DIANA L. POWELL, ET AL.
PENNY D. CLARK
December 2, 2014
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.
Sowell, Nashville, Tennessee, for the appellant, Allstate
D. Galligan and Susan N. Marttala, McMinnville, Tennessee,
for the appellees, Diana and Ronald Powell.
ARMSTRONG, J., delivered the opinion of the Court, in which
J. STEVEN STAFFORD, P.J., W.S., and ARNOLD B. GOLDIN, J.,
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.
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.
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.
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. §
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.
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.
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.
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
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.
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 ...