Day on Torts
The statutory presumption created by Tenn. Code Ann. § 56-7-135(b) that payment of an insurance premium “creates a rebuttable presumption that the coverage provided has been accepted by all insureds under the contract” applies in claims against insurance agents for negligent failure to procure an insurance policy.
In Parveen v. ACG South Insurance Agency, LLC, 613 S.W.3d 113 (Tenn. Dec. 4, 2020), plaintiffs lived in Georgia and had an umbrella insurance policy that included $2,000,000 in excess uninsured motorist coverage. When plaintiffs moved to Tennessee, they worked with defendant agent to obtain new insurance, and they alleged that they provided him with a copy of their old policy and asked for the exact same coverage. Defendant agent obtained an umbrella policy for plaintiffs, but the policy did not include any excess uninsured motorist coverage. There was no “separate line item” for uninsured motorist coverage on the quote given to plaintiffs, the policy premium did not “reflect the inclusion of such coverage,” and the declarations page did not include uninsured motorist coverage. Further, the policy itself specifically excluded uninsured or underinsured motorist coverage.
Plaintiffs initially paid for the policy obtained by defendant in 2013, and they renewed the policy in 2014 and 2015. In 2015, plaintiff wife was involved in an accident with an underinsured motorist. After this accident, plaintiffs added uninsured motorist coverage to their policy, but because such addition was not retroactive, the insurance company was found not liable for damages from the accident.
Plaintiffs filed this action against their insurance agent and agency, alleging negligent failure to procure the requested insurance coverage. Defendants filed a motion for summary judgment, arguing that because plaintiffs paid the policy premium, Tenn. Code Ann. §56-7-135 created a rebuttable presumption that plaintiffs accepted the policy without the excess uninsured motorist coverage, and that plaintiffs had done nothing to rebut this presumption. The trial court agreed, granting summary judgment, but the Court of Appeals ruled that this statute was not intended to “apply to actions against an insurance agent.” In this opinion, the Supreme Court reinstated the trial court’s summary judgment ruling.
Tenn. Code Ann. § 56-7-135(b) states: “The payment of a premium for an insurance contract, or amendment thereto, by an insured shall create a rebuttable presumption that the coverage provided has been accepted by all insureds under the contract.” The sole issue in this case, which was a matter of first impression, was whether this section’s “rebuttable presumption of acceptance of the policy terms by payment of premiums applies equally to an insured’s action against an agent for negligent failure to procure requested coverage as it does to an action against a carrier for coverage under the policy.”
In its analysis, the Supreme Court wrote that the “statutory language [was] clear,” and that “[i]f the legislature had intended to limit subsection (b)’s rebuttable presumption to actions against certain persons or entities…it could have done so.” The statute, though, contains no such limitation, and therefore is applicable “where the acceptance of coverage by the insureds under the contract is called into question.”
Regarding plaintiff’s argument that this statutory interpretation would significantly change the common law, the Court pointed out that the rebuttable presumption “does not leave insureds without redress against a negligent agent who fails to procure the coverage requested.” Instead, insureds are permitted to present evidence to rebut this statutory presumption, a step which plaintiffs in the present matter failed to do.
Because the legislature drew no distinction in the statute between “claims against the insurer and claims against the agent,” the Court held that “the rebuttable presumption articulated in Tennessee Code Annotated section 56-7-135(b) does apply to actions against an insurance agent by insureds under the contract of insurance for negligent failure to procure an insurance policy as directed.” The decision of the Court of Appeals was reversed, and summary judgment was thus reinstated.
This case marked the first time the Supreme Court considered whether the rebuttable presumption statute, which was adopted in 2012, applied in cases against insurance agents. With this decision, plaintiffs can expect this statute to play a role in most any claims for negligent failure to procure insurance brought against insurance agents and agencies in the future.
NOTE: This opinion was released three months after oral arguments in this case.