TENNESSEE INSURANCE COVERAGE RESOURCES
1 Insurer’s Duty to Defend
- 1.1 Four Corners Rule
- 1.2 Consideration of Extrinsic Evidence
- 1.3 Occurrence Requirement
- 1.4 Bodily Injury Requirement
- 1.5 Property Damage Requirement
- 1.6 Trigger of Coverage for Latent Injury i.e. exposure to asbestos, silica and lead paint
- 1.7 Trigger of Coverage Non-Latent Injury
- 1.8 Duty to Defend Covered and Uncovered Claims
- 1.9 Duty to defend contractual indemnity and common law indemnity claims
- 2 Insurer’s Wrongful Refusal to Defend
- 3 Conditions of Coverage
- 4 Meaning of “arising out of”
- 5 Coverage for punitive damages
- 6 Additional Insured Endorsement
- 7 Coverage B- Personal and Advertising Injury
Insurer’s Duty to Defend
An insurer has a duty to defend when the underlying complaint alleges damages that are within the risk covered by the insurance contact and for which there is a potential basis for recovery. Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d 302, 305 (Tenn. 2007).
Four Corners Rule
A liability insurer has no obligation to go beyond the pleadings to determine the duty to defend. See Appel Corp. v. St. Paul Fire & Marine Ins. Co., Inc., 930 S.W.2d 550 (Tenn. Ct. App. 1996). The duty to defend is determined solely by the allegations contained in the complaint. Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d 302, 305 (Tenn. 2007).
Consideration of Extrinsic Evidence
An “occurrence” is defined as an “accident,” which [the Court] holds is an event that is unforeseen by the insured. Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d 302, 305 (Tenn. 2007).
Faulty workmanship and construction defect claims
Damages arising from faulty workmanship may be the result of an “occurrence.” Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d 302, 305 (Tenn. 2007).
Bodily Injury Requirement
One Tennessee court has held that coverage did not exist for emotional distress within the traditional definition of “bodily injury” Am. Indem. Co. v. Foy Trailer Rentals, Inc., W200000397COAR3CV, 2000 WL 1839131, 2000 Tenn. App. LEXIS 794 (Tenn. Ct. App. Nov. 28, 2000).
Consideration of physical manifestations
Tennessee courts have not directly addressed this issue, but see case cited in 1.4.1.
Property Damage Requirement
Purely economic loss
“[G]eneral liability policies are not intended to cover the insured's contractual liability for economic loss because its work was not that for which the damaged person bargained” Tenn. Farmers Mut. Ins. Co. v. Reed, 419 S.W.3d 262, 269 (Tenn. Ct. App. 2013).
Loss of use
“Loss of use” means the deprivation of the ability to put the [tangible property] into service or apply [the tangible property] for a purpose. Marlin Fin. & Leasing Corp. v. Nationwide Mut. Ins. Co., 157 S.W.3d 796, 810 (Tenn. Ct. App. 2004).
Trigger of Coverage for Latent Injury i.e. exposure to asbestos, silica and lead paint
No instructive authority in Tennessee on these issues
Trigger of Coverage Non-Latent Injury
The court will look to the policy language to determine when the policy is triggered. For example, in State Farm Fire & Cas. Co. v. McGowan, 421 F3d 433 (6th Cir. 2005), the Court held that the policy was triggered by the “occurrence” happening during the policy period because the policy required that the occurrence take place during the policy period but did not require that the resulting injury occur within the policy period. McGown contrasted the language at issue there with other cases that specifically require injury or damage during the policy period. See State Auto Mut. Ins. Co. v. Shelby Mut. Ins. Co., 1988 Tenn. App. LEXIS 412, No. 1162, 1988 WL 67155, at *3 (Tenn. Ct.App. June 30, 1988) (unpublished) (holding that "coverage of property damage caused by an occurrence as defined in the policy is limited to damage occurring during the policy period"); Monticello Ins. Co. v. Kentucky River Community Care, Inc., 1999 U.S. App. LEXIS 7487, No. 98-5372, 1999 WL 236190, at *4 (6th Cir. Apr. 14, 1999) (unpublished) (noting that the "customary rule" is that the occurrence of an accident is when the damage occurs, not the wrongful act) (applying Kentucky law).
Construction Defect Claims
See the above explanation. For example, a court found there was no coverage for a wall which collapsed after expiration of the policy but was constructed during the policy period because policy required “property damage” during the policy period. State Auto Mut. Ins. Co. v. Shelby Mut. Ins. Co., No. 1162, 1988 Tenn. App. LEXIS 412, at *2 (Tenn. Ct. App. June 30, 1988).
Duty to Defend Covered and Uncovered Claims
The court must review the allegations of the complaint and determine whether any of them are covered under the policy. If even one of the allegations is covered, the insurer has a duty to defend irrespective of the number of allegations that may be excluded by the policy. Drexel Chemical Co. v. Bituminous Ins. Co., 933 S.W.2d 471 (Tenn. Ct. App. 1996).
Duty to defend contractual indemnity and common law indemnity claims
General contractor against insured
No instructive authority.
Is there an anti-indemnification statute?
