State Auto Ins. Co. v. Bishop ( 2000 )


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  •                                                   FILED
    IN THE COURT OF APPEALS OF TENNESSEE
    March 16, 2000
    AT NASHVILLE
    Cecil Crowson, Jr.
    STATE AUTO INSURANCE         )                   Appellate Court Clerk
    COMPANY,                     )
    )
    Plaintiff/Appellee,     )       Appeal No.
    )       M1998-00900-COA-R3-CV
    v.                           )
    )       Lawrence County Chancery
    RAYMOND L. BISHOP,           )       No. 8250-96
    )
    Defendant/Appellant.    )
    )
    COURT OF APPEALS OF TENNESSEE
    APPEAL FROM THE CHANCERY COURT
    FOR LAWRENCE COUNTY
    THE HONORABLE JIM T. HAMILTON
    MICHAEL P. MILLS
    MILLS & COOPER
    NASHVILLE, TENNESSEE
    ATTORNEY FOR PLAINTIFF/APPELLEE
    TOM W. MOORE, JR.
    MOORE & PEDEN, P.C.
    COLUMBIA, TENNESSEE
    ATTORNEY FOR DEFENDANT/APPELLANT
    AFFIRMED AND REMANDED
    PATRICIA J. COTTRELL, JUDGE
    CONCUR:
    CANTRELL, P. J.
    KOCH, J.
    OPINION
    State Auto Insurance Company ("State Auto") commenced this
    declaratory judgment action against its insured, Raymond Bishop, to determine
    whether Mr. Bishop failed to comply with conditions precedent to his recovery
    under a homeowners policy. Mr. Bishop counterclaimed, seeking unpaid
    proceeds from the policy and bad faith penalties. After the trial court found for
    State Auto, Mr. Bishop commenced this appeal. For the following reasons, we
    affirm.
    On May 18, 1995, a tornado which State Auto classified as catastrophic
    hit Lawrence County, Tennessee, damaging Mr. Bishop's dwelling, outbuildings,
    and personal property. After Mr. Bishop notified State Auto of the damage on
    or about May 19, a claims representative, Jeff Lewis, was assigned to handle the
    claim. Mr. Lewis maintained that he initially contacted the Bishops on May 19.
    Due to the number of claims arising from the storm, Mr. Lewis was unable to
    retain a contractor who could make immediate repairs. He arranged for Tarpley
    Construction Company (“Tarpley Construction”) to begin repairs to Mr. Bishop’s
    property in late May or early June. Tarpley Construction commenced repairs on
    or about May 26.
    During a May 25 telephone conversation with Mary Bishop, Mr.
    Bishop’s wife, Mr. Lewis asked her to compile a price list of the damaged
    property. The next day, according to Mr. Lewis, Mr. Bishop called, "yelling and
    cussing" that no one had contacted him. Mr. Bishop purportedly ordered Mr.
    Lewis to "come down with his checkbook."
    2
    On July 7, State Auto sent agent Jo Oldenski to inspect the premises
    and the progress of the repairs. She reported that several outbuildings had not yet
    been repaired, but the roof and windows of the house were almost complete.
    Interior repairs to the drywall, paneling, and floor were finished. She reported
    that Mr. Bishop was dissatisfied with the roof repairs because the shingles did not
    extend to the edge of the roof. She also noted that the paneling color and floor
    pattern did not match the originals.
    On August 2, 1995, State Auto issued a $15,178.33 check to Mr.
    Bishop. As part of the documentation for this payment, Tarpley Construction
    submitted a list of contents damaged by the storm. The list was of items Tarpley
    Construction arranged to be cleaned or repaired. The check covered these
    expenses as well as the construction work.
    State Auto subsequently sought this check's return, claiming it should
    have been issued to Tarpley Construction for the repairs it made to the Bishops'
    property rather than to Mr. Bishop alone. Both Mr. Lewis and his supervisor,
    Larry Winters, arranged to visit and inspect the Bishop property on August 31
    while retrieving the check. At some unspecified later date, State Auto paid
    Tarpley Construction directly for repairing Mr. Bishop’s home. On July 20,
    1995, Mr. Bishop signed a Completion Certificate which stated that the work by
    Tarpley Construction was satisfactorily completed.
