BRANDI BURGE, ET AL.
FARMERS MUTUAL OF TENNESSEE
Session March 22, 2017
Appeal from the Circuit Court for Grundy County No. 8650
Justin C. Angel, Judge
appeal involves an insurer's refusal to pay a claim for a
fire loss. The trial court granted summary judgment in favor
of the plaintiffs on the issue of liability and held a bench
trial on the issue of damages only. The trial court
ultimately awarded the plaintiffs $127, 500 for their covered
losses, prejudgment interest, and a statutory penalty because
the insurer's refusal to pay the claim was not in good
faith. On appeal, the insurer argues that the plaintiffs are
not entitled to any recovery because they failed to
sufficiently prove their damages. The insurer also contends
that it did not act in bad faith because it had substantial
legal grounds for denying the claim. The plaintiffs argue
that the trial court should have awarded additional damages.
We conclude that the trial court should have awarded $4, 000
in additional damages for the loss of the residence but
otherwise affirm the trial court's judgment as modified.
R. App. P. 3 Appeal as of Right; Judgment of the Circuit
Court Affirmed as Modified and Remanded
Christopher Dunn Heagerty, Knoxville, Tennessee, for the
appellant, Farmers Mutual of Tennessee.
Russell Anne Swafford, Dunlap, Tennessee, for the appellees,
Brandi Burge, Daniel Layne, and Sharon Layne.
Brandon O. Gibson, J., delivered the opinion of the court, in
which J. Steven Stafford, P.J., W.S., and Kenny Armstrong,
BRANDON O. GIBSON, JUDGE.
Facts & Procedural History
Burge resided in a mobile home in Grundy County with her
husband and five children. Mrs. Burge's parents purchased
the mobile home from a mobile home dealer in 2008, when it
was newly manufactured, and sited the home on their family
farm for Mrs. Burge and her family. On July 10, 2013, the
mobile home caught fire. The local fire department responded
and attempted to extinguish the fire, but it reignited and
eventually burned the home to the ground. No walls remained
standing, and nothing was salvageable. The only thing saved
during the fire was one basket of laundry.
Burge maintained a mobile homeowner's insurance policy
with Farmers Mutual of Tennessee ("Insurer"). The
policy provided coverage for direct physical loss or damage
to the mobile home and her personal property because of fire.
As co-owners of the mobile home, Mrs. Burge's parents,
Sharon and Daniel Layne, were listed as additional insureds
on the policy.
after the fire, Sharon Layne contacted their local insurance
agency to report the fire. Mrs. Burge and Mrs. Layne
maintained contact with their local agency and Insurer over
the next few months, submitting numerous documents and
participating in an examination under oath as requested by
Insurer. Mrs. Burge and her family could not afford to rent
another home while continuing to pay the promissory note on
their burned mobile home. As a result, the Burge family moved
into the home of Mr. and Mrs. Layne, intending to stay until
the matter was settled.
August 2013, Insurer granted Mrs. Layne's request for a
$2, 000 "advance" on the personal property claim in
order to purchase school clothing for the children. Aside
from that payment, however, Insurer failed to meet the
demands for payment under the policy without any response or
explanation as to why it failed or refused to pay.
7, 2014, almost one year after the fire occurred, Mrs. Burge
and Mr. and Mrs. Layne (collectively "Plaintiffs")
jointly filed this lawsuit against Insurer. They sought to
recover $69, 000 for the "face amount" of the
policy coverage for the residence, $34, 500 as the limit on
coverage for personal property (minus $2, 000 for the
advanced payment for school clothing), and $13, 800 for
additional living expenses, in addition to prejudgment
interest, attorney's fees, and the statutory "bad
faith penalty" set forth at Tennessee Code Annotated
answer, Insurer admitted that Plaintiffs sustained a fire
loss to their mobile home and its contents on July 10, 2013.
It admitted that the home and contents were covered by a
casualty insurance policy provided by Insurer. It also
acknowledged receiving Plaintiffs' demand for payment
pursuant to the policy. However, Insurer claimed that it had
"significant legal grounds for failing to pay" the
claim. Specifically, Insurer asserted that "Plaintiffs
made material misrepresentations in their application for
insurance" in 2008. Insurer did not specify what type of
misrepresentation was allegedly made but suggested that the
policy was subject to being declared void ab initio
and that Plaintiffs were not entitled to any recovery under
circuit court judge retired shortly after Insurer's
answer was filed, effective September 1, 2014, and the case
was transferred to a new circuit judge in July 2015. In the
meantime, in November 2014, Plaintiffs propounded discovery
requests to Insurer, and Insurer failed to respond to the
discovery for a period of six months. After a motion to
compel and subsequent order were filed with the court,
Insurer finally responded in May 2015. At that time, it
disclosed, for the first time, that it denied the existence
of coverage for Plaintiffs' claim based on an alleged
failure to disclose on the application for insurance the
existence of "multiple mortgages on the property."
