### IN THE COURT OF APPEALS OF TENNESSEE, AT NASHVILLE September 2001 Ses sion

VANDAL DOSS V

. TENNE SSE E FARME RS MUTUA L I NSURANC E COMPANY

Appeal from the Circuit Court for Sumner County No. 19338-CTom E. Gray, Chancellor

___________________ NO. M2000-01971-COA-R3-CV - Filed Dec ember 10, 2001

___________________

This is an appeal from the Judgment of the Chancellor for Sumner County , Tennessee, dismissing Vondal Doss’s Complaint against Tennessee Farmer s Mutual Insurance Company, alleg ing breach of contract for failure to make pay

ment for medical expenses pursuant to the medical pay ment coverage contained in two insuranc e policies and the Defendant’s Counter-Complaint for subrogation. Doss had suff ered a personal injury

as a result o f an auto

accide nt which o ccurre d on April 8 , 1993 invo lving a t hird-pa rtytortfeasor. Plaintiff/Appellant filed a Motion to Appeal on August 2, 2000. The Judgment of the Chancellor is affirmed on all counts. Doss’s claim for additional post-settlement medical payme

nts is denied as a result of the execution of the Release and Order of Compromise and Settlement which extinguished Tennessee Farmers’ subrog ation rights. Tennessee Farmers’ claim for reimbursement is denied. Costs of this Appeal are assessed to the Appellant.

Tenn.R.App.P.3 Appeal as of Right; Judgment of the Circuit Court Affirmed

D ON R. A SH , S.J., delivered the opinion of the court, in which W IL LI AM B. C AIN , J. and B EN H. C ANT RELL , P.J., joined.

OPINION

I.

Plaintiff/Appellant Vondal Doss suffered a personal injury as a result of a motor vehicle accident on April 8, 1993. She was a passeng er in a car owned and driven by her daughter, Angie For

d. The accident occurred when a truck driven by Jimmy

Gotcher turned left directly

into the path of the Ford vehicle. At the time of the accident, Vonda l Doss and Angie Ford were both insure d by automobile policies written and issued by Defendant/Appellee Tennessee F armers Mutual Insuranc e Company (her ein after “Tennessee Farmers”) which contained medical pay ment coverage with limits of $5,000.Appellant was eligible for medical pay ment coverage under both policies for a grand total of $10,000. At the time of the accident, Jimmy Gotcher was also insured by a

n automobile policy written and issued by Farmers Insur

ance Exchange that carried a liability limit of $25,000.

Shortly after the a

ccident on April 8, 1993, Doss sought and received $3,000 as compensation for her initial medical expenses under the terms of two insurance policies written b y Te

nnessee Farmer s. Tenne ssee Fa

rmers wa s under a

contractual oblig ation to make payme

nt for medical expenses up to the liability limit of $10,000. I t is uncontested in this matter the insured’s medical expenses totaled $46,000. Mike Delk, agent of Tennessee Farmers, advised the Plaintiff’s husba nd the insurer was prepared to make the payment of an a

dditional $7,000 under the applicable insurance policies if the insured accepted the $25,000 limit of the Gotcher insurance policy . Delk indicated Tennessee Farmers would not make such pay ment if suit was filed against Jimmy Gotcher seeking damage s in excess of the $25 ,000 polic y lim it. Vonda l Doss ele cted to f

ile suit ag ainst the third p arty

tort-fe asor, Jimmy

Gotcher and the Sp

ringfi eld Printin g busine ss on April 14, 1994 rather than pursue a second demand on Te nnessee Farmers for the re maining $7,000 of medical coverage. Te nnessee Farmers was also serve d with a copy of the Complaint, pursuant to T.C.A. § 56-7-1201. et. seq. Tennessee Farmers filed a Notice of Appearance as an uninsured motorist carr ier on April 27, 1994. On May 27, 1994, a n Agreed Order was e

ntered whereby

Tennessee Farmers was dismissed from the third party tort claim.

The third -party

tort-fe asor, Jimmy

Gotcher and Spring

field Of fice Ma chines & Printing filed for bankruptcy under Chapter 11 six days prior to the trial with Doss. On October 27, 1997, a settlement was reached be tween the Plaintiff and Gotcher, for a total
pay ment of $6 0,000. Fa

rmers I nsuranc e Exchang e paid its p olicy limit of $25 ,000 while the rema ining $35 ,000 was p aid by some comb ination of

the Gotch

ers and Sp

ringfi eld Printing. As a result of this settlement, Plaintiff executed a Release and an Orde r of Compromise and Settlement forever releasing the third par ty tort-feasor

from any liability arising from the A

pril 8, 199 3 accide

nt and dism

issing the tort cla

im with prejudice. The bankruptcy petitions of Jimmy Gotcher and Springfield Off ice Machines & Printing were ultimately dismissed by Order of the U.S. Bankruptcy

Court on November 13, 1997.

