Keith Patterson v. Shelter Mutual Insurance Company

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
June 23, 2015 Session
KEITH PATTERSON ET AL. v. SHELTER MUTUAL INSURANCE COMPANY
Appeal from the Chancery Court for Rutherford County
No. 12CV-973 Robert E. Corlew III, Chancellor
No. M2014-01675-COA-R9-CV – Filed September 11, 2015
This is an action by homeowners against the insurance company that provided their
homeowners‟ insurance coverage. At issue is whether the insurer violated Tenn. Code
Ann. § 56-7-130(b) (2006) by failing to make available coverage for insurable sinkhole
losses and whether the physical damage to the home was caused by “sinkhole activity.”
When the insurer denied coverage, Plaintiffs commenced this action alleging, inter alia,
that the insurer breached the policy and acted in bad faith when it refused to pay their
claim. Plaintiffs also sought to hold the insurer liable for violating Tenn. Code Ann.
§ 56-7-130(b) because the insurer did not notify Plaintiffs that sinkhole coverage was an
available option. At the time of the occurrence, the statute stated: “Every insurer offering
homeowner property insurance in this state shall make available coverage for insurable
sinkhole losses on any dwelling, including contents of personal property contained in the
dwelling, to the extent provided in the policy to which the sinkhole coverage attaches.”
Tenn. Code Ann. § 56-7-130(b) (emphasis added). It is undisputed that the insurer did not
notify Plaintiffs that sinkhole coverage was available. The insurer filed a motion for
summary judgment contending that Tenn. Code Ann. § 56-7-130 did not require it to
notify Plaintiffs that sinkhole coverage was an available option. The insurer also denied
the factual assertion that sinkhole activity caused the loss and asserted that it was not
liable because, if sinkhole activity caused the damage, the policy contained an exclusion
for such an occurrence. Plaintiffs filed a cross-motion for summary judgment, arguing
that they were entitled to a judgment that the insurer had violated Tenn. Code Ann.
§ 56-7-130 and that their insurance policy did not exclude coverage for the damage to
their home. The trial court granted Plaintiffs‟ motion with respect to Tenn. Code Ann.
§ 56-7-130, concluding it was undisputed that the insurer “did nothing to make the
Plaintiffs aware of the sinkhole endorsement and, therefore, did not meet the
requirements of [Tenn. Code Ann. § 56-7-130].” The trial court denied summary
judgment on all remaining issues concluding that material facts were disputed concerning
the cause of the damage to Plaintiffs‟ home. On appeal, we reverse the grant of summary
judgment to Plaintiffs based on Tenn. Code Ann. § 56-7-130 and remand with
instructions to grant summary judgment to the insurer on that issue because the statutory
language, “make available,” does not require insurers to give notice that sinkhole
coverage is available. We affirm the trial court‟s denial of summary judgment concerning
whether the loss at issue is excluded from coverage because, as the trial court correctly
found, material facts are in dispute.
Tenn. R. App. P. 9 Interlocutory Appeal; Judgment of the Chancery Court
Affirmed in Part and Reversed in Part
FRANK G. CLEMENT, JR., P.J., M.S., delivered the opinion of the Court, in which ANDY
D. BENNETT and RICHARD H. DINKINS, JJ., joined.
Autumn LaCarla Gentry and Thomas M. Donnell, Jr., Nashville, Tennessee, for the
appellant, Shelter Mutual Insurance Company.
Sonya S. Wright, Murfreesboro, Tennessee, and Joshua E. Burnett, Tampa, Florida, for
the appellees, Keith and Kimberly Patterson.
OPINION
Keith and Kimberly Patterson (“Plaintiffs”) acquired a Platinum Shield
Homeowners Policy from Shelter Mutual Insurance Company (“Shelter”) in 1995 that
did not expressly include or exclude “sinkhole coverage.” The policy was renewed every
year through 2011. At all times material to this action, the policy stated in pertinent part:
PERILS WE INSURE AGAINST-SECTION I
We cover accidental direct physical loss to property covered under
Dwelling and Other Structures Coverages except for losses excluded in this
section.
...
EXCLUSIONS-SECTION I
We do not cover any loss or damage if it would not have occurred in the
absence of any event or condition listed below.
...
