance company, made a mistake by authorizing work on an insured’s property when

the policy does not provide coverage for the work, the agent’s actions could bind the

insurance company and estop the insurance company from denying financial

responsibility for the work authorized by only the insurance company’s agent and

performed pursuant to that authorization. As a matter of public policy, an insurer or its

agent should make a reasonable determination concerning coverage prior to authorizing

service on behalf of the insured rather than commit their insured to a liability of

thousands of dollars for work that the insured did not authorize and may never have

authorized if the insured knew there was no insurance coverage for that work. There

exists at least a genuine issue whether Mr. Webster, while acting as an agent for

Tennessee Farmers, authorized the work on May 28, 2013, which began on the same

date, even though Tennessee Farmers had both the date of the loss and the effective date

of the policy readily available to it. Given that Tennessee Farmers has successfully

argued that their policy was not in effect as of the date of the loss, Tennessee Farmers had

2

The Court in Tarrant also held that the insurer should not be relieved of liability for its agent’s mistake

due to the insured’s failure to discover the error and that the insured’s payment of the insurance premiums

did not ratify the agent’s mistaken modification of coverage. Tarrant, 363 S.W.3d at 519, 521. Shortly

after the Tarrant opinion was released, the general assembly enacted Tennessee Code Annotated § 56-7-

135 in May 2012, which provides:

(a) The signature of an applicant for or party to an insurance contract on an application,

amendment, or other document stating the type, amount, or terms and conditions of

coverage, shall create a rebuttable presumption that the statements provided by the person

bind all insureds under the contract and that the person signing such document has read,

understands, and accepts the contents of such document.

(b) The payment of premium for an insurance contract, or amendment thereto, by an

insured shall create a rebuttable presumption that the coverage provided has been

accepted by all insureds under the contract.

We do not find this statute to be relevant in the present case as to whether Tennessee Farmers should be

bound by the act of its insurance adjuster if he authorized work to be performed on the Property while

acting as an agent of the company.

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no authority to have work done on the Property and somehow obligate Plaintiff to pay for

that work he never authorized.

The Trial Court found that as to the issue of who authorized the work to be

performed on Plaintiff’s property, Plaintiff had signed an authorization for ServPro to

perform services on the Property and that the authorization form stated Plaintiff was

responsible for costs not covered by insurance and ServPro works for the customer, not

the insurance company, agent, or adjuster. However, the Trial Court failed to recognize

the affidavits executed by employees of ServPro, which stated that Quint Webster with

Tennessee Farmers actually authorized ServPro to perform the work on the Property

beginning on May 28, 2013. Additionally, Plaintiff’s affidavit states that the

authorization he signed was for only one day of work to remove the water and that he had

not signed additional documentation to authorize additional work. Plaintiff’s affidavit

further states that Mr. Webster informed him that Mr. Webster had authorized ServPro to

place a dumpster on the Property to begin demolition. We hold that (1) whether Mr.

Webster was acting as an agent of the insurance company, (2) whether Mr. Webster

authorized ServPro to perform work on the Property, and (3) the scope of ServPro’s

services authorized by Plaintiff are genuine issues of material fact relevant to whether

Tennessee Farmers can be estopped to deny responsibility to pay for the work it and only

it allegedly authorized ServPro to perform on the Property and which ServPro actually

performed. As such, we find and hold that the Trial Court erred by granting Tennessee

Farmers’ motion for summary judgment as to the work actually performed by ServPro

beginning on May 28, 2013. The Trial Court, however, did not err in its determination

that the effective date of the policy was and remained May 29, 2013. We, therefore,

modify the Trial Court’s grant of summary judgment and remand for further proceedings

consistent with this Opinion.

Conclusion

The judgment of the Trial Court is affirmed in part and reversed in part. The Trial

Court’s judgment granting summary judgment in favor of Tennessee Farmers is affirmed

as to the effective date of the policy but is reversed as to Tennessee Farmers’ liability for

the work performed by ServPro, which was authorized and began on May 28, 2013. This

cause is remanded to the Trial Court for further proceedings consistent with this Opinion

and for collection of the costs below. The costs on appeal are assessed equally against

the appellant, Robert F. Clark, and his surety, if any, and the appellee, Tennessee Farmers

Mutual Insurance Company.

_________________________________

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D. MICHAEL SWINEY, CHIEF

JUDGE

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