IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
FILED
March 27, 2000
AMERICAN JUSTICE INSURANCE ) FOR PUBLICATION
RECIPROCAL, ) Cecil Crowson, Jr.
) Appellate Court Clerk
Plaintiff/Appellant, ) Filed: March 27, 2000
)
v. )
) Certification of Questions of State
TIM HUTCHISON, BEN HARKINS, ) Law from United States District
CHARLES SPANGLER, KNOX ) Court for the Eastern District of
COUNTY, TENNESSEE and SHERIFF ) Tennessee, Northern Division.
TIM HUTCHISON, in his official )
capacity, )
)
Defendants/Appellees. ) No. M1999-00672-SC-R23-CQ
For Plaintiff-Appellant: For Defendants-Appellees:
Paul Campbell, III Robert L. Crossley
Witt, Gaither & W hitaker, P.C. The Crossley Law Firm, P.C.
Chattanooga, Tennessee Knoxville, Tennessee
Reggie E. Keaton John E. Owings
Franz, McConnell & Seymour Chief Deputy Law Director
Knoxville, Tennessee Knox County, Tennessee
Mary Ann Stackhouse
For Amicus Curiae: Deputy Law Director
Knox County, Tennessee
National Association of Independent Insurers
G. Brian Jackson
Amanda Haynes Young
David L. Johnson
Miller, Martin & Trabue
Nashville, Tennesee
OPINION
DROWOTA, J.
QUESTIONS CERTIFIED
Pursuant to Rule 23 of the Rules of the Supreme Court of Tennessee,1 this
Court has accepted two questions certified to us by the United States District
Court for the Eastern District of Tennessee. The questions are as follows:
1. Whether the Sheriff of Knox County and employees of the Knox
County Sheriff’s Department were volunteers of the Scott County
Sheriff’s Department when they received no compensation from
Scott County but received their regular salary from Knox County.
2. Whether a standard liability policy is automatically forfeited when
the insured fails to comply with the policy’s notice provision,
regardless of whether the insurer has been prejudiced by the delay.
As explained below, the answer to the first certified question is that the
Knox County Sheriff and employees of the Knox County Sheriff’s Department
were volunteers of the Scott County Sheriff’s Department when they rendered
assistance in connection with a siege in Scott County but received no
compensation from Scott County. We reach this conclusion because we find the
term “volunteer,” as used in the liability policy issued to the Scott County Sheriff’s
Department, to be ambiguous. With respect to the second question, we conclude
that a standard liability policy is not automatically forfeited when the insured fails
to comply with a policy’s notice provision. Rather, breach of a notice provision
1
Supreme Court Rule 23, § 1, provides: “The Supreme Court may, at its discretion, answer
questions of law certified to it by the Supreme Court of the United States, a Court of Appeals of the
United States, a District Court of the United States in Tennessee, or a United States Bankruptcy
Court in Tennessee. This rule may be invoked when the certifying court determines that, in a
proceeding before it, there are questions of law of this state which will be determinative of the cause
and as to which it appears to the certifying court there is not controlling precedent in the decisions
of the Suprem e Court of Tennes see.”
2
establishes a presumption that the insurer was prejudiced by the failure to provide
timely notice. The insured may rebut the presumption with competent evidence
that the insurer was not prejudiced by the delay in notice.
FACTS AND PROCEDURAL BACKGROUND
On January 22 and 23, 1994, Max Carpenter, a Scott County resident,
barricaded himself in his trailer home in an effort to resist arrest. Believing Mr.
Carpenter to be armed, law enforcement officials attempted to negotiate with him
before resorting to the use of ammunition and tear gas to force Mr. Carpenter from
the trailer. Initially the officers involved in the siege included only Scott County
Sheriff’s deputies and agents of the Tennessee Bureau of Investigation (“TBI”).
However at some point during the incident the Scott County Sheriff’s Department
asked the TBI to contact the Knox County Sheriff’s Department to request
assistance in removing Mr. Carpenter from the trailer home. In response to this
request, Tim Hutchison, the Sheriff of Knox County, went with two deputies to the
scene and aided efforts to eject Mr. Carpenter from the trailer. The Knox County
Sheriff and deputies did not receive any form of compensation from Scott County
in connection with the assistance they provided to the Scott County Sheriff’s
Department. As salaried employees of the Knox County Sheriff’s Department,
they each received their regular salary for the pay period that included the time
they provided assistance in the Carpenter incident.