Movement of materials that support, or surround, a structure. We do not
cover damage to any structure . . . if that damage is caused by the sinking,
rising, shifting, expanding, or contracting, of earth or any other supporting,
or surrounding, material. This exclusion apples to earthquakes, volcanic
explosions, lava flow, landslides, mudflow, mudslides, sinking of ground,
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subsidence, erosion, movement resulting from improper construction or
compaction, improper site selection or any other force.
Prior to January 7, 2007, the effective date of Tenn. Code Ann. § 56-7-130 (2006),
insurers doing business in Tennessee were not required to make available coverage for
insurable sinkhole losses on dwellings they insured. See 2006 Tenn. Pub. Acts. Ch. 805,
§ 2. However, for policies “issued or renewed on or after January 7, 2007,”1 the statute
stated that “every insurer offering homeowner property insurance” in Tennessee “shall
make available coverage for insurable sinkhole losses on any dwelling, including
contents of personal property contained in the dwelling, to the extent provided in the
policy to which the sinkhole coverage attaches.” Tenn. Code Ann. § 56-7-130(b) (2006).
In March 2011, Plaintiffs‟ house was damaged by what they allege was a sinkhole.
Plaintiffs made a claim for sinkhole loss to Shelter in August 2011. In response to the
claim, Shelter employed HSA Engineers & Scientists (“HSA”) to investigate the cause of
the damage. In November 2011, HSA issued a report stating that “sinkhole activity was
not a cause of the physical damage to the home. However, subsurface conditions that
were consistent with sinkhole activity were discovered in the rear yard and were judged
to be the cause of the formation of the depression [found in the backyard].”2
Plaintiffs filed this action against Shelter in July 2012, asserting claims for breach
of contract, violations of the Tennessee Consumer Protection Act, and bad faith under
Tenn. Code Ann. § 56-7-105 arising from “a sinkhole loss” to their home that occurred
on or about March 1, 2011. They alleged that the Platinum Shield Homeowners Policy
was an “„all risk‟ policy which covers „accidental direct physical loss‟ to the insured
dwelling unless caused exclusively by one or more excluded perils” and that the damage
to their property was “not excluded under the Platinum Policy.” The complaint also
contained claims of negligence per se based on Shelter‟s alleged violations of Tenn. Code
Ann. § 56-7-130.
At the time of Plaintiffs‟ loss, Tenn. Code Ann. § 56-7-130(b) stated: “Every
insurer offering homeowner property insurance in this state shall make available
coverage for insurable sinkhole losses on any dwelling, including contents of personal
property contained in the dwelling, to the extent provided in the policy to which the
sinkhole coverage attaches.” Plaintiffs alleged that Shelter did not make sinkhole
coverage available to them because it did not notify them that they could purchase it. It is
undisputed that Shelter never informed Plaintiffs that they could purchase sinkhole
1
The act states that it “shall take effect for policies issued or renewed on or after January 7,
2007 . . . .” See 2006 Tenn. Pub. Acts. Ch. 805, § 2.
2
HSA‟s report is not contained in the record, but Plaintiffs do not dispute that the report contains
the quoted statement.
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coverage. It is also undisputed that Shelter filed a policy endorsement concerning
sinkhole coverage with the Tennessee Department of Commerce and Insurance in
October 2006.
In March 2014, Shelter filed a motion for summary judgment on two main
grounds. First, Shelter contended that summary judgment was appropriate because Tenn.
Code Ann. § 56-7-130 did not require it to notify Plaintiffs that they could purchase
sinkhole coverage. Second, Shelter denied that the damage to Plaintiffs‟ home was the
result of sinkhole activity but argued that, even if sinkhole activity was the cause of
Plaintiffs‟ loss, an exclusion in the insurance policy relieved it of any obligation to pay
for sinkhole-related damage.
Plaintiffs filed a response in opposition to Shelter‟s motion for summary
judgment. In addition, Plaintiffs filed a cross-motion for summary judgment contending
that that they were entitled to a judgment that Shelter had failed to comply with Tenn.
Code Ann. § 56-7-130 because Shelter failed to notify them that they could purchase
sinkhole coverage. Plaintiffs also argued that they were entitled to a judgment as a matter
of law that Shelter had breached the insurance policy because Shelter had not proven that
the policy contained an exclusion for sinkhole damage.
The trial court granted Plaintiffs‟ motion with respect to Tenn. Code Ann.
§ 56-7-130 because it concluded that Shelter had violated the statute. In relevant part, the
court‟s order states:
Further, the Court finds that Defendant had a duty under Tenn. Code Ann.
