Yolannda Solomon v. Brad Hager

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
July 10, 2001 Session
YOLANDA SOLOMON v. BRAD HAGER, ET AL.
Appeal from the Chancery Court for Hamblen County
No. 97-248 Thomas R. Frierson, II, Chancellor
No. E2000-02586-COA-R3-CV
Filed December 27, 2001
This lawsuit finds its genesis in the construction of a residence. The plaintiff, Yolanda Solomon,
filed suit against Allstate Insurance Company1, alleging breach of contract and seeking damages and
a bad faith penalty for Allstate’s failure to pay her claim under a builder’s risk policy covering her
under-construction residence. Solomon later amended her complaint to seek additional damages
under the Tennessee Consumer Protection Act.2 By way of a special verdict, the jury found (1) that
the insurance policy provided coverage for Solomon’s loss; (2) that Allstate had acted in bad faith
in denying her claim; and (3) that Allstate had violated the Consumer Protection Act. As modified
by the trial court, Allstate was ordered to pay $101,098, the full amount of the plaintiff’s coverage
less the deductible; a 25% bad faith penalty; $1,500 under the Consumer Protection Act; attorney’s
fees; discretionary costs; and prejudgment interest. Allstate appeals, challenging, among other
things, the jury’s finding of coverage, the assessment of the bad faith penalty, evidentiary and jury
instruction rulings, and the amount of damages. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded
CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which HOUSTON M. GODDARD,
P.J., and HERSCHEL P. FRANKS, J., joined.
Christopher D. Heagerty, Knoxville, Tennessee, for the appellant, Allstate Insurance Company.
1
Solomon also sued the builder of the residence, Brad Hager and Trevie Richard Oney, doing business as Hager
Construction, for breach of contract and gross negligence. The jury found that the construction had not been performed
in a workmanlike manner and awarded Solomon a judgment against the builder for comp ensatory and punitive dam ages,
Consu mer Pro tection A ct dama ges, attorne y’s fees, an d discretion ary costs. T he builde r did not ap peal.
2
T.C.A. § 47-18-101 et seq. (1995 and Supp . 2000).
James M. Davis, Morristown, Tennessee, for the appellee, Yolanda Solomon.
OPINION
I. Facts
In November, 1996, Solomon entered into a verbal contract with Brad Hager and Trevie
Richard Oney, doing business as Hager Construction, to build a house for a contract price of
$55,000. On December 16, 1996, Solomon obtained a builder’s risk policy from the defendant,
Allstate Insurance Company. Solomon testified that Clarence Thompson, the Allstate agent who
sold her the policy, advised her (1) that the policy was “to protect me”; and (2) that “if I have any
complications with the structure while it’s under construction, then the policy would pay for it and
I wouldn’t have to take any more money out of my pocket.” The limit of coverage under the policy
was $101,598. There was a deductible of $500.
When Hager Construction began excavating for the house’s foundation, it discovered that
the ground was full of rock and would require blasting before work on the house could proceed. It
dynamited the site, but the resulting hole was larger than expected. The company gave Solomon the
option of building a basement for an additional $10,000. Solomon agreed, and the construction
proceeded.
On February 21, 1997, following several days of apparently heavy rains, the front wall of the
basement fell. The plaintiff testified that when she arrived on the construction site3, she saw that the
roof was sagging and that the house was bowed in the middle. She immediately called Thompson,
who told her, “Well, I’m sorry, but it sounds like it has been a flood, and Allstate does not cover
floods.” Unsatisfied with this response, Solomon called Thompson again the next day and asked
him to come and look at the house. She testified as follows:
I called Mr. [Brad] Hager and asked him if he would come and be
there with me. He did come.
The three of us discussed the collapse of the wall, and I asked Mr.
Thompson if he – he came dressed in a suit, and I asked him if he had
brought boots so he could go and look at the house.
He said he didn’t need to look at the house, he could see what he
needed to see from the road. He stood in the road and looked at my
house and said, “All three of us need to make an agreement that it
was a flood that caused the damage, because Allstate is not going to
pay this claim.”
3
The parties agree that the residence w as still under construction at the tim e of the loss.
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Solomon asked Thompson whether he had brought a camera in order to document the damage, but
Thompson told her “there was no need to do that.” Nevertheless, Solomon and Hager took
photographs of the house. Thereafter, repair work and cleanup began on the site.
Solomon called the Allstate claims department and advised it that she was making a claim
for the loss. A few days later, Mike Smith, an Allstate claims adjuster, contacted Solomon and made
arrangements to visit the site, along with an engineer, to survey the damage. Eleven days after the
failure of the wall, Smith visited the site alone. By that time, the new basement wall was near
completion and the debris had been cleared. Smith obtained the photographs taken by Solomon and
Hager and advised that he would consult with an engineer in order to determine the cause of the fall
of the basement wall. After a week had passed without any word from Smith, Solomon attempted
to contact him. After several days, she finally reached him, and he advised her “that the engineer
said that the wall failed due to electrostatic pressure against that wall and that Allstate wouldn’t pay
for it.” When she asked Thompson what electrostatic pressure was, he said he did not know.
