11/05/2020
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
September 15, 2020 Session
ALVIN LEWIS v. STATE FARM
Appeal from the Circuit Court for Tipton County
No. 6601 Joe H. Walker, III, Judge
___________________________________
No. W2019-01493-COA-R3-CV
___________________________________
Appellant was injured in an automobile accident, and a jury found that an unknown
motorist was 100% at fault and awarded damages in favor of Appellant. Thereafter, the
trial court denied Appellant prejudgment interest on its finding that Appellant’s uninsured
automobile insurance policy with Appellee State Farm Mutual Automobile Insurance
Company precludes an award of prejudgment interest. We conclude that the policy
language “all damages” is sufficiently broad to include prejudgment interest. However,
because the award of prejudgment interest is an equitable consideration within the
discretion of the trial court, we decline to address Appellant’s issue concerning whether
prejudgment interest is necessary and equitable in this case. This question is remanded to
the trial court. Vacated and remanded.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Vacated and Remanded
KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN
STAFFORD, P.J., W.S., and CARMA DENNIS MCGEE, J., joined.
Glenn Keith Vines, Jr., Memphis, Tennessee, for the appellant, Alvin Lewis.
Melanie M. Stewart, Memphis, Tennessee, for the appellee, State Farm Mutual
Automobile Insurance Company.
OPINION
I. Background
On July 19, 2008, Appellant Alvin Lewis was seriously injured in a car accident
involving Appellant and an unknown driver. A witness to the accident, George Parker,
corroborated that an unknown motorist caused the accident and left the scene. The
vehicle Appellant was driving was owned by his brother and was insured by Nationwide
Insurance, with uninsured motorist coverage limits of $50,000.00. Appellant was also
personally insured by Appellee State Farm Mutual Automobile Insurance Company
(“State Farm”), with uninsured motorist coverage of $500,000.00 per accident.
On July 17, 2009, Appellant filed suit against unknown motorist John Doe and
served Nationwide and State Farm pursuant to Tennessee Code Annotated section 56-7-
1206.1 Appellant agreed to settle with Nationwide for the policy limits of $50,000.00.
On July 1, 2011, State Farm filed an offer of judgment, wherein it offered Appellant
$25,000.00 plus costs. The parties entered mediation, where State Farm withdrew its
initial offer and offered $5,000.00.
Appellant’s case was tried to a jury on March 6 and 7, 2019. The jury found that
the unknown motorist was 100% at fault for Appellant’s accident and entered judgment
in favor of Appellant for $275,000.00. The trial court entered judgment on the jury
verdict on March 7, 2019.
1
The statute provides, in relevant part:
a) Any insured intending to rely on the [uninsured motorist] coverage required by this
part shall, if any action is instituted against the owner and operator of an uninsured
motor vehicle, serve a copy of the process upon the insurance company issuing the
policy in the manner prescribed by law, as though the insurance company were a
party defendant. The company shall thereafter have the right to file pleadings and
take other action allowable by law in the name of the owner and operator of the
uninsured motor vehicle or in its own name; provided, that nothing in this subsection
(a) shall prevent the owner or operator from employing counsel of the owner’s own
choice; and provided, further, that the evidence of service upon the insurance carrier
shall not be made a part of the record.
b) If the owner or operator of any motor vehicle that causes bodily injury or property
damage to a person insured under this part is unknown and if the insured satisfies all
of the requirements of § 56-7-1201(e), should suit be instituted, the insured shall
issue a John Doe warrant against the unknown owner or operator in order to come
within the coverage of the owner’s uninsured motorist policy. If the uninsured
motorist’s identity and whereabouts are discovered during the pendency of the
proceeding, subsection (e) shall govern the proper course of action following the
discovery.
-2-
As discussed in further detail below, on April 8, 2019, Appellant filed a post-trial
motion for prejudgment interest. In addition to the State Farm insurance policy,
Appellant relied on Tennessee Code Annotated section 47-14-123 in support of his claim
for prejudgment interest. By order of July 26, 2019, the trial court denied Appellant’s
motion, and he appeals.
II. Issues
Appellant raises two issues for review as stated in his brief:
1. Whether State Farm’s automobile insurance contract with Appellant
pertaining to underinsured motorist coverage excludes prejudgment
interest?
2. Whether an award of prejudgment interest is equitable under the facts
and circumstances of this case and if so, the amount that should be
awarded?
III. Standard of Review
The foremost principle that guides the court to award or deny prejudgment interest
is the principle of equity. Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998)
superseded by statute in part as recognized in Lindenberg v. Jackson Nat. Life Ins. Co.,
912 F.3d 348 (6th Cir. 2018). In arriving at an equitable decision, a court must keep in
mind that the purpose of awarding prejudgment interest is to fully compensate a plaintiff
for the loss of the use of funds to which the plaintiff was legally entitled. Myint, 970
S.W.2d at 927. As such, “[a]n 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.” Id. (citing
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)). An abuse of
discretion occurs when the trial court causes an injustice by applying an incorrect legal
standard, reaches an illogical result, resolves the case on a clearly erroneous assessment
of the evidence, or relies on reasoning that causes an injustice. Wright ex rel. Wright v.