The insured subsequently f iled suit against Tennessee Farmers on Ma rch 22, 1999, alleging breach of c ontract for failure to make pay ment of the remaining $7,000 pursuant to the medical pay ment provision of the two insurance policies. On March 29, 2000, Tennessee Farmers filed its Answer de nying c overage and a Counter-Complaint seeking reimbursement of the $3,000 pay ment.

This caus e was he ard bef ore Hono rable To m E. Gray , Chancellor of the Circuit Court of Sumner County, Tennessee at Gallatin on April 12, 2000. Based on the evidence, the Chancellor found Doss was not made whole bythe settlement of the thirdparty tort claim for

$60,000. However, the Chancellor further held Te nnessee Farmers was under no obligation to make additional medical pay ments to the insured since theinsurer did not consent to the settlement and was not consulted. The Chancellor

dismissed the Complaint and the Counter Complaint and assessed costs against each party re spectively. II.

The following issues are before the c ourt: (A) whether the insured’s final settlement and release of the third party tort-feasor affects either her claim for additional post-settlement compensation under the insurance policy or the insurer’s claim for subrogation; and (B) whether the ma de-whole doctrine espoused in York v. Sevier County Ambulanc e Author

ity , 8 S.W.3d 616 (TENN.1999), affects either the insured’s claim for additional medical pay ments or the insurer’s claim for subrogation when the thi rd pa rty tor t-f ea sor ha s been re le as ed ?

III.

A. Doss argues the third-party tort-feasor’s filing for bankruptcy and invocation of the automatic stay destroy ed Tennessee Farmers’ c laim for subrogation. Doss further argues her settlement of the third-par ty tort claim is irrelevant to her claim for additional medical payme

nts under the provisions of the insurance policies with Tennessee Fa rmers or the insurer’s allegedly

non-existent subrogation claim. The appellant’s arguments ar e mistaken. The invocation of the automatic stay does not destroy or e

xtinguish a creditor’s claim against the debtor. The a utomatic stay is merely

a temporary

relief that precludes collection efforts aga inst the claims of debtors who have filed for bankruptcy

. The bankruptcy

court permits creditors to seek relief from the automatic stay under Section 362 and may allow c reditors to pursue the collection of their debts under appropriate circumstances. The filing of the bankruptcy pe

titions by Jimmy Gotche

r and Springf ield Off ice Mac hine & Pr

inting di d not exting

uish the in surer’ s subrog ation cla im and is irrelevant to the disposition of the respective claims of Vondal Doss and Tennessee Farmers.

Doss’s settlement of the third party tort claim had a significant impact upon Tennessee Farmers’ subrog ation claim. The right of subrogation was cr eated at common law under principles of equity and natural justice. Castleman Constr. Co. v. Pennington

, 432 S.W.2d 669 at 675 (Tenn.1968). Subrogation was created in order to prevent an insured from obtaining a double recovery for the same loss and to assure the tort-feasor compensate the insurance company for payme

nts made to the insured. Wimberly v. Am. Cas. Co. of

Reading , Pennsy

lvania

, 584 S.W.2d 200at 203 (Tenn.1979). The courts of Tennessee allow an insurer to claim subroga tion under the medical pay ment provisions of its policy. Wilson v. Tennessee Farmers Mutual I nsurance Company , 411 S.W.2d 699 (1966). T he public policy of insura nce con template s that insur

ance ca rriers s hall have

all rights of recovery

against the tort-feasor that the insured would have up to the amount paid by the insur er. Ten nessee Farmers r

eserve d a righ

t of subro gation t

hrough the terms of the insurance policy

and enjoyed ide

ntical rights to those of Doss. Thus, the insured extinguished the rights of Tennessee Far mers under their claim for subrogation when she relinquished her rights through the execution of the Relea se and the Order ofCompromise and Settlement. McGee v. County of Wilson , 574 S.W.2d 744 at 747

(Tenn.App. 1978).

An additio nal consequence of the se ttlement isthat Plaint

iff/Appe llant’s a bility to

rec ove r ad di ti ona l co mp ens ati on f rom Ten nes see Far mer s wa s pr ecl ude d or for fei ted . If an insured destroy s an insurer’s subrogation rights after payment, the insured f

orfeits any rights of recovery

against the insurance carrie r. Aetna Casualty a

nd Surety Company

v. Tennessee Farmers Mutual I nsurance Company , 867 S.W.2d 321 at 323 (Tenn.Ct.App. 1993). Con sequentl

y, t his court affirms the deci sion of the Chancel lor and ho lds Doss’ claim for additional post-settlement medical pay ments is denied as a result of the execution of the Release and Order of Compromise and Settlement which extinguished Tennessee Farmers’ subrog ation rights.

