Phyllis T. Craighead v. Bluecross Blueshield Of Tennessee, Inc. ( 2008 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
February 6, 2008 Session
PHYLLIS T. CRAIGHEAD v. BLUECROSS BLUESHIELD OF
TENNESSEE, INC., ET AL.
Appeal from the Circuit Court for Wilson County
No. 12,289 Clara W. Byrd, Judge
No. M2007-01697-COA-R10-CV - Filed July 31, 2008
We reverse the trial court’s finding that the immunity granted in the second sentence of Tenn. Code
Ann. § 56-53-110 applied only where there was proof that actual malice was absent. With regard
to the statute of limitations governing claims related to diminution in value to a business, where the
gravamen of the complaint is for breach of contract, the six-year period of Tenn. Code Ann. § 28-3-
109 governs, but where the gravamen of the complaint is for injury to property, the three-year period
of Tenn. Code Ann. § 28-3-105 governs.
Tenn. R. App. P. 10 Extraordinary Appeal; Judgment of the Circuit Court
Reversed and Remanded
PATRICIA J. COTTRELL, P.J., M.S., delivered the opinion of the court, in which FRANK G. CLEMENT ,
JR., and RICHARD H. DINKINS, JJ., joined.
Gary C. Shockley, Samuel T. Bowman, Nashville, Tennessee, for the appellants, BlueCross
BlueShield of Tennessee, Inc., and Volunteer State Health Plan, Inc.
Robert E. Cooper, Jr., Attorney General and Reporter, Dennis J. Garvey, Deputy Attorney General,
Jeremy E. Pyper, Assistant Attorney General, Nashville, Tennessee, as Amicus Curiae in support of
appellants, BlueCross BlueShield of Tennessee, Inc., and Volunteer State Health Plan, Inc.
Robert L. Huskey, Jason L. Huskey, Manchester, Tennessee, for the appellee, Phyllis T. Craighead.
OPINION
This court granted defendant’s Tenn. R. App. P. 10 application for an extraordinary appeal
to review the trial court’s denial of defendant’s request for partial summary judgment of plaintiff’s
claim for malicious prosecution and to review which statute of limitations applies to a claim
pertaining to diminution in value to a business.
In July of 2002, Phyllis Craighead, individually and as an assignee of Kids and Nurses, Inc.1
(“K&N”), sued BlueCross BlueShield of Tennessee (“BCBS”)2 for breach of contract, malicious
prosecution, and outrageous conduct.
The following facts are not disputed. K&N, as the name implies, provided nursing services
for children with special health problems. In May of 1993, K&N entered into a contract with BCBS
to provide these services to BCBS enrollees. In February of 1996, the parties entered into an
amendment of their contract such that K&N provided the services as a subcontract to BCBS under
the TennCare program. The contract between BCBS and K&N gave either party the right to
terminate the contract without cause upon 90 days written notice. On September 11, 1997, BCBS
gave K&N notice of its intent to terminate the contract which was effective 90 days thereafter.
All parties acknowledge that the contract between BCBS and K&N was subject to the
TennCare Contractor Risk Agreement between BCBS and the TennCare Bureau. The Contractor
Risk Agreement between BCBS and the State of Tennessee for TennCare services provides in § 1.5
as follows:
All managed care organizations shall immediately report to the TBI MFCU
[Tennessee Bureau of Investigation Medicaid Fraud Control Unit] any suspicion or
knowledge of fraud and/or abuse, including but not limited to the false or fraudulent
filings of claims and/or the acceptance or failure to return monies allowed or paid on
claims known to be false or fraudulent. The reporting entity shall not attempt to
investigate or resolve the reported suspicion, knowledge or action without informing
the TBI MFCU and must cooperate fully in any investigation by the TBI MFCU or
subsequent legal action that may result from such an investigation. TennCare
managed care organizations and health care providers shall, upon request, make
available to the TBI MFCU any and all administrative, financial and medical records
relating to the delivery of items or services for which TennCare monies are expended.