    It was learned at trial that on August 12, 1995, Mr. Bishop held an
    auction of his personal property, including a couch, table, chairs, shop and
    welding equipment, a lathe, sheet metal tools, automobiles and car parts,
    bushhogs, and other equipment. He purportedly earned approximately $17,000
    from the sale. It is undisputed that Mr. Bishop did not notify State Auto of this
    sale. At trial, Mr. Bishop admitted that he disposed of a lot of personal property
    3
    at this sale, but provided only a few receipts.
    On August 31, before leaving for the previously arranged trip to the
    Bishops’ house, Mr. Winters called to assure that the visit was convenient, to
    inform Mr. Bishop that he intended inspect anything Mr. Bishop desired, and to
    conclude the claim in its entirety. When Mr. Lewis and Mr. Winters arrived to
    retrieve the mistakenly issued check, Mr. Bishop refused to shake hands, to allow
    them to inspect the damage, to let them inside his home, to discuss the claim, or
    to return the check. When Mr. Winters asked for the list of damaged items, Mr.
    Bishop responded that it was not complete. The insurance men claimed Mr.
    Bishop cursed them, claimed to have cashed the check, and told them to leave.1
    As they were leaving, they noticed a sign on the property which said “Ray’s
    Machine Shop” or “Ray’s Tool and Die.” This raised a question about coverage
    because Mr. Bishop’s policy did not cover outbuildings used in business.
    Shortly thereafter, the Bishops sent State Auto a list of the property
    they lost in the tornado. On September 13, Mr. Winters responded by advising
    the Bishops that until they returned the $15,178.33 check, their claim would not
    be resolved. The letter also stated that upon receipt of the mistakenly issued
    check, they would be sent a $5,640 payment to cover damage to appurtenant
    structures. Mr. Winters’s letter also informed the Bishops that:
    The list of contents items you have submitted, will be in need
    of supporting documentation. For your convenience, we
    enclose an inventory form which will allow you to present
    additional information such as the date on which an item was
    purchased, the identity of the brand, make or model of the
    item involved, the original cost, and other information as is
    indicated on the form. It will also be necessary that you
    make each of these items available for inspection in order
    that we can determine the type and/or extent of damage
    sustained. It will also be required that you cooperate with us
    to provide information as to where these items were located
    1
    Mr. Bishop later testified that he had lied about cashing the check.
    4
    when they were damaged as well as to identify the usage of
    these items as we request. We would also have questions
    regarding invoices from Ray’s Machine and Tool Company.
    We would also have questions about charges you have
    shown for lodging. Especially we would question a charge
    on 5-2-95, when this loss occurred on 5-18-95. . . .
    In separate correspondence that same day, State Auto notified the
    Bishops that it was canceling their insurance. State Auto issued a refund of $110.
    Mr. Lewis had recommended the cancellation of the Bishops' policy in an
    underwriting report in May, shortly after his first contact with Mr. Bishop. Mr.
    Lewis testified that “there were times that I would talk to him in the morning. I
    would talk to him again that afternoon and he would say he hadn’t talked to
    anybody since the date of the loss.” Both Mr. Lewis and the contractor alleged
    that Mr. Bishop cursed them during almost every contact.
    On September 20, 1995, Mr. Bishop responded to Mr. Winters’s inquiry
    about the claim made for lodging charge on May 2, 1995. He stated that he
    written the wrong date on his claim and had incurred the motel bills in June, after
    the tornado.
