IN THE COURT OF APPEALS OF TENNESSEE,
AT JACKSON
_______________________________________________________ FILED
)
December 18, 1998
JOHN HOGINS, ) Hardeman County Circuit Court
) No. 8708
Cecil Crowson, Jr.
Plaintiff, ) Appellate C ourt Clerk
)
And ) C.A. No. 02A01-9804-CV-00102
)
TENNESSEE INSURANCE )
GUARANTY ASSOCIATION, )
)
Intervening Plaintiff/Appellant, )
)
VS. )
)
TONY ANDREW ROSS, WARNER )
ROSS and UNITED STATES FIDELITY )
& GUARANTY COMPANY, )
)
Defendants/Appellees. )
______________________________________________________________________________
From the Circuit Court of Hardeman County at Savannah
Honorable Jon Kerry Blackwood, Judge
William D. Leader, Jr.,
Julie C. Murphy,
BOULT, CUMMINGS, CONNERS & BERRY, PLC, Nashville, Tennessee
Jef Feibelman,
Melissa A. Maravich,
BURCH, PORTER & JOHNSON, Memphis, Tennessee
Attorneys for Intervening Plaintiff/Appellant Tennessee Insurance Guaranaty Association.
James A. Hopper, HOPPER & PLUNK, Savannah, Tennessee
Attorney for Defendant/Appellee United States Fidelity & Guaranty Company.
John Knox Walkup, Attorney General & Reporter
Michael E. Moore, Solicitor General
Sarah A. Hiestand, Senior Counsel
For Tennessee Department of Commerce and Insurance
OPINION FILED:
REVERSED AND REMANDED
FARMER, J.
CRAWFORD, P.J., W.S.: (Concurs)
HIGHERS, J.: (Concurs)
Tennessee Insurance Guaranty Association (TIGA), the intervening plaintiff in this
action, appeals the trial court’s order entering summary judgment in favor of Defendant/Appellee
United States Fidelity & Guaranty Company (USF&G). We reverse the trial court’s judgment based
on our conclusion that the court erred in ruling that USF&G’s policy did not provide uninsured
motorist coverage to Plaintiff John Hogins.
On August 2, 1994, John Hogins was involved in a motor vehicle accident when his
Jeep collided with a vehicle which was driven by Defendant Tony Andrew Ross and owned by
Defendant Warner Ross. At the time of the accident, Hogins was covered by an automobile liability
insurance policy issued by USF&G which, as pertinent to this appeal, contained the following
definition of “uninsured motor vehicle:”
C. “Uninsured motor vehicle” means a land motor vehicle or
trailer of any type:
....
4. To which a bodily injury liability bond or policy
applies at the time of the accident but the bonding or
insuring company;
....
b. is or becomes insolvent.
Hogins timely sued the Rosses for the injuries he allegedly suffered as a result of the
accident. In December 1996, however, while this lawsuit was pending, the Rosses’ automobile
liability insurance carrier, Coronet Insurance Company, was found to be insolvent by an Illinois state
court. As required by the Tennessee Insurance Guaranty Association Act, TIGA subsequently
assumed the responsibilities of Coronet in this lawsuit to the extent of its obligation on “covered
claims,” as defined by the Act. See T.C.A. §§ 56-12-104, -107 (1994).
Although TIGA assumed Coronet’s rights and duties to the extent of its obligation
on covered claims, the Act required Hogins first to exhaust his right to coverage under his USF&G
policy. See T.C.A. § 56-12-111 (1994). Accordingly, Hogins was required to seek coverage under
the uninsured motorist provisions of the USF&G policy before he could recover from TIGA for any
covered claims.
In July 1997, USF&G filed a motion for summary judgment, contending that the
uninsured motorist provisions of its policy provided no coverage to Hogins because Coronet was
found to be insolvent more than one year after the August 1994 accident. In support of this
argument, USF&G relied upon the following statutory provision:
56-7-1203. Insolvency protection limitation -- More
favorable protection not precluded. -- An insurer’s insolvency
protection shall be applicable only to accidents occurring during a
policy period in which its insured’s uninsured motorist coverage is in
effect where the liability insurer of the tort-feasor becomes
insolvent within one (1) year after such an accident. Nothing herein
contained shall be construed to prevent any insurer from affording
insolvency protection under terms and conditions more favorable to
its insureds than is provided hereunder.