In addition, the TBI MFCU must be allowed access to the place of business and to
all records of any TennCare managed care organization or health care provider during
normal business hours, except under special circumstances when after hour
admission shall be allowed. Special circumstances shall be determined by the TBI
MFCU.
1
It is not disputed for purposes of this appeal that Kids and Nurses, Inc. was sold to Pediatric Services of
America on November 21, 1997, including M s. Craighead’s interest in K&N. It appears that Ms. Craighead was assigned
by K&N its interest in the lawsuit against BCBS, although the terms and extent of this assignment are neither challenged
nor clear. For purposes of this opinion, it is assumed that K&N assigned to M s. Craighead any breach of contract claims
K&N may have had against BCBS.
2
Included as defendant were the affiliated companies of BCBS, including Volunteer State Health Plan, Inc.
which is a managed care organization that contracted with the State of Tennessee, TennCare Bureau, in the Contractor
Risk Agreement to provide services for TennCare, the state’s Medicaid plan. The defendant is collectively referred to
as “BCBS.”
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In Ms. Craighead’s Response to the defendant’s Rule 56.03 Statement of Undisputed Facts, the
parties agreed as follows:
2. BCBS was under a contractual duty to report suspected fraud to the TBI.
Source: Contractor Risk Agreement § 1-5.
Response: Admit, but this requirement to admit does not give
them the license to misrepresent the facts to TBI for
BlueCross’s financial gain.
3. BCBS was under a contractual duty to cooperate with the TBI in its
investigation of suspected fraud.
Source: Deposition of Patricia Schermerhorn, page 107, lines 1-19;
Response: Admit
In her complaint, Ms. Craighead alleges that BCBS wrongfully reported accepted billing
practices as Medicaid fraud to the Tennessee Bureau of Investigation (“TBI”) which prompted a
criminal investigation and that during the course of the criminal investigation BCBS provided
“slanted” and “incomplete” information to authorities. Ms. Craighead also alleges that BCBS “slow
walked and intentionally evaded their obligation under the contract to timely process the payments”
in violation of their contract which resulted in a cash flow problem for K&N. As a result of these
actions, Ms. Craighead alleges that the value of K&N was diminished when it was later sold. Ms.
Craighead alleges that she was tried on thirty-six (36) counts of TennCare insurance fraud in federal
court and was ultimately acquitted. As a result of these alleged actions, Ms. Craighead alleged
BCBS is liable for outrageous conduct, malicious prosecution and breach of contract.
The defendant filed a motion for partial summary judgment seeking dismissal of the
malicious prosecution claim and the outrageous conduct claim. The trial court dismissed the
outrageous conduct claim, and that dismissal is not appealed.3 The rulings which are subject to this
appeal are the trial court’s denial of summary judgment on the malicious prosecution claim and its
refusal to find that recovery for diminution in value to K&N is barred by the three-year limitations
period of Tenn. Code Ann. § 28-3-105.
The trial court gave two reasons for its refusal to dismiss the malicious prosecution claim.
First, the trial court found that there were issues of material fact surrounding elements of the
malicious prosecution claim. The trial court declined to grant BCBS dismissal of the malicious
3
Earlier the trial court denied BCBS’s motion for summary judgment on the breach of contract claim which is
likewise not subject to this appeal. Consequently, the claim that BCBS breached its contract with K&N by its delays
and failure to pay for services rendered by K&N remains.
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prosecution claim finding that there was a genuine issue of material fact as to whether BCBS
provided false information or omitted information when it reported suspected fraud to the TBI. The
court also found that reasonable minds could differ as to whether there was probable cause to suspect
fraud. Second, the trial court further found that BCBS did not enjoy the immunity offered by Tenn.
Code Ann. § 56-53-110 since it “does not apply in case of actual malice, and that there is a genuine
issue as to the existence of malice under the facts and before the court.”
