Randall D. Kiser v. Ian J. Wolfe & Consumers Insurance Company

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
February 3, 2010 Session
RANDALL D. KISER v. IAN J. WOLFE & CONSUMERS INSURANCE
COMPANY
Appeal from the Circuit Court for Bradley County
No. V-05-869 Lawrence Puckett, Judge
No. E2009-01529-COA-R9-CV - FILED MAY 28, 2010
This interlocutory appeal considers an issue of uninsured motorist coverage following an
automobile accident in which Plaintiff Randall D. Kiser was permanently injured. The
plaintiff was working within the scope of his employment, driving for a towing company,
when his truck was struck by Defendant Ian J. Wolfe’s vehicle. The defendant driver
tendered his liability policy limits to the plaintiff and is not a party to this appeal. The
employer towing company was insured by Defendant Consumers Insurance Company. In
anticipation of arbitration for determination of damages and liability, the insurance company
moved for partial summary judgment. The trial court denied summary judgment but granted
the insurance company permission for an interlocutory appeal to determine two issues, on
which we hold: (1) On a policy of vehicle insurance, the statutory requirement of Tenn.
Code Ann. § 56-7-1201(a)(2) for a written rejection of uninsured/underinsured motorist
benefits or written selection of uninsured/underinsured motorist benefits lower than liability
limits is met when the insured signs an application containing a lower selection but neglects
to initial a block provided for that purpose; and (2) the insurer bears the burden of proof to
show that the insured signed an insurance contract application containing a stated limit of
uninsured/underinsured motorist coverage, but once that burden has been met, the insured
must raise any issue that the insurer obtained the insured’s signature unlawfully under Tenn.
Code Ann. § 56-7-1201(a)(2). We vacate the trial court’s denial of the insurance company’s
Motion for Partial Summary Judgment and remand for reconsideration in light of this
holding.
Tenn. R. App. P. 9 Appeal; Judgment of the Circuit Court
Reversed; Case Remanded
J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which H ERSCHEL P. F RANKS,
P.J., and C HARLES D. S USANO, J R., J., joined.
N. Mark Kinsman and J. Chad Hogue, Chattanooga, Tennessee, for the appellant, Consumers
Insurance Company.
Christopher D. Markel, Chattanooga, Tennessee, for the appellee, Randall D. Kiser.
OPINION
I. BACKGROUND
We accepted this interlocutory appeal to consider the issue of whether the provision
of Tenn. Code Ann. § 56-7-1201(a)(2) requiring written rejection or selection of uninsured
motorist coverage is met when the insured signs a policy application but does not initial a
block provided specifically to reflect the insured’s choice. This action arose as a negligence
suit following an automobile accident that occurred in Bradley County on May 5, 2005.
Defendant Ian J. Wolfe’s vehicle crossed the center line of Frontage Road and struck a tow
truck driven by Plaintiff/Appellee Randall D. Kiser. At the time of the accident, Mr. Kiser
was working within the scope of his employment for Lawson Towing Company (“Lawson
Towing”), which was covered under an automobile insurance policy issued by
Defendant/Appellant Consumers Insurance Company (“Consumers”). After Mr. Wolfe
tendered his liability policy limits to Mr. Kiser, Consumers was joined to the negligence
action under Tennessee’s uninsured motorist coverage statute, Tenn. Code Ann. § 56-7-1201,
et seq.
It is undisputed that Consumers issued an insurance policy to Lawson Towing in
response to an application completed by owner Ken Lawson, dated September 10, 2002, and
titled “Towing - Commercial Application” (“the Application”). The policy had been
repeatedly renewed and was in effect at the time of the accident. It is also undisputed that
as an employee/driver, Mr. Kiser was covered by the policy.
The front page of the Application contains a table with each type of available
coverage listed in the first column, the corresponding limit of each type of coverage in the
second column, and the policy fee for that coverage in the third column. The table clearly
lists the “Liability” coverage limit as $1,000,000 and the “Uninsured Motorist” coverage
limit as $60,000.
The dispute giving rise to this appeal centers on the third page of the Application.
