Rebuttable Presumption of Acceptance of Insurance Policy Terms Applies in Actions against Insurance Agents - Talat Parveen, et al. v. ACG South Ins. Agency
The Tennessee Supreme Court recently decided a case involving an issue of first impression: whether Tennessee Code Annotated Section 56-7-135(b)’s rebuttable presumption (the “Rebuttable Presumption”) of acceptance of an insurance policy’s terms by payment of premiums applies to an insured’s action against an insurance agent for negligent failure to procure the requested coverage. Parveen, et al. v. ACG South Insurance Agency, LLC, et al., 2020 WL 7086157 (Tenn. Dec. 4, 2020).
Parveen is noteworthy for lawyers and non-specialists alike, because it provides newfound clarity on Tennessee’s interpretation of a law that impacts insurance policyholders, agents who procure policies for individuals and businesses, and the burden of proof for litigants in actions against insurance agents. With Parveen’s significance in mind, let’s look at the case...
How Did the Case Arise?
The case arose from the purchase of a personal umbrella insurance policy by a couple (“Plaintiffs”) who moved to Tennessee from Georgia in 2013. Before becoming Tennessee residents, the Plaintiffs had a personal umbrella liability policy that provided $2,000,000 in excess uninsured motorist coverage. When they moved to Johnson City in March 2013, one of the Plaintiffs met with an insurance agent (the “Insurance Agent”) for ACG South Insurance Agency, LLC (“ACG”) to obtain replacement auto, umbrella, and renters insurance policies on behalf of both Plaintiffs. The Plaintiffs maintained that the Insurance Agent was provided with a copy of the policies the Plaintiffs held in Georgia and explained that the Plaintiffs wanted the exact coverage in Tennessee.[1]
After the initial meeting, the Insurance Agent provided a quote for a personal umbrella policy through Safeco Insurance Company of America (“Safeco”). A copy of the quote provided to the Plaintiffs had no line item for excess uninsured motorist coverage, and the policy's premium did not reflect the inclusion of such coverage. The Plaintiffs purchased the Safeco umbrella policy, received a copy of the declarations page, and paid the premiums. The Safeco umbrella policy was then renewed for two (2) subsequent years (the “Safeco Policies”). Notably, the Safeco Policies contained an exclusion for uninsured/underinsured motorist coverage (“UM Coverage”) unless endorsed for such coverage, which they were not. Id.
In November 2015, one of the Plaintiffs was involved in a car accident that resulted in both personal injuries and the vehicle’s total loss.[2] In the aftermath of the accident, the Plaintiffs discovered that the Safeco umbrella policy did not include excess uninsured motorist coverage. A suit was filed in February 2016 against the driver, a wrecker service company, and Safeco. Safeco was dismissed on summary judgment based on the lack of UM Coverage.[3]
The Plaintiffs’ Separate Action Against the Insurance Agent and ACG
This is where Parveen gets interesting. In December 2016, the Plaintiffs filed another lawsuit – this time, against the Insurance Agent and ACG (the “Defendants”), alleging that the Insurance Agent negligently failed to procure the requested excess UM Coverage. The Defendants moved for summary judgment (the “MSJ”) under Tennessee Code Annotated § 56-7-135 (“the Statute”), because the Plaintiffs could not meet their burden of overcoming the Rebuttable Presumption that, by paying the premiums for the Safeco Policy, they accepted it without excess uninsured motorist coverage. Id.
The trial court granted the Defendants’ MSJ after finding that the Plaintiffs paid the premiums for the Safeco Policies. In doing so, it concluded that the Statute created a rebuttable presumption that the Plaintiffs accepted the coverages in the Safeco Policy, which did not include excess uninsured motorist coverage.[4]
The Appeal Leading to the Tennessee Supreme Court Ruling
The Plaintiffs appealed the trial court’s grant of the Defendants’ MSJ, and the Court of Appeals reversed, holding that the statutory presumption did not apply to actions against an insurance agent. In reversing the trial court’s decision, the Court of Appeals “specifically focused”[5] on the Statute's use of the phrase “under the contract.”[6]
Essentially, the Court of Appeals stated that the Statute creates a rebuttable presumption that insured parties under a policy accepted the coverages and the “General Assembly intended to restrict the application of the statute to actions between the parties to the insurance contract.”[7] Thus, the Court of Appeals held that, because only the parties to an insurance contract accept the coverages therein, the Statute’s application was narrowly limited to actions between the parties to the contract – i.e., the insured and its insurance company. The “big picture” effect of that decision removed the Statute’s Rebuttable Presumption from all actions that did not involve parties to an insurance contract.[8]
The Tennessee Supreme Court granted the Defendants’ appeal to address whether the Rebuttable Presumption in the Statute applies to actions against insurance agents even though they are not parties to the policy.[9]
What Exactly Does the Statute Say?
Tennessee Code Annotated § 56-7-135(b) provides:
(b) The payment of 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.[10]
Put simply, the Statute provides that if an insured pays a policy premium, then there is a rebuttable presumption that the coverages contained in the policy were accepted by everyone insured under the policy. Nothing more, nothing less. The Supreme Court said the Statute’s language “is clear.”[11]
What Did the Parties Argue on Appeal to the Tennessee Supreme Court?