§ 56-7-130 (“Sinkhole Statute”) to make available the sinkhole coverage to
the Plaintiffs and failed to do so. The undisputed facts, for the purposes of
summary judgment, in this matter are that the Defendant did nothing to
make the Plaintiffs aware of the sinkhole endorsement and, therefore, did
not meet the requirements of the Sinkhole Statute. The questions of what
Defendant should have done to make the coverage available and what
damages this caused the Plaintiffs should be determined by the jury.
As for the exclusion concerning “movement of materials that support, or surround,
a structure,” the trial court found that material facts were in dispute and denied both
parties‟ motions.
Thereafter, the trial court and this court granted Shelter‟s application for an
interlocutory appeal pursuant to Tenn. R. App. P. 9.
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ANALYSIS
This case is before us on an interlocutory appeal under Rule 9 of the Tennessee
Rules of Appellate Procedure. Shelter‟s Rule 9 application designated three issues for
appeal: (1) whether the trial court erred by concluding that Tenn. Code Ann. § 57-6-130
required Shelter to notify or make Plaintiffs aware that they could purchase sinkhole
coverage; (2) whether the trial court erred when it denied Shelter‟s motion for summary
judgment concerning the existence of a policy exclusion applicable to Plaintiffs‟ loss; and
(3) whether the trial court erred when it determined that what Shelter needed to do to
“make available” sinkhole coverage was an issue of fact for the jury.3 We will address the
interpretation of Tenn. Code Ann. § 57-6-130 first and the existence of a policy exclusion
second; however, we will not discuss Shelter‟s third issue because our interpretation of
Tenn. Code Ann. § 56-7-130 renders it moot.
STANDARD OF REVIEW
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. The party seeking summary
judgment bears the burden of demonstrating that no genuine dispute of material fact
exists and that it is entitled to a judgment as a matter of law. Armoneit v. Elliot Crane
Service, Inc., 65 S.W.3d 623, 627 (Tenn. Ct. App. 2001). If the facts are undisputed, the
moving party who does not bear the burden of proof at trial can prove that it is entitled to
a judgment as a matter of law if it “[s]ubmits affirmative evidence that negates an
essential element of the nonmoving party‟s claim” or “[d]emonstrates to the court that the
nonmoving party‟s evidence is insufficient to establish an essential element of the
nonmoving party‟s claim.” See Tenn. Code Ann. § 20-16-101.
The decision to grant or deny a motion for summary judgment is a matter of law,
and this court reviews such decisions de novo with no presumption of correctness. Dick
Broad Co. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 671 (Tenn. 2013) (quoting Kinsler v.
Berkline, LLC, 320 S.W.3d 796, 799 (Tenn. 2010)). Accordingly, we must make a fresh
determination of whether the requirements of Tenn. R. Civ. P. 56 have been satisfied.
3
On interlocutory appeal under Rule 9 of the Tennessee Rules of Appellate Procedure, “the only
issues that can be raised are those certified in the trial court‟s order granting permission to seek an
interlocutory appeal and in the appellate court‟s order granting the interlocutory appeal.” Heatherly v.
Merrimack Mut. Fire Ins. Co., 43 S.W.3d 911, 914 (Tenn. Ct. App. 2000). When neither the trial court
nor this court has delineated the issues to be addressed on appeal, we have considered it appropriate to
address the issues that both parties have briefed without objection. See McCormick v. Illinois Cent. R.
Co., No. W2008-00902-COA-R9-CV, 2009 WL 1392575, at *2 n.4 (Tenn. Ct. App. May 19, 2002).
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Armoneit, 65 S.W.3d at 628. In so doing, we must consider the evidence in the light most
favorable to the non-moving party and resolve all inferences in its favor. Id.
I. TENN. CODE ANN. § 56-7-130 (2006)
Shelter contends it was entitled to summary judgment as a matter of law
concerning Plaintiffs‟ claims under Tenn. Code Ann. § 56-7-130 because the statute does
not require Shelter to expressly offer or otherwise inform an insured that sinkhole
coverage is an available option. Conversely, Plaintiffs argue that Shelter was required to
make them aware that they could purchase sinkhole coverage.