Following her conversation with Smith, Solomon again contacted Thompson regarding
coverage. Solomon insisted that the loss was covered under the policy. Thompson told her that he
had contacted the Allstate home office and had been advised that “they’re not going to pay.” On
June 25, 1997, Solomon went to Thompson’s office. During the meeting that followed, Thompson
called Smith, the claims adjuster who had visited the site some three months earlier. Over the
telephone, Smith told Solomon, “I am formally telling you that I do – that we are not going to pay
your policy.”
On August 8, 1997, Solomon filed the instant action against Allstate and the builder. The
complaint seeks $110,000 in compensatory damages, $110,000 in exemplary damages for gross
negligence, a 25% penalty for Allstate’s bad faith in denying her claim, and general relief. On
December 6, 1999, Solomon filed a motion seeking to amend her complaint to allege that the
defendants had violated the Consumer Protection Act. An order allowing the amendment was
entered on February 9, 2000, the day the jury was impaneled and the trial started.
At trial, Solomon presented the testimony of two experts to support her theory that her loss
was caused by a “collapse” and was covered under the policy. Max Cook, an engineer, testified that
the basement wall had been built using a defective method of construction. He opined that the wall
had not been built to withstand the “normal lateral earth pressure” of nine feet of backfill – the
amount of backfill that had been placed against it – and that, given this amount of backfill, the wall
should have been constructed using 12-inch block, reinforced with concrete and steel rebar. He
opined that if the wall had been constructed in this manner, it would not have fallen.
Cook testified that the collapse of the wall had “severely damaged the whole house structure,
both cosmetic[ally] and structurally.” He noted that the truss plates in the floor joists had been
severely stressed and weakened, resulting in a bouncy floor. The failure of the wall also had caused
numerous cracks in the drywall throughout the house and had caused the exterior siding to buckle.
Cook testified that the house
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could be fixed, but it would probably cost more to fix it than to tear
it down and start over. I don’t see a practical way to fix these
problems, because there’s just so much damage that it would be so
difficult to analyze the total scope of the damage there.
Every joint connection, every truss connection, every nail connection
throughout the house would have to be checked, and that’s cost
prohibitive to do that.
Don Kimbrough, a builder and general contractor, was also a witness for Solomon. He
agreed that the failure of the wall was caused by the failure to construct the wall with 12-inch block
reinforced with steel and concrete rebar. Like Cook, Kimbrough testified that it would cost more
to repair the house than to rebuild it. He opined that “to build it right, it would probably run about
one hundred, one hundred forty thousand dollars.”
Allstate defended on the theory that the plaintiff’s loss was not covered because, according
to Allstate, the wall fell as a result of several factors that were excluded under the policy. Allstate
presented the testimony of Jerry Lambert, an engineer, who testified that the failure of the basement
wall was caused by “dirt [that] had been piled up above [it] and slid down.” He acknowledged,
however, that the use of 8-inch block without reinforcements is an inadequate design for a wall that
is required to support nine feet of backfill.
At the conclusion of all the proof, Solomon and Allstate both moved for directed verdicts,
which motions were denied. Thereafter, the case was submitted to the jury. By way of a special
verdict, the jury found that the builder breached its contract with Solomon by failing to perform the
construction in a workmanlike manner and that it had committed unfair or deceptive acts in violation
of the Consumer Protection Act. As to the builder, the jury awarded Solomon $115,000 in
compensatory damages, plus either $150,000 in damages under the Consumer Protection Act or
$200,000 in punitive damages, as well as prejudgment interest.
As to Allstate, the jury was asked the following: “With reference to construction of the first4
basement wall, does the applicable policy of insurance by Defendant Allstate provide coverage for
Plaintiff’s claimed losses?” The jury responded in the affirmative and found that Allstate was
responsible for $117,598 in damages. The jury further found that Allstate had failed to act in good
faith when it denied Solomon’s claim and that Allstate’s bad faith resulted in additional expense, loss
or injury to Solomon; accordingly, it awarded Solomon a 25% bad faith penalty. The jury further
found that Allstate had violated the Consumer Protection Act and awarded Solomon $200,000 in
damages under the Act. The jury also awarded Solomon prejudgment interest against Allstate.
4
The evidence reflects that the repaired basement wall began to bulge inward shortly after its construction.
The jury found that the policy did not provide coverage for any loss claimed in connection with the sec ond w all. This
finding has not been appealed.