    On November 3, 1995, State Auto received the completed inventory
    form previously sent to the Bishops on September 13, which again listed their
    lost and damaged property. This second list included more items than the first
    list. In this second list, Mr. Bishop raised his estimate of the cost of some of the
    lost items included on the first list. For example, on the first list he valued a
    satellite system at $1,500. He increased his valuation to $2,500 on the second list
    and stated that the original cost was $3,500, although it was later learned that the
    system had been given to him. An entertainment center valued on the first list at
    $700 was estimated at $800 on the second. An air conditioner valued at $450 on
    the first list was listed as $650 on the second. In all, he increased the value of 25
    5
    items included on the second list. Virtually none of the items were reduced.
    After hearing nothing from Mr. Bishop for several months, State Auto
    closed his file in February 1996. On March 6, 1996, Mr. Bishop sent State Auto
    the voided check for $15,178.33 which mistakenly had been issued to him. He
    testified that he held onto the check until it expired just to make his insurer
    wonder. State Auto never paid any remaining proceeds under the policy. Mr.
    Bishop subsequently retained counsel, who demanded payment on November 12,
    1996.
    State Auto filed the underlying declaratory judgment action on
    December 18, 1996, alleging that Mr. Bishop failed cooperate with the terms and
    conditions of the policy. Specifically, State Auto asserted that Mr. Bishop
    refused to meet with its agents to resolve the claim, failed to provide an inventory
    of items until November 3, 1995, and thereafter made no contact for over one (1)
    year. The complaint sought a declaration that Mr. Bishop was not entitled to
    receive any proceeds under the policy.
    Mr. Bishop answered and counterclaimed, alleging fraud based upon
    State Auto's assertion that after the $15,178.33 check was returned, his claim
    would be processed. Mr. Bishop also alleged bad faith failure to pay.
    At trial, Mr. Bishop admitted that he had submitted receipts from his
    business, Ray's Machine and Tool, to State Auto for “outside electrical work.”
    The receipts, which totaled over $200, were for power poles and a security light,
    which he had on hand, and for labor, although he admitted that he incurred no
    labor costs. Mr. Bishop had not paid the amounts on the receipts. He also
    admitted that he sought his policy limits for additional living expenses without
    establishing that he actually spent that amount and that he listed $3,000 in debris
    removal, despite the fact that he only paid $100. He admitted that when he sent
    6
    the list of allegedly damaged personal property to State Auto in November 1995,
    most of the property included on it was gone, having been sold by him in August.
    When he told Mr. Winters and Mr. Lewis on their August 31 visit that he had not
    finished the list of damaged personal property because he was “still searching
    through stuff,” he was aware “most of” the property was gone, having been sold.
    The trial court found that Mr. Bishop was not entitled to any proceeds
    under his homeowners policy because he did not cooperate with State Auto as
    required by the policy and failed to comply with the terms and conditions of the
    policy. In support of these conclusions, the trial court specifically found that: Mr.
    Bishop never fully cooperated with State Auto’s agents when they attempted to
    settle his claim; he refused to return the $15,178.33 check mistakenly sent him
    and held it for 180 days; he held an auction where he sold his personal property,
    which produced $17,000, and never notified State Auto of the sale; and when
    State Auto sent agents to settle the claim, Mr. Bishop prohibited them from
    inspecting the alleged damaged property and the personal property which he had
    already sold. The court found that Mr. Bishop cursed the agents, called them
    obscene names, and told them to leave.
    7
    I.
    This case was tried before the court without a jury. Our standard of
    review, therefore, is de novo upon the record, with a presumption of correctness
    of the findings of fact by the trial court. See Squibb v. Smith, 
    948 S.W.2d 752
    ,
    754 (Tenn. Ct. App. 1997). Unless the evidence otherwise preponderates against
    those findings, we must affirm, absent an error of law. See Tenn. R. App. P.
    13(d).
    On appeal, Mr. Bishop argues that the trial court erred in finding that
    his actions constituted a breach of the non-cooperation provisions of his policy.
    He also claims that State Auto failed to establish that his non-cooperation was
    sufficiently substantial and material to warrant nonpayment of his claim.