T.C.A. § 56-7-1203 (1994) (emphasis added). Citing the same statutory provision, TIGA also
moved for summary judgment, contending that it was entitled to a judgment as a matter of law on
the issue of whether the statute’s minimum time limit for insurers to provide insolvency protection
was incorporated into the uninsured motorist provisions of USF&G’s automobile liability insurance
policy.
After conducting a hearing, the trial court granted USF&G’s motion for summary
judgment and denied TIGA’s motion. The trial court ruled that
pursuant to the provisions of [T.C.A.] § 56-7-1203, the automobile
liability insurance policy issued to the Plaintiff, John Hogins, by
[USF&G] does not provide uninsured/underinsured motorists
coverage to John Hogins for injuries received in the accident of
August 2, 1994 because Coronet Insurance Company, the individual
defendants’ automobile liability insurance carrier, was declared
insolvent more than one year following the accident forming the basis
of this lawsuit.
The trial court dismissed with prejudice all claims against USF&G and directed the entry of a final
judgment as to USF&G. See T.R.C.P. 54.02.
On appeal, TIGA contends that, contrary to the trial court’s ruling, the insolvency
protection of USF&G’s policy was not limited to the one-year minimum limit set forth in section
56-7-1203. TIGA points out that, although the statute provides that such protection shall be
applicable only when the tortfeasor’s liability insurer becomes insolvent within one year after the
accident, the statute also expressly permits insurers to afford more favorable coverage. TIGA argues
that, by providing uninsured motorist coverage when the insuring company “is or becomes
insolvent,” without limiting such coverage to a certain time period, USF&G has agreed to extend its
insolvency protection beyond the one-year time period set forth in the statute.
We agree. As noted by TIGA and by the Court of Appeals of North Carolina, the
majority of jurisdictions which have considered this issue have held that, by using the phrase “is or
becomes insolvent” to describe the insolvency protection provided by an automobile liability
insurance policy’s uninsured motorist provisions, an insurer extends such insolvency protection
beyond the time period specified in the applicable statute. North Carolina Ins. Guar. Ass’n v. State
Farm Mut. Auto. Ins. Co., 446 S.E.2d 364, 368 (N.C. Ct. App. 1994). Although the North Carolina
statute mandated insolvency protection for a three-year period, the remainder of the statute’s
language was virtually identical to the statute at issue here. Id. at 366 (citing N.C. Gen. Stat.
§ 20-279.21(b)(3)(b)). In that case, the insurer, State Farm, also had issued a policy which defined
an “uninsured motor vehicle” as “a land motor vehicle or trailer of any type” to which a “liability
bond or policy applies at the time of the accident but the bonding or insuring company . . . is or
becomes insolvent.” Id. at 367 (emphasis added). In holding that State Farm, by including such a
provision in its policy, agreed to afford coverage under terms and conditions more favorable to the
insured than required by the statute, the court reasoned:
Terms of an insurance contract must be given their plain,
ordinary, and accepted meaning unless they have acquired some
technical meaning or it is apparent another meaning was intended. . . .
In addition, policies are to be accorded a reasonable interpretation,
and, if not ambiguous, should be construed according to their terms
and the ordinary and plain meaning of their language. . . . If
ambiguous, the language of a policy is to be construed strictly against
the insurer and liberally in favor of the insured. . . .
....
The phrase “is or becomes insolvent” contemplates two
occasions of insolvency. The first, represented by “is insolvent,”
refers to insolvency existing at the time of collision. The second,
described by “becomes insolvent” refers, as the definition of
“becomes” reveals, to insolvency occurring some time following the
accident. “Become” is defined as: “to come to exist or occur.”
Webster’s Third International Dictionary 195 (1976).
The policy phraseology “is or becomes insolvent” contains no
ambiguity. Further it contains no time limitation. Giving the words
a reasonable interpretation based upon their plain and ordinary
meaning, . . . we therefore conclude [that State Farm] by utilizing this
wording agreed to furnish coverage beyond the three years mandated
in [the statute]. Accordingly, we hold that under an insurance policy
providing that a vehicle is uninsured if the liability insurer “is or
becomes insolvent” without specifying any period of time, an
uninsured motorist claim may not be barred even though the
minimum period specified in [the statute] has elapsed. By including
such language, the insurer agreed to afford coverage under terms and
conditions more favorable to the insured than required by the statute.