Mr. Carpenter died as a result of the confrontation with the law enforcement
officials. As a result, in 1994, representatives of his estate filed a wrongful death
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suit against the Scott County Sheriff’s Department and several of its deputies in
the United States District Court for the Eastern District of Tennessee.2 The Scott
County defendants were served with the complaint in August and October 1994,
and filed an answer in January 1995. On June 6, 1995, pursuant to discovery
procedures, they issued disclosures in which they stated that American Justice
Insurance Reciprocal (“American Reciprocal”), the liability insurance carrier for the
Scott County Sheriff’s Department, may be liable to satisfy all or part of any
judgment rendered against them. A copy of their policy with American Reciprocal
was attached to the disclosures.
Also named as defendants in the Carpenter wrongful death suit were Knox
County and Knox County Sheriff Tim Hutchison, in both his official and individual
capacities, as well as deputies Ben Harkins and Charles Spangler, in their
individual capacities (“Knox County defendants”). The Knox County defendants
were served with the complaint on August 1, 1994. They then proceeded to
defend the lawsuit without making a request that American Reciprocal provide a
defense on their behalf and incur liability for any judgment rendered against them.
The Knox County defendants assert that they were not aware of the general
liability insurance policy issued by American Reciprocal to the Scott County
Sheriff’s Department until June 6, 1995.
In September 1997, Knox County Sheriff Hutchison and the two deputies
2
Also nam ed as defe nda nts w ere tw o m em bers of the Cam pbe ll Cou nty Sh eriff’s
Depa rtmen t, two park rangers and a T BI agen t. See Gra ce M . Car pen ter v. J ack Laxt on, e t. al., No.
3-94-CV-438.
4
wrote to American Reciprocal and demanded that the company provide benefits
under the policy with regard to their potential liability in the Carpenter suit. In
response to this demand, American Reciprocal filed an action in the United States
District Court for the Eastern District of Tennessee to obtain a declaratory
judgment asserting that it is not liable to the Knox County defendants under the
liability policy it had issued the Scott County Sheriff’s Department. As basis for
the suit, American Reciprocal asserted that the Knox County defendants were not
“volunteers” of the Scott County Sheriff’s Department, within the meaning of the
policy, in connection with the assistance they provided in the Carpenter incident.
The insurance company further contends that the Knox County defendants failed
to provide it with timely notice of the January 22-23, 1994 incident or the filing of
the Carpenter suit against them and that they therefore forfeited any coverage
under the policy.
The Knox County defendants filed a counterclaim for a declaratory
judgment asserting that they are entitled to coverage under the liability policy in
connection with the Carpenter suit because they were volunteers of the Scott
County Sheriff’s Department within the meaning of the liability policy. On August
16, 1999, after both American Reciprocal and the Knox County defendants filed
motions for summary judgment, the District Court filed an order in this Court
certifying the questions of law quoted above.
Although the parties devote significant portions of their briefs in this Court
to discussion of factual disputes surrounding the Carpenter incident, we need not
address these issues in resolving whether the Knox County defendants were
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volunteers of the Scott County Sheriff’s Department within the meaning of the
liability insurance policy. Moreover, we need not address factual disputes
concerning compliance with the notice provision because the District Court made
implicit findings that the Knox County defendants failed to give timely notice under
the liability policy but that such failure did not result in prejudice to the insurance
company.
QUESTION ONE
The first question of law to be resolved, as certified by the United States
District Court for the Eastern District of Tennessee, is whether the Sheriff of Knox
County and employees of the Knox County Sheriff’s Department were volunteers
of the Scott County Sheriff’s Department when they received no compensation
from Scott County but received their regular salary from Knox County. After a
careful review of the policy at issue and the parties’ arguments, we conclude that
they were volunteers.
The policy issued by American Reciprocal to the Scott County Sheriff’s
Department is a standard general liability policy covering “those sums that the
insured becomes legally obligated to pay as damages because of ‘personal injury’
or ‘property damage’ arising out of the insured’s operations in the performance of
or failure to perform official law enforcement duties.” The policy provides that the
term “insured” includes “volunteers,” but “only for acts within the scope of their law
enforcement duties for [the Scott County Sheriff’s Department].” The policy does
not define the term “volunteers.”
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In general, courts should construe insurance contracts in the same manner
as any other contract. See McKimm v. Bell, 790 S.W.2d 526, 527 (Tenn.1990);
Draper v. Great Am. Ins. Co., 458 S.W.2d 428, 432 (Tenn. 1970). The language
of the policy must be taken and understood in its plain, ordinary and popular
sense. See Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521
S.W.2d 578, 580 (Tenn. 1975). Where language in an insurance policy is
susceptible of more than one reasonable interpretation, however, it is ambiguous.