    The purpose of including a cooperation clause in a policy and for
    conducting examinations pursuant to it is obvious enough. See Shelter Ins. Co.
    v. Spence, 
    656 S.W.2d 36
    , 38 (Tenn. Ct. App. 1983). The insurer is:
    entitled to obtain, promptly and while the information is still
    fresh, "all knowledge, and all information as to other sources
    and means of knowledge, in regard to the facts, material to
    their rights to enable them to decide upon their obligations,
    and to protect them against false claims.”
    
    Id.
     (quoting Dyno-Bite, Inc. v. The Travelers Co., 
    80 A.D.2d 471
    , 
    439 N.Y.S.2d 558
    , 560 (1981)).
    Tennessee courts have consistently upheld clauses requiring insureds
    to cooperate with their insurance companies. See Linehan v. Allstate Ins. Co.,
    No. 01A01-9308-CH-00387, 
    1994 WL 164113
     at * 4 (Tenn. Ct. App. May 4,
    1994) (no Tenn. R. App. P. 11 application filed) (citing 8 John A. Appleman &
    Jean Appleman, Insurance Law & Practice § 4771 (1981)). Our courts view these
    clauses as conditions precedent and consider their viability “so often sustained
    that the question should be considered at rest." Horton v. Employers' Liab. Assur.
    8
    Corp., 
    179 Tenn. 220
    , 224, 
    164 S.W.2d 1016
    , 1017 (1942); see Hartford Accident
    & Indem. Co. v. Partridge, 
    183 Tenn. 310
    , 314-15, 
    192 S.W.2d 701
    , 702-03
    (1946).
    The clause at issue states in pertinent part:
    Your Duties After Loss. In case of a loss to covered
    property, you must see that the following are done: . . .
    d.    (3) keep an accurate record of repair expenses;
    e.     prepare an inventory of damaged personal property showing the
    quantity, description, actual cash value and amount of loss.
    Attach all bills, receipts and related documents that justify the
    figures in the inventory.
    f.     as often as we reasonably require:
    (1) show the damaged property;
    (2) provide us with records and documents we request and
    permit us to make copies; . . .
    The record showed that Mr. Bishop did not turn in an inventory of
    damaged personal property for over three months after the damage occurred.
    During that time, he sold much of his personal property and offered little or no
    documentation of its value. Mr. Bishop failed to disclose that he held an auction
    to dispose of the goods. He refused to allow State Auto’s agents to inspect his
    real property or the allegedly damaged personal property. The inflated values
    included on the second inventory list Mr. Bishop submitted to State Auto and the
    dearth of documentation raise serious questions about the reliability of the list.
    Mr. Bishop provided receipts from Ray’s Machine and Tool that he never paid.
    Mr. Bishop admitted that he never spent the $3,000 in debris removal or the $900
    in additional living expenses that he claimed.
    Manifestly, the obtaining of true and accurate information
    about the type and extent of damage to the insured premises
    9
    and its contents is relevant and material.
    Shelter Ins. Co., 
    656 S.W.2d at 38
    . Mr. Bishop’s actions prevented the insurer
    from obtaining verifiable information about the nature and extent of the damage.
    Accordingly, we find that his actions breached the cooperation clause in the
    policy.
    As stated above, Mr. Bishop asserts that State Auto failed to establish
    that any non-cooperation on his part was sufficiently substantial and material to
    warrant a finding that he breached the insurance contract. This requirement of
    a showing of substantial prejudice due to the insured’s non-cooperation as a
    prerequisite to using that non-cooperation as a defense to liability finds its basis
    in several opinions of this court, the first being Thaxton v. Allstate Ins. Co., No.
    87-251-II, 
    1988 WL 23922
     (Tenn. Ct. App. March 18, 1988) (Tenn. R. App. P.
    11 application denied July 18, 1988). See also Allstate Ins. Co. v. Auto Owners
    Ins. Co., No. 03A01-9706-CH-00225, 
    1998 WL 102075
     (Tenn. Ct. App. Feb. 27,
    1998) (Tenn. R. App. P. 11 application denied Oct. 19, 1998) .