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Following the jury’s verdict, Solomon filed a motion seeking an additional recovery under
the Consumer Protection Act, including treble damages, attorney’s fees, and discretionary costs. In
a supplemental judgment entered August 11, 2000, the trial court found that Solomon was entitled
to treble damages of $4,500 against the builder for what the court found to be its willful and knowing
violation of the Consumer Protection Act. The trial court determined, however, that Solomon had
failed to demonstrate that Allstate’s violation of the Act was willful or knowing and thus declined
to award treble damages as to it. The trial court held that Solomon is entitled to recover her
attorney’s fees of $14,781.25 and discretionary costs of $2,888.06 against the defendants, jointly and
severally.
The defendants filed motions for a new trial. The trial court denied the motions but
suggested a remittitur, which was accepted by the plaintiff. The trial court reduced the compensatory
damages awarded to Solomon against Allstate to $101,098 and the damages awarded under the
Tennessee Consumer Protection Act against all defendants to $1,500. The court approved the jury’s
assessment of a 25% bad faith penalty.5
II. The Insurance Policy
The pertinent provisions of the builder’s risk policy at issue in this case are as follows:
Coverage A
Dwelling Protection
Property We Cover Under Coverage A:
1. Your dwelling,...
* * *
Coverage B
Other Structures Protection
* * *
Losses We Cover Under Coverages A and B:
We will cover sudden and accidental direct physical loss to property
described in Coverage A – Dwelling Protection...except as limited
or excluded in this policy.
5
The trial court also suggested a remittitur of the compensatory damages awarded against the b uilder to
$110,000, the amount requested by the plaintiff in her ad damnum. Upon the plaintiff’s election, she was also awarded
$200,0 00 in pu nitive dam ages in lieu of $4,50 0 in treble d amag es unde r the Con sumer P rotection A ct.
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Losses We Do Not Cover Under Coverages A and B:
We do not cover loss to the property described in Coverage A –
Dwelling Protection or Coverage B – Other Structures Protection
consisting of or caused by:
1. Flood, including, but not limited to surface water, waves,
tidal water or overflow of any body of water, or spray from
any of these, whether or not driven by wind.
* * *
4. Water or any other substance on or below the surface of the
ground, regardless of its source. This includes water or any
other substance which exerts pressure on, or flows, seeps or
leaks through any part of the residence premises.
* * *
5. Earth movement of any type, including, but not limited to
earthquake, volcanic eruption, lava flow, landslide, subsidence,
mudflow, pressure, sinkhole, erosion, or the sinking, rising,
shifting, creeping, expanding, bulging, cracking, settling or
contracting of the earth.
This exclusion applies whether or not the earth movement
is combined with water.
* * *
12. Collapse, except as specifically provided in Section I –
Additional Protection under item 11, “Collapse.”
* * *
22. Planning, Construction or Maintenance, meaning faulty,
Inadequate or defective:
a) planning, zoning, development, surveying, siting;
b) design, specifications, workmanship, repair, construction,
renovation, remodeling, grading, compaction;
c) materials used in repair, construction, renovation or
remodeling; or
d) maintenance;
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of property whether on or off the residence premises
by any person or organization.
23. We do not cover loss to covered property described in Coverage
A – Dwelling Protection or Coverage B – Other Structures
Protection when:
a) there are two or more causes of loss to the covered
property; and
b) the predominant cause(s) of loss is (are) excluded under
Losses We Do Not Cover, items 1 through 22 above.
(Bold print in original; emphasis in “Collapse” provision added). In addition to the coverage
provisions and exclusions set forth above, the policy provides additional terms of coverage in a
section entitled “Additional Protection,” which protections are alluded to in the “Collapse” exclusion
set forth in the policy provisions quoted above. As pertinent here, the “Additional Protection”
language is as follows:
Additional Protection
* * *
11. Collapse
We will cover:
a) the entire collapse of a covered building structure;
b) the entire collapse of part of a covered building
structure; and
c) direct physical loss to covered property caused
by (a) or (b) above.
For coverage to apply, the collapse of a building
structure specified in (a) or (b) above must be a
sudden and accidental direct physical loss caused by
one or more of the following:
* * *
f) defective methods or materials used in construction,
repair, remodeling or renovation, but only if the
collapse occurs in the course of such construction,
repair, remodeling or renovation.
(Bold print in original).
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III. Issues
Allstate appeals, arguing, for various reasons, that the trial court erred (1) by not granting its
motion for directed verdict and (2) by failing to grant its motion for a new trial.
IV. Standard of Review
A directed verdict is appropriate only when the evidence is susceptible to but one conclusion.
Eaton v. McLain, 891 S.W.2d 587, 590 (Tenn. 1994). In reviewing a trial court’s denial of a motion
for directed verdict, we must take the strongest legitimate view of the evidence favoring the
opponent of the motion. Id. Additionally, all reasonable inferences in favor of the opponent of the
motion must be allowed, and all evidence contrary to the opponent’s position must be disregarded.
Id.
A motion for a new trial addressing factual issues requires the trial court to perform its
function as a thirteenth juror. See Ridings v. Norfolk S. Ry. Co., 894 S.W.2d 281, 288 (Tenn. Ct.