See Tata v. Nichols, 848 S.W.2d 649, 650 (Tenn. 1993). If the ambiguous
language limits the coverage of an insurance policy, that language must be
construed against the insurance company and in favor of the insured. See
Allstate Ins. Co. v. Watts, 811 S.W.2d 883, 886 (Tenn. 1991); Renfro v. Doe, 979
S.W.2d 311, 312-13 (Tenn. Ct. App. 1998).
When called upon to interpret a term used in an insurance policy that is not
defined therein, courts in Tennessee sometimes refer to dictionary definitions.
See Tata v. Nichols, 848 S.W.2d at 653; Hogins v. Ross, 988 S.W.2d 685, 687
(Tenn. Ct. App. 1998). Black’s Law Dictionary, 1576 (6th ed. 1990), defines
“volunteer” as follows:
A person who gives his services without any express or implied
promise of remuneration. One who intrudes himself into a matter
which does not concern him, or one who pays the debt of another
without request, when he is not legally or morally bound to do so,
and when he has no interest to protect in making such payment. A
person who pays the debt of another without a request, when not
legally or morally bound to do so and not in protection of his own
interest.
Focusing on the content of this and similar definitions of the term
“volunteer,” both parties have propounded arguments focusing on whether the
7
Knox County defendants assisted the Scott County Sheriff’s Department with
expectation of compensation and whether being dispatched to the neighboring
county constitutes acting of one’s own free will. While both sides have made
plausible arguments concerning these issues, based on the language of the
policy, we cannot discern whether it was the intent of the drafters that the
definition of “volunteer” encompass the type of assistance provided by the Knox
County defendants. Because the language of the policy is susceptible to more
than one reasonable interpretation, as is evidenced by the arguments advanced
by each party, the term “volunteer,” as it is used in the policy, is ambiguous. As
such, we resolve the ambiguity by construing the term “volunteer” in favor of the
insured, and conclude that the Knox County defendants were volunteers within the
meaning of the liability insurance policy issued to Scott County while rendering
assistance to the Scott County Sheriff’s Department during the January 1994
Carpenter incident.
QUESTION TWO
The second question of law to be resolved, as certified by the District Court,
is whether a standard liability insurance policy is automatically forfeited when the
insured fails to comply with the policy’s notice provision, regardless of whether the
insurer has been prejudiced by the delay. Although the parties dispute whether
the Knox County defendants fulfilled the policy’s notice provisions, in addressing
this question, we acknowledge that the District Court implicitly assumed: (1) that
the Knox County defendants failed to comply with the policy’s notice provisions,
and (2) that such failure to provide notice did not result in prejudice to the insurer,
8
American Reciprocal. These factual issues not relevant to the question before
us, we focus only on the certified question of law.3
In Alcazar v. Hayes, 982 S.W.2d 845 (Tenn. 1998), this Court considered
whether an uninsured motorist insurance policy is automatically forfeited when the
insured does not comply with the policy’s notice provision, regardless of whether
the insurer was prejudiced by the delay. Abandoning the traditional approach,
which recognized that notice is a condition precedent to recovery under a policy
and that no showing of prejudice to the insurer need be required to result in
forfeiture, in Alcazar we adopted the modern trend and held that in order for
forfeiture of an insurance policy to result from an insured’s breach of a notice
provision, prejudice to the insurer must be shown. See Alcazar v. Hayes, 982
S.W.2d at 856.
American Reciprocal argues that the holding in Alcazar should not be
extended to apply in the instant case because this case concerns a general
3
The notice provision in the policy issued to the Scott County Sheriff’s Department by
Am erican R eciproc al provides :
We have no duty to provide coverage under this policy unless you and any other
involv ed ins ured have fully co mp lied wit h the cond itions cont ained in this p olicy.
1. Duties in the Event of Occu rrence , Claim o r Suit.
a. You must see to it that we are notified in writing as soon as practicable
of any occu rrence which m ay result in a c laim. To the exten t possible,
notice should include:
(1) How, when and where the “occurrence” took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) The nature a nd location of any injury or d ama ge arising out of the “o ccurre nce.”
Notice of an “ occurr ence” is not notice of a “claim .”
b. If a “claim” is re ceived b y any insured you mu st:
(1) Immediately record the specifics of the “claim” and the date received; and
(2) Notify us in writing as soon as practicable.
c. You and a ny other invo lved insure d mu st:
(1) Im me diate ly send us co pies of an y dem and s, no tices , sum mo nse s or le gal
papers re ceived in c onnec tion with the “c laim” or “s uit” . . .