    In Thaxton, this court explained that:
    the insured's lack of cooperation must be substantial and
    material to result in a breach of a policy condition. Courts
    have developed, in effect, three different doctrines in this
    area. The largest number of courts have adopted the
    standard of substantial prejudice to the insurer. If the
    insured violates the cooperation clause, the insurer may
    use this breach as a defense only where it can show that it
    was substantially prejudiced by the breach. 8 J. Appleman,
    Insurance Law and Practice, § 4773 (1981); R. Anderson
    and M. Rhodes, 14 Couch on Insurance, § 51:118 (1982).
    See Foundation Reserve Ins. Co. v. Esquibel, 
    94 N.M. 132
    ,
    
    607 P.2d 1150
    , 1152 (1980) and cases cited therein. A few
    states have adopted the "California rule," which presumes
    prejudice when the cooperation clause is breached.
    Valladao v. Fireman's Fund Indem. Co., 
    13 Cal.2d 322
    , 
    89 P.2d 643
    , 649 (1939); Western Mut. Ins. Co. v. Baldwin,
    
    258 Iowa 460
    , 
    137 N.W.2d 918
    , 925 (1965); Bass v. Aetna
    Cas. & Sur. Co., 
    199 So.2d 790
    , 793 (Fla.App.1967).
    10
    Appleman describes this as "probably the better rule, since
    the insurer does not have the onus of proving that the
    injured person could not possibly have recovered had
    cooperation been rendered; yet in those cases where lack
    of cooperation was not of decisive importance the insured
    could rebut the presumption." 8 J. Appleman, supra, §
    4773.
    Still a third approach is to reject the whole notion of
    substantial prejudice, and to adopt a rule that a breach of
    the cooperation clause under any circumstances is
    prejudicial; proof of actual harm is immaterial, unless the
    breach is "trivial" or "innocent." Glens Falls Indem. Co.
    v. Keliher, 
    88 N.H. 253
    , 
    187 A. 473
    , 477 (1936); Pearl
    Assurance Co. v. Watts, 58 N.J.Super 483, 
    156 A.2d 725
    ,
    730 (1959). Some courts in states which, like Tennessee,
    consider cooperation by the insured a condition precedent
    to any action against the insurer when a cooperation clause
    is included in the policy, Horton v. Employers Liab.
    Assur. Corp., 
    supra,
     
    179 Tenn. at 224
    , 
    164 S.W.2d at 1017
    , have adopted this view, holding that the terms of the
    policy must be fully complied with unless the insured can
    show justification for the failure to cooperate. Wolverine
    Ins. Co. v. Sorrough, 
    122 Ga.App. 556
    , 
    177 S.E.2d 819
    ,
    822 (1970); U.S. Fire Ins. Co. v. Watts, 
    370 F.2d 405
    , 410
    (5th Cir.1966) (construing Alabama law).
    We believe that this position is unrealistic on two counts:
    1) Courts following it are almost always forced into
    making exceptions for "trivial" or "innocent" breaches, as
    in the Wolverine case, which is hardly different from
    recognizing the "substantial prejudice" standard; and, 2)
    as Appleman points out, "liability contracts are, at least in
    part, third party beneficiary contracts and ... it is in the
    public interest to see that [injured persons] who are
    themselves free from fault should recover--with policy
    defenses being looked upon with disfavor except where a
    miscarriage of justice would result." 8 J. Appleman, supra,
    § 4773.
    We think that, as a practical matter, placing the burden on
    the insurer to show substantial prejudice is the best rule to
    adopt. If the noncooperation of the insured is meaningful,
    such should be readily apparent from the circumstances of
    the case. If it was merely peripheral, then this too should
    be apparent from the insurance company's proof. Under
    the "California rule" advocated by Mr. Appleman, the
    burden would be on the insured to show that his
    non-cooperation, once proved, was not meaningful.