Wright, 337 S.W.3d 166, 176 (Tenn. 2011); Henderson v. SAIA, Inc., 318 S.W.3d 328,
335 (Tenn. 2010).
The instant appeal involves an award of damages under Appellant’s State Farm
uninsured motorist policy. To the extent our review requires an interpretation of that
policy, the Tennessee Supreme Court has explained:
This Court has previously recognized that “[a]n insurance policy is a
contract of adhesion drafted by the insurer.” Alcazar [v. Hayes], 982
S.W.2d [845,] 851 [(Tenn. 1998)] (citing Bill Brown Const. v. Glens Falls
-3-
Ins., 818 S.W.2d 1, 12 (Tenn.1991)). As such, insurance contracts do not
contain terms which are the result of mutual negotiation and concession but
instead contain terms fixed by the insurer and to which the insured must
adhere if the insured desires insurance coverage. Alcazar, 982 S.W.2d at
851-52 (citing Brandt v. Mutual Ben. Health & Acc. Ass’n, 30 Tenn. App.
14, 202 S.W.2d 827 (1947)). Given these realities, we construe provisions
in an insurance policy against the insurer and in favor of the insured so as
to provide coverage. Id. Like any other contract, however, this Court has a
duty to enforce insurance contracts “according to their plain terms. Further,
the language used must be taken and understood in its plain, ordinary and
popular sense. The courts, of course, are precluded from creating a new
contract for the parties.” Alcazar, 982 S.W.2d at 848-49 (quoting Bob
Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578,
580 (Tenn.1975)).
Griffin v. Shelter Mut. Ins. Co., 18 S.W.3d 195, 199-200 (Tenn. 2000).
IV. Analysis
We begin our analysis with a review of the relevant portions of Appellant’s State
Farm policy. Concerning uninsured motorist coverage, the policy provides, “The limit
shown under ‘Each Person’ is the most we will pay for all damages resulting from bodily
injury to any one insured in any one accident . . . .” Although the subject policy contains
an “Exclusions” provision, “prejudgment interest” is not listed as a specific exclusion.
Rather, the exclusions provision provides:
Exclusions:
There is no coverage:
1. For an insured who, without our person or organization who
may be liable for the bodily injury or property damage;
2. For property damage caused when your car or a newly acquired
car is struck by a motor vehicle owned by you or any resident
relative which is not insured for liability coverage;
3. For an insured who sustains bodily injury while occupying a
motor vehicle owned by that insured if it is not your car or a
newly acquired car.
4. For an insured whose bodily injury results from the discharge of
a firearm;
5. To the extent it benefits:
a) Any workers’ compensation or disability benefits insurance
company;
-4-
b) A self-insurer under any workers’ compensation law,
disability benefits law, or similar law; or
c) Any government or any of its political subdivisions or
agencies;
d) Any property insurer;
6. For any insured who sustains bodily injury as a pedestrian if
other collectible uninsured motor vehicle coverage has limits
greater than the limits of uninsured motor vehicle coverage of
this policy;
7. For punitive or exemplary damages;
8. For any order of restitution issued by a court in a criminal
proceeding or equitable action; or
9. For the first $200 of property damage resulting from any one
accident.
In its order denying Appellant’s motion for prejudgment interest, the trial court
held, in part, that, “The State Farm policy of Uninsured Motor Vehicle Coverage does not
provide for the payment of prejudgment interest . . . .” In so holding, the trial court
appears to focus on the fact that the subject policy does not specifically mention
prejudgment interest. However, as set out above, the policy does not specifically exclude
prejudgment interest. Exclusionary clauses are not to be construed broadly in favor of
the insurer, nor are they to be construed so narrowly as to defeat their purpose. Midland
Ins. Co. v. Home Indemnity Co., 619 S.W.2d 387, 389 (Tenn. Ct. App. 1981). Because
the policy at issue here contains a list of specific exclusions that does not include
prejudgment interest, we must presume that the policy exclusions are restricted to the
enumerated items. City of Knoxville v. Brown, 260 S.W.2d 264, 268 (Tenn. 1953).
Accordingly, the omission of prejudgment interest from the list of specific exclusions
precludes us from expanding the list of exclusions to include prejudgment interest.
Furthermore, the fact that the policy does not specifically state that State Farm will
pay prejudgment interest is not fatal to the award of same. Although, in its order, the trial
court states that the policy “does not provide for the payment of ‘all damages,’” this
finding is incorrect. As set out above, in the policy limit section, the policy states that,
“The limit shown under ‘Each Person’ is the most we will pay for all damages resulting
from bodily injury to any one insured in any one accident . . . .” (Emphasis added).