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liability policy rather than an uninsured / underinsured motorist policy, as was at
issue in Alcazar. American Reciprocal contends that the rationale behind
Alcazar’s holding does not apply in cases dealing with general liability policies
because it is obvious to an insured under a standard liability policy that, in order
for the insurance company to provide a defense, the insured must inform the
company that a lawsuit has been filed. The company argues that, on the other
hand, common sense does not dictate that one insured by an uninsured /
underinsured motorist policy should notify the insurance company when the
insured files a lawsuit.
The National Association of Independent Insurers (NAII), a national trade
organization representing hundreds of insurers, agrees that the holding in Alcazar
should not be extended to encompass general liability insurance policies. In an
amicus curiae brief, the NAII highlights distinctions between uninsured motorist
policies and standard liability policies in an effort to persuade this Court that the
Alcazar holding should not be expanded. The most significant distinction it notes
is the differing public policy objectives behind each type of policy. Uninsured
motorist coverage is required by all automobile liability policies, the NAII points
out, indicating the legislature’s objective of compensating victims of accidents
caused by uninsured and underinsured motorists. Requiring prejudice to the
insurer safeguards this objective by making recovery more accessible to the
insured. No such policy consideration, argues the NAII, is implicated where
general liability policies are concerned. Because such policies are not mandated
and are voluntarily purchased, the unique policy considerations present in Alcazar
do not arise in the context of general liability policies, and the notice provisions
10
should be more strictly enforced. Accordingly, asserts the NAII, prejudice to the
insurer is irrelevant to whether forfeiture of an insurance contract should result
from an insured’s breach of a notice provision.
We disagree with these contentions. In Alcazar we observed three policy
reasons for adopting the modern view that prejudice to an insurer should be
required as a prerequisite to forfeiture of a policy based on failure to give timely
notice: “(1) the adhesive nature of insurance contracts; (2) the public policy
objective of compensating tort victims; and (3) the inequity of the insurer receiving
a windfall due to a technicality.” Alcazar v. Hayes, 982 S.W.2d at 850. In
examining these objectives in the instant case, we conclude that these rationales
apply to liability insurance policies to the same degree as to uninsured motorist
policies. Both types of insurance policies are contracts of adhesion, in that they
are “form contracts drafted by the insurer, and the insured has little, if any,
bargaining power.” Alcazar v. Hayes, 982 S.W.2d at 850. With both types of
policies the insurer would receive a windfall due to a technicality if there were a
forfeiture without there being any prejudice to the insurer. With respect to the
public policy of compensating tort victims, this objective would be served in cases
in which an insured under a liability policy is financially incapable of paying a
judgment. In sum, contrary to the contentions of the appellant and amicus curiae,
we conclude that, for purposes of deciding whether prejudice to the insurer should
be required before a policy is forfeited based on breach of a notice provision,
there is no significant difference between an uninsured motorist policy and a
general liability policy. The public policy objectives are achieved by the modern
trend adopted in Alcazar with respect to each policy.
11
Although in Alcazar we declined to decide whether the modern trend
applies to standard liability policies,4 nothing in the Alcazar holding indicates that
the modern trend is limited to uninsured / underinsured motorist policies. The
treatises upon which we relied in deciding Alcazar do not indicate that there is, or
that there should be, a distinction between uninsured motorist policies and liability
policies in discerning whether failure to comply with a notice provision should
result in forfeiture of the policy when the insurer is not prejudiced by the delay.
See Charles C. Marvel, Annotation, Modern Status of Rules Requiring Liability
Insurer to Show Prejudice to Escape Liability Because of Insured’s Failure or
Delay in Giving Notice of Accident or Claim, or in Forwarding Suit Papers, 32
A.L.R. 4th 141, §3[a] (1984 & Supp. 1997); 1 Appleman on Insurance, 2d, § 4.30
(1996); 13A George J. Couch, et al, Couch on Insurance, §§ 49: 338 & 49:50 (2d
rev. ed. 1982). Moreover, many of the cases we cited in Alcazar in support for the
modern trend involve liability insurance policies. See Aetna Cas. & Sur. Co. v.