North Carolina Ins. Guar. Ass’n, 446 S.E.2d at 367-68 (citations omitted).
In noting that its holding was consistent with a majority of jurisdictions which have
considered this issue, the North Carolina court cited the following decisions: Utah Property &
Casualty Insurance Guaranty Ass’n v. United Services Automobile Ass’n, 281 Cal. Rptr. 917 (Cal.
Ct. App. 1991); Government Employees Insurance Co. v. Burak, 373 So. 2d 89 (Fla. Dist. Ct. App.
1979); Thomas v. American Family Mutual Insurance Co., 485 N.W.2d 298 (Iowa 1992); and
Kentucky Insurance Guaranty Ass’n v. State Farm Mutual Automobile Insurance Co., 689
S.W.2d 32 (Ky. Ct. App. 1985). In Kentucky Insurance Guaranty Ass’n v. State Farm Mutual
Automobile Insurance Co., State Farm’s policy defined an “uninsured motor vehicle” to include a
motor vehicle “with respect to which there is a bodily injury liability bond or insurance policy
applicable at the time of the accident but the company writing the same . . . is or becomes insolvent.”
Kentucky Ins. Guar. Ass’n, 689 S.W.2d at 34 (emphasis added). Like the Tennessee statute at issue
here, the Kentucky statute provided that an insurer’s insolvency protection
shall be applicable only to accidents occurring during a policy period
in which its insured’s uninsured motorist coverage is in effect where
the liability insurer of the tortfeasor becomes insolvent within one (1)
year after such an accident. Nothing herein contained shall be
construed to prevent any insurer from affording insolvency protection
under terms and conditions more favorable to its insureds than is
provided hereunder.
Id. (quoting Ky. Rev. Stat. § 304.20-020(3)). In reaching the same conclusion as the North Carolina
court, the Court of Appeals of Kentucky stated:
We conclude, therefore, that the one-year limitation period in [the
statute] was intended by the legislature to define a minimum period
after an accident during which uninsured motorist coverage protecting
against insolvency of a tortfeasor’s insurer must be provided, rather
than to define a maximum period during which such coverage may be
provided. . . .
Here, State Farm issued a policy in which [it] elected not to
impose any time limitation whatever on the period during which
protection against insolvency is afforded. By doing so, State Farm
must be deemed to have voluntarily agreed to provide uninsured
motorist coverage protecting against insolvency more favorable than
the minimum coverage which is required by [the statute].
Id. at 35.
In Thomas v. American Family Mutual Insurance Co., 485 N.W.2d 298 (Iowa
1992), the insurer issued two policies which defined an “uninsured motor vehicle” to include a motor
vehicle that was insured by “a bodily injury liability bond or policy at the time of the accident but
the company . . . is or becomes insolvent.” Thomas, 485 N.W.2d at 300 (emphasis added). In
addition, the Iowa statute similarly provided that an insurer’s insolvency protection would be
applicable only if “the liability insurer of the tortfeasor is insolvent at the time of such an accident
or becomes insolvent within one year after such an accident.” Id. (quoting Iowa Code § 516A.3
(Supp. 1991)). Although the statute apparently did not expressly permit an insurer to afford more
favorable coverage, as do the Tennessee, North Carolina, and Kentucky statutes, the Supreme Court
of Iowa nevertheless held that American Family’s policies afforded coverage in addition to that
required by the statute. The court reasoned:
[T]his is not a case where the policy provisions contravene the statute,
rendering the policy language ineffective. . . . American Family is not
narrowing the coverage it is required by law to provide. Rather, as
the [trial] court wisely noted, the language of the policies enhances
the minimum insolvency time limit imposed by section 516A.3 and
extends the period during which victims may collect under their
uninsured motorist coverages:
The only difference between the statutory
definition of “uninsured motor vehicle” and the policy
definition of “uninsured motor vehicle” is that the
[policies do] not limit the term of insolvency to one
year. Rather, the [policies expand] the definition to
any period of time [in] which the liability insurer
becomes insolvent. This expansion in coverage
actually works to extend the protection granted by the
legislature. . . .