Therefore, by its plain language, the policy provides for the payment of “all damages.”
The question, then, is whether the term “all damages” is sufficiently broad to include
prejudgment interest. For this answer, we begin with Tennessee Code Annotated section
47-14-123, 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 accordance with the
-5-
principles of equity at any rate not in excess of a maximum effective rate of
ten percent (10%) per annum; provided, that with respect to contracts
subject to § 47-14-103, the maximum effective rates of prejudgment
interest so awarded shall be the same as set by that section for the particular
category of transaction involved. In addition, contracts may expressly
provide for the imposition of the same or a different rate of interest to be
paid after breach or default within the limits set by § 47-14-103.
(Emphasis added). In Malone v. Maddox, No. E2002-01403-COA-R3-CV, 2003 WL
465668, *5 (Tenn. Ct. App. Feb. 25, 2003), this Court explained:
Contrary to the policyholder’s assertion, there is no ambiguity in the
policy pertaining to the issue of prejudgment interest. The UM coverage
extends to “all damages.” (Emphasis added). As we have previously noted,
prejudgment interest, by the language of the applicable statute, is “an
element of, or in the nature of, damages.” Tenn. Code Ann. § 47-14-123. In
the instant case, the UM carrier contracted to pay “all damages.”
Prejudgment interest is an element of damages. Therefore, prejudgment
interest is covered by the language of the policy pertaining to that which
can be recovered under the UM coverage.
We reject the policyholder’s argument that the language “all
damages” does not include prejudgment interest. We also reject the
policyholder’s argument that the reference to prejudgment interest in the
damages section of the liability feature of the policy in some way means
that prejudgment interest is not a part of “all damages” under the UM
coverage. Under the liability feature of the policy, prejudgment interest is a
part of the covered damages because the policy says it is. Under the UM
coverage, it is a part of the covered damages because “all damages” means
just that, all damages, and, by statute, prejudgment interest is an element of
the injured party’s damages.
Relying on the Malone case, in Thurman v. Harkins, No. W2004-01023-COA-R3-CV,
2005 WL 1215959, *5 (Tenn. Ct. App. May 23, 2005), we likewise held:
As this Court previously noted, pre-judgment interest is “an element of, or
in the nature of, damages.” Tenn. Code Ann. § 47-14-123 (2001); Malone,
2003 Tenn. App. LEXIS 147, at *16, 2003 WL 465668. Because the policy
on its face limits the amount Great River is required to pay for “all
damages” in the event the uninsured/underinsured motorist coverage is
triggered and pre-judgment interest is an element of damages, pre-judgment
interest is encompassed by the limiting language of the policy. See Malone,
2003 Tenn. App. LEXIS 147, at *16, 2003 WL 465668.
-6-
Under the foregoing authority, we conclude that the trial court erred in holding that the
subject policy precludes an award of prejudgment interest. However, our conclusion that
“all damages,” as used in the policy, includes prejudgment interest does not, ipso facto,
mean that Appellant is entitled to that interest.
As discussed by the Tennessee Supreme Court in Myint,
Several principles guide trial courts in exercising their discretion to award
or deny prejudgment interest. Foremost are the 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)].
Myint, 970 S.W.2d at 927. The Myint Court went on to explain that, in exercising its
discretion, the court is not necessarily limited by the question of whether the damages are
certain, to-wit:
[W]e 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.
Id. at 928. Although uncertainty as to the amount of a plaintiff’s claim is not fatal to an
award of prejudgment interest, this Court has held that a trial court did not err when it
“‘capped’ the amount of damages, including prejudgment interest, pursuant to the limit
stated in the policy.” Thurman, 2005 WL 1215959 at *6. Within the policy limits,
however, the trial court is vested with considerable discretion concerning whether an
award of prejudgment interest is necessary to fully compensate a plaintiff. This inquiry,
which is grounded in equity and rests on the specific facts of each case, falls squarely
within the trial court’s purview. As such, we decline to address Appellant’s second issue
-7-
concerning whether an award of prejudgment interest is equitable under the facts and
circumstances of this case and, if so, the amount that should be awarded. Rather, we
remand this question to the trial court.
V. Conclusion
For the foregoing reasons, we vacate the trial court’s order holding that
prejudgment interest is precluded under the subject policy. We remand the case to the
trial court for consideration of whether prejudgment interest is necessary and equitable
under the specific facts of this case and for such further proceedings as may be necessary
and are consistent with the opinion. Costs of the appeal are assessed to the Appellee,
State Farm Mutual Automobile Insurance Company, for all of which execution may issue
if necessary.
_________________________________
KENNY ARMSTRONG, JUDGE
-8-