IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
WIN MYINT and wife ) FOR PUBLICATION
PATTI K. MYINT )
) FILED: JUNE 1, 1998
Plaintiffs/Appellants )
) DAVIDSON COUNTY
v. )
) HON. CHRISTINA NORRIS,
ALLSTATE INSURANCE COMPANY ) Special Chancellor
)
Defendant/Appellee ) NO. 01-S-01-9612-CH-00238
For Appellants:
JOSEPH H. JOHNSTON
For Appellee:
BARRY FRIEDMAN
FILED
Nashville, TN PAIGE WALDROP MILLS
JOHN D. SCHWALB June 1, 1998
Nashville, TN
JON L. FLEISCHAKER Cecil W. Crowson
Louisville, KY Appellate Court Clerk
For Amicus Curiae:
EDWARD K. LANCASTER
Columbia, TN
Tennessee Farmers Mutual Insurance Company
J. RICHARD LODGE
E. CLIFTON KNOWLES
Nashville, TN
State Farm Mutual Automobile Insurance
Company
THOMAS H. PEEBLES, III
G. BRIAN JACKSON
Nashville, TN
National Association of Independent Insurers
and The Alliance of American Insurers
JOHN KNOX WALKUP
STEPHEN C. KNIGHT
Nashville, TN
State of Tennessee
OPINION
JUDGMENT OF THE COURT OF APPEALS
REVERSED IN PART AND AFFIRMED IN PART BIRCH, J.
In this cause, the insuror refused to pay a claim under
a policy of insurance. The insured contends that such refusal
constitutes an “unfair or deceptive act or practice,” in violation
of the Consumer Protection Act, Tenn. Code Ann. §§ 47-18-101, et
seq.1 In contrast, the insuror insists that Tenn. Code Ann. § 56-
7-105,2 commonly known as the “bad faith statute,” is the exclusive
remedy for the bad faith denial of an insurance claim. Because
Title 56, Chapters 7 and 8 of the Tennessee Code comprehensively
regulates the insurance industry, the insuror insists that the acts
and practices of an insurance company are never subject to the
Consumer Protection Act.
1
Tennessee Code Annotated § 47-18-109 (1995) provides the
remedies for a violation of the Consumer Protection Act:
(a)(1) Any person who suffers an ascertainable loss
of money or property, real, personal, or mixed, . . . as
a result of the use or employment by another person of an
unfair or deceptive act or practice declared to be
unlawful by this part, may bring an action individually
to recover actual damages.
. . . .
(a)(3) If the court finds that the use or employment
of the unfair or deceptive act or practice was a willful
or knowing violation of this part, the court may award
three (3) times the actual damages sustained and may
provide such other relief as it considers necessary and
proper.
2
Tennessee Code Annotated § 56-7-105(a)(1989) provides:
[I]nsurance companies . . . , 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 upon the holder of the policy . . . .
2
We find, for the reasons stated herein, that the acts and
practices of an insurance company may, indeed, be subject to the
Consumer Protection Act. We conclude, however, that the facts
before us do not evince an act “affecting the conduct of any trade
or commerce” such as would be subject to the Consumer Protection
Act.
I
The property herein involved is a two-unit structure
located at 224 Treutland Street in Nashville. The appellants, Win
and Patti Myint, purchased it in 1983 and began leasing the units.
Since 1989, they maintained insurance coverage on the structure
with the appellee, Allstate Insurance Company, under a “landlord’s
package” policy. The structure was insured for its estimated
market value--$61,000. In April 1991, the ground floor tenant
reported water leaking from the second floor. Repairs were made,
and the Myints received no further complaints.
In June 1991, Win Myint inspected the property and
discovered that water leaking from the second-floor kitchen sink
had extensively damaged the ceiling and walls of the ground-level
unit. Win Myint then initiated the eviction process against the
tenants so that he might make necessary repairs.
When one of those tenants applied for subsidized housing,
the Metropolitan Development and Housing Authority investigated her
housing status. In processing the application, a building codes
officer inspected the property and reported several code
3
violations. On August 5, 1991, the Myints received notice of the
codes violations from the chief housing inspector of the Codes
Department of the Metropolitan Government of Nashville and Davidson
County. The notice described the property as “unfit for human
habitation,” and a hearing was set for August 20, 1991. The Myints
failed to attend the hearing, and the property was classified as
“H-6."3 The Myints were ordered to relocate the structure or
demolish it.