BCBS also argues on appeal that the trial court erred when it held that diminution in value
to K&N is not an injury to property governed by the three-year limitations period of Tenn. Code
Ann. § 28-3-105. The court found that plaintiff’s “attempt to recover for damages in value to Kids
& Nurse, Inc. is an element of the damages of the breach of contract [claim] and not a separate claim
for property damages.”
We will first address whether the trial court erred when it denied defendant’s request for
summary judgment of plaintiff’s malicious prosecution claim. Since the question whether BCBS
is immune under Tenn. Code Ann. § 56-53-110 would pretermit any other issues raised on appeal
about the malicious prosecution matter, we will start our inquiry with the immunity issue.
I. IMMUNITY UNDER TENN . CODE ANN . § 56-53-110
In 2001, the General Assembly enacted Chapter 53 of Title 56 of Tennessee Code Annotated
entitled “Insurance Fraud” to combat, as the title suggests, insurance fraud. By virtue of this act, it
became a criminal violation to participate in a “fraudulent insurance act” as defined by Tenn. Code
Ann. § 56-53-102. Included with the definition of a “fraudulent insurance act,” among other things,
is the following:
(a) Any person who, knowingly and with intent to defraud, and for the purpose of
depriving another of property or for pecuniary gain, commits, participates in or aids,
abets, or conspires to commit or solicits another person to commit, or intentionally
permits its employees or its agents to commit any of the following acts, has
committed a fraudulent insurance act:
(1) Presents, causes to be presented, or prepares with knowledge or belief that it
will be presented, by or on behalf of an insured, claimant or applicant to an insurer,
insurance professional or premium finance company in connection with an insurance
transaction or premium finance transaction, any information which contains false
representations as to any material fact, or which withholds or conceals a material fact
concerning any of the following:
...
(B) A claim for payment or benefit pursuant to any insurance policy;
(C) Payments made in accordance with the terms of any insurance policy;
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...
Civil liability was created for anyone who commits an “unlawful insurance act” as defined
by Tenn. Code Ann. § 56-53-103. If a party is convicted of a fraudulent insurance act, courts are
authorized to order restitution of damages under Tenn. Code Ann. § 56-53-105. This act also
granted civil immunity for those persons cooperating under the Act. Tenn. Code Ann. § 56-53-110
provides as follows:
In the absence of actual malice, no person furnishing, disclosing or requesting
information pursuant to § 56-53-109 shall be subject to civil liability for libel,
slander, or any other cause of action arising from the furnishing, disclosing or
requesting of such information. No person providing information pursuant to §
56-53-109(a) shall be subject to civil liability for any cause of action arising from
the person’s provision of requested information. Any person against whom any
action is brought who is found to be immune from liability under this section, shall
be entitled to recover reasonable attorneys’ fees and costs from the person or party
who brought the action. This section does not abrogate or modify in any way any
common law or statutory privilege or immunity heretofore enjoyed by any person.
(emphasis added).
The code section referenced above, Tenn. Code Ann. § 56-53-109, entitled “Cooperation,”
provides as follows:
(a) When any law enforcement official or authority, any insurance department, state
division of insurance fraud, or state or federal regulatory or licensing authority
requests information from an insurer or insurance professional for the purpose of
detecting, prosecuting or preventing insurance fraud, the insurer or insurance
professional shall take all reasonable actions to provide the information requested,
subject to any legal privilege protecting such information.
(b) Any insurer or insurance professional who has reasonable belief that an act
violating § 56-53-102 or § 56-53-103 will be, is being, or has been committed shall
furnish and disclose any information in such insurance professional’s possession
concerning such act to the appropriate law enforcement official or authority,
insurance department, state division of insurance fraud, or state or federal regulatory
or licensing authority, subject to any legal privilege protecting such information. In
no case shall the information be required by subpoena or otherwise to be given to the
person alleged to have committed a violation, unless in possession of an insurer and
that insurer used the information to deny a claim of the person, in whole or in part.