Murphy, 538 A.2d 219 (Conn. 1988); Jones v. Bituminous Cas. Corp., 821 S.W.2d
798 (Ky. 1991); Johnson Controls, Inc. v. Bowes, 409 N.E.2d 185 (Mass. 1980);
Great Am. Ins. Co. v. C.G. Tate Constr., 279 S.E.2d 769 (N.C. 1981); Brakeman
v. Potomac Ins. Co., 371 A.2d 193 (Pa. 1977); Cooperative Fire Ins. v. White
Caps, Inc., 694 A.2d 34 (Vt. 1997). We find no compelling reason to limit our
holding in Alcazar to uninsured / underinsured motorist policies.
After having decided that prejudice to the insurer is a prerequisite to a
forfeiture of a policy based on a failure to comply with a notice provision, in
4
Alcazar v. Hayes, 982 S.W.2d at 856 n.14.
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Alcazar we considered three alternatives regarding the burden of proof that should
apply in determining whether prejudice exists. We observed:
States that consider prejudice essentially follow one of three
different approaches: (1) once it is shown that the insured has
breached the notice provision, the contract is, nevertheless, effective
unless the insurer shows that it has been prejudiced by the delay; (2)
once it is shown that the insured has breached the notice provision,
a rebuttable presumption exists that the insurer has been prejudiced
by the delay; and (3) prejudice to the insurer is considered a factor in
the initial inquiry of whether the insured provided timely notice.
Alcazar v. Hayes, 982 S.W.2d at 853.
This Court concluded that the second alternative, which sets up a
rebuttable presumption of prejudice, “provides the best balance between the
competing interests.” Alcazar v. Hayes, 982 S.W.2d at 856. We held:
. . . once it is determined that the insured has failed to provide timely
notice in accordance with the insurance policy, it is presumed that
the insurer has been prejudiced by the breach. The insured,
however, may rebut this presumption by proffering competent
evidence that the insurer was not prejudiced by the insured’s delay.
Alcazar v. Hayes, 982 S.W.2d at 856.
The appellant and amicus curiae argue that if this Court elects to extend
the rule in Alcazar to liability insurance policies, we should apply the rebuttable
presumption approach adopted in Alcazar rather than one of the two other
models.5 We agree. In Alcazar we noted that “[s]ince the issue is not before us,
5
The N AII also as ks this C ourt to app ly this rule only to “oc curren ce” policies , and not to
“claim s m ade ” polic ies. T hey po int ou t that th e inst ant c ase involv es an “occ urre nce ” polic y. This
question was not certified to us by the District Court and, accordingly, will not be addressed.
13
we need not decide whether this approach should apply to a standard liability
policy.” Alcazar v. Hayes, 982 S.W.2d at 856 n.14. Now the issue of which
burden of proof regarding prejudice in cases involving liability policies is before us,
and we believe, as we did in Alcazar, that the rebuttable presumption model best
achieves the competing interests at stake. In fact, many of the cases we cited in
Alcazar in support of the decision to adopt the rebuttable presumption of prejudice
model involved a failure to give notice of the filing of a lawsuit under a liability
insurance policy. See Tiedtke v. Fidelity & Cas. Co., 222 So.2d 206 (Fla. 1969);
Miller v. Dilts, 463 N.E.2d 257 (Ind. 1984); Fillhart v. Western Res. Mut. Ins. Co.,
684 N.E.2d 1301 (Ohio App. 1996); Gerrard Realty Corp. v. American States Ins.
Co., 277 N.W.2d 863 (Wis. 1979). Accordingly, when an insured has failed to
provide timely notice of a claim against it in accordance with a liability insurance
policy, it is presumed that the insurer has been prejudiced by the breach. The
insured may rebut this presumption by proffering competent evidence establishing
that the insurer was not prejudiced by the insured’s delay.
CONCLUSION
For the reasons stated above, our answer to the first certified question is
that the Knox County Sheriff and the employees of the Knox County Sheriff’s
Department were volunteers of the Scott County Sheriff’s Department within the
meaning of the liability insurance policy issued to the Scott County Sheriff’s
Department when they rendered assistance in the 1994 Carpenter incident. Our
answer to the second question is that a standard liability policy is not automatically
forfeited when an insured fails to comply with a policy’s notice provision. Rather,
14
breach of a notice provision establishes a presumption that the insurer was
prejudiced by the delay. The insured may rebut the presumption with competent
evidence that the insurer was not prejudiced by the delay in notice.
The clerk will transmit this opinion in accordance with Rule 23, § 8 of the
Rules of the Supreme Court. The costs in this Court will be taxed to the
Appellant, American Justice Insurance Reciprocal.
__________________________________
FRANK F. DROWOTA, III,
JUSTICE
Concur:
Anderson, C.J.
Birch, Holder, Barker, J.J.
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