Immediately before the signature line at the end of the document, there are three text blocks
that go across the page. In the first, there is a warning against fraudulent representation on
an insurance form. In the second, there is the following statement in all capital letters:
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I UNDERSTAND AND ACKNOWLEDGE THAT UNINSURED
MOTORISTS (UM) BODILY INJURY AND PROPERTY DAMAGE
COVERAGES HAVE BEEN EXPLAINED TO ME. I HAVE BEEN
OFFERED THE OPTIONS OF SELECTING UM LIMITS EQUAL TO MY
LIABILITY LIMITS, UM LIMITS LOWER THAN MY LIABILITY
LIMITS, OR TO REJECT UM BODILY INJURY AND/OR UM PROPERTY
DAMAGE COVERAGE IN ITS ENTIRETY.
The third text block lists the following three choices, again in all capital letters and
reproduced here to read in single lines across the page as on the original:
1. I SELECT UNINSURED MOTORISTS BODILY INJURY LIMIT(S) INDICATED IN THIS APPLICATION. ___ (INITIALS)
2. I SELECT UNINSURED MOTORISTS BODILY INJURY AND PROPERTY DAMAGE COVERAGE IN ITS ENTIRETY.___ (INITIALS)
3. I SELECT ONLY UNINSURED MOTORISTS PROPERTY DAMAGE COVERAGE IN ITS ENTIRETY. ___ (INITIALS)
All three of these choices regarding uninsured motorist coverage are blank on the
Application.
The “Applicant’s Signature” line below these choices was signed by Ken Lawson,
owner of Lawson Towing. The “Producer’s Signature” line was signed by Jeff Holden, an
agent with Consumers and son of the company’s president, Elaine Holden. Mr. Holden gave
the following testimony by deposition regarding the signatures:
Counsel: Does your signature appear on that last page [of the
Application]?
Mr. Holden: It does.
Counsel: Which one, the right or the left?
Mr. Holden: The right.
Counsel: Okay. And the other signature, whose signature is that?
Mr. Holden: It’s [sic] appears to be Ken Lawson.
Counsel: Did you see him sign that?
Mr. Holden: Yes. I assume I signed here and he signed there.
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Counsel: Is that the purpose of your signature is to verify he’s signed it?
Mr. Holden: Yes, you could say that.
Dorris Waldron, Claims Supervisor with Consumers, stated in an affidavit that
between the insurance policy’s issuance on September 10, 2002, to the date of Mr. Kiser’s
accident on May 5, 2005, “Ken Lawson received thirty (30) separate mailings from
Consumers Insurance Company that showed uninsured motorist policy limits of $60,000.”
Mr. Kiser does not dispute this fact. Several mailings from Consumers to Lawson Towing,
all reflecting uninsured motorist limits of $60,000, are included in the record as exhibits. Of
particular note is the “Towing Renewal Declaration,” dated September 13, 2004. This policy
renewal was in effect at the time of the accident, and the uninsured motorist coverage listed
on the renewal is $60,000.
Mr. Kiser sought an award of the full liability amount of $1,000,000 from Consumers,
as well as compensatory damages from Mr. Wolfe. Consumers moved for partial summary
judgment on the basis that Mr. Kiser was bound by the election of the lower uninsured
motorist limit. Following a hearing, the trial court denied Consumers’ motion, stating the
following three reasons:
1. [T]he page with a signature [on the Application] notes an “effective
date” of the policy of insurance of September 10, 2002, and contains a
section for an insured-applicant to acknowledge that “uninsured bodily
injury and property damage coverage have been explained to me. I
have been offered the options of selecting UM limits equal to my
liability units, UM limits lower than my liability limits, or to reject UM
bodily injury and/or UM property damages entirely.” Below this
section, on the same page, appear several blanks, for the insured to
initial acknowledgment of the aforementioned, and his selection of UM
limits contained in the application, his rejection of all UM coverage,
and/or rejection only of UM property damage coverage. It is
undisputed that each blank in this section on the signature page was not
initialed by the insured.