At all times relevant to the matters at issue, Tenn. Code Ann. § 56-7-130 stated:
“Every insurer offering homeowner property insurance in this state shall make available
coverage for insurable sinkhole losses on any dwelling, including contents of personal
property contained in the dwelling, to the extent provided in the policy to which the
sinkhole coverage attaches.” Tenn. Code Ann. § 56-7-130(b) (2006) (emphasis added).4
Determining whether Shelter complied with Tenn. Code Ann. § 56-7-130 (2006)
requires us to interpret this statute. Statutory construction is a question of law that this
court reviews de novo with no presumption of correctness. In re Estate of Tanner, 295
S.W.3d 610, 613 (Tenn. 2009). When interpreting a statute, our primary objective “is to
carry out legislative intent without broadening or restricting the statute beyond its
intended scope.” Id. (citing Houghton v. Aramark Educ. Res., Inc. 90 S.W.3d 676, 678
(Tenn. 2002)). Courts ascertain legislative intent “from the natural and ordinary meaning
of the language used, without forced or subtle construction that would limit or extend the
meaning of the language.” Faust v. Metro. Gov’t. of Nashville, 206 S.W.3d 475, 490
(Tenn. Ct. App. 2006) (quoting LensCrafters, Inc. v. Sundquist, 33 S.W.3d 772, 777
(Tenn. 2002)). Although every word that the legislature uses must be given effect, this
court “must be circumspect about adding words to a statute that the General Assembly
did not place there.” Coleman v. State, 341 S.W.3d 221, 241 (Tenn. 2011) (citing City of
4
The General Assembly amended Tenn. Code Ann. § 56-7-130(b) effective July 1, 2014.
Subsection (b) currently states:
Every insurer offering homeowner property insurance in this state shall make coverage
available for insurable sinkhole losses, including contents of personal property contained
in the dwelling. The insurer may require an inspection of the property before issuance of
sinkhole loss coverage. Nothing in this section mandates that sinkhole loss coverage be
included in any homeowner property insurance policy, but only that insurers offering
homeowner property insurance make such coverage available for optional purchase on
request by policyholders.
See 2014 Tenn. Pub. Acts 537, § 1. The 2014 amendment became effective after the occurrence at issue,
and the amendment is not retroactive. Therefore, the 2014 amendment has no bearing on this appeal.
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Knoxville v. Entm’t Res., LLC, 116 S.W.3d 650, 658 (Tenn. 2005)). When the statue is
clear, we need go no further than its written language; however, when the statute is
ambiguous we may reference the statutory scheme, history of the legislation, or other
sources. See In re Estate of Tanner, 295 S.W.3d at 614.
When the General Assembly has not provided a specific definition for a statutory
term, courts may look to other sources for guidance. See State v. Edmondson, 231 S.W.3d
925, 928 (Tenn. 2007). Although dictionary definitions of words or phrases are not
binding on this court, see Brown v. Tennessee Dept. of Correction, 11 S.W.3d 911, 912-
13 (Tenn. Ct. App. 1999), dictionaries remain the usual and accepted source for
information concerning the natural and ordinary meaning of words. English Mountain
Spring Water Co. v. Chumley, 196 S.W.3d 144, 148 (Tenn. Ct. App. 2005); see State v.
Majors, 318 S.W.3d 850, 859 (Tenn. 2010); Walker v. Sunrise Pontiac-GMC Truck, Inc.,
249 S.W.3d 301, 309 (Tenn. 2008). We are mindful that our obligation is to interpret the
statute as a whole rather than a word or phrase in isolation. See Waldschmidt v. Reassure
Am. Life. Ins. Co., 271 S.W.3d 173, 176 n.2 (Tenn. 2008). Dictionaries are helpful tools
for identifying the plain meaning of a word or phrase, but they do not absolve us of our
responsibility to carry out the General Assembly‟s intent when it enacted a statute. See id.
Plaintiffs argue that Shelter was required to make them aware that they could
purchase sinkhole coverage; however, the statute does not expressly require notification,
and, as mentioned above, courts “must be circumspect about adding words to a statute
that the General Assembly did not place there.” See Coleman, 341 S.W.3d at 241.
Nevertheless, Plaintiffs contend that the phrase “make available” implicitly entails the
requirement that they be offered – expressly made aware – that they could purchase
sinkhole coverage. They argue that the plain meaning of the phrase “make available” is
“to offer” and that the definition of “offer” is “[t]o present for acceptance or rejection;
proffer” or “[t]o put forward for consideration; propose.” The American Heritage College
Dictionary, 947 (3d ed. 1997); see Concise Oxford English Dictionary 992 (11th ed.