App. 1994). This Court has described that function as follows:
[i]f a trial court is called upon to act as a thirteenth juror following the
filing of a motion for a new trial, the trial court must be
independently satisfied with the verdict of the jury. In performing
this function, the trial court must itself weigh the evidence heard by
the jury. If after weighing the evidence, the trial court is satisfied
with the verdict, it is that court's responsibility to approve the verdict;
on the other hand, if it is not satisfied with the verdict after weighing
the evidence, the trial court must grant a new trial. The trial court's
performance of its function as thirteenth juror must be performed
without regard to and without deference being shown to the result
reached by the jury. As the thirteenth juror, the trial court acts as a
jury unto itself in evaluating and weighing the evidence presented at
the trial.
Id. at 288-89 (citations omitted).
The denial of a motion for new trial is a decision within the discretion of the trial court, and
we will not disturb that decision absent an abuse of that discretion. See Mize v. Skeen, 468 S.W.2d
733, 736 (Tenn. Ct. App. 1971). In reviewing the trial court’s decision, we do not reweigh the
evidence and consider where the preponderance lies. Id. Rather, our duty is to determine whether
the record contains material evidence to support the verdict. See id. In the process of searching for
material evidence, we must disregard all evidence to the contrary, even though such evidence may
have supported one or more of the defendant’s theories at trial. See Electric Power Bd. of
Chattanooga v. St. Joseph Valley Structural Steel Corp., 691 S.W.2d 522, 526 (Tenn. 1985).
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V. Coverage
Allstate first argues that the trial court erred in failing to grant it a directed verdict, or, at a
minimum, a new trial, as to the issue of coverage. In so arguing, Allstate contends that there is no
competent proof in the record that the failure of the wall was the type of collapse covered by the
policy. Allstate argues that the basement wall collapsed as a result of several factors, including
backfill pressure, movement of the soil, inadequate design, and faulty workmanship, any one of
which, Allstate contends, is an excluded cause under the policy. Allstate also takes issue with
evidentiary rulings, the trial court’s charge to the jury and with the questions posed to the jury on
the special verdict form.
A.
As a general rule, contracts of insurance are subject to the same rules of interpretation and
construction as other contracts. See McKimm v. Bell, 790 S.W.2d 526, 527 (Tenn. 1990). Absent
fraud or mistake, such contracts are interpreted as written, and their terms are given their plain and
ordinary meaning. Swanson v. Mid-South Title Ins. Corp., 692 S.W.2d 415, 419 (Tenn. Ct. App.
1984). If a term is susceptible to more than one reasonable meaning, the term is construed against
the insurer and in favor of the insured. Harrell v. Minnesota Mut. Life Ins. Co., 937 S.W.2d 809,
814 (Tenn. 1996). The interpretation of a contract presents a question of law for the court. Union
Planters Corp. v. Harwell, 578 S.W.2d 87, 92 (Tenn. Ct. App. 1978).
While the policy in the instant case expressly and comprehensively addresses a loss due to
“collapse,” it does not define that term. However, the ordinary meaning of this word is “[t]he act
of falling down or inward, as from loss of supports.” Webster’s II New Riverside University
Dictionary 280 (1994). In the instant case, there is material evidence to support a finding that the
plaintiff’s loss was caused by a “collapse” – as that word is commonly defined – of the basement
wall. While the parties dispute which factors contributed to the collapse itself, we find that it is clear
beyond any doubt that the plaintiff’s loss in this case was precipitated by the collapse of the
basement wall. We therefore hold, as a matter of law, that the provisions of the policy relative to
collapse are implicated in the instant case, and it is to these provisions that we look to determine
whether the plaintiff’s loss is covered.
The plaintiff’s policy provides that a loss caused by a collapse is excluded unless the collapse
meets the criteria set forth in the coverage provisions listed under “Additional Protection.” Thus,
a collapse is covered if it was “sudden and accidental” and was caused by, among other things,
“defective methods or materials used in construction.”
There is material evidence in the record to support a finding that the basement wall collapsed
as a result of a defective method of construction. Max Cook testified that the amount of backfill
against the basement wall required that it be constructed with 12-inch block reinforced with concrete
and steel rebar. He opined that the construction of such a wall with 8-inch concrete block without
such reinforcements constitutes a defective method of construction. Don Kimbrough testified to the
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same effect, stating that the wall should have been constructed with 12-inch reinforced block. Based
upon the testimony of these experts, we find that there is material evidence to support a finding that
a “defective method[]...[was] used in construction” and that this defective method resulted in a
collapse, which collapse was the cause of the plaintiff’s loss. It therefore follows that the coverage
provisions pertaining to a collapse apply, and the plaintiff’s loss is a covered event.
