After decedent was killed when hit by a vehicle while riding her bicycle, her surviving spouse brought claims against various parties, including a claim against decedent’s insurance provider for negligent misrepresentation and negligent failure to procure insurance. Because these claims were based in tort rather than wrongful death, the Court of Appeals ruled that they accrued to the decedent at the time of her fatal injuries and the settlement proceeds should have been distributed to her estate, not to her surviving spouse.
In Sanders v. Higgins, No. M2022-00892-COA-R3-CV (Tenn. Ct. App. Aug. 29, 2023), plaintiff was the surviving spouse of decedent, who was killed when she was hit by a vehicle while riding her bicycle. Plaintiff brought various claims against several defendants, but the one at issue in this appeal was a claim for negligent misrepresentation and negligent failure to procure insurance against decedent’s insurance company. According to plaintiff, the insurer had misrepresented to plaintiff and decedent that an umbrella policy had been reinstated, and plaintiff did not learn until after decedent’s death that the policy reinstatement never occurred.
The parties reached a settlement on the negligence claims, and the trial court ordered disbursement of the settlement proceeds to plaintiff as surviving spouse. The trial court ruled that the settlement proceeds were compensatory damages to plaintiff, “encompassing the amount of coverage [plaintiff] would have received as a result of the Decedent’s death had an umbrella policy been in place.” Decedent’s estate appealed this ruling, arguing that the tort claim proceeds should have been distributed to the estate. On appeal, the trial court was reversed.
On appeal, the Court explained that “the essential dispute [was] whether the settlement proceeds at issue arose from a wrongful death claim and are therefore payable to [plaintiff] as Decedent’s surviving spouse or whether the proceeds stem from a tort claim over which [plaintiff’s] right to control the action on Decedent’s behalf does not equate to a right to receive the proceeds from the action.” The estate argued that the cause of action was based on tortious conduct that occurred prior to decedent’s death, and that while Tennessee’s survival statute authorized plaintiff to control the action as the surviving spouse, the settlement proceeds nonetheless belonged to Decedent and therefore her estate. The Court of Appeals agreed.
Tennessee’s survival statute is found at Tenn. Code Ann. § 20-5-102, and it directs the steps to be followed when a person dies while a civil action he or she filed is pending. The trial court had found that the statute could not apply because the suit was not pending before decedent’s death, but the Court of Appeals disagreed, ruling that at least the portion of the statute dictating the payment of proceeds was applicable.
The Court of Appeals wrote that the claim against the insurance carrier was not one for wrongful death, as the insurance carrier did not cause decedent’s death. Instead, “Decedent did have a cause of action against the [insurance] defendants that accrued, or vested, at the time of her death, namely for the torts of negligent failure to procure insurance and negligent misrepresentation[.]” The action that was settled was for the insurance company’s wrongdoing prior to decedent’s death, as it was based on the representations that the umbrella policy had been reinstated. The Court ruled that “the injury of non-coverage under the Umbrella Policy was to Decedent, and the tort claims of negligent misrepresentation and negligent failure to procure insurance belonged to her.”
Plaintiff asserted on appeal that the tort claims were inseparable from the wrongful death action, but the Court of Appeals held that while control of the tort claims passed to plaintiff under Tennessee statutory law, the right to control the action “did not assume the right to proceeds recovered from the tort action.” Instead, the proceeds belonged to the estate. And while the trial court based its decision in part on its finding that the cause of action could not have belonged to decedent because it vested after her death, the Court of Appeals found that this analysis was a misinterpretation of the discovery rule. The Court stated that the cause of action against the insurance defendants “accrued, or vested, when the tort was complete and injury to Defendant had occurred, which we determine to have been when Decedent was fatally injured without the Umbrella Policy coverage she had purportedly been led to believe she possessed.” While the discovery rule may have tolled the statute of limitations, “Decedent’s cause of action had nonetheless accrued.”
Ultimately the Court held that “the action resulting in the settlement proceeds at issue was based in tort rather than wrongful death and that it was Decedent’s cause of action,” and that although plaintiff had a right to control the action, the settlement proceeds should be distributed to decedent’s estate. The trial court was accordingly reversed.