On September 27, 1991, the Myints filed a claim with
Allstate for the damage caused by the water, and Allstate sent an
adjuster to inspect the property. While the claim for water damage
was pending, the Myints began to make repairs. On September 30,
1991, Allstate informed them that the claim had been denied because
the damage had been caused by slowly leaking water, which is
excluded from coverage by the terms of the policy.
On October 1, 1991, the codes officials ordered a halt to
the repair process because the Myints had not obtained the
appropriate permit. Consequently, the Myints applied for a permit,
but this application was denied because the property had been
previously scheduled for demolition.
3
Dorsey Barnett, the Metropolitan Codes Department housing
inspector who examined the property, explained that an H-6
structure is usually scheduled for demolition. However, not all
H-6 structures are ultimately demolished. The Codes Department
often lists borderline cases, such as this one, as H-6 in order to
force the property owner to make the necessary repairs as soon as
possible. Should repair of an H-6 structure be denied, the owner
must first appeal to the Housing Appeals Board for a variance. The
variance then entitles the owner to obtain a permit to repair the
structure.
4
On October 18, 1991, Allstate notified the Myints that
the contract of insurance would be terminated as of December 2,
1991. At trial, an Allstate employee testified that the
cancellation was due to the overall poor condition of the property,
as Allstate’s adjuster had observed when he inspected the water
damage. On October 23, 1991, a small fire in the basement of the
property caused minor smoke damage; it is unclear whether the
Myints notified Allstate of this occurrence. Three days later, on
October 26, 1991, a second fire engulfed the property and caused
substantial damage. The Myints then applied for a variance in
order to obtain a building permit. The Metropolitan Board of
Housing Code Appeals granted the variance, giving the Myints until
September 1, 1992, to bring the property into compliance with code
requirements.
On January 10, 1992, the Myints filed with Allstate
“sworn statements in proof of loss” for the fire damage. Because
Allstate failed to respond as of June 17, 1992, the Myints’
attorney wrote Allstate demanding a decision on the claim. On June
23, 1992, Allstate denied the claim, citing two policy violations:
(1) the Myints intentionally set fire to the property for the
purpose of collecting the insurance proceeds; and (2) the fire
damage was the result of an increase in hazard created by the
Myints’ failure to maintain the property. While the parties
stipulated that both fires had been intentionally set, the Myints
have always denied any involvement in the setting of the fire.
The Myints subsequently filed suit against Allstate for
breach of the insurance policy, violation of the bad faith statute,
5
and violation of the Consumer Protection Act.4 Prior to trial, the
trial court dismissed the claim for relief under the Consumer
Protection Act. The jury found Allstate liable under the terms of
the insurance policy and awarded the Myints $45,000 in damages,
subject to a $250 deductible. The jury’s award reflected the
decrease in the market value of the residence, from approximately
$50,000 to $5,000, caused by the fire. The jury further determined
that Allstate did not deny the claim in bad faith; thus, the Myints
were not entitled to additional damages under the bad faith
statute. After the jury verdict, the trial court awarded $13,106
in prejudgment interest to the Myints, pursuant to Tenn. Code Ann.
§ 47-14-123 (1988).
The Court of Appeals reversed the trial court’s
prejudgment interest ruling and affirmed the judgment in all other
respects. The Court of Appeals reasoned that the Consumer
Protection Act is not applicable because the insurer’s bad faith
statute, Tenn. Code Ann. § 56-7-105, provides the exclusive remedy
for the bad faith refusal to pay an insurance claim. The Myints
now appeal that determination and also challenge the Court of
Appeals’ reversal of the trial court's award of prejudgment
interest. Pursuant to Tenn. R. App. P. 11, we granted the Myints’
application to address both issues.5
4
The Myints also sued the Metropolitan Government, seeking an
injunction to prevent demolition of the property. The suit against
the Metropolitan Government was subsequently dismissed for failure
to state a claim upon which relief could be granted.
5
With respect to the issue of whether the Consumer Protection
Act may apply to an insurance company’s decision to deny a claim,
the following parties were granted leave to file briefs as amicus
curiae: the Attorney General of the State of Tennessee, State Farm
Automobile Mutual Insurance Company, Tennessee Farmers Mutual
6
II
Allstate and the several insurance companies which filed
amicus briefs argue that the Consumer Protection Act does not apply
to the insurance industry because the comprehensive insurance
regulations in Title 56, Chapters 7 and 8 of the Tennessee Code
specifically address unfair or deceptive acts or practices on the
part of the insurance industry. Each asserts that Tenn. Code Ann.