2. The record contains no testimony from Mr. Lawson as to his intent in
these matters. Further, both parties have declined the option of
obtaining testimony from Mr. Lawson as to his intent in these matters,
and have agreed to proceed based upon the Court’s interpretation of the
application and facts in the record.
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3. Based upon the undisputed facts, the Court finds that the application
fails to satisfy Tennessee Code Annotated § 56-7-1201(a)(2).
Consumers then moved for permission to file an interlocutory appeal. In granting
permission, the trial court stated:
The Court declares that resolution of this coverage issue by the Court of
Appeals will prevent needless, expensive, and protracted litigation, given that
Plaintiff, will need to secure extensive medical proof and/or expert testimony
for the binding arbitration under Tennessee Code Annotated § 56-7-1206.
Since this coverage issue appears to be the primary dispute between the
Plaintiff and Consumers Insurance Company, the Court finds that an
interlocutory appeal will result in a net reductions [sic] in the duration and
expense of the litigation.
We subsequently allowed the application by Consumers for interlocutory appeal.
II. ISSUES
In its Order Granting Permission to File Interlocutory Appeal, the trial court stated that
this case presented “two significant and novel legal questions for which there is no binding
authority . . . .” As stated by the trial court, the two questions are:
A. [W]hether, on a policy of vehicle insurance, the statutory requirements
of Tenn. Code Ann. § 56-7-1201(a)(2), which require rejection in
writing of uninsured/underinsured motorist coverage limits that match
policy liability coverage limits, have been met, based upon the
undisputed facts noted in the record of this case, and without further
proof of intent to reject matching uninsured motorist coverage.
B. The second question at issue is which party has the burden of going
forward in light of the undisputed facts in this case.
III. STANDARD OF REVIEW
This appeal requires us to determine whether Mr. Lawson’s signature, as the
representative for Lawson Towing, on an insurance contract application fulfilled the statutory
requirement that selection of uninsured motorist coverage lower than liability coverage be
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in writing. The proper interpretation of Tenn. Code Ann. § 56-7-1201(a)(2) presents issues
of law, which we review de novo with no presumption of correctness. See Carter v. Quality
Outdoor Prods., Inc., 303 S.W.3d 265, 267 (Tenn. 2010) (citing Perrin v. Gaylord Entm’t
Co., 120 S.W.3d 823, 826 (Tenn. 2003)).
IV. DISCUSSION
A. Written Rejection or Selection Requirement of Uninsured Motorist Coverage
Tenn. Code Ann. § 56-7-1201(a)(2)
Legislation requiring insurance companies to provide uninsured motorist coverage has
been in effect in Tennessee since 1967. Dunn v. Hackett, 833 S.W.2d 78, 81 (Tenn. Ct. App.
1992) (citing 1967 Tenn. Pub. Acts, ch. 371). Under the current statute, [“t]he limits of the
uninsured motorist coverage shall be equal to the bodily injury liability limits stated in the
policy.” Tenn. Code Ann. § 56-7-1201(a)(1); Dunn, 833 S.W.2d at 81 (“The language of
T.C.A. § 56-7-1201 is clear and unequivocal that every automobile liability policy issued for
delivery in this state shall include uninsured motorist coverage with limits equal to the bodily
injury liability limits, unless the coverage is rejected by the named insured.”).
The 1967 statute included a provision allowing the insured to reject uninsured
motorist coverage, but the provision did not specify how the rejection must be accomplished.
Dunn, 833 S.W.2d at 81 (citing Tenn. Code Ann. § 56-1148 (amended 1982)). The
legislature has amended the full statute several times, but the language regarding rejection
was amended only once in 1982. Tenn. Code Ann. § 56-7-1201; Dunn, 833 S.W.2d at 81.
