### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE October 16, 2001 Se ssion TIP'S PACKAGE STORE, INC., ET AL 

### . v. COMMERCIAL INSURANCE MANAGERS, INC., ET AL 

### . Appeal from the Chancery Court for Knox County No. 117251-3 Sharon J. Bell, Chancellor FILED DECEMBER 11, 2001
No. E2000-02070-COA-R3-CV

Plaint iffs H. Way

ne Tipton ( “Tipton” ) and Tip’ s Packag e Store, I nc., (Tip ’s) brou ght this lawsui t agains tGeorge P. Tay

lor (“Taylo r”) and Commercial Insur ance Managers, I

nc., (“Commercial”) seeking indemni fication for an agreed judg ment entered against Tip’s in a lawsuit involving the tragic deaths of

two y oung Un

iversity of Tenne ssee stud

ents. Plain tiffs cla

im that Defendant s improper ly obtained for them a

n “occu rrence ” liability

policy as oppose d to a “claims made” liability po li cy, thereby r

esulting in a lack of insurance covera ge for the wrongful de ath claims. After a jury trial, the Chancery

Court entered

judgment in favor of both Plaintiffs in the amount of $1,000,000 for indemnification based on the jury ’s answers to interrogatories. Def endants app eal, arguin g, among other things, that: (1) the statute of limitations had run; (2) a covena nt not to execute entered into between the families of the deceased y oung women and Plaintiffs extinguished any potential li ab il it y; and (3) the jury’s re sponses to interrogatories were fa tally inconsiste

nt. We aff

irm in par t, reverse in part, and remand.

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

med in P art and Re

versed in P

art; Case Remanded.
D. M ICHAEL S WINEY , J., delivered the opinion of the court, in which H OUSTON M. G ODDARD , P.J., and H ERSCHEL P. F RANKS , J., joined.
Ronald L. Grimm and Stephen W. Gibson, Knoxville, Tennesse e, for the Appella

nts Commercial Insurance Mana

gers, Inc ., and George P. Tay lor, IV.
James S. MacDonald, Knoxville, Tennessee, for theAppellees Rebecca J. Jordan, deceased, by next friend and parents, Marvin H. Jordan and Betty J. Jordan.
John K. Harber, Knoxville, Tennessee, for the Appellee K athleen M. Mob erg , dec ease d, by next frien d and f ather, Warre n D. Mo berg.
M. Robin Repass and John D. Lockri dge, J r., Kn oxvi lle, T ennes see, fo r the A ppell ees Ti p’s P ackage Store, Inc., and H. Way

ne Tipton.-2- OPINION Background
On Apr il 18, 198 9, a tragic incident occurred in Knox County . Two University of Tennessee students, Kathlee n Moberg and Rebe cca Jorda

n, were struck a nd killed b y a

n automobi le driven by Greg ory

Darren Guhy

(“Guhy” ). In March and A pril of 1990, two separate lawsuits were filed in the Kno x County

Circuit Cou

rt by the pare nts of Ms. M oberg

and Ms. Jordan as next friend s. Included as defendants were Tip’s Packag e Store (“Tip’s”) and H. Way ne Tipton (“Tipton”). Tip’s is an incor

porated retail li quor sto re and Tipton is a shareholder, officer, a nd director of that corporation. The material allegations aga inst Tip’s and Tipton involved c laims of neg ligenc e in selling alc ohol to a minor who allegedly then provided the alcohol to Guhy , who later struck and killed Ms. Moberg and Ms. Jordan while driving intoxicated.

The present

lawsuit a rises fr om a serie s of even

ts which occurred shortly

before the tragic automobile

accide nt. This action was f

iled by Tip’s and

Tipton (“ Plaintiff

s”) ag ainst Comme rcial Insurance Mana gers, Inc . (“Commercial”), George P. Ta ylor (“Ta ylor”), a nd Geo rg e P. Tay lor d/b/a C onsolid ated Insurance Servic es (“Consolidated”). The material allega tions containedwithin the complaint center around Plaintiffs’ attempt to secure liquor liability insurance th ro ugh Commerci al and Ta ylo r (“Def endants” ). Plaintif

fs alleg e they

were c ontacte d in earl

y summer or fall of 1989, by De

fendants who inquired into selling Plaintiffs liability insuranc e. At that time, Plaintiffs already we re insured throu gh Lexington Insurance Compa ny ( “Le xington”) , with policy limits of $300,000. The insuranc e policy through Lexing ton was a “claims made” po licy

