IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

JANUARY 17, 2006 Session

HEALTH COST CONTROLS, INC. v. RONALD GIFFORD

Direct Appeal from the Chancery Court for Weakley County

No. 15726 William M. Maloan, Chancellor

No. W2005-01381-COA-R3-CV - Filed March 20, 2006

This is not the first time this case has been on appeal. In this appeal, we are asked to determine if

the chancery court erred when it found that an insured individual was made whole by a settlement

agreement with a third party tortfeasor so as to require the insured to reimburse his insurer.

Specifically, Appellant contends that the chancery court erred in finding that the insured was not

made whole because it failed to use the formula method used by federal courts for determining

whether an insured is made whole and failed to engage in an analysis of the dollar amounts of the

insured’s recovery and losses. We reverse and find that the insurer is entitled to reimbursement from

the insured. 

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

ALAN E.HIGHERS,J., delivered the opinion of the court, in which W.FRANK CRAWFORD,P.J.,W.S.,

and HOLLY M. KIRBY, J., joined.

John M. Russell, Thomas H. Lawrence, and Julie Y. McLaughlin, Memphis, TN, for Appellant

H. Max Speight, Dresden, TN, for Appellee
 Rule 10 of the Rules of the Court of Appeals of Tennessee governs the issuance of Memorandum Opinions,

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which states:

This Court, with the concurrence of all judges participating in the case, may affirm,

reverse or modify the actions of the trial court by memorandum opinion when a

formal opinion would have no precedential value. When a case is decided by

memorandum opinion it shall be designated “MEMORANDUM OPINION”, shall

not be published, and shall not be cited or relied on for any reason in any unrelated

case.

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MEMORANDUM OPINION1

I. FACTS & PROCEDURAL HISTORY

This is not the first time this case has been on appeal. In a previous opinion rendered by the

Tennessee Supreme Court concerning this case, it noted the following pertinent factual and

procedural history:

Ronald Gifford [(“Gifford” or “Appellee”)], the County

Executive of Weakley County, Tennessee, was seriouslyinjured in an

automobile accident while a passenger in a vehicle driven by his

brother and owned by his mother. Gifford’s mother, who was also a

passenger, later died as a result of injuries from the accident.

Gifford was insured at the time of the accident through a

Prudential Insurance Company group policy insuring Weakley

County employees for medical benefits. On Gifford’s behalf,

Prudential paid under the policy $37,795.08 for medical expenses

incurred because of injuries in the accident.

Gifford’s separate tort claim for his personal injuries was

based on the negligence of his brother, the driver of the car, imputed

to his mother, the owner of the car. The tort claim was settled by State

Farm Insurance Company, Gifford’s mother’s liability insurance

carrier, by the payment of $100,000 - the limit under her policy.

After State Farm Insurance Company made the $100,000

payment to Gifford, Health Cost Controls, Inc., (“HCC” [or

“Appellant”]), Prudential’s assignee, demanded reimbursement from

Gifford of the $37,795.08 paid by Prudential for his medical

expenses. HCC’s claim for reimbursement relied upon terms in

Gifford’s policy entitled “Benefit Modification for Third Party

Liability,” which included the following:
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A. This Modification applies when a person, other

than the person for whom a claim is made, is

considered responsible for a Sickness or Injury. To

the extent payment for the Sickness or Injury is made,

or may be made in the future, by or for that

responsible person (as a settlement, judgment or in

any other way):

(1) charges arising from that Sickness or Injury are

not covered; . . . .

B. But when a claim is received by Prudential,

benefits which would be payable except for A above

will be paid if:

(1) payment by or for the responsible person has not

yet been made; and

(2) the Covered Person(s) involved (or if incapable,

that person’s legal representative) agrees in writing

to pay back promptly the benefits paid as a result of

the Sickness or Injury to the extent of any future

payments made by or for the responsible person for

the Sickness or Injury. . . .

(Emphasis added). Gifford refused to reimburse the expenses.

HCC filed this action for reimbursement seeking return of the

payment for medical expenses on the theory that the payment had

been made by mistake and moved for summary judgment based on

the “third party liability” terms of Gifford’s policy with Prudential.

The trial court concluded that the provisions in the policy set out

above denied coverage for an injury caused by a third party on whose

behalf payment is made by “settlement, judgment, or in any other

way.” The trial court did not consider the made whole doctrine,

although HCC had filed an affidavit stating that $44,000 of the

payment was for Gifford’s medical expenses and that the remaining

$ 56,000 of the payment was for Gifford’s pain and suffering.

Accordingly, the trial court granted summary judgment in favor of

HCC and ordered Gifford to reimburse HCC for the medical expenses

that had been paid by Prudential.
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The Court of Appeals held that the medical expenses payment

was not covered under the policy, that Prudential’s payment was

based on a mistake of fact, and that the trial court properly granted

summary judgment. Before oral argument, however, this Court

released York v. Sevier County Ambulance Authority, 8 S.W.3d 616

(Tenn. 1999), in which we held that an insured must be made whole

based on equitable principles before an insurer is entitled to

reimbursement, regardless of policy language. Gifford, who had

pleaded the made whole doctrine in the trial court as a defense,

discussed York in oral argument in the Court of Appeals as

controlling authority in this case. On application for appeal, we

remanded the case to the Court of Appeals to consider York. On

remand, the Court of Appeals once again affirmed the trial court’s

summary judgment after determining that York was inapplicable and

that “Gifford did not carry his burden of establishing that he was not

made whole.” 