The current provision reads:
(a)(2) However, any named insured may reject in writing the uninsured
motorist coverage completely or select lower limits of the coverage but not less
than the minimum coverage limits in § 55-12-107. Any document signed by
the named insured or legal representative that initially rejects the coverage or
selects lower limits shall be binding upon every insured to whom the policy
applies, and shall be conclusively presumed to become a part of the policy or
contract when issued or delivered, regardless of whether physically attached
to the policy or contract. Unless the named insured subsequently requests the
coverage in writing, the rejected coverage need not be included in or
supplemental to any continuation, renewal, reinstatement, or replacement of
the policy, or the transfer of vehicles insured under the policy, where the
named insured had rejected the coverage in connection with a policy
previously issued by the same insurer; provided, that whenever a new
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application is submitted in connection with any renewal, reinstatement or
replacement transaction, this section shall apply in the same manner as when
a new policy is being issued.
Tenn. Code Ann. § 56-7-1201(a)(2). This language, in force since 1982, requires that
rejection of uninsured motorist coverage be in writing and allows for selection of coverage
lower than the bodily injury liability limit in the policy. Id. A selection for lower limits must
be for at least the amount required for bodily injury liability by Tenn. Code Ann. § 55-12-107,
which references section 55-12-102(12)(D)(i)(a), which requires minimum liability coverage
of $60,000 per accident. Id. Thus, if an insured selects a lower amount of uninsured motorist
coverage, rather than rejecting it outright, that coverage still must be at least $60,000.
In the case at bar, it is undisputed that Mr. Kiser, as a covered employee of Lawson
Towing, is bound by the terms agreed to by Mr. Lawson when he entered the contract with
Consumers Insurance. See Tenn. Code Ann. § 56-7-1201(a)(2) (“Any document signed by
the named insured or legal representative that initially rejects the coverage or selects lower
limits shall be binding upon every insured to whom the policy applies . . . .”). The liability
coverage limit in Lawson Towing’s policy is $1,000,000. The uninsured motorist coverage
limit amount listed on the first page of the policy is $60,000. This amount matches the
minimum amount that the insured can select without completely rejecting
uninsured/underinsured motorist coverage under Tenn. Code Ann. § 56-7-1201(a)(2). The
issue, and necessary interpretation of the statute, then centers on whether Mr. Lawson’s
signature on the last page of the Application constitutes a “selection” of lower coverage when
the lower amount of that coverage is listed on the first page of the Application. The trial court
concluded that because Mr. Lawson did not check one of the three options provided on the
last page of the Application for rejecting uninsured motorist benefits or selecting a lower
amount, the written requirement of the statute had not been met. We disagree.
In granting permission for this interlocutory appeal, the trial court correctly stated that
there is no binding state authority on this issue. However, the Tennessee Supreme Court has
held that “unpublished intermediate court opinions have persuasive force.” Allstate Ins. Co.
v. Watts, 811 S.W.2d 883, 886 n.2 (Tenn. 1991). This court held in Peak v. Travelers
Indemnity Co. that the plaintiff had effectively selected a lower limit of uninsured motorist
coverage under Tenn. Code Ann. § 56-7-1201(a), where he had signed an insurance policy
containing a stated uninsured motorist limit of $60,000 but had not initialed one of three
selection options provided for the purpose. No. M2001-03047-COA-R3-CV, 2002 WL
31890892, at *5 (Tenn. Ct. App. M.S., Dec. 31, 2002). In Dunn, a reported case with highly
distinguishable facts, another panel of this court held that an insured party had not selected
lower limits of uninsured motorist coverage by simply “negotiating a $1,000,000.00
deductible for all insured losses.” 833 S.W.2d at 82. Key to this factual distinction is that in
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Dunn, “the policy provisions did not expressly include uninsured motorist coverage for
vehicles based in Tennessee.” Id. at 80.
The facts in this case mirror those in Peak in many aspects but are distinguishable in
a way that helps hone the issue for the question raised here. In Peak, the record reflected
testimony showing that the insured “requested of [the insurance agent] $60,000 in
uninsured/underinsured motorist coverage and [the agent] penned-in the $60,000 figure on
the selection form, then forwarded the form to [the insured] who signed it. . . .” 2002 WL
31890892, at *5. In both Peak and the case at bar, the insured continued to be covered by the
policy for several years, renewing it with the same uninsured motorist coverage as listed on
the original. See id. However, in this case, the only evidence in the record of Mr. Lawson’s
intent when signing the Application is his signature, verified by the insurance agent but
without any additional testimony as to the circumstances surrounding Mr. Lawson’s signing.