    Although this is certainly a workable system, we believe
    11
    that instead of putting the burden on the insured to prove a
    negative, the burden should more properly be put on the
    insurer to prove a positive; viz., that the noncooperation
    was substantial and material, and in some meaningful way
    hindered the insurer's investigation or defense. This is not
    a high evidentiary threshold. We agree with Mr.
    Appleman that "if the rule is carried to the point of
    imposing an almost insurmountable burden of proving that
    the verdict was the result of the lack of cooperation, it
    would amount to a perversion of such contractual
    provision." 8 J. Appleman, supra, § 4773. It is simply
    necessary for the insurer to show that the
    noncooperation would more likely than not seriously
    interfere with the insurer's investigation of the claim or
    defense of the action.
    Thaxton v. Allstate Ins. Co., 
    1988 WL 23922
     at * 2 (emphasis added.)
    In a recent opinion, the United States District Court for the Western
    District of Tennessee determined that, although it thought that Thaxton
    provided the better rule, it was bound to follow Supreme Court precedent on
    this topic, specifically, Horton v. Employers Liab. Assur. Co., 
    179 Tenn. at 220
    , 
    164 S.W.2d at 1016
    , and its progeny. See Allstate Indem. Co. v. Fifer,
    
    47 F. Supp.2d 913
    , 916 (W.D. Tenn. 1998). According to the federal court,
    this line of cases held that no showing of prejudice was required under
    Tennessee law to enforce a non-cooperation clause. See 
    id.,
     47 F. Supp.2d at
    916-17.
    Our Supreme Court has not spoken directly to the prejudice
    requirement established in Thaxton, and we are not convinced that the Court
    would not require a showing a prejudice. The Horton court did not
    specifically broach the subject of prejudice. Further, most of the cases relied
    upon by the federal court clearly involved prejudice to the insurer and none
    precluded a finding of prejudice. See Horton, 
    179 Tenn. at 220
    , 
    164 S.W.2d at 1016
    ; Pennsylvania Ins. Co. v. Horner, 
    198 Tenn. 445
    , 
    281 S.W.2d 44
    12
    (1955) (failure to provide proper notice to insurer); Goodner v. Occidental
    Fire & Cas. Co., 
    59 Tenn. App. 317
    , 
    440 S.W.2d 614
     (1968) (failure of
    insured to appear at trial).
    In any event, assuming that State Auto was required to demonstrate
    prejudice, the position most favorable to Mr. Bishop, the insurer has
    successfully shown that Mr. Bishop’s non-cooperation “more likely than not
    seriously interfere[d] with . . . [its] investigation of the claim or defense of the
    action.” Thaxton, 
    1988 WL 23922
     at *2. Mr. Bishop characterized his non-
    cooperation as merely cursing and rudeness. However, as the trial court
    found, Mr. Bishop also made it impossible for the insurer to view the
    damaged property and sold off personal property he later claimed was
    damaged.
    Moreover, in addition to the cooperation requirement, Mr. Bishop’s
    policy included other terms and conditions which must be complied with for
    coverage. It had a separate condition which voided the policy if an insured:
    a. intentionally concealed or misrepresented any material
    fact or circumstance; or
    b. made any false statements or engaged in fraudulent
    conduct; . . .
    The record shows that Mr. Bishop submitted claims which he later
    admitted had no factual basis. These acts could independently preclude
    recovery under the policy, although the trial court made no specific findings
    on whether Mr. Bishop committed fraud. In any event, the submission of
    inaccurate and false claims on the scale present in this case are evidence of
    non-cooperation, and such claims prejudice the insurer in determining its
    obligations.
    13
    II.
    Mr. Bishop argues that even if he breached the cooperation clause,
    State Auto is liable under the policy because it failed to expressly reserve its
    rights and waived the breach by continuing to process his claim. Mr. Bishop
    asserts that State Auto should be estopped from denying coverage by its
    failure to inform him that his claim was being denied.