B. The court must now consider whether the made-whole doc trine espoused in York v. Sevier County Ambulanc e Author

ity , 8 S.W.3d 616 (TENN.1999), affects either the insured’s claim for additional medical pay ments or the insurer’s claim for subrogation when the third party

tort-feasor has been release d. Complete compensation of the insured i s gene

rally a prerequisite to t

he righ t of subro gation u

nder wha t has bec ome known as “the made whole doctrine” or the “f ull recovery

principle.” York v. Sevier County Ambulanc e Author

ity

, 8 S.W.3d 616 (Tenn.199 9); Wimberly v. Am. Cas. Co. of Reading , Pennsy

lvania

, 584 S.W.2d 20 0at 203 (Tenn.1979 ). Courts h ave con sistently balance d the equi

ties in subr

ogation cases by holding t hat the in surer mu st bear th e loss when all of the damages to the victim are not fully compensated by the

tort-feasor because that is a risk it has been paid to assume. Wimb erly v. Am . Cas. Co. o f Read ing, Pennsy lvania

, 584 S.W.2d 200at 203 (Tenn.1979).

It is uncontested in this matter Plaintiff/Appellant was not made whole in spite of the settlement of the tort claim against Jimmy Gotche r for an amount in excess of her stated medical expenses. Typic ally, the made whole doctrine espoused in York v. Sevier County Am bulance A uthority would ope rate to p reclude an insure r from exe

rcising their right of subrogation where the insure d was not fully compensate d for their injuries. However, Appellee correctly recites the e xception to the made whole doctrine under Tenness ee law ( espoused in an unre

ported decision) w

here the insurer did not par

ticipate in the settlement negotiations surrounding the tort claim and did not waive their rig ht of subrogation. “If

the insurer claiming subrogation did not participate in the settlement negotiations between the insured and the third party tort-feasor and waived no rights, it’s subrogation claim must be honored and the made-whole doctrine has no application.” Tennessee Farmers Mutual I nsurance Company

v. Farmer

, 1998 Tenn.App. LEXI S 581; Eastwood v. The Glens Falls Ins. Co., 646 S.W.2d 15 6 (Tenn. 1983); Aetna Casualty a nd Surety Company

v. Tennessee Farmers Mutual I nsurance Company , 867 S.W.2d 321 at 323 (Tenn.Ct.App. 1993). The present facts provide that Tenne ssee Farmers’ right of subrogation was extinguished by Vondal Doss’ settlement of the third-party tort claim. Tennessee Farmers neither pa rticipated in the settlement negotiations with Gotcher nor consented to the Release and Order of Compromise and Settlement. The Chancellor specific ally

found tha

t, “No not ice of se ttlement w as give

n to Tenne ssee Fa

rmers Mut

ual, and Tennessee F armers M utual is no t involved

the settle ment. The

y di d not conse

nt tothe settlement; they did not waive their subr ogation claim.” (R. Page 80 L ines 20-24). Tenness ee Far

mers con tends tha t their cl aim for su

broga tion must be

honored as a consequence of their exclusion from the settlement of the third-party tort claim by the insured under Tennessee Farmers Mutual I nsurance Company

v. Farmer

. The appellee omits reference to anothe r relevant passage in Tennessee Farmers Mutual Insurance Company v. Farmer where the court acknowledg es the insurer’s subrogation claim will be defeated even thoug h the insured settled the tort claim without the knowledge of the insurer where the parties have either agreed the insured has not been mad e whole b y the tort re covery , or the underly ing facts are c lear the

recove ry did not make the insured whole. Tennessee Farmers Mutual I nsurance Company

v. Farmer

, 1998 Tenn.App. LEXI S 581. This court is precluded from speculating Vondal Doss was made whole through her voluntary acceptance of a settlement offe r of $60,000, an amount which exceeded her $46,000 in medical expenses, because it is undisputed by the parties in this case the Appellant was not made whole. Thus, this court concludes that Tenness ee Far

mers’ sub rogati on claim isnot valid u nder the principle s of Tennessee Farmers Mutual Insurance Company v. Farmer

. This court affirms the decision of the Chancellor and holds that Tennessee Farmer s’ claim for reimbursement is denied.

***

IV.

This cour t conclud es that Vo ndal Doss ’ claim f or an add itional $7, 000 of pos tsettlement medical payme nts is denied, and Tennessee Farmers’ c laim for reimbursement in th e a mo un t o f $ 3, 00 0 i s d en ie d. Th e J ud gm en t o f t he Ch an ce ll or fo r S um ne r C ou nt y, Tennessee is affirmed on all counts. Costs of this Appeal are asse ssed to the Appellant.

________________________ DON R. ASH, SPECIAL JUDGE