§ 56-7-105, which provides a penalty for an insuror’s bad faith
refusal to pay a claim, is the exclusive remedy for such refusal.
The Myints and the Attorney General, on the other hand, urge that
the purposes of the insurance regulations and the Consumer
Protection Act are distinct, each with different standards of
liability, and each with different remedies. They insist that
under appropriate circumstances, both may apply. We note that
while this Court has never explicitly held the Tennessee Consumer
Protection Act applicable to insurance companies, we implicitly did
so in Morris v. Mack's Used Cars, 824 S.W.2d 538, 539-40 (Tenn.
1992). In Morris, we cited with approval to Skinner v. Steele, 730
S.W.2d 335 (Tenn. App. 1987), a case in which the Court of Appeals
expressly held that the insurance industry was not exempt from the
Act.
Construction of a statute is a question of law which we
review de novo, with no presumption of correctness. Roseman v.
Roseman, 890 S.W.2d 27, 29 (Tenn. 1994). The role of the Court in
construing statutes is to ascertain and give effect to legislative
Insurance Company Association, National Association of Independent
Insurers, and the Alliance of American Insurers.
7
intent. Wilson v. Johnson County, 879 S.W.2d 807, 809 (Tenn.
1994). Legislative intent is to be ascertained whenever possible
from the natural and ordinary meaning of the language used, without
forced or subtle construction that would limit or extend the
meaning of the language. Carson Creek Vacation Resorts, Inc. v.
Department of Revenue, 865 S.W.2d 1, 2 (Tenn. 1993). Here, the
language of the statutes at issue provide ample evidence that the
legislature did not intend to exclude insurance companies from the
purview of the Consumer Protection Act.
First, we examine the insurance regulations which
Allstate and several amicae insist are the exclusive means of
sanctioning insurance companies for unfair or deceptive acts or
practices. The Insurance Trade Practices Act, Tenn. Code Ann. §§
56-8-101 et seq., was passed in 1981 for the purpose of
regulat[ing] trade practices in the
business of insurance . . . by
defining, or providing for the
determination of, all such practices
in this state which constitute
unfair methods of competition or
unfair or deceptive acts or
practices and by prohibiting the
trade practices so defined or
determined.
Tenn. Code Ann. § 56-8-101 (1994). Section 56-8-104 specifically
lists the acts which constitute unfair competition or deceptive
acts, including unfair claim settlement practices. Tenn. Code Ann.
§ 56-8-104(8) (1994). The Insurance Trade Practices Act gives the
Commissioner of Commerce and Insurance broad authority to
investigate violations of the Act, issue cease and desist orders,
impose civil penalties, and order suspension or revocation of
8
insurance licenses. Tenn. Code Ann. §§ 56-8-107 & -109(a) (1994).
No private right of action may be maintained under the Act. Tenn.
Code Ann. § 56-8-104(8).
While the Insurance Trade Practices Act focuses on the
comprehensive regulation of insurance industry practices, the bad
faith statute, Tenn. Code Ann. § 56-7-105, focuses on specific
instances of bad faith. Enacted in 1901, the bad faith statute
provides a private right of action to an individual injured by an
insurance company’s refusal to pay a claim, if the refusal “was not
in good faith.”
We find nothing in either the Insurance Trade Practices
Act or the bad faith statute which limits an insured’s remedies to
those provided therein. Allstate argues that Tenn. Code Ann. § 56-
8-103 “plainly states that it is the sole means” for regulating
unfair or deceptive insurance acts or practices. Section 56-8-103
(1995) provides:
No person shall engage in this state
in any trade practice which is
defined in this chapter as, or
determined pursuant to § 56-8-108 to
be, an unfair method of competition
or an unfair or deceptive act or
practice in the business of
insurance.
This language cannot reasonably be construed as limiting the
remedies available outside the Insurance Trade Practices Act.
Likewise, the language in Tenn. Code Ann. § 56-8-101, explaining
the purpose of the Insurance Trade Practices Act, is not relevant
to whether a private right of action created outside the Act is
9
available to a consumer who is harmed by an insurance company’s act
or practice. We therefore conclude that the insurance regulations
in Title 56, Chapters 7 and 8 of the Tennessee Code do not
foreclose application of the Consumer Protection Act to insurance
companies.