(c) All documents or other information submitted to or generated by a law
enforcement, regulatory, licensing or other governmental agency pursuant to
subsection (a) or (b) shall not be subject to disclosure pursuant to the Tennessee
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Public Records Act, codified in title 10, chapter 7, and shall be confidential unless
disclosed by such law enforcement, regulatory, licensing or other governmental
agency at such agency’s sole discretion.
(d) Any person who has a reasonable belief that an act violating this chapter will be,
is being, or has been committed, or any person who collects, reviews or analyzes
information concerning insurance fraud may furnish and disclose any information in
such person’s possession concerning such act to an authorized representative of an
insurer who requests the information for the purpose of detecting, prosecuting or
preventing insurance fraud.
(e) Failure to cooperate with a request for information from an appropriate local, state
or federal governmental authority shall bar a person’s eligibility for restitution from
any proceeds resulting from such governmental investigation and prosecution. This
subsection shall not be construed as limiting the ability of any governmental authority
from imposing lawful civil discipline upon a person or entity that fails to cooperate
with a request for information as delineated in this subsection.
Whether BCBS is shielded by this statutory immunity is a matter of statutory construction.
Construction of a statute is a question of law which appellate courts review de novo, without a
presumption of correctness of the trial court’s findings. Barge v. Sadler, 70 S.W.3d 683, 686 (Tenn.
2002); Hill v. City of Germantown, 31 S.W.3d 234, 237 (Tenn. 2000); Gleaves v. Checker Cab
Transit Corp., Inc., 15 S.W.3d 799, 802 (Tenn. 2000); Exxonmobil Oil Corp. v. Metro. Gov’t. of
Nashville and Davidson County, 246 S.W.3d 31, 35 (Tenn. Ct. App. 2005).
The primary rule of statutory construction is “to ascertain and give effect to the intention and
purpose of the legislature.” LensCrafters, Inc. v. Sundquist, 33 S.W.3d 772, 777 (Tenn. 2000);
Carson Creek Vacation Resorts, Inc. v. Dept. of Revenue, 865 S.W.2d 1, 2 (Tenn. 1993);
Exxonmobil, 246 S.W.3d at 35; McGee v. Best, 106 S.W.3d 48, 64 (Tenn. Ct. App. 2002). To
determine legislative intent, one must look to the natural and ordinary meaning of the language used
in the statute itself. We must examine any provision within the context of the entire statute and in
light of its over-arching purpose and the goals it serves. State v. Flemming, 19 S.W.3d 195, 197
(Tenn. 2000); Cohen v. Cohen, 937 S.W.2d 823, 828 (Tenn. 1996); Exxonmobil, 246 S.W.3d at 35;
T.R. Mills Contractors, Inc. v. WRH Enterprises, LLC, 93 S.W.3d 861, 867 (Tenn. Ct. App. 2002).
The statute should be read “without any forced or subtle construction which would extend or limit
its meaning.” Nat’l Gas Distributors, Inc. v. State, 804 S.W.2d 66, 67 (Tenn. 1991). As our
Supreme Court has said, “[w]e must seek a reasonable construction in light of the purposes,
objectives, and spirit of the statute based on good sound reasoning.” Scott v. Ashland Healthcare
Center, Inc., 49 S.W.3d 281, 286 (Tenn. 2001) (citing State v. Turner, 913 S.W.2d 158, 160 (Tenn.
1995)).
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Courts are also instructed to “give effect to every word, phrase, clause and sentence of the
act in order to carry out the legislative intent.” Tidwell v. Collins, 522 S.W.2d 674, 676-77 (Tenn.