August 2015, Plaintiffs filed a motion for summary judgment,
asserting that no genuine issue of material fact existed with
regard to Insurer's defense regarding the existence of
multiple mortgages. Plaintiffs submitted affidavits and
exhibits in an attempt to demonstrate that the mobile home
was only encumbered by one mortgage. Insurer filed a response
and asked the court to enter summary judgment in its favor.
Insurer insisted that "the insured property was
encumbered by two (2) mortgages at the time the application
for insurance was submitted" and that "Plaintiffs
did not disclose both mortgages to [Insurer] in their
April 18, 2016, the trial court entered an order granting
summary judgment to Plaintiffs and denying Insurer's
request for summary judgment. The trial court found that
there was only one lien holder on the mobile home and that
the bank that held that lien was specifically listed on the
Plaintiffs' insurance application. Therefore, the court
held, "there was no misrepresentation or failure to
disclose by Plaintiff[s] to Defendant" in the
application for insurance.
19, 2016, a bench trial was held on the issue of damages. The
only witnesses to testify were Plaintiffs (Mrs. Burge and Mr.
and Mrs. Layne) and their real estate valuation expert.
Insurer cross-examined three of Plaintiffs' witnesses but
presented no witnesses of its own. The trial court found that
Plaintiffs and their expert were all credible witnesses. It
found that Plaintiffs had cooperated with Insurer
"throughout this process" and fulfilled all of
their obligations. Ultimately, the trial court awarded
Plaintiffs $65, 000 for the value of the residence at the
time of the fire, which was less than the coverage limit of
$69, 000 that Plaintiffs sought to recover. The trial court
awarded Plaintiffs $34, 500 for the loss of personal
property, which was the policy limit they requested. The
court awarded $2, 500 for additional living expenses (minus
the $2, 000 advance already paid), which was also less than
the policy limit of $13, 800 that Plaintiffs sought to
recover for additional living expenses. The trial court
awarded prejudgment interest at the rate of ten percent and
imposed a statutory bad faith penalty of fifteen percent,
noting Insurer's delays, its failure to pursue its
claimed defense in an efficient manner, and the "harsh
and rude treatment" Plaintiffs received from
Insurer's adjuster and company representative when they
sought information from him. All things considered,
Plaintiffs were awarded a total judgment of $127, 500.
Insurer timely filed a notice of appeal.
presents the following issues for review, as slightly
reworded, on appeal:
1. Whether the trial court erred in entering judgment for
Plaintiffs for the loss sustained to the mobile home when
there was no competent proof to support such an award.
2. Whether the trial court erred in entering judgment for
Plaintiffs on their personal property claim when there was no
actual proof of the amount and value of their personal
3. Whether the trial court erred in granting Plaintiffs
recovery under Tennessee Code Annotated section 56-7-105,
when there were substantial legal reasons supporting
Insurer's decision to dispute liability for the claim.
their posture as appellees, Plaintiffs present the following
additional issues, as slightly reworded, for review:
4. Whether the trial court should have awarded the policy
limit of $69, 000 for loss of the mobile home, rather than
5. Whether the trial court should have awarded the policy
limit of $13, 800 for additional living expenses, rather than
the net award of $500.
6. Whether the trial court should have awarded the statutory
maximum of twenty-five percent for the statutory bad faith
penalty, rather than fifteen percent.
following reasons, we affirm the decision of the circuit
court as modified and remand for further proceedings.
Standard of Review
court's findings of fact from a bench trial are presumed
to be correct, and we will not overturn those factual
findings unless the evidence preponderates against them.
Tenn. R. App. P. 13(d); In re Estate of Ledford, 419
S.W.3d 269, 277 (Tenn. Ct. App. 2013). "For the evidence
to preponderate against a trial court's finding of fact,
it must support another finding of fact with greater
convincing effect." Watson v. Watson, 196
S.W.3d 695, 701 (Tenn. Ct. App. 2005) (citation omitted).
Appellate courts afford trial courts considerable deference
when reviewing issues that hinge on the credibility of the
witnesses because trial courts are uniquely positioned to
observe the witnesses' ...