Next, we examine the Consumer Protection Act to determine
whether the acts and practices of insurance companies are outside
its scope. Clearly, they are not. The Consumer Protection Act is
remedial, rather than regulatory in nature, and it specifically
provides a private right of action for any “[u]nfair or deceptive
acts or practices affecting the conduct of any trade or commerce.”
Tenn. Code Ann. §§ 47-18-104(a) & -109(a)(1) (1995 & Supp. 1997).
Within the Act is an nonexclusive list of the unfair or deceptive
acts or practices which are prohibited. This list does not
specifically address the acts or practices of insurance companies,
but it includes a general, “catch-all” provision which prohibits
“[e]ngaging in any other act or practice which is deceptive to the
consumer or to any other person.” Tenn. Code Ann. § 47-18-
104(b)(27) (Supp. 1997).
Additionally, it is significant that the Consumer
Protection Act specifically exempts certain entities and
transactions from the prohibitions of the Act. Tennessee Code
Annotated § 47-18-111 (1995) states:
(a) The provisions of this
part do not apply to:
(1) Acts or transactions
required or specifically authorized
under the laws administered by, or
10
rules and regulations promulgated
by, any regulatory bodies or
officers acting under the authority
of this state or of the United
States;
(2) A publisher, broadcaster,
or other person principally engaged
in the preparation or dissemination
of information or the reproduction
of printed or pictorial matter, who
has prepared or disseminated such
information or matter on behalf of
others without notification from the
division that the information or
matter violates or is being used as
a means to violate the provisions of
this part;
(3) Credit terms of a
transaction which may be otherwise
subject to the provisions of this
part, except insofar as the
Tennessee Equal Consumer Credit Act
of 1974, compiled in part 8 of this
chapter may be applicable; or
(4) A retailer who has in good
faith engaged in the dissemination
of claims of a manufacturer or
wholesaler without actual knowledge
that such claims violated this part.
Insurance companies are not mentioned in this statute. Because
exemptions in other areas have been explicitly addressed, the
omission of an exemption for insurance companies strongly indicates
that no such exemption was intended.
Moreover, to exempt insurance companies from the purview
of the Consumer Protection Act would frustrate the purposes of the
Act, which include:
(1) To simplify, clarify, and
modernize state law governing the
protection of the consuming public
and to conform these laws with
existing consumer protection
policies;
11
(2) To protect consumers and
legitimate business enterprises from
those who engage in unfair or
deceptive acts or practices in the
conduct of any trade or commerce in
part or wholly within this state;
(3) To encourage and promote
the development of fair consumer
practices;
(4) To declare and to provide
for civil legal means for
maintaining ethical standards of
dealing between persons engaged in
business and the consuming public to
the end that good faith dealings
between buyers and sellers at all
levels of commerce be had in this
state; and
(5) To promote statewide
consumer education.
Tenn. Code Ann. § 47-18-102 (1995). Furthermore, the legislature
has explicitly required that the Act be liberally construed in
order to effectuate these purposes. Id. Section 47-18-115 (1995)
further emphasizes the point: “This part, being deemed remedial
legislation necessary for the protection of the consumers of the
state of Tennessee and elsewhere, shall be construed to effectuate
the purposes and intent.”
Finally, the most decisive language is found in Tenn.
Code Ann. § 47-18-112 (1995):
The powers and remedies provided in
this part shall be cumulative and
supplementary to all other powers
and remedies otherwise provided by
law. The invocation of one power or
remedy herein shall not be construed
as excluding or prohibiting the use
of any other available remedy.
12
This language is crystal clear. Even when a different code section
applies and is invoked to obtain relief, the Consumer Protection
Act may also apply, assuming the act or practice in question falls
within the scope of its application.
Therefore, the mere existence of comprehensive insurance
regulations does not prevent the Consumer Protection Act from also
applying to the acts or practices of an insurance company. In this
context, the legislature has enacted a trilogy of statutes which,
on their faces, apply to unfair and deceptive insurance trade acts
and practices. We consider the Insurance Trade Practices Act, the
bad faith statute, and the Consumer Protection Act as complementary
legislation that accomplishes different purposes, and we conclude,
accordingly, that the acts and practices of insurance companies are
generally subject to the application of all three.