....
In sum, we find that the legislature intended a mandatory
minimum time frame during which a victim is guaranteed recovery
from the victim’s own uninsured motorist policy if the tortfeasor’s
insurer becomes insolvent. Insurers are free to extend this protection.
If they do, the one-year minimum in section 516A.3 is not
incorporated into the policy so as to deny an insured uninsured
motorist coverage.
So we conclude the one-year limitation regarding insolvency
in section 516A.3 was not incorporated into the two policies here so
as to limit uninsured motorist coverage otherwise afforded by the
policies. Instead, the policies afforded coverage in addition to that
required by section 516A.3.
Thomas, 485 N.W.2d at 300-01 (citation omitted).
To bolster its position, the Iowa court quoted the comments of an authority on
uninsured motorist insurance:
[W]hen the insurance policy uses coverage language that provides
that a vehicle is uninsured if the liability insurer “is or becomes
insolvent” without specifying any period of time, the uninsured
motorist claim may not be barred even though the period specified in
the statute has passed.
When an uninsured motorist insurance policy includes
coverage for insolvencies, but does not specify a time limit, the time
period prescribed in the statute may not be incorporated into the
coverage terms. Courts could decide that the statute only establishes
the minimum level of coverage, and that insurance companies are free
to provide more favorable or extensive coverage. Several courts have
applied this analysis, holding that when uninsured motorist coverage
states that insurance is provided in the event of an insolvency and
does not place a time limit with respect to the occurrence of an
insolvency, the uninsured motorist coverage was more extensive than
required by the statute. The courts concluded that in this situation, an
insured is not barred from asserting a claim under the uninsured
motorist coverage even though the insolvency occurred after the time
specified in the statute had passed.
Thomas, 485 N.W.2d at 301 (quoting 1 Alan I. Widiss, Uninsured and Underinsured Motorist
Insurance § 8.17, at 388 (2d ed. 1990)).
In accordance with the foregoing authorities, we hold that, by providing uninsured
motorist coverage when the insuring company “is or becomes insolvent,” USF&G agreed to furnish
coverage beyond the one year mandated in section 56-7-1203. The phrase “is or becomes insolvent”
neither specifies a period of time for, nor imposes any time limitation on, the insolvency protection
afforded by USF&G’s policy. Instead, the phrase serves to expand the definition of an uninsured
motor vehicle to include any period of time in which the insuring company becomes insolvent. By
including such language, and thereby electing not to impose any time limitation on the period during
which protection against insolvency is provided, USF&G effectively agreed to afford coverage under
terms and conditions more favorable than those required by section 56-7-1203.
On appeal, USF&G insists that, by operation of law, the time limitation set forth in
section 56-7-1203 became part of its policy. It is true that, in Tennessee, “any statute applicable to
an insurance policy becomes part of the policy and such statutory provisions override and supersede
anything in the policy repugnant to the provisions of the statute.” Hermitage Health & Life Ins.
Co. v. Cagle, 420 S.W.2d 591, 594 (Tenn. App. 1967). Specifically, all provisions of this state’s
uninsured motorist statutes become provisions of all automobile insurance policies issued for
delivery in Tennessee. Dunn v. Hackett, 833 S.W.2d 78, 82 (Tenn. App. 1992). Where there is a
conflict between a statutory provision and a policy provision, the statutory provision must prevail.
Id.
We do not perceive any conflict between the insolvency protection afforded by
section 56-7-1203 and that afforded by USF&G’s policy. The statute limits such protection to one
year but permits the insurer to include more favorable terms and conditions in its policy. As
previously discussed, by providing Hogins with uninsured motorist coverage when the insuring
company “is or becomes insolvent,” without placing a time limitation on such insolvency, USF&G
has afforded more favorable coverage to Hogins than that required by the statute. Inasmuch as the
statute specifically contemplates and permits such a result, no conflict exists between the statute and
the policy provisions.
The trial court’s judgment is reversed, and this cause is remanded for further
proceedings consistent with this opinion. Costs of this appeal are taxed to USF&G, for which
execution may issue if necessary.
____________________________________
FARMER, J.
______________________________
CRAWFORD, P.J., W.S. (Concurs)
______________________________
HIGHERS, J. (Concurs)