STATE OF TENNESSEE, ex rel., )
DOUGLAS M. SIZEMORE, )
Commissioner of Commerce and )
Insurance for the State of Tennessee, )
)
Plaintiff/Appellee, )
) Appeal No.
) 01-A-01-9610-CH-00449
VS. )
) Davidson Chancery
) No. 92-1120-II(III)
UNITED PHYSICIAN INSURANCE )
RISK RETENTION GROUP, )
Defendant/Appellee,
)
) FILED
)
IN RE: NARESH B. DAVE, M.D. ) April 16, 1997
)
Claimant/Appellant. ) Cecil W. Crowson
Appellate Court Clerk
COURT OF APPEALS OF TENNESSEE
MIDDLE SECTION AT NASHVILLE
APPEALED FROM THE CHANCERY COURT OF DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
THE HONORABLE ROBERT S. BRANDT, CHANCELLOR
RENARD A. HIRSCH
ROBIN L. HARRIS
SMITH & HIRSCH
619 Woodland Street
Nashville, Tennessee 37206
Attorneys for Jeanne Barnes Bryant, Receiver for
United Physicians Insurance Risk Retention Group
KENNETH M. BRYANT
WILLIAM E. LONG, JR.
TRABUE, STURDIVANT & DeWITT
2500 Nashville City Center
Nashville, Tennessee 37219
Attorneys for Naresh B. Dave, M.D.
REVERSED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
LEWIS, J.
OPINION
The Receiver of an insurance company in liquidation denied the claim
of a policyholder, because the Proof of Claim form required under the Insurance
Rehabilitation and Liquidation Act, Tenn. Code Ann. § 56-9-101 et seq., was filed after
the deadline. Following a hearing on the denial of the claim, the Special Master for
the Chancery Court of Davidson County found that the failure to timely file was due
to excusable neglect, and recommended that the late filing be excused and the claim
be accepted as timely filed.
The Chancellor declared that he was unable to follow the Master’s
recommendation, holding that the court had no more authority under the Act to excuse
the late filing than did the Receiver. We believe that the Chancellor was mistaken,
and we accordingly remand this case to the Chancery Court to determine if the facts
support the appellant’s assertion of excusable neglect.
I.
In 1991, Dr. Naresh P. Dave (pronounced Dah! vay), an orthopedic
surgeon practicing in Tampa Florida, purchased a policy of professional malpractice
insurance from the United Physicians Insurance Risk Retention Group (UPI), a
Tennessee company. The policy included retroactive coverage for acts performed on
or after October 1, 1987.
UPI subsequently went into receivership. On July 16, 1992, the
Chancery Court of Davidson County ordered that the company be liquidated, and
appointed Jeanne Barnes Bryant as Special Deputy Receiver for that purpose. The
Chancellor’s order specified July 23, 1993 as the deadline for filing of claims against
the liquidation estate.
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Dr. Dave had performed knee surgery on Constance T. Hale on March
8, 1990. Ms. Hale subsequently sent Dr. Dave a notice of her intent to initiate
malpractice litigation against him, in accordance with the requirements of the Florida
malpractice statute. On August 19, 1992, Dr. Dave wrote a letter to UPI, which timely
notified the company of Ms. Hale’s claim. However Dr. Dave does not claim that this
notice was an effective substitute for the Proof of Claim form, whose filing was
necessary to preserve the claimant’s right to receive a share in the liquidation estate.
See Tenn. Code Ann. § 56-9-323.
UPI appointed a Florida attorney named Kenneth Deacon to represent
Dr. Dave in the malpractice action. Like the other policyholders, Dr. Dave received
instructions from the Receiver regarding the necessity of filing the Proof of Claim form
in a timely manner. He also received a reminder from Mr. Deacon of the importance
of filing on time, together with another blank copy of the Proof of Claim form.
Because of an apparent miscommunication between Ms. Nancy
Castellano, who was Dr. Dave’s office manager, and Bonnie Montgomery, a paralegal
employed by Mr. Deacon’s firm, the Proof of Claim form was not filed on time. Copies
of faxes and other documents in the record indicate that Ms. Castellano erroneously
believed that Mr. Deacon had agreed to submit the form on Dr. Dave’s behalf.
On September 24, 1993, the Receiver sent Dr. Dave a letter notifying
him that because his Proof of Claim form was not timely filed, coverage to defend the
Hale claim would be terminated immediately. Dr. Dave subsequently retained his own
counsel, who submitted an executed Proof of Claim form to Ms. Barnes on October
27, 1993, together with an explanation of the circumstances surrounding the missed
deadline. The Receiver declined to reinstate coverage, and Dr. Dave timely objected,
thus preserving his right to a hearing in chancery court on the question. See Tenn.