2004) (“present (something) for (someone) to accept or reject”). Therefore, Plaintiffs
contend, the statutory provision to “make available” required Shelter to offer them the
opportunity to accept or reject sinkhole coverage. We are not persuaded by this argument.
The phrase “make available” is not defined in the statute, and we are not aware of
any appellate decision in Tennessee that interprets this phrase in the context of this
statute. 5 Accordingly, we turn to dictionaries for guidance in ascertaining the natural and
ordinary meaning of “make available.” See English Mountain, 196 S.W.3d at 148.
5
In addition to the trial court order in this case, we are aware of two other trial court orders that
have concerned this version of Tenn. Code Ann. § 57-6-130. On July 19, 2011, in an order authored by
then-Judge Jeffrey S. Bivins (now Justice Bivins of the Tennessee Supreme Court), the Williamson
County Circuit Court concluded that “the plain language of Tenn. Code Ann. § 56-7-130 does not require
an insurance agent or insurance company to take affirmative actions or to make potential policyholders
(continued…)
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The definitions that Shelter cited indicate that “make” means “to seem to begin (an
action),” “to cause to happen to or be experienced by someone,” and “to cause to exist
occur, or appear . . . .”, while “available” means “present or ready for immediate use” and
“accessible, obtainable . . . .” See Webster‟s Ninth New Collegiate Dictionary 119, 718-
19 (9th ed. 1987). These definitions are consistent with those contained in other sources.
For example, the American Heritage College Dictionary states that “make” is a verb
meaning “[t]o cause to exist or happen; bring about; create” and “[t]o bring into existence
by shaping modifying, or putting together material; construct . . . .” The American
Heritage College Dictionary, supra, at 818. It also states that “available” is an adjective
meaning “[p]resent and ready for use; at hand; accessible” and “obtainable.” Id. at 94.
Similarly, another source defines “available” as “able to be . . . obtained.” Concise
Oxford English Dictionary, supra, at 90.6
None of these definitions contain the requirement that one party notify another in
order to make something available. Instead, an item or product is made available when it
can be obtained. For example, a library makes a book available by having the book in its
shelf as part of its collection. Moreover, the library does not have to inform its patrons
that it has a specific book for that book to be available to its patrons. Instead, the book is
made available because it is part of the library‟s collection. In the same way, an insurer
makes a particular type of coverage available when it is obtainable upon request of an
insured. For the reasons stated above, we find the natural and ordinary meaning of “make
available” is to cause something to be accessible or obtainable.
The foregoing notwithstanding, Plaintiffs correctly note that some definitions of
“offer” include the phrase “make available.”7 However, the purpose of consulting a
dictionary during the process of interpreting a statute is to determine the “natural and
ordinary” meaning of the word, not to formulate a comprehensive list of every possible
meaning for the word or phrase at issue. See Faust, 206 S.W.3d at 490; English
Mountain, 196 S.W.3d at 148. “That a definition is broad enough to encompass one sense
of a word does not establish that the word is ordinarily understood in that sense.”
Taniguchi v. Kan Pac. Saipan, Ltd., --- U.S. ----, 132 S. Ct. 1997, 2003, 182 L. Ed. 2d
903 (2012) (citing Mallard v. United States Dist. Court for Southern Dist. of Iowa, 490
aware of a sinkhole insurance coverage.” Burkhalter, et al. v. Eric Loes, et al., Case No. 2010-184. On
September 20, 2012, the Fifth Circuit Court for Davidson County denied a motion for summary judgment
because a genuine dispute of material fact existed; accordingly, that court did not interpret Tenn. Code
Ann. § 57-6-130. Shakir et al. v. Farmers Ins. Exchange, Case No. 10C-4235.
6
See also The New Oxford American Dictionary 109, 1023 (2nd ed. 2005); The Merriam-
Webster Dictionary 33, 296 (2005); Webster‟s Third New International Dictionary 150, 1363-64 (1993).
7
See Webster‟s Third New International Dictionary 1566 (1993) (including “to make available or
accessible” as one definition of “offer”).
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U.S. 296, 301 (1989)) (emphasis in original). Accordingly, the fact that some senses of
“offer” include the phrase “make available” does not mean that these words are ordinarily
understood to be synonymous.