Allstate strenuously argues that we should focus upon certain exclusions other than the
“collapse” exclusion, i.e., exclusion number 12, particularly the provisions that exclude losses caused
by earth movement, water pressure, and inadequate or defective design or workmanship. The
problem with this approach is twofold. First, Allstate insists that every exclusion in the policy
should be considered and a determination made as to whether the collapse that occurred was a result
of any excluded cause. We cannot agree with this analysis in this case. Each exclusion in an
insurance policy operates independently of the other and should be read separately. Standard Fire
Ins. Co. v. Chester-O’Donley & Assocs., Inc., 972 S.W.2d 1, 8 (Tenn. Ct. App. 1998). While
exclusions should not “be construed so narrowly as to defeat their intended purpose,” they also
cannot be construed too broadly in favor of the insurer. Id. We think the proper analysis is the
approach adopted by the trial court in the instant case. First, it must be determined whether a
collapse occurred. Second, the cause of the collapse must be ascertained. If the collapse was caused
by any of the factors listed in the coverage provisions applicable to a “collapse” – such as “defective
methods or materials used in construction” – the collapse is covered. If the collapse was the result
of a factor other than those listed in the coverage provisions pertaining to collapse, the collapse
would not be covered. The other exclusions stated in the policy simply are not implicated once a
determination has been made that a collapse has occurred, a loss-causing condition which is, at the
same time, addressed in an exclusion provision as well as a coverage provision. In other words, the
policy states that collapse is excluded unless it is covered under the expressed conditions applying
exclusively to an incident of collapse.
The second problem with Allstate’s approach is that the exclusions it relies upon are in direct
conflict with the coverage provided by the policy for certain collapses. The policy provides that a
loss is covered if it is the result of a collapse caused by, among other things, “defective methods or
materials used in construction, repair, remodeling or renovation,” if the collapse occurs in the course
of construction, repair, remodeling or renovation. One of the exclusions relied upon by Allstate,
however, excludes losses caused by, among other things, inadequate or defective “materials used in
repair, construction, renovation or remodeling.” This conflicting language leads us to conclude that
the exclusions relied upon by Allstate do not apply in the event of a collapse. Allstate will not be
permitted to specifically provide coverage for an event and then take it away in the general language
of the policy.
We have determined that there was a collapse within the meaning of the policy and that there
is material evidence to support a finding that the collapse was caused by a defective method of
construction. Accordingly, we hold that the policy covers the plaintiff’s loss. Allstate’s argument
that other exclusions in the policy operate to exclude that coverage is without merit.
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B.
We now turn to Allstate’s arguments regarding the trial court’s charge to the jury. In
reviewing a jury charge, we consider the charge as a whole to determine whether prejudicial error
has been committed. Otis v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 446 (Tenn. 1992); In
re Estate of Elam, 738 S.W.2d 169, 174 (Tenn. 1987). The challenged portion of the charge must
be viewed in context. Estate of Elam, 738 S.W.2d at 174. “The charge will not be invalidated as
long as it fairly defines the legal issues involved in the case and does not mislead the jury.” Otis,
850 S.W.2d at 446; Grissom v. Metropolitan Gov’t of Nashville, 817 S.W.2d 679, 685 (Tenn. Ct.
App. 1991). Accordingly, jury instructions are not measured against a standard of perfection. Id.
First, Allstate argues that the trial court erred in failing to instruct the jury as to the legal
meaning of the term “defective methods...used in construction” as used in the policy and that by
failing to so, the trial court erroneously allowed the jury to interpret the contract. Allstate argues that
the trial court should have charged the jury with the following instruction:
In order to find that a collapse resulted from a “method in
construction,” you must find that improper methods or procedures
were used in the actual laying of the block wall. “Method in
construction” does not include design defects. Hathaway v.
Cedarburg Mut. Ins. Co., 503 N.W.2d 5 (Wis. App. 1993).
A trial court may decline to give a requested instruction if (1) it is not supported by the
evidence; (2) the substance of the instruction is already addressed in the charge; or (3) it is an
incorrect statement of the law or is otherwise incomplete. Ingram v. Earthman, 993 S.W.2d 611,
636 (Tenn. Ct. App. 1998), perm. app. denied March 22, 1999, cert. denied 528 U.S. 986 (1999).
In the instant case, the trial court refused to charge the jury as requested by Allstate, noting “I have
not been able to determine that is the law in the State of Tennessee, and by virtue of that, I’m not
going to charge the jury with regard to Wisconsin law.” We find no error in the trial court’s
decision. Like the trial court, we have not found any authority to indicate that the requested charge
is an accurate statement of the law in Tennessee. Indeed, if we look to the plain and ordinary
meaning of the terms “method” and “design,” we find that these words are very similar in meaning.
“Method” is commonly defined as “[a] manner or means of procedure,...a systematic and regular
way of accomplishing a given task.” Webster’s II New Riverside University Dictionary 747 (1994).