The next question is whether the particular act at issue
here--the denial of the Myints’ claim--violated the Consumer
Protection Act. The stated purpose of the Consumer Protection Act
is “[t]o protect consumers and legitimate business enterprises from
those who engage in unfair or deceptive acts or practices in the
conduct of any trade or commerce in part or wholly within this
State.” Tenn. Code Ann. § 47-18-102(2) (1988). The terms “trade,”
“commerce,” and “consumer transaction” are defined by the Act to
mean
the advertising, offering for sale,
lease or rental, or distribution of
any goods, services, or property,
tangible or intangible, real,
personal, or mixed, and other
13
articles, commodities or things of
value wherever situated.
Tenn. Code Ann. § 47-18-103(9) (1988).
While the sale of a policy of insurance easily falls
under this definition of “trade” and “commerce,” we conclude that
Allstate’s conduct in handling the Myints’ insurance policy was
neither unfair nor deceptive. The record reveals no evidence of an
attempt by Allstate to violate the terms of the policy, deceive the
Myints about the terms of the policy, or otherwise act unfairly.
It is apparent that the denial of the Myints’ claim was Allstate’s
reaction to circumstances which Allstate believed to be suspicious.
Consequently, Allstate’s conduct does not fall within the purview
of the Tennessee Consumer Protection Act, and the Myints are not
entitled to the benefits of treble damages and attorney’s fees
recoverable under the Act. The trial court’s dismissal of the
Consumer Protection Act claim and the subsequent approval of that
dismissal by the Court of Appeals is therefore affirmed.
III
The final issue is whether the trial court properly
awarded prejudgment interest to the Myints. They requested the
prejudgment interest pursuant to Tenn. Code Ann. § 47-14-123
(1988), which provides:
Prejudgment interest, i.e., interest
as an element of, or in the nature
of, damages, as permitted by the
statutory and common laws of the
state as of April 1, 1979, may be
awarded by courts or juries in
14
accordance with the principles of
equity at any rate not in excess of
a maximum effective rate of ten
percent (10%) per annum . . . .
The trial court’s award of $13,106 in prejudgment interest was
calculated under the simple interest method by applying a 10%
annual interest rate to the judgment amount of $44,750 from June
26, 1991, the date the insurance claim was denied, to May 31, 1995,
the date the trial court’s judgment was entered.
An award of prejudgment interest is within the sound
discretion of the trial court and the decision will not be
disturbed by an appellate court unless the record reveals a
manifest and palpable abuse of discretion. Spencer v. A-1 Crane
Service, Inc., 880 S.W.2d 938, 944 (Tenn. 1994); Otis v. Cambridge
Mut. Fire Ins. Co., 850 S.W.2d 439, 446 (Tenn. 1992). This
standard of review clearly vests the trial court with considerable
deference in the prejudgment interest decision. Generally stated,
the abuse of discretion standard does not authorize an appellate
court to merely substitute its judgment for that of the trial
court. Thus, in cases where the evidence supports the trial
court’s decision, no abuse of discretion is found. See State v.
Grear, 568 S.W.2d 285, 286 (Tenn. 1978) (applying abuse of
discretion standard to trial court’s decision to deny request for
suspended sentence), cert. denied, 439 U.S. 1077, 99 S. Ct. 854, 59
L. Ed.2d 45 (1979).
Several principles guide trial courts in exercising their
discretion to award or deny prejudgment interest. Foremost are the
15
principles of equity. Tenn. Code Ann. § 47-14-123. Simply stated,
the court must decide whether the award of prejudgment interest is
fair, given the particular circumstances of the case. In reaching
an equitable decision, a court must keep in mind that the purpose
of awarding the interest is to fully compensate a plaintiff for the
loss of the use of funds to which he or she was legally entitled,
not to penalize a defendant for wrongdoing. Mitchell v. Mitchell,
876 S.W.2d 830, 832 (Tenn. 1994); Otis, 850 S.W.2d at 446.
In addition to the principles of equity, two other
criteria have emerged from Tennessee common law. The first
criterion provides that prejudgment interest is allowed when the
amount of the obligation is certain, or can be ascertained by a
proper accounting, and the amount is not disputed on reasonable
grounds. Mitchell, 876 S.W.2d at 832. The second provides that
interest is allowed when the existence of the obligation itself is
not disputed on reasonable grounds. Id. (citing Textile Workers
Union v. Brookside Mills, Inc., 205 Tenn. 394, 402, 326 S.W.2d 671,
675 (1959)).
