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Powell v. Clark

Court of Appeals of Tennessee, Nashville

February 3, 2015


         Session December 2, 2014

         Appeal from the Circuit Court for Rutherford County. No. 62933. Robert E. Corlew, III, Judge, sitting by interchange.

          Judgment of the Circuit Court is Affirmed and Remanded.

         Alan M. Sowell, Nashville, Tennessee, for the appellant, Allstate Insurance Company.

         Michael D. Galligan and Susan N. Marttala, McMinnville, Tennessee, for the appellees, Diana and Ronald Powell.

         KENNY ARMSTRONG, J., delivered the opinion of the Court, in which J. STEVEN STAFFORD, P.J., W.S., and ARNOLD B. GOLDIN, J., joined.



Page 529

          This appeal involves a limitation of liability in an insurance policy. Appellant Allstate Insurance Company seeks reduction of its uninsured motorist liability by amounts paid by Appellee insured's automobile insurance carrier. In light of the legislative intent that offsets should be limited to monies received from legally responsible parties or entities, and the limiting language used in the Allstate policy, we conclude that the trial court correctly denied the offset in this case. Affirmed and remanded.


         I. Background

         The relevant facts in this case are not in dispute. On July 1, 2012, Diana Powell was riding as a guest passenger in a vehicle driven by Patricia Collins. Ms. Collins' vehicle was struck by a vehicle that was driven by Penny Clark. There is no dispute that Ms. Clark was 100% at fault for the collision. However, Ms. Clark never appeared in the case and was an uninsured motorist at the time of the accident.

         Ms. Powell was insured by State Farm. Her policy included uninsured motorist limits of $100,000.00. Her policy also provided medical payments coverage in the amount of $100,000.00. Patricia Collins was insured by Allstate Insurance Company (" Allstate," or " Appellant" ). Her policy likewise provided an uninsured motorist coverage limit of $100,000.00. However, Ms. Collins' policy only provided for medical payments coverage in the amount of $2,000.00.

         There is no dispute that Allstate, rather than State Farm, is the primary carrier for uninsured motorist coverage with respect to this accident. See Tenn. Code Ann. § 56-7-1201(b)(3).[1]

Page 530

Allstate paid Ms. Powell $2,000.00 under the medical portion of Ms. Collins' policy. Thereafter, State Farm, under its policy, paid medical payments in the amount of $70,021.32 on behalf of Ms. Powell.

         Ms. Powell and her husband Ronald (together the " Powells," or " Appellees" ) filed suit against Penny Clark on June 27, 2011. A summons was issued for State Farm as the uninsured motorist carrier for the Powells. A summons was also issued for Allstate as the uninsured motorist carrier for Ms. Collins. State Farm filed its answer on July 28, 2011. Allstate filed its answer on August 1, 2011. As noted above, the named defendant, Ms. Clark, never made an appearance. On September 2, 2011, an agreed order of dismissal was entered as to State Farm.

         On October 30, 2012, the Powells filed a motion for declaratory judgment, asking the trial court to determine that Allstate was not entitled to offset the medical payments made by State Farm against Allstate's uninsured motorist limits. On December 3, 2012, the trial court issued a memorandum opinion, in which it specifically held that " Allstate Insurance is not allowed to setoff payments made by State Farm Mutual Insurance to or on behalf of the Plaintiff for medical expenses for treatment of injuries the Plaintiff received in the accident at issue." In so holding, the trial court reasoned, in relevant part, as follows:

[T]he clear language of the Allstate policy. . . provides that Allstate is entitled to a setoff for the $67,500 paid by State Farm. The practical application of such a decision, however, is far-reaching. First, because State Farm has the right of subrogation under the terms of its policy, Allstate would effectively be able to preclude any such recovery by State Farm. Thus, by stepping up promptly to provide relief for its insured, State Farm would be in the position of saving money for Allstate while expend[ing] its own dollars which otherwise would have been paid first by Allstate to the injured party, and then potentially recouped by State Farm. Were this rule to be enforced, the obvious result would be the position of insurers that they will not pay until all other sources of payment have been made.

         The trial court further reasoned that:

The Allstate policy appears to show that the maximum payment the Plaintiff could receive under that policy is $100,000, including all payments from other sources. Though the State Farm policy is not exhibited, State Farm's pleadings before they were dismissed from the action show that State Farm was wanting to be credited for the medical payments it made against the $100,000, including medical payments. Because the law provides that the Allstate policy provides primary coverage, then State Farm should not be required to make payments until the Allstate policy is exhausted. Were we to allow Allstate an offset then Allstate would pay some $32,500 and State Farm would pay some $67,500.
[I]nsurance companies cannot be required to pay for losses in excess of the limits to which they have agreed. . . . The proof before us shows that the

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terms of each policy provide that an injured Plaintiff is entitled to a maximum of $100,000 including all payments. Thus, Allstate, which provides the primary coverage, should be required to pay its limits if the evidence justifies an award of $100,000 or more, and then State Farm is entitled to subrogation as to the payments which it advanced. Because the law provides that the Allstate policy of insurance is primary, we find that Allstate should be required to pay the entire limits of their policy to the extent that the evidence justifies such payments. . . . [W]ere we to find that Allstate is entitled to the setoff it claims, State Farm would pay at least twice the sum that Allstate pays ($67,500 versus $32,500), and the net effect of such a ruling would be that the State Farm policy was actually primary, at least to the extent of the costs of medical care. Such a decision would be in derogation of the provisions of Tennessee law.

         On March 14, 2013, the trial court entered an order on the motion for declaratory judgment, in which it reiterated its findings and concluded that Allstate ...

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