Code Ann. § 56-9-327.
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The Chancellor had appointed a Special Master to hear appeals by
those who objected to denials of coverage. The Special Master submitted a report on
Dr. Dave’s case, which summarized the facts leading up to the missed deadline,
concluded that the delay was due to excusable neglect, and recommended that the
Court apply its power under Tenn. R. Civ. P. 6.02(2) to retroactively extend the filing
deadline for Dr. Dave’s benefit, in order to render his notice timely.
The Chancellor did not agree with the Master that the Court had the
authority to extend the filing deadline, and he accordingly sustained Ms. Barnes’
objection to the Master’s report, without commenting on the allegations of excusable
neglect. This appeal followed.
II.
In his memorandum, the Chancellor noted that under the circumstances
of this case, the Liquidation Statute does not permit the Receiver to treat a late-filed
claim as if it were timely filed. See Tenn. Code Ann. § 56-9-323. The memorandum
goes on to say:
“It is helpful to consider the respective roles of the
court and the receiver . . . . The receiver does the real
work. The court’s involvement is quite limited . . . .
Restricting the court’s authority to allow late filed claims to
the same authority given to the receiver seems to be in
keeping with the respective roles for the court and the
receiver established by the Act.
...
“This Court concludes that a court supervising a
receivership is bound by the same statute that limits the
authority of the Receiver to allow late filed claims . . . . If
the Receiver concludes that a late filed claim should not
be allowed, then judicial review of the Receiver’s decision
is limited to consideration of whether the Receiver acted
illegally, arbitrarily, or in an abuse of discretion. There is
no de novo judicial review of the Receiver’s decision.”
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We believe the Court applied an unnecessarily restricted interpretation
of its powers in deciding this case. While the liquidation statute assigns to the
Chancery Court of Davidson County a specified role in all insurance liquidation
proceedings, it does not purport to limit the traditional equitable powers of a court of
chancery, nor to abridge the application of the Tennessee Rules of Civil Procedure.
Rule 6.02 Tenn. R. Civ. P. reads in pertinent part:
Enlargement. -- When by statute or by these rules or by
a notice given thereunder or by order of court an act is
required or allowed to be done at or within a specified
time, the court for cause shown may, at any time in its
discretion, (1) . . . (2) upon motion made after the
expiration of the specified period permit the act to be
done, where the failure to act was the result of excusable
neglect.
Tenn. Code Ann. § 56-9-327 establishes a procedure whereby an
individual whose claim is denied by the Receiver may object and may receive a
prompt hearing. The statute states in part: “The matter may be heard by the court
or by a court-appointed referee who shall submit findings of fact along with such
referee’s recommendation.” If the legislature had intended to limit the standard of
review in the manner specified by the chancellor, this statute would seem to be a
logical place for it to so state. But no such statement is to be found in this statute or
in any other part of the Act.
Perhaps the trial court was swayed by the language contained in a
recent Tennessee Supreme Court case which it cited in its memorandum, State of
Tennessee ex rel v. UPI, in re: Vasudev V. Kulkarni, M.D., 921 S.W.2d 176 (1996).
In that case, the Court emphasized the importance of a uniform treatment of claims
and of deadlines in order to avoid “a piecemeal and protracted processing of claims
inconsistent with the Act’s stated principles of efficiency, economy, and equity.” 921
S.W.2d at 180.
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However the Kulkarni case did not involve the power of the chancery
court to review the actions of the Receiver. It rather raised the question of whether
the Receiver could establish a uniform accelerated date by which any medical incident
covered under any of UPI’s policies had to be reported in order to qualify for benefits,
regardless of the reporting periods provided for in the policies themselves. In holding
that the Receiver’s powers were broad enough to encompass such an action, we do
not believe the Court intended thereby to nullify the equitable powers of the chancery
court.
In reaching this conclusion, we are not expressing an opinion one way
or another as to whether the facts found by the Special Master actually constitute
excusable neglect, but only that the chancellor is entitled to make that inquiry.
III.
The order of the trial court is reversed. Remand this cause to the
Chancery Court of Davidson County for further proceedings consistent with this
opinion. Tax the costs on appeal to the appellee.
_____________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
SAMUEL L. LEWIS, JUDGE
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