    The need for a reservation of rights arises after an insured is sued by
    a third party and seeks a defense to the underlying action. The law in this state
    prohibits an insurer from denying coverage under a cooperation clause “after
    it has conducted a defense for its insured, without first reserving its rights
    through some form of notice.” Allstate Ins. Co. v. Auto Owners Ins. Co., 
    1998 WL 102075
     at * 3.
    The general rule supported by the great weight of authority
    is that if a liability insurer, with knowledge of a ground of
    forfeiture or noncoverage under the policy, assumes and
    conducts the defense of an action brought against the
    insured, without disclaiming liability and giving notice of
    its reservation of rights, it is thereafter precluded in an
    action upon the policy from setting up such ground of
    forfeiture or noncoverage. In other words, the insurer's
    unconditional defense of an action brought against its
    insured, constitutes a waiver of the terms of the policy and
    an estoppel of the insured [sic] to assert such grounds.
    American Home Assur. Co. v. Ozburn-Hessey Storage Co., 
    817 S.W.2d 672
    ,
    675 (Tenn.1991) (quoting Maryland Cas. Co. v. Gordon, 
    371 S.W.2d 460
    ,
    464 (Tenn. App.1963), in turn quoting 29A Am. Jur., Insurance § 1465, p.
    577).
    Here, it is undisputed that State Auto did not conduct a defense on
    behalf of Mr. Bishop. Mr. Bishop was not sued by a third party and he never
    sought representation by State Auto. Thus, no reservation of rights was
    14
    required to prevent a waiver of the terms of the policy requiring cooperation.
    See id.
    Further, the record refutes Mr. Bishop’s contention that State Auto
    waived the breach by continuing to process his claim. While an insurance
    carrier may waive any contractual provision of an insurance policy by the
    acts, representations, or knowledge of its agents, "there must be a clear,
    unequivocal, and decisive act of the party showing such a purpose, or acts
    amounting to an estoppel on [its] part." Kentucky Nat’l Ins. Co. v. Gardner,
    No. 01A01-9808-CV-00445, 
    1999 WL 378334
     at * 5 (Tenn. Ct. App. June
    11, 1999) (Tenn. R. App. P. 11 application denied Oct. 18, 1999); see Bill
    Brown Constr. Co. v. Glens Falls Ins. Co., 
    818 S.W.2d 1
    , 13 (Tenn.1991). A
    waiver is an intentional relinquishment of a known right. See Baird v.
    Fidelity-Phenix Fire Ins. Co., 
    178 Tenn. 653
    , 
    162 S.W.2d 384
    , 389
    (Tenn.1942). In this state it is universally accepted that:
    “Abandonment or waiver of a right important to parties
    cannot be made out by uncertain implication, but ought
    clearly to appear. To constitute such a waiver of a benefit
    there must be clear, unequivocal, and decisive acts of the
    party, an act which shows a determination not to have the
    benefit intended.” Charleston, S.C., Mining & Mfg. Co. v.
    American Agric. Chem. Co., 
    126 Tenn. 18
    , 
    150 S.W. 1143
    ,
    1146 (Tenn.1911); accord Springfield Tobacco Redryers
    Corp. v. City of Springfield, 
    41 Tenn. App. 254
    , 
    293 S.W.2d 189
    , 198 (Tenn. App.1956); Koontz v. Fleming, 
    17 Tenn. App. 1
    , 
    65 S.W.2d 821
    , 825 (Tenn. App.1933); see
    also Stovall of Chattanooga, Inc. v. Cunningham, 
    890 S.W.2d 442
    , 444 (Tenn. App.1994); Trice v. Hewgley, 
    53 Tenn.App. 259
    , 
    381 S.W.2d 589
    , 595 (Tenn. App.1964);
    Webb v. Board of Trustees of Webb School, 
    38 Tenn. App. 173
    , 
    271 S.W.2d 6
    , 19 (Tenn. App.1954). The law will not
    presume a waiver, and the party claiming the waiver has
    the burden of proving it by a preponderance of the
    evidence. Koontz, 65 S.W.2d at 825; see also Springfield
    Tobacco Redryers, 293 S.W.2d at 198. Waiver may be
    proved by "express declaration; or by acts and declarations
    manifesting an intent and purpose not to claim the
    15
    supposed advantage; or by a course of acts and conduct, or
    by so neglecting and failing to act, as to induce a belief
    that it was [the party's] intention and purpose to waive."