“Design” is commonly defined as “[i]nvention and disposition of the forms, parts, or details of
something according to a plan” and as “a method for making, doing, or accomplishing,” such as a
“design” for a building. Id. at 367 (emphasis added). The trial court did not err in refusing to give
this particular instruction to the jury.
Allstate complains that the trial court erred in giving the following instruction:
You must first determine whether plaintiff has carried her burden of
proof that the loss of which she complains resulted in substantial part
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from collapse as defined in the policy. If your answer is yes, you
should then determine the extent, if any, of plaintiff’s recovery
from...the defendant Allstate. If your answer is no, you must then
consider each of the exclusions upon which defendant Allstate relies
to determine if coverage is not provided because of an excluded risk.
We find no error in this instruction. The trial court correctly instructed the jury that if they
found that the plaintiff’s loss was due in substantial part to a “collapse” as defined in the coverage
provisions of the policy, i.e., a sudden and accidental collapse resulting from defective methods or
materials used in the construction of the residence, then the loss would be covered. The instruction
also correctly advises the jury that if a covered collapse is found, the other exclusions set forth in the
policy would not apply, as those exclusions would be implicated only in the event that a collapse had
not occurred. As discussed previously, we find this to be a correct interpretation of the insurance
policy before us. Allstate’s argument is without merit.
Next, Allstate argues that the trial court erred in instructing the jury as follows:
Remember as an overriding rule of law, there should be coverage
where a nonexcluded cause, i.e. collapse, as defined in this policy is
a substantial factor in producing damage or injury even though an
excluded cause may have contributed in some form to the ultimate
result and standing alone would have properly invoked the exclusion
contained in the policy.
Allstate argues that this charge is an erroneous application of the “concurrent causation” theory set
forth in cases such as Allstate Ins. Co. v. Watts, 811 S.W.2d 883 (Tenn. 1991). It contends that the
principle enunciated in the Watts case is not applicable to the instant case because it is contrary to
the following express provision of the policy:
We do not cover loss to covered property described in Coverage
A – Dwelling Protection or Coverage B – Other Structures
Protection when:
a) there are two or more causes of loss to the covered
property; and
b) the predominant cause(s) of loss is (are) excluded under
Losses We Do Not Cover, items 1 through 22 above.
(Emphasis in original). The problem with Allstate’s argument is simply this: the provisions of the
policy relied upon by the insurance company to support its argument are not implicated by the facts
of this case. This is because the cause of the loss – a collapse – is not excluded under “Losses We
Do Not Cover,” as previously explained in this opinion. Since the policy provisions relied upon by
the insurance company are not implicated by the facts of this case, the language of these provisions
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is immaterial to the resolution of this controversy. We therefore find Allstate’s argument as to this
issue to be without merit.
C.
Allstate next takes issue with the special verdict form. The jury was asked, “With reference
to construction of the first basement wall, does the applicable policy of insurance by Defendant
Allstate provide coverage for Plaintiff’s claimed losses?” Allstate argues that the trial court
committed reversible error in allowing the jury to determine the legal question of whether coverage
exists and contends that the jury should have been presented with inquiries regarding each possible
cause of the collapse proven at trial.
While it is true that the interpretation and construction of insurance contracts are for the court
and not the jury, see Union Planters Corp. v. Harwell, 578 S.W.2d 87, 92 (Tenn. Ct. App. 1978),
we do not agree with Allstate that the trial court committed reversible error in this case by asking
the jury whether there was coverage for the plaintiff’s loss. Such error will not afford a ground for
reversal “if it should appear that the jury had nevertheless construed the writing correctly.”
Louisville & N. R. Co. v. Wynn, 88 Tenn. 320, 333, 14 S.W. 311, 314 (1890). In order to find that
the plaintiff’s loss was covered under the particular facts of this case, the jury had to find that a
collapse occurred as a result of a defective method used in the construction of the basement wall; that
is the coverage provision implicated by the plaintiff’s theory of recovery in this case. Upon
reviewing the evidence, we have determined that there is material evidence to support a finding that
the facts bring this case within the coverage of the policy, as that coverage has been found by this
Court as a matter of law. This issue if found adverse to Allstate.
VI. Award of Damages
Allstate next argues that the award of damages against Allstate it not supported by the law
or the evidence. It contends that the award “is totally without foundation” and that the only proof
of damage resulting from the collapse of the wall was $3,244.84, the amount that the plaintiff
testified that she spent on repairing the wall. Allstate further argues that the trial court erred in
admitting the testimony of the plaintiff’s two experts because, so the argument goes, the plaintiff
failed to properly disclose the subject matter and factual basis for their opinion testimony before
trial. Allstate also contends that the award to the plaintiff constitutes a double recovery in excess
of her ad damnum. We will address each of these arguments in turn.
A.