Health Cost Controls, Inc. v. Gifford, 108 S.W.3d 227, 228-29 (Tenn. 2003). The Tennessee

Supreme Court reversed the decision of this Court, finding that its decision in York v. Sevier County

Ambulance Authority, 8 S.W.3d 616 (Tenn. 1999) was applicable and that the made whole doctrine

applied in this case. Id. at 231. The Tennessee Supreme Court remanded the case to the trial court

to make a factual determination of whether Gifford was “made whole” by his settlement. Id.

On remand, the chancery court found that 

[i]n light of the severity of the physical and emotional injuries, and

the medical bills incurred, the Court finds Gifford has not been made

whole by the settlement proceeds in this case and, therefore, HCC is

not entitled to reimbursement of the $37,795.08 it paid in medical

bills on behalf of Gifford.

II. ISSUE PRESENTED

Appellant has timely filed its notice of appeal and presents the following issue for review:

1. Whether the chancery court erred when it found that Appellee was not “made whole” by his

settlement.

For the following reasons, we reverse the decision of the chancery court.

III. STANDARD OF REVIEW
 This Court is cognizant of the fact that when the chancery court attempted to determine whether Appellee

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was made whole, it used the amount recovered by Appellee from the settlement agreement as the total amount of recovery

as a basis to determine whether Appellee was made whole. When determining whether an insured is made whole, a court

must make its determination in light of the total recovery, which in this case not only included the amount of the

settlement agreement but also included the amount paid by Appellant and another insurer of Appellee for his medical

expenses. See Wimberly v. Am. Cas. Co., 584 S.W.2d 200, 203-04 (Tenn. 1979) (determining total recovery by insured

by adding amounts recovered by insured from two different insurers).

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This Court reviews findings of fact by a trial court sitting without a jury under a de novo

standard with a presumption of correctness for the trial court’s findings. Tenn. R. App. P. 13(d).

This Court reviews a trial court’s conclusions of law de novo with no presumption of correctness for

the trial court’s conclusions. Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993)

(citing Estate of Adkins v. White Consol. Indus., Inc., 788 S.W.2d 815, 817 (Tenn. Ct. App. 1989)).

IV. DISCUSSION

On appeal, Appellant contends that the chancery court erred when it found that Appellee was

not made whole by his settlement agreement so as to require Appellee to reimburse Appellant for

the medical expenses Appellant paid for on behalf of Appellee. We agree.

Recently, this Court found in Abbott v. Blount County, No. E2004-00637-COA-R3-CV,

2005 Tenn. App. LEXIS 469, at *23 (Tenn. Ct. App. Aug. 9, 2005) (perm. app. filed), that where

a trial court “made no findings of any damage amount other than medical expenses of $223,000, .

. . [and] simply stated that in light of the severity of [the insured’s] injuries, neither the $1,275,000

out-of-court settlement nor any amount of money could possibly make her whole” was “neither proof

nor finding of damages.” Id. at *22-23. In doing so, this Court stated that “[c]ompensable damages

must be proved in compensable terms; in other words, theymust be valuated monetarily.” Id. at *23.

 Further, this Court concluded that “the burden of proof is on the insured to demonstrate that the

settlement did not make her whole in light of all the facts . . . .” Id. at *23-24 (citing Tenn. Farmers

Mut. Ins. Co. v. Farmers, No. 03A01-9610-CH-00327, 1998 Tenn. App. LEXIS 581, at *3 (Tenn.

Ct. App. Aug. 20, 1998) (no perm. app. filed)). We find this rationale to apply in this case as well.

At trial, while the chancery court found that Appellee was not made whole by the settlement

agreement and determined the amount of medical damages Appellee incurred, it did not assign a

monetary amount to the injuries Appellant suffered from the accident. Rather, the chancery court

made specific findings as to what injuries Appellant suffered. In this case, the only monetary

damages that the chancery court found that Appellee incurred was the amount of Appelle’s medical

expenses, which the chancery court stated was in excess of $45,000. From the limited record before

us on appeal, we can find no evidence that Appellee presented as to the monetary value of his

injuries. Appellee has recovered $100,000 for his injuries from the settlement agreement,

$37,795.08 from Appellant for medical expenses incurred from his injuries, and $7,358.95 from

another insurer of Appellee, bringing Appellee’s total recovery to $145,154.03. As his total 2

recovery is in excess of the amount of damages proved at trial, we conclude that Appellee was made
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whole by the settlement. Accordingly, we reverse the decision of the chancery court and find that

Appellant is entitled to reimbursement from Appellee.

V. CONCLUSION

For the aforementioned reasons, we reverse the decision of the chancery court and find that

Appellant is entitled to reimbursement from Appellee because Appellee was made whole from his

settlement agreement. Costs of this appeal are taxed to Appellee, Ronald Gifford, for which

execution may issue if necessary.

___________________________________ 

ALAN E. HIGHERS, JUDGE