    Baird v. Fidelity- Phenix Fire Ins. Co., 
    178 Tenn. 653
    , 
    162 S.W.2d 384
    , 389 (Tenn.1942) (quoting Farlow v. Ellis, 
    81 Mass. 229
    , 231 (1860)). In order to establish waiver by
    conduct, the proof must show some "absolute action or
    inaction inconsistent with the claim or right" waived.
    Koontz, 65 S.W.2d at 825; accord Stovall, 890 S.W.2d at
    444; Webb, 271 S.W.2d at 19. Specifically, the record must
    show conduct on the part of the insurance carrier which is
    so clearly inconsistent with an intention to insist upon a
    strict compliance with the provision at issue that the
    conduct constitutes an implied waiver. Crumley v.
    Travelers Indem. Co., 
    225 Tenn. 667
    , 
    475 S.W.2d 654
    ,
    658 (Tenn.1972).
    Kentucky Nat’l Ins. Co., 
    1999 WL 378334
     at * 5.
    We find no evidence revealing actions by State Auto which satisfy
    this criteria. Instead, the record affirmatively establishes that there was no
    waiver. Mr. Winters’s September 13, 1996 correspondence to Mr. Bishop
    delineated the numerous issues that required resolution before the claim could
    be processed. These included return of the mistakenly issued check,
    clarification of certain items listed as losses, and allowing inspection of the
    items. Because Mr. Bishop never fully complied with the instructions in Mr.
    Winters’s letter, State Auto did not continue to process the claim. The fact
    that Mr. Bishop admittedly sold many of the items he claimed as losses at his
    auction precluded him from fully complying even had he departed from his
    previous practice and allowed State Auto’s agents to inspect his property.        A
    preponderance of the evidence supports the trial court’s implicit conclusion
    that no waiver occurred.
    Nor do we find that State Auto is estopped from asserting a breach
    of the cooperation clause.
    The essential elements of an equitable estoppel as related
    16
    to the party claiming the estoppel, are, (1) lack of
    knowledge and of the means of knowledge of the truth as
    to the facts in question; (2) reliance upon the conduct of
    the party estopped, and (3) action based thereon of such a
    character as to change his position prejudicially. Provident
    Washington Ins. Co. v. Reese, 
    213 Tenn. 355
    , 
    373 S.W.2d 613
     (1963).
    Smith v. Shelby Ins. Co. 
    936 S.W.2d 261
    , 263-64 (Tenn. Ct. App. 1996)
    (quoting Gitter v. Tennessee Farmers Mut. Ins. Co., 
    60 Tenn.App. 698
    , 
    450 S.W.2d 780
    , 783 (1969)). The record contains no evidence that State Auto
    made any unconditional promises to fully pay Mr. Bishop’s claim. Nor is
    there evidence of prejudicial reliance. See id.; Robinson v. Tennessee
    Farmers Mut. Ins. Co., 
    857 S.W.2d 559
    , 563 (Tenn. Ct. App.1993) ("The
    burden of proof is on the insured to prove that a misrepresentation was made
    and that the insured reasonably relied upon the misrepresentation.").
    III.
    Accordingly, the judgment of the trial court is affirmed. This case is
    remanded for such further proceedings as may be necessary. Costs of this
    appeal are to be taxed to Mr. Bishop for which execution may issue if
    necessary.
    ________________________________
    PATRICIA J. COTTRELL, JUDGE
    CONCUR:
    _______________________________
    BEN H. CANTRELL,
    PRESIDING JUDGE, (M. S.)
    _______________________________
    WILLIAM C. KOCH, JR., JUDGE
    17