Yes. Tennessee’s anti-indemnification statute which applies to construction contracts is set forth at T.C.A. 62-6-123 and states: “[a] covenant, promise, agreement or understanding in or in connection with or collateral to a contract or agreement relative to the construction, alteration, repair or maintenance of a building, structure, appurtenance and appliance, including moving, demolition and excavating connected therewith, purporting to indemnify or hold harmless the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee, the promisee's agents or employees, or indemnitee, is against public policy and is void and unenforceable.”
Insurer’s Wrongful Refusal to Defend
Reliance on coverage defenses to deny indemnity
"[T]he duty to pay turns upon coverage and may not be predicated upon a breach of the duty to defend."Kelly v. Cherokee Ins. Co., 574 S.W.2d 735, 39 (Tenn. 1978) (citing Ala. Farm Bureau Mut. Cas. Ins. Co. v. Moore, 349 So. 2d 1113, 1116 (Ala. 1977)). The Kelly Court recognized "the general rule that in the absence of fraud or collusion an insurer, who has the duty to defend, has timely notice and defends or elects not to defend, is bound by the judgment in such a case as to issues which were or might have been litigated therein… The general rule binding an insurer by the terms of an earlier judgment presumes that the insurer "has the duty to defend." Clark v. Sputniks, 368 S.W.3d 431, 437-38 (Tenn. 2012)
Conditions of Coverage
Factors considered to determine if coverage is forfeited
Alcazar v. Hayes, 982 S.W.2d 845, 856 (Tenn. 1998) provides a non-exclusive guidelines for determining whether the insurer has been prejudiced:
the availability of witnesses to the accident; the ability to discover other information regarding the conditions of the locale where the accident occurred; any physical changes in the location of the accident during the period of the delay; the existence of official reports concerning the occurrence; the preparation and preservation of demonstrative and illustrative evidence, such as the vehicles involved in the occurrence, or photographs and diagrams of the scene; the ability of experts to reconstruct the scene and the occurrence; and so on.
If an insured fails to provide timely notice of an accident in accordance with the insurance policy, prejudice to the insurer is presumed, but the insured may rebut this presumption by proffering competent evidence that the insurer was not prejudiced by the delay. Alcazar v. Hayes, 982 S.W.2d 845, 856 (Tenn. 1998).
Meaning of “arising out of”
The term “arising out of the use” in liability policies has generally been held to be a broad, comprehensive term meaning “origination from,” “having its origin in,” “growing out,” or “flowing from.” Travelers Ins. Co. v. Aetna Cas. & Sur. Co., 491 S.W.2d 363, 365 (Tenn. 1973)
Courts hold that “exceptions, exclusions and limitations in insurance policies must be construed against the insurance company and in favor of the insured.” Thus when “arising out of” is contained in an exclusion, Courts apply the concurrent causation doctrine.
“Tennessee recognizes the concurrent cause doctrine, which provides that there is insurance coverage in a situation "where a nonexcluded cause is a substantial factor in producing the damage or injury, even though an excluded cause may have contributed in some form to the ultimate result and, standing alone, would have properly invoked the exclusion contained in the policy."Clark v. Sputniks, 368 S.W.3d 431, 441 (Tenn. 2012)(quoting Allstate Ins. Co. v. Watts, 811 S.W.2d 883, 887 (Tenn. 1991).
Other policy forms
No instructive authority.
Coverage for punitive damages
Insurable, unless arising from intentional tort. Lazenby v. Universal Underwriters Ins. Co., 383 S.W.2d 1 (Tenn. 1964); General Cas. Co. of America v. Woodby, 238 F.2d 452 (6th Cir. 1956). West v. Pratt, 871 S.W.2d 477, 480 (Tenn. 1994)
Distinction for statutory multiple damages?
No instructive authority.
Additional Insured Endorsement
Contract or writing required
Additional insured endorsement in policy requiring insurer to provide additional insured coverage “where required by contract” did not require a written contract between insured and its customer to add customer as additional insured to policy, despite language in written agreement between insured and its customer that no verbal agreements could be made a part of their agreement concerning provision of security guard services. Lancaster v. Ferrell Paving, Inc., 397 S.W.2d 606, 2011 WL 4357308 (Tenn. Ct. App. 2011).
Analysis and factors considered for liability arising out/caused by of the named insured’s work
The court addressed the extent of coverage for the additional insured. The endorsement provided that an additional insured would have coverage “only with respect to liability arising out of your ongoing operations performed for that insured.” The court reviewed case law from around the country and concluded that they did not equate the phrase “arising out of the named insured’s ongoing operations” with “arising out of a named insured’s negligence.” Therefore, since the litigation involved an injury to the named insured’s employee that occurred while the employee was on duty at the additional insured’s premises providing services for the additional insured in furtherance of the contract between the named insured and additional insured. The court found that the additional insured was covered by the additional insured endorsement. Lancaster v. Ferrell Paving, Inc., 397 S.W.2d 606, 2011 WL 4357308 (Tenn. Ct. App. 2011).
Coverage B- Personal and Advertising Injury
Meaning of publication for “oral or written publication of material, in any manner, that violations a person’s right of privacy” offense
No instructive authority.