More importantly, the General Assembly did not use the word “offer” when it
enacted Tenn. Code Ann. § 56-7-130. In 2006, the General Assembly had used “offer” in
several statutes regarding insurance coverage but did not use that word when it drafted
the statute at issue. See Tenn. Code Ann. § 56-7-2363(a) (2006) (“All individual and
group health insurance policies providing coverage on an expense incurred basis . . . shall
include, or shall offer to prospective policy holders and existing policy holders on
renewal as an optional benefit, coverage for colorectal cancer examinations . . . .”)
(emphasis added); Tenn. Code Ann. § 56-7-2603(a)(1) (2006) (“[A]ny insurer providing
individual, franchise, blanket or group policy of insurance issued pursuant to this title that
provides hospital expense and surgical or medical expense insurance . . . shall offer to
provide benefits for expense . . . arising from conditions or disorders of hearing or
conditions or disorders of speech, voice, or language . . . .”) (emphasis added). This court
must abide by the words that the legislature chose to use, and we cannot add words that
the General Assembly chose not to include. See Coleman, 341 S.W.3d at 241.
Indeed, in at least two other statutes, the General Assembly explicitly required
insurance companies to notify existing policyholders when they “make available” a new
type of coverage. See Tenn. Code Ann. § 56-7-2601(b)-(c) (2006) (requiring certain
insurers to “make available” benefits for the treatment of mental health issues on policies
issued after July 1, 1980 and to notify group policyholders that the new coverage was
available); Tenn. Code Ann. § 56-7-2604(b) (2006) (requiring insurers to “make
available benefits for pediatric nursery care” on policies issued after January 1, 1983 and
to notify “the group policyholder or group contract holder of the availability of [this
coverage]” with respect to policies issued before January 1, 1983).8 Because the General
Assembly knows how to explicitly require insurers to notify existing policyholders about
new coverage, we find no rational basis to add notification as an implicit requirement to
Tenn. Code Ann. § 56-7-130.
For the foregoing reasons, we conclude that Tenn. Code Ann. § 56-7-130 (2006)
does not require insurers to notify policyholders that they could purchase sinkhole
coverage. Instead, by using the words “make available” the General Assembly only
intended to require that insurers make sinkhole coverage obtainable by their customers
upon request. It is undisputed that Shelter filed an endorsement with Department of
Commerce and Insurance and that this endorsement was approved. Accordingly, sinkhole
coverage was available to Plaintiffs through Shelter. Therefore, we reverse the trial
8
We cite to the 2006 versions of these and other statutes because the General Assembly is
presumed to have been aware of these statutes when it enacted Tenn. Code Ann. § 56-7-130 in 2006. See
Hayes v. Gibson County, 288 S.W.3d 334, 337 (Tenn. 2009).
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court‟s order granting summary judgment to the Plaintiffs on the grounds that Shelter
failed to comply with Tenn. Code Ann. § 56-7-130 (2006) and remand with instructions
to grant summary judgment to Shelter on this issue. We will now address the trial court‟s
denial of Shelter‟s motion for summary judgment concerning whether the policy
exclusion applies to Plaintiffs‟ loss.
II. POLICY EXCLUSION
Shelter contends that Plaintiffs‟ breach of contract and statutory bad faith claims
should be dismissed because the insurance policy in question does not cover the loss that
Plaintiffs claimed for their property. It contends that the trial court erred when it denied
Shelter‟s motion for summary judgment based on the existence of a material dispute of
fact. We disagree.
“The purpose [of summary judgment] is to resolve controlling issues of law, and
that alone.” Byrd v. Hall, 847 S.W.2d 208, 216 (Tenn. 1993) (quoting Bellamy v. Federal
Exp. Corp., 749 S.W.2d 31, 33 (Tenn. 1988)). Accordingly, summary judgment is
inappropriate when the movant has failed to demonstrate that there are genuine disputes
of material fact. See Byrd, 846 S.W.2d at 216; Armoneit, 65 S.W.3d at 627; Tenn. R. Civ.
P. 56.04. A fact is “material” if “it must be decided in order to resolve the substantive
claim or defense at which the motion is directed.” Byrd, 847 S.W.2d at 215. A “genuine
issue” exists when a reasonable jury could legitimately resolve the fact in favor of one
side or the other. Id.