1975); In re Estate of Dobbins, 987 S.W.2d 30, 34 (Tenn. Ct. App. 1998). Courts must presume
that the General Assembly selected these words deliberately, Tenn. Manufactured Housing Ass'n.
v. Metro. Gov't., 798 S.W.2d 254, 257 (Tenn. Ct. App. 1990), and that the use of these words
conveys some intent and carries meaning and purpose. Tennessee Growers, Inc. v. King, 682 S.W.2d
203, 205 (Tenn. 1984); Clark v. Crow, 37 S.W.3d 919, 922 (Tenn. Ct. App. 2000).
When construing statutes that are part of a statutory scheme, we are also directed to look to
the context of the particular provision. Our Supreme Court has made the following observation:
When statutory provisions are, as in this case, enacted as part of a larger Act, ‘we
examine the entire Act with a view to arrive at the true intention of each section and
the effect to be given, if possible, to the entire Act and every section thereof. Where
different sections are apparently in conflict we must harmonize them, if practicable,
and lean in favor of a construction which will render every word operative.’
Hill, 31 S.W.3d at 238 (quoting Bible & Godwin Constr. Co. v. Faener Corp., 504 S.W.2d 370, 371
(Tenn. 1974)).
The trial court found that in order for the immunity of Tenn. Code Ann. § 56-53-110 to apply,
there must be an absence of malice. This is clearly a prerequisite in order to claim the immunity
granted in the first sentence of the statute. Consequently, absent actual malice, no person who
furnishes, discloses, or requests information pursuant to the first sentence of Tenn. Code Ann. § 56-
53-109 may be subject to civil liability.
We do not believe, however, the immunity available in the second sentence requires an
absence of actual malice for several reasons. First, the plain language of the second sentence, which
applies only if a person is providing information upon request, contains no such requirement of
actual malice. Second, to imply such a requirement would make the second sentence redundant and
useless. We must give meaning to the second sentence and recognize the legislature’s intent to
create a different kind of immunity in a specific situation. Also, the second sentence refers to
subsection (a) of Tenn. Code Ann. § 56-53-109 which only applies to information requested from
an insurer. The reference to Tenn. Code Ann. § 56-53-109 in the first sentence is not limited to
subsection (a), but also applies to one furnishing information under Tenn. Code Ann. § 56-53-
109(b), (c), (d) and (e). Therefore, the meaning of Tenn. Code Ann. § 56-53-110 becomes clear.
The determinative distinction between the two sentences is whether one is an insurer responding4
to a request for information. If so, then one is immune from civil liability. If not, then one is
immune from civil liability only if there is an absence of actual malice.
4
Presumably, if one is acting on behalf of an insurer such as an employee or agent the immunity would likewise
apply.
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Omitting the absence of actual malice requirement while granting immunity to insurers who
respond to requested information is also an expression of public policy within the legislature’s
domain. If a person intentionally provides investigating authorities with false information and
evidence then the authority involved may take whatever lawful recourse is available. Consequently,
there exists incentive to prevent such behavior. The legislature has clearly decided that exposing and
eliminating insurance fraud is important and that to be successful one must secure the cooperation
of insurers. To that end, immunity is granted without reservation to insurers who provide
information upon request to proper authorities, including the TBI. Whether one cooperates with the
purest of motives or the darkest of heart is irrelevant under the second sentence of Tenn. Code Ann.
§ 56-53-110. The legislature is responsible for balancing the interests involved and has clearly
decided that securing the cooperation of insurers in responding to requested information to root out
fraud overrides the interest of a person to recover damages in a civil suit for tortious conduct.
In addition to the ground relied upon by the trial court requiring an absence of actual malice,
Ms. Craighead offers an additional reason why BCBS may not claim the immunity granted in the
second sentence of Tenn. Code Ann. § 56-53-110. According to Ms. Craighead, the allegedly
tortious behavior of BCBS occurred in 1996, 1997 and 1998, years before the immunity statute was
enacted in 2001. Ms. Craighead was indicted on July 10, 2001 and acquitted in April of 2002.