We note that these criteria, if strictly construed, could
prohibit the recovery of prejudgment interest in the vast majority
of cases. Indeed, only a liquidated claim, for which prejudgment
interest is already recoverable as a matter of right under Tenn.
Code Ann. § 47-14-109,6 can truly be considered an obligation of
certain and indisputable amount. Further, it is safe to say that,
6
Section 47-14-109(b) (1995) provides: "Liquidated and
settled accounts, signed by the debtor, shall bear interest from
the time they become due, unless it is expressed that interest is
not to accrue until a specific time therein mentioned.”
16
at trial, defendants usually can articulate at least one good
reason for disputing the existence of the obligation, for were it
otherwise, defendants would rarely survive summary judgment.
Finally, the focus on whether the defendant had a reasonable
defense ignores the principle that prejudgment interest is not a
penalty imposed on the defendant for indefensible conduct.
Not surprisingly, an analysis of relevant case law
reveals that these criteria have not been used to deny prejudgment
interest in every case where the defendant reasonably disputed the
existence or amount of an obligation. More typically, courts
either use the certainty of a claim as support for an award of
prejudgment interest, or they do not discuss the certainty of the
claim at all. See, e.g., Mitchell, 876 S.W.2d at 832 (allowing
the award of interest where the existence and amount of the
obligation under a settlement agreement were not reasonably
disputed); Otis, 850 S.W.2d at 446 (allowing the award of interest
to a plaintiff whose right to recover under a fire insurance
contract was reasonably disputed on the grounds of arson and
misrepresentation); Performance Systems, Inc. v. First American
Nat. Bank, 554 S.W.2d 616, 619 (Tenn. 1977) (allowing the award of
interest, although the existence of the defendant’s obligation
under the lease was reasonably disputed); Johnson v. Tennessee
Farmers Mut. Ins. Co., 556 S.W.2d 750, 752 (Tenn. 1977)(allowing
the award of interest, although the amount of recovery under the
insurance claim was reasonably disputed); Uhlhorn v. Keltner, 723
S.W.2d 131, 138 (Tenn. App. 1986) (allowing award of interest in a
boundary dispute case, where the existence of any obligation to pay
rent and the amount of rent due were both reasonably disputed);
17
Schoen v. J.C. Bradford & Co., 667 S.W.2d 97, 101-02 (Tenn. App.
1984)(rejecting argument that prejudgment interest should not be
imposed when defendant appealed in good faith).7
Thus, we find that if the existence or amount of an
obligation is certain, this fact will help support an award of
prejudgment interest as a matter of equity. After all, the more
clear the fact that the plaintiff is entitled to compensatory
damages, the more clear the fact that the plaintiff is also
entitled to prejudgment interest as part of the compensatory
damages. The converse, however, is not necessarily true. The
uncertainty of either the existence or amount of an obligation does
not mandate a denial of prejudgment interest, and a trial court’s
grant of such interest is not automatically an abuse of discretion,
provided the decision was otherwise equitable. The certainty of
the plaintiff’s claim is but one of many nondispositive facts to
consider when deciding whether prejudgment interest is, as a matter
of law, equitable under the circumstances.
Turning to the facts at hand, the Court of Appeals found
that the trial court abused its discretion in awarding prejudgment
interest because the amount due was not certain and Allstate had a
7
But see Textile Workers Union, 205 Tenn. at 402-03, 326
S.W.2d at 675 (where the employer reasonably and in good faith
disputed its contractual obligation to provide vacation pay to
certain employees, there was no reasonable basis for allowance of
interest); Howard G. Lewis Construction Co. v. Lee, 830 S.W.2d 60,
66 (Tenn. App. 1991) (where the plaintiff requests $25,000 in
damages but receives only $11,000, there is too substantial a
controversy over the amount due, rendering the award of interest
an abuse of discretion). To the extent these cases suggest that
prejudgment interest can never be awarded when a claim is
reasonably disputed, regardless of any equitable considerations,
they are hereby overruled.
18
reasonable basis upon which to dispute the Myints’ right to
recovery. Concededly, Allstate did have a reasonable basis on
which to dispute liability in this case, considering the series of
events which led to the loss: (1) the Myints were notified by a
letter dated October 18, 1991, that their insurance policy would be
canceled as of December 2, 1991; (2) this cancellation was due to
the deteriorating condition of the house; (3) five days later, on
October 23, a small fire was intentionally set in the basement of
the house; and (4) on October 26, a second fire was intentionally
set, causing more extensive damage. Although no conclusive
evidence was adduced to support Allstate's suspicions that the
Myints were involved in the arsons, under these circumstances,
Allstate’s denial of the claim was certainly reasonable.