A claim for breach of contract requires the plaintiff to prove “(1) existence of an
enforceable contract, (2) nonperformance amount to a breach of the contract, and (3)
damages caused by the breach of the contract.” ARC LifeMed, Inc. v. AMC-Tennessee,
Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005). In order to recover for bad faith under
Tenn. Code Ann. § 56-7-105, Plaintiffs must prove “(1) the policy of insurance must, by
its terms, have become due and payable, (2) a formal demand for payment must have
been made, (3) the insured must have waited 60 days after making demand before filing
suit (unless there was a refusal to pay prior to the expiration of the 60 days), and (4) the
refusal to pay must not have been in good faith.” Ginn v. Am. Heritage Life Ins. Co., 173
S.W.3d 433, 443 (Tenn. Ct. App. 2004) (quoting Stooksbury v. Am. Nat. Property and
Cas. Co., 126 S.W.3d 505, 519 (Tenn. Ct. App. 2003)). Accordingly, in order to recover
for both breach of contract and bad faith under Tenn. Code Ann. § 56-7-105, Plaintiffs
must show, inter alia, that their homeowner‟s policy required Shelter to pay for the
damage they sustained. Conversely, Shelter is entitled to summary judgment on this issue
if it negates an essential element of both these claims, which can be accomplished if
Shelter demonstrates that the policy does not cover the claimed loss. Shelter contends that
it has done so by demonstrating that an exclusion in the policy applies to the claim, which
relieves it of any liability.
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Generally, courts should construe insurance contracts in the same manner as any
other contract. Am. Justice Ins. Reciprocal v. Hutchison, 15 S.W.3d 811, 814 (Tenn.
2000). Accordingly, “[t]he language of the policy must be taken and understood in its
plain, ordinary and popular sense.” Id. “When coverage questions arise, the courts should
consider the components of an insurance policy in the following order: (1) the
declarations, (2) the insuring agreements and definitions, (3) the exclusions, (4) the
conditions, and (5) the endorsements.” Mass. Mut. Life Ins. Co. v. Jefferson, 104 S.W.3d
13, 20 (Tenn. Ct. App. 2002) (citing Standard Fire Ins. Co. v. Chester O’Donley &
Assoc., Inc., 972 S.W.2d 1, 7 (Tenn. Ct. App. 1998)).
Here, the policy covers “accidental direct physical loss to property covered under
Dwelling and Other Structures Coverages except for losses excluded in this section.”
Accordingly, if Plaintiffs‟ house was covered property and the damage that occurred to it
was “accidental direct physical loss” as defined by the policy, then the insurance policy
covers Plaintiffs‟ claimed loss unless an exclusion eliminates that coverage.
Both parties agree that this loss occurred while the policy was in effect. Further,
Shelter does not dispute that the policy covers Plaintiffs‟ property or that the loss in
question was “accidental direct physical loss” as defined in the policy. Instead, Shelter
argues that the exclusion relieves it of the obligation to pay for Plaintiffs‟ loss. As a
result, Shelter, as both the party seeking summary judgment and as an insurer, must carry
the burden of showing that a policy exclusion applies to the loss Plaintiffs suffered. See
Armoneit, 65 S.W.3d at 627; Jefferson, 104 S.W.3d at 22 n.10 (“[A]n insurance company
has the burden of proving that an exclusion in its policy applies to a claim.”).
The exclusion at issue eliminates coverage for damage that “would not have
occurred in the absence of any event or condition . . . caused by the sinking, rising,
shifting, expanding, or contracting, of earth or any other supporting, or surrounding,
material.” (emphasis added). Thus, neither party can be entitled to summary judgment on
the exclusion issue if facts material to whether the loss was or was not caused by the
listed events or conditions are in dispute. As the trial court correctly found, facts material
to determining the cause of the damage to Plaintiffs‟ home are disputed. Accordingly,
Shelter was not entitled to summary judgment on this issue.
For the foregoing reasons, we affirm the denial of Shelter‟s motion for summary
judgment concerning whether the exclusion applies to Plaintiffs‟ loss.
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IN CONCLUSION
The judgment of the trial court is affirmed in part and reversed in part, and this
matter is remanded for further proceedings consistent with this opinion. Costs of appeal
are assessed equally against Plaintiffs, Keith and Kimberly Patterson, and Defendant,
Shelter Mutual Insurance Company.
______________________________
FRANK G. CLEMENT, JR., JUDGE
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