Therefore, the narrow question is whether the signature on the policy, without facts in
evidence regarding the insured’s intent on selection of lower uninsured motorist coverage,
constitutes written selection of that lowered coverage under Tenn. Code Ann. § 56-7-
1201(a)(2).
It is well settled in Tennessee that an insurance policy is a contract, subject to the
principles of contract law. See Giles v. Allstate Ins. Co., 871 S.W.2d 154, 156-57 (Tenn. Ct.
App. 1993) (citing Beasley v. Metropolitan Life Ins. Co., 229 S.W.2d 146 (Tenn. 1950), with
approval in applying contract law to an insurance contract). When the insured has signed a
contract, he or she is presumed to have knowledge of the contract’s contents. Giles, 871
S.W.2d at 156 (“‘[T]hat if, without being the victim of fraud [the insured] fails to read the
contract or otherwise learn its contents, he signs the same at his peril and is estopped to deny
his obligation, will be conclusively presumed to know the contents of the contract, and must
suffer the consequences of his own negligence.’”) (quoting Beasley v. Metropolitan Life Ins.
Co., 229 S.W.2d 146, 148 (Tenn. 1950)) (multiple supporting citations omitted). Mr. Lawson
signed the insurance contract application containing the $60,000 uninsured motorist limit.
Mr. Kiser raises no specter of fraud that would provide an exception to the presumption that
Mr. Lawson knew what he was signing. The requirement under Tenn. Code Ann. § 56-7-
1201(a)(2) that uninsured motorist coverage lower than liability limits be selected in the
contract was met by that coverage’s clear listing on the front page and Mr. Lawson’s signature
on the last page.
B. Burden of Proof
The second question raised on interlocutory appeal, as stated by the trial court, is
“which party has the burden of going forward in light of the undisputed facts of this case.”
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The key undisputed facts in this case are that Mr. Lawson signed the insurance contract
application and that the application contained a clearly stated uninsured motorist coverage
limit of $60,000. Because Mr. Lawson is presumed to have knowledge of the application’s
contents, the insurance company has met its burden of proof under Tenn. Code Ann. § 56-7-
1201(a)(2) by showing that Mr. Lawson voluntarily signed an insurance contract application
that contained a written uninsured motorist coverage limit lower than the bodily injury liability
coverage in the same contract. See Giles, 871 S.W.2d at 156. If Mr. Kiser had alleged that
Consumers committed fraud in obtaining Mr. Lawson’s signature, Mr. Kiser would then bear
the burden of going forward to show that Mr. Lawson’s signature was obtained unlawfully.
See, e.g., Beasley, 229 S.W.2d at 147 (analyzing the insured party’s proof to determine that
the insured had signed the contract without reading it, “though there was no fraud, duress, or
disability to prevent his reading it”). However, Mr. Kiser has made no such allegation of
fraud, and Mr. Lawson has been silent on the matter. Consumers has met its burden of proof
under the statute.
V. CONCLUSION
We conclude that for a policy of vehicle insurance, the statutory requirement of Tenn.
Code Ann. § 56-7-1201(a)(2) for a written rejection of uninsured/underinsured motorist
benefits or selection of uninsured/underinsured motorist benefits lower than liability limits is
met when the insured signs an application containing a lower selection but neglects to initial
a block provided for that purpose. In addition, the insurer has met its burden of proof under
the statute if, absent fraud, it can show that the insured voluntarily signed an insurance
contract application that clearly stated an uninsured/underinsured motorist coverage amount
lower than the bodily injury liability amount. We vacate the trial court’s denial of Consumer’s
Motion for Partial Summary Judgment and remand for reconsideration in light of this
holding. The costs on appeal are assessed against the Appellee, Randall D. Kiser.
_________________________________
JOHN W. McCLARTY, JUDGE
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