While the Myints’ right of recovery may have been
reasonably disputed, we are not convinced that the amount of
recovery was uncertain for the purposes of prejudgment interest.
The test for determining whether the amount of damages is certain
is not whether the parties agree on a fixed amount, for a fixed
amount would be a liquidated claim, and the plaintiff would have a
right to collect interest under Tenn. Code Ann. § 47-14-109(b).
Instead, the test is whether the amount of damages is ascertainable
by computation or by any recognized standard of valuation. This is
true even if there is a dispute over monetary value or if the
parties’ experts compute differing estimates of damage. See
Unlimited Equip. Lines v. Graphic Arts Centre, Inc., 889 S.W.2d
926, 942-43 (Mo. Ct. App. 1994); Community State Bank v. O’Neill,
553 N.E.2d 174, 177-78 (Ind. Ct. App. 1990). Here, the amount of
damages was ascertainable by two well-accepted methods of
19
valuation: by estimation of the cost to repair the fire damage,
and by calculation of the difference between the market value of
the house prior and subsequent to the fire. That these values were
contested by the parties does not preclude an award of prejudgment
interest.
Additional facts indicate that the trial court’s award of
prejudgment interest was an equitable decision. First, a jury
determined that the Myints did not commit arson and were legally
entitled to the insurance proceeds. Yet, they were without the use
of those proceeds from the date of the loss, October 1990, to the
trial court’s judgment in May 1995--a period of approximately four
and a half years. During that time, Allstate had full use of the
funds, while the Myints possessed only unproductive property.
Unquestionably, then, the Myints cannot be fully compensated
without the award of interest. Further, the trial court did not
allow the interest to begin accruing until the date Allstate denied
the claim, June 1991, rather than the date of the loss, as the
trial court did in Wilder v. Tennessee Farmers Mutual Ins. Co., 912
S.W.2d 722, 727 (Tenn. App. 1995) (award of interest beginning at
date of loss was abuse of discretion; two year period was more
appropriate under the circumstances).
In conclusion, we find that there is evidence here to
support the award of prejudgment interest. Consequently, the trial
court’s decision was not a “manifest and palpable abuse of
discretion,” and, as a matter of law, we are constrained to sustain
20
the trial court’s judgment, even if we were to disagree with it.8
IV
In sum, we hold that the Consumer Protection Act,
although applicable to the insurance industry as a whole, does not
provide a right to recovery to the Myints for the denial of their
insurance claim. Further, under the circumstances of this case, we
find no error in the award of prejudgment interest. Accordingly,
we affirm the Court of Appeals’ dismissal of the claim made under
the Consumer Protection Act. We reverse the Court of Appeals’
decisions that the Consumer Protection Act does not apply to
insurance companies and that the prejudgment interest award was an
abuse of discretion.
______________________________
ADOLPHO A. BIRCH, JR., Justice
8
As a final matter, Allstate argues that it had a
constitutional right to have the issue of prejudgment interest
decided by a jury, under Article I, § 6 of the Tennessee
Constitution. Allstate cites one unpublished decision for support,
a decision which has already been implicitly overruled by Mitchell,
876 S.W.2d at 832, on the issue of pleading requirements for
prejudgment interest.
We find Allstate’s argument without merit. As Tenn. Code Ann.
§ 47-14-123 indicates, prejudgment interest is awarded as a matter
of equity. The right to a jury in an equitable matter is not the
common law right guaranteed by the constitution. Rather, the right
exists only to the extent provided by Tenn. Code Ann. § 21-1-103.
This statute provides a right to have “any material fact in
dispute” tried by a jury in chancery, but it does not require that
the jury also decide all mixed questions of law and fact. See
Wright v. Quillen, 909 S.W.2d 804, 813-14 (Tenn. App. 1995); Sasser
v. Averitt Express, Inc., 839 S.W.2d 422, 434 (Tenn. App. 1992).
In this case, the jury found the facts, and the court decided
whether an award of prejudgment interest was equitable in light of
those facts. We do not find this improper.
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CONCUR:
Anderson, C.J.
Drowota, Holder, JJ.
Reid, S.J.
22
Win Myint and wife Patti KI. Myint v. Allstate Insurance Company
Combined Opinion