According to Ms. Craighead, applying Tenn. Code Ann. § 56-53-110 to these facts would be an
inappropriate retroactive application.
In order to be successful in a claim for malicious prosecution, the plaintiff must show: (a)
that a prior lawsuit or judicial proceeding was brought against the plaintiff without probable cause,
(b) that the prior lawsuit or judicial proceeding was brought against the plaintiff with malice, and (c)
that the prior lawsuit or judicial proceedings terminated in the plaintiff’s favor. Parrish v. Marquis,
172 S.W.3d 526, 530 (Tenn. 2005) (citing Christian v. Lapidus, 833 S.W.2d 71, 73 (Tenn. 1992));
Roberts v. Federal Express Corp., 842 S.W.2d 246, 247-48 (Tenn. 1992).
Since the suit was not terminated in Ms. Craighead’s favor until April of 2002, she did not
have a cause of action for malicious prosecution until that time. At the time her cause of action arose
in April of 2002, the statutory immunity had been in effect since July of 2001. Therefore, even if
Tenn. Code Ann. § 56-53-110 is given a prospective application only, it is applicable to Ms.
Craighead’s action.
Neither party raises the issue in their briefs of whether the contractual reporting requirement
in Section 1.5 of the Contract between BCBS and TennCare is the type of “request” contemplated
by the second sentence of Tenn. Code Ann. § 56-53-110. It is required that the person seeking
immunity be providing “requested information.” In turn, Tenn. Code Ann. § 56-53-109(a) provides
“when any law enforcement official or authority, any insurance department, state division of
insurance fraud, or state or federal regulatory or licensing authority” requests information from an
insurer then the insurer must “take all reasonable actions to provide the information requested.”
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First, it is clear from the record that while BCBS may have initially brought suspected fraud
to the attention of the TBI, thereafter, all information was provided by BCBS to the TBI upon their
request by subpoena or otherwise. Second, it is clear that BCBS was contractually obligated to
report suspected fraud to the TBI. Consequently, it was clearly upon request. Third, since this
objection to the application of the statutory immunity has not been raised by Ms. Craighead either
below or in her brief on appeal, then Ms. Craighead may not now raise it for the first time on appeal.
Since we find that BCBS is afforded immunity under the second sentence of Tenn. Code
Ann. § 56-53-110, we reverse the trial court’s denial of summary judgment to BCBS on the
malicious prosecution claim.
II. STATUTE OF LIMITATIONS ON CLAIM THAT
K&N SUFFERED DIMINUTION IN VALUE
BCBS argues on appeal that Ms. Craighead’s claim that she is entitled to recover for
diminution in value to K&N should be dismissed as barred by the three-year limitations period of
Tenn. Code Ann. § 28-3-105. Under Tenn. Code Ann. § 28-3-105, any damage to property is
governed by a three-year statute of limitations. On the other hand, Ms. Craighead argues that since
diminution in value to K&N is a damage under her breach of contract action, then the six-year
limitations period of Tenn. Code Ann. § 28-3-109 governs “actions and contracts not otherwise
expressly provided for.”
They are both correct. This case is unusual since Ms. Craighead is suing both in her capacity
as assignee of K&N’s contractual rights against BCBS and as an individual whose ownership interest
in K&N was damaged. In order to decide the applicable limitation period, we must look to the
“gravamen” of the complaint. Gunter v. Lab. Corp. of America, 121 S.W.3d 636, 638 (Tenn. 2003);
Tip’s Package Store, Inc. v. Commercial Ins. Managers, Inc., 86 S.W.3d 543, 551 (Tenn. Ct. App.