Summarily, the Plaintiffs argued that the Rebuttable Presumption does not apply to cases against insurance agents.[12] The Plaintiffs argued that allowing the Rebuttable Presumption invocation by the Insurance Agent, who was not a party of the contract, would be in derogation of the common law (which requires express statutory language stating such). The Plaintiffs contended that the common law elements of a claim against an insurance agent for failure to procure claims focus exclusively on the agent’s acts and that the purchaser’s actions are irrelevant.[13]
The Supreme Court’s opinion seemed to acknowledge and appreciate the Plaintiffs’ arguments regarding the Statute’s text and intent, but the Defendants’ arguments were more compelling, and the Court was inclined to agree with them.
The gravamen of the Defendants’ issues with the Court of Appeals’ decision was that the court erred by “isolating the phrase ‘under the contract’ . . .” thereby resulting in a forced interpretation. The Defendants argued that that particular language only served to define the class of persons to whom the presumption applied, but not claims or legal theories.[14]
What Did the Supreme Court Have to Say About the Debacle?
The Supreme Court recognized the public impact and courtroom-related ramifications of the well-reasoned opinion of the Court of Appeals, and it issued a practical, straightforward explanation as to why the Rebuttable Presumption applies in all actions arising out of the procurement of and payment for insurance coverage but does not restrict the rights of plaintiffs in such actions.
Important to the Supreme Court was “the single statutory sentence at issue . . .”, which was: “The payment of 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.”[15] The Court found that the phrase “under the contract”. . . ‘simply modifies’ the word ‘insureds’”, and “clearly refers only to those against whom the rebuttable presumption applies – ‘all insureds’ – and not to the persons or entities by whom the presumption may be asserted.” That the Statute says “under the contract” serves to let litigants know that the Rebuttable Presumption only applies to the insureds under the contract at issue.[16]
The issue of legislative intent was briefly addressed, but the Supreme Court did not perform an inquiry and analysis of that intent because the language of the Statute was clear. The Statute is “silent about the legal claims to which the Rebuttable Presumption applies and as to which persons or entities may rely on the presumption.”[17] As explained, this silence clearly suggests that, where acceptance or existence of coverage is called into question, the Rebuttable Presumption is applicable. The Supreme Court also made sure to explain that the ruling does not change or reject the common law because it does not repeal any common law cause of action against insurance agents. The Statute is procedural and deals with burden shifting.[18]
Finally, the Supreme Court was clear that the Parveen decision thoughtfully considered the rights of potential plaintiffs in Tennessee. It explained that the ruling does not result in a material change to the rights of any potential plaintiffs in an insurance procurement action. Potential plaintiffs may still obtain redress from a negligent agent who does not obtain requested coverage – the plaintiff merely needs to put forth evidence to refute the Rebuttable Presumption.
How Might Parveen Apply to Me?
Non-lawyers reading this who are still awake may be thinking, “that was a lot of legal jargon” and “how does all of this apply to me?”.
Insureds and Potential Insureds: If you are someone with insurance or who is looking to procure new insurance, the Parveen case has made it abundantly clear that if you pay for premiums for your policy, a court is going to presume that you knowingly accepted the coverages and exclusions outlined in the policy. And if you need to sue because your policy does not contain the coverages you expected, you will need to present evidence to refute the presumption that you accepted a policy that did not have the coverage you wanted.
What should you do?
· First and foremost: read your policy. Really, read it. Read the declarations page. Know what it says about coverage dates, coverage types, exclusions, limits, etc. Cross-reference to parts of the policy with the endorsements and exclusions mentioned in your policy’s coverage sections.
· Second: read your renewal policies. Sometimes innocent mistakes can happen! Reading renewals will allow you to catch them.
· Third: communicate with your insurance agent in writing. If you have a question about your policy or coverages, send it in an email or letter. It could be the evidence you need down the road if, for some unexpected reason, your policy does not contain the coverage that you wanted.
Insurance Agents: If you are an insurance agent who is sued for failure to procure coverage, the Supreme Court has made clear that the Rebuttable Presumption will apply in that case. However, as the Supreme Court more-eloquently explained, the Rebuttable Presumption is not a “get out of jail free card” for anyone. Make sure that every policy you procure has every coverage your clients have requested. Check your policy applications and coverage requests before new policies bind. It will make life easier for both you and your clients in the long run.
If you need help reviewing a policy/or defending a policy you procured, please contact Meridian Law at (615) 229-7499, info@meridian.law, or www.meridian.law to schedule a free consultation and discuss your options. Although we are practicing “social distancing” at this time we are available by phone, videoconferencing, and email to discuss your options.
Edward “Drew” Voelker IV
[The information provided above is not intended to constitute legal advice. It is for general informational purposes only. Readers should contact an attorney to obtain advice regarding any particular legal matter. No reader should act or refrain from acting based on information on this site without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein is applicable to your particular situation. Use of this website do not create an attorney-client relationship between the reader or the website authors or contributors.]
[1] Parveen, Id. at *1.
[2] It is worth noting that the Plaintiff that was involved in the car accident was not the Plaintiff who met with the Insurance Agent and negotiated/submitted the requests for coverage(s). She was an insured under the Safeco Policy.
[3] Id. at 2.
[4] Id. (The Plaintiffs never introduced evidence to overcome the Rebuttable Presumption., so summary judgment was appropriate.)
[5] Quotes in original.
[6] Id. at 4.
[7] Id. at 5 (emphasis added).
[8] Id. at 3-5.
[9] Id. at 3.
[10] Subsection (a) was not at issue on appeal, so the Supreme Court did not analyze or apply it.
[11] Id. at 6.
[12] Id. at 4.
[13] Id. at 6.
[14] Id. at 5 (emphasis added).
[15] Id. at 5 (citing Tenn. Code Ann. § 56-7-135(b)).
[16] Id. at 6.
[17] Id. (emphasis added).
[18] Id.