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Erie Insurance Exchange v. Maxwell

Court of Appeals of Tennessee, Nashville

November 15, 2017

Erie Insurance Exchange
v.
Gary H. Maxwell, Et Al.

          Session September 7, 2017

         Appeal from the Chancery Court for Putnam County No. 2016-14 Ronald Thurman, Chancellor

         Erie Insurance Exchange ("Erie") commenced this declaratory judgment action seeking a declaration that Erie has no duty to defend its insureds in a separate action because the policies of insurance issued to its insureds provided no coverage for the claims asserted in that action. The insureds are the defendants in a separate action in which the buyers of the insureds' home allege that the insureds made negligent misrepresentations concerning the property's propensity to flood. The buyers sought to recover damages they sustained from flooding that occurred after the sale. Following discovery, Erie filed a motion for summary judgment on the ground that the "negligence" and "negligent misrepresentation" claims asserted against its insureds do not contain any allegations that constitute an "occurrence" as that term is defined in the policies; therefore, there is no coverage and no duty to defend the insureds. The trial court denied the motion, and this appeal followed. We have determined that the "negligence" and "negligent misrepresentation" claims asserted against Erie's insureds do not arise from an "occurrence" as that term is defined in the insurance policies; therefore, there is no coverage, and Erie has no duty to defend the insureds in the other action. For these reasons, we reverse the judgment of the trial court and remand with instructions to enter summary judgment in favor of Erie.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded

          Parks T. Chastain and Ashley E. Geno, Nashville, Tennessee, for the appellant, Erie Insurance Exchange.

          Patrick Shea Callahan, Cookeville, Tennessee, for the appellees, Gary H. Maxwell and Lucretia H. Maxwell.

          Frank G. Clement Jr., P.J., M.S. delivered the opinion of the Court, in which Richard R. Dinkins and W. Neal McBrayer, JJ., joined.

          OPINION

          FRANK G. CLEMENT JR., P.J., M.S

         On January 25, 2016, Erie Insurance Exchange ("Erie") commenced this action for declaratory judgment that it has no duty to defend or indemnify Gary and Lucretia Maxwell in an action brought against the Maxwells by Paul and Barbara Chapman.

         The dispute between the Maxwells and Chapmans arises from the Chapmans' purchase of the Maxwells' residential property on March 7, 2014. Prior to the sale, the Maxwells completed a residential property disclosure in which they allegedly misrepresented the propensity of the property to flood and the city's corrective action to mitigate that propensity. Five months after the Chapmans purchased the property from the Maxwells, the residence sustained damage as a result of two floods within three days. In the civil action that followed, the Chapmans alleged that they relied on the Maxwells' representations regarding the propensity for flooding and that they sustained property damage as a result of, inter alia, the Maxwells' negligence and negligent misrepresentations. The Chapmans asserted six claims but only two of those claims are at issue in this appeal, that of negligence and negligent misrepresentation.

         The Chapmans' negligence claim against the Maxwells states:

25. The Defendants had a duty to advise Plaintiffs of the defects and problems with the property relative to the flooding that occurs at 609 Denton Avenue, Cookeville, Tennessee.
26.The Defendants breached this duty by failing to advise the Plaintiffs of the defects and problems with the flooding of the property prior to their purchase of the property on March 7, 2014. The Defendants knew, or should have known, that the representations set forth above were incorrect or false.
27.As a result of the negligence of the Defendants Gary H. Maxwell and wife Lucretia H. Maxwell, the Plaintiffs have sustained substantial damages.

         The Chapmans' negligent misrepresentation claim against the Maxwells states:

29. Defendants had a duty to advise the Plaintiffs of the defects and problems with flooding of the property prior to their purchase of the property on March 7, 2014.
30. The Defendants made representations to the prospective purchasers in an effort to induce them into entering into a contract for the sale of real estate which is the subject matter of this litigation.
31. The representations made by the Defendants were false. The Plaintiffs relied upon the negligent misrepresentations of the Defendants and purchased the property from them.
32. As a result of the negligent misrepresentation and fraudulent inducement by the Defendants, the Plaintiffs sustained substantial damages.

         The Maxwells notified Erie of the lawsuit and insisted that Erie had a duty to defend and indemnify them based on two policies Erie had issued to the Maxwells. Thereafter, Erie commenced this action in which they sought a declaratory judgment that the policies of insurance it issued to the Maxwells provided no coverage for the claims asserted in the lawsuit filed against them by the Chapmans in the Chancery Court for Putnam County, Tennessee;[1] therefore, Erie has no duty to defend the Maxwells in that action.

         Erie subsequently filed a Motion for Summary Judgment based on the ground that the undisputed facts established that neither policy provided any coverage for the allegations in the Chapman lawsuit. In pertinent part, Erie contended that none of the claims asserted in the Chapman Complaint contained an allegation constituting an "occurrence" as that term was defined by either ...


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