We begin by addressing the award of damages. There is material evidence in this record to
support the award of the full amount of the insurance policy. Solomon testified that she spent
$111,570 in building her house. The evidence reflects that when the basement wall collapsed, the
structural integrity of the house was weakened. The collapse caused the drywall in the house to
crack and the siding on the exterior to buckle. There is also evidence to suggest that the collapse has
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contributed to the inward bulging of the other basement walls. The plaintiff’s experts testified that,
given the amount of damage from the collapse, it would cost more to repair the home than to tear
it down and rebuild it. There is material evidence to support the plaintiff’s award.
B.
Next, Allstate argues that the trial court erred in failing to exclude the testimony of
Solomon’s experts, Max Cook and Don Kimbrough. It argues that Solomon failed to supplement
her responses to Allstate’s interrogatories to notify Allstate that Cook “changed and added opinions
after his discovery deposition.” Allstate further complains that Kimbrough had not been identified
prior to trial as an expert witness.
Under the rules of discovery, a party has the duty to seasonably supplement his or her
responses to a request for the identity of any expert witnesses expected to be called at trial and the
substance of their opinions. See Tenn. R. Civ. P. 26.05. Although the rules do not provide a
sanction for a party’s failure to seasonably supplement his or her responses, trial judges have the
inherent power to take corrective action against a party for abuse of the discovery process. Lyle v.
Exxon Corp., 746 S.W.2d 694, 699 (Tenn. 1988). In some cases, the trial judge may deem that the
exclusion of the undisclosed expert’s testimony is the appropriate sanction, see Ammons v. Bonilla,
886 S.W.2d 239, 243 (Tenn. Ct. App. 1994), although other, less severe sanctions may be
appropriate where the failure to disclose is not knowing and deliberate. Lyle, 746 S.W.2d at 699.
We will not disturb the trial court’s determination of the appropriate sanction to be imposed unless
the court commits an abuse of its discretion. See id.
Allstate argues that Cook changed his opinion prior to trial. In his April 16, 1998, report,
Cook states that he could not determine whether the bulging of the other basement walls was caused
by defects in their construction or by the collapse of the front wall. At trial, he testified that, upon
looking at the problem “a little closer,” he had determined that the bulging was a result of a
combination of these factors.
The trial court did not abuse its discretion in allowing Cook to testify. It does not appear that
Cook significantly changed the substance of his testimony so as to require a supplement to his report.
Moreover, there is nothing to indicate that the plaintiff deliberately and knowingly withheld such
information from the defense. Allstate’s argument is without merit.
We further find that the trial court did not abuse its discretion in allowing Kimbrough to
testify. In declining to exclude his testimony, the trial court noted that some ten months prior to trial,
Solomon’s counsel sent correspondence to Allstate’s counsel, identifying Kimbrough as a builder
and contractor, and indicating that he would testify at trial. The court also noted that Kimbrough had
been listed as a witness on the plaintiff’s witness list and that photographs taken by him had been
listed on the plaintiff’s exhibit list. Despite this notification, the trial court noted, Allstate failed to
engage in any discovery of this witness. Given these circumstances, we do not find that the trial
court abused its discretion in allowing Kimbrough to testify. Moreover, given that the substance of
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Kimbrough’s testimony is almost identical to that given by Cook, we find that even if the failure to
exclude Kimbrough’s testimony was in error, such error was not one that more probably than not
affected the verdict. See Tenn. R. App. P. 36(b).
C.
Allstate also contends that the plaintiff has been awarded a double recovery, and that the
award exceeds the plaintiff’s ad damnum. We disagree. The plaintiff was ultimately awarded
$110,000 in compensatory damages against the builder and $101,098 against Allstate. Pursuant to
the policy, Allstate has the right to seek subrogation against Hager and Oney for the amount it is
required to pay. Therefore, Allstate’s argument that the plaintiff was awarded a double recovery in
excess of her ad damnum is without merit.
VII. Bad Faith Penalty
Next, Allstate challenges the assessment of a 25% bad faith penalty pursuant to T.C.A. § 56-
7-105, which provides, in pertinent part, as follows:
The insurance companies of this state...in all cases when a loss occurs
and they refuse to pay the loss within sixty (60) days after a demand
has been made by the holder of the policy or fidelity bond on which
the loss occurred, shall be liable to pay the holder of the policy or
fidelity bond, in addition to the loss and interest thereon, a sum not
exceeding twenty-five percent (25%) on the liability for the loss;
provided, that it is made to appear to the court or jury trying the case
that the refusal to pay the loss was not in good faith, and that such
failure to pay inflicted additional expense, loss, or injury including
attorney fees upon the holder of the policy or fidelity bond; and
provided further, that such additional liability, within the limit
prescribed, shall, in the discretion of the court or jury trying the case,
be measured by the additional expense, loss, and injury including
attorney fees thus entailed.
T.C.A. § 56-7-105(a) (2000).
Before a plaintiff may recover a penalty pursuant to this provision,
(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 his 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.
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Palmer v. Nationwide Mut. Fire Ins. Co., 723 S.W.2d 124, 126 (Tenn. Ct. App. 1986); Walker v.