2001). The “gravamen” of the complaint is determined on the basis of the claimed damage. Gunter,
121 S.W.3d at 641-42; Tip’s Package Store, 86 S.W.3d at 551.
We will first address Ms. Craighead’s claim against BCBS as assignee of K&N’s claim
against BCBS. For purposes of this appeal, we assume that as assignee, Ms. Craighead steps into
the shoes of K&N. The gravamen of K&N’s suit against BCBS is that BCBS breached its contract
and K&N is entitled to damages resulting from that breach. One of the possible types of damages
that may be recovered for breach of K&N’s contract is diminution in value, if such damage was
foreseeable at the time the parties entered into the contract.5 Consequently, in her capacity as
5
The inquiry whether diminution in value to K&N is a consequential damage that may be assessed against
BCBS for breach of contract has not yet taken place in this case. Judge Cantrell succinctly described the issue thusly:
Consequential or “special” damages are defined in Black’s as “[s]uch damage as does not flow directly
and immediately from the act of the party, but only from some of the consequences or results of such
act.” The rule from the venerable and familiar case of Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep.
(continued...)
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assignee of K&N’s contractual rights, the gravamen of her complaint is for breach of contract and
the six-year limitations applies.
The same is not true of Ms. Craighead’s claim for diminution in value to K&N in her
individual capacity. As a former owner, Ms. Craighead is alleging that due to wrongful actions of
BCBS, her property, i.e., her ownership interest in K&N, was damaged. The gravamen of this action
is clearly one for injury to property under Tenn. Code Ann. § 28-3-105 and is barred since the action
was brought in July of 2002, nearly 4 1/2 years after she suffered the damage, i.e., when she sold
K&N at an allegedly diminished value.
This matter is remanded to the trial court to proceed on the remaining breach of contract
claim in accordance with this opinion. Costs of this appeal are assessed against the appellee, Ms.
Phyllis Craighead, for which execution may issue if necessary.
____________________________________
PATRICIA J. COTTRELL, P.J., M.S.
5
(...continued)
145 (1854) states that consequential damages will only be awarded if they could reasonably be
supposed to have been within the contemplation of the parties at the time of contracting, as a probable
consequence of a breach of contract. The Baxendale rule has been seconded many times by our
Tennessee courts. See, for example, Lane v. Associated Housing Developers, 767 S.W .2d 640 (Tenn.
Ct. App. 1988); Turner v. Benson, 672 S.W .2d 752 (Tenn. 1984).
Several Tennessee cases have stated that our courts may allow recovery of all damages which are the
normal and foreseeable results of a breach of contract. Moore Construction Co. v. Clarksville Dept.
of Electricity, 707 S.W .2d 1 (Tenn. Ct. App. 1985); Bush v. Cathey, 598 S.W .2d 777 (Tenn. Ct. App.
1979); Wilson v. Dealy, 434 S.W .2d 835 (Tenn.1968). Such results would include both incidental
damages and those consequential damages that meet the Baxendale test. For purposes of analysis, to
say that certain results were foreseeable at the time of contracting, or that they could reasonably be
supposed to have been within the contemplation of the parties would seem to be functionally
equivalent.
Wills Electric Co., Inc., v. Mirsaidi, M2000-02477-COA-R3-CV, 2001 W L 1589119, at *4 (Tenn. Ct. App., Dec. 13,
2001). On at least one occasion the Tennessee Supreme Court has recognized that diminution in value can be a
consequential damage subject to recovery. BVT Lebanon Shopping Center, Ltd. v. Wal-Mart Stores, Inc., 48 S.W .3d
132, 135-36 (Tenn. 2001) (finding diminution in value a measure of damages for breach of a covenant of continuous
occupancy).
If the trial court finds that under the circumstances presented in this case that diminution in K&N’s value is
recoverable for the alleged breach by BCBS, then the trial court must also consider “all factors impacting the diminution
in value,” 48 S.W .3d at 136, and not just the breach. Facts that may have diminished K&N’s value but for which there
can be no recovery include but are not limited to the termination of the contract with BCBS which Ms. Craighead agrees
was not in violation of the contract and was within B CBS’s contractual rights and any action that damaged K&N for
which BCBS is immune under Tenn. Code Ann. § 56-53-110.
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