Tennessee Farmers Mut. Ins. Co., 568 S.W.2d 103, 106 (Tenn. Ct. App. 1977). The plaintiff has
the burden of proving the insurer’s bad faith. Palmer, 723 S.W.2d at 126. Whether an insurer acted
in good faith is generally a fact question for the jury. Mason v. Tennessee Farmers Mut. Ins. Co.,
640 S.W.2d 561, 567 (Tenn. Ct. App. 1982).
Allstate argues that Solomon failed to make a formal demand as required by the statute. It
further contends that the lawsuit was premature because Solomon waited only 44 days after the
denial of her claim to file suit.
We disagree on both counts. The formal demand requirement in T.C.A. § 56-7-105 gives
insurers “notice of the claim for bad faith and a period in which to reflect upon the consequences of
its failure to pay.” See Walker, 568 S.W.2d at 107. Upon reviewing the record, we find that there
is material evidence to support a finding that Allstate had ample time to contemplate the
consequences of its denial of the plaintiff’s claim. Solomon contacted Allstate on numerous
occasions to inquire about coverage and to request that her claim be processed and paid. Each time
she contacted the company, she was advised that Allstate would not pay. We find that the plaintiff’s
actions gave Allstate adequate notice and time to contemplate the possibility of a bad faith lawsuit.
Moreover, we do not find that the lawsuit was “premature.” An insured need not wait the statutorily-
required 60 days before filing suit if the insurer refused to pay prior to the expiration of that period.
See Palmer, 723 S.W.2d at 126. The evidence reflects that Allstate refused to pay the plaintiff’s
claim on several occasions; the last of those denials being on June 25, 1997. Because Allstate had
already notified her of its refusal to pay, Solomon was not required to wait 60 days following her
formal demand before filing suit. Allstate’s arguments as to this issue are without merit.
Allstate next argues that the amount of the bad faith penalty was excessive. We disagree.
The evidence reflects that the house the plaintiff expected to build for $65,000 has so far cost her
$111,000, and the cost of repairing the damage caused by the collapse of the basement wall is more
costly than tearing the house down and rebuilding it. Immediately after the wall collapsed, the
plaintiff made repeated attempts to have the insurer inspect the structure, without success. She
repeatedly asked her agent to file a claim under her policy, and her request was repeatedly denied.
The plaintiff finally filed the claim herself, and, after months of discussions with the agent and the
claims adjuster, was ultimately told that her claim, which the jury found to be meritorious, was
denied. There is material evidence in this record to support the penalty assessed by the jury, and we
will not disturb that award.
VIII. Consumer Protection Act
Allstate’s final argument relates to the plaintiff’s claim under the Consumer Protection Act.
First, it contends that the claim is barred by the one-year statute of limitations set forth in T.C.A. §
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47-18-110 (1995). The plaintiff, on the other hand, argues that her amended complaint relates back
to the filing of the original complaint pursuant to Tenn. R. Civ. P. 15.03.6
In order to ascertain whether an amended complaint relates back, we must determine whether
the amended claims arose out of the same conduct, transaction or occurrence as the claims set forth
in the original complaint. Karash v. Pigott, 530 S.W.2d 775, 777 (Tenn. 1975); Hawk v.
Chattanooga Orthopaedic Group, 45 S.W.3d 24, 31 (Tenn. Ct. App. 2000), perm. app. denied
February 26, 2001. Upon reviewing the record, we conclude that the plaintiff’s Consumer Protection
Act claim arises out of the same conduct, transaction or occurrence relied upon in the original
complaint. Thus, the amended claim is not time barred.
Finally, Allstate argues that an insured is not entitled to recover damages under the Consumer
Protection Act for an insurer’s refusal to pay a claim.
We think that Allstate mischaracterizes the nature of Solomon’s claim under the Consumer
Protection Act. The plaintiff alleged below that Allstate committed an unfair or deceptive act by
representing to her that any damages that resulted during the construction of her house would be
reimbursed under the policy. The plaintiff is basing her Consumer Protection Act claim upon
misrepresentations made by the insurer in selling her the policy. Such misrepresentations are clearly
covered by the Act. See generally T.C.A. § 47-18-104 (Supp. 2000). This issue is found adverse
to Allstate.
IX. Conclusion
The judgment of the trial court is affirmed. This case is remanded for enforcement of the
trial court’s judgment and for collection of costs assessed below, all pursuant to applicable law.
Costs on appeal are taxed to the appellant, Allstate Insurance Company.
_______________________________
CHARLES D. SUSANO, JR., JUDGE
6
Tenn. R. Civ . P. 15.03 prov ides, in pertinent part, as follow s:
Whenever the claim or defense asserted in amended pleadings arose out of the
condu ct, transaction, or occurrence set forth or attempted to be set forth in the
original pleading, the amendment relates back tho the date of the original pleading.
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