with effectivedates of 12/22/88 through 12/22/89. Plaintiffs claim they made it clea r to Defendants that there was to be

no gap in covera

ge and they wanted c overag e similar

to that whi ch was currently in effec t. Plaintiff

s claim the

y w ere ass ured by

Tay lor that th ere would be no la

pse in coverage and

the
new covera

ge woul d be ident

ical to the

covera ge aff orded by Lexing ton. Rely

ing on the se assurances, Plaintiffs obtained new insuran c e coverage throug h Great American I

nsurance Companies (“Great American”), with an e ffective policy

date of 12/19/89 through 12/19/ 9 0. The policy limi ts on this insu rance p olicy were $1,00 0,000 . The p olicy is sued t hrough Great American was, however, an “occurre nce” policy , as opposed to a “claims made” policy

. The wrongf

ul death suits file d again st

Tip’s and Tipton by the pare nts of Ms. Moberg and Ms. Jordan were forwarded to both L exington and Great American for covera ge and/or defense. Lexington

denied any c overage or

obligation to defend under its “claims made” policy because the claims by the pare

nts of Ms. Moberg and Ms. Jo rd an we re ma de af te r t he ef fe ct iv e d at e o f i ts po li cy. Likewise, Great American denie d cove rage or an obligation to defend under its “occurr ence” policy because the incid ent which resulted in the dea ths of Ms. M oberg

and Ms. Jord an did

not occur during1 Plaint iff s als o had an umbrell a policy through American St ates Insura nce C omp any. Am erican States initially provided a defense to Plainti ffs i n the lawsui t fi led by the parents of Ms. Moberg and Ms. Jordan. Ameri can State s then obtained a declaratory judgment which r elie ved it of th e duty to defend or t o provide coverag e. That ruling i s not at i ssue in this app eal. -3- the effective date of

it s p ol ic y. 1 Because of the absence of coverage, Plaintiffs broug htsuit aga

inst Defendants for neglige

nce, breach of contract, and f raudulent misrepresentation.
On April 10, 1990, after discerning that there mig ht not be any applica

ble insurance
covera ge, Pla intiffs’ attorne

y se nt Tay lor a lett er which states asfollows:
This will confirm our telephone conversation this morning relative to the liquor lia

bili ty insurance policy

obtained by y

our company f

or Tip’s Package Store, I

nc.
As you are aw are, Tip ’s Packa

ge St ore, Inc. and Way

ne Tipton, Indivi du al ly, along w ith othershas (sic ) been su ed in the c apti one d matter arising out of

an alleg ed sale o f alcoho lic beve rage t o a minor on or about April 18, 1989.
It appears that y ou acquired a liquor liability insura nce policy for Ti p ’s Package Store, I

nc. with effective coverag e dates from December

19, 1989 to December 19, 1990. This policy appe ars to h ave be en is su ed by t he Gr ea t A me ri ca n In su ra nc e C om pa ny a n d bears Policy Number PAC 1-64-70-38-00. This policy is an “occurrence” policy. As y ou are a ware, Tip’s Package Store, I nc. previous ly

maintained a policy of liquior (sic ) liability insurance p olicy throu gh the Lexington I nsurance Company

with effective dates of cov erag e of December 22, 1988 through December 22, 1989, Policy Number PC 559 0733 0262. This polic y w as a “claims made” po li cy.
It appe ars that at the

time Tip’sPackag e Store, I nc. moved

its
covera ge fro m t he C ase y C. J one s Ins ura nce Gro up, In c. to y our organization, you were

given copies of the pre vious policy and advisedin a mee ting between y ourself, Wayne Tipton and Char les LaRue that Tip’s Package Store, I nc. desired to obtain an insura nce policy that w ould provide continual liquor liability coverage. In as much (sic) as the policy that y ou issued was an “o cc ur re nc e p ol ic y” and the previous policy wa s a “c l aims made” policy, ther e has been
a lapsed (sic) in coverage whic h includes the time fra

me involved in the capt ioned suit

.-4- I respectfully r

equest that you

notify y our errors and ommissions (sic)
ca rr ie r o f t hi s s it ua ti on an d a sk th at th ey c on ta ct me im me di at el y.
I am encl osing a copy

of the captioned suit. As I advised, we ar e under a very short time constra

int and it may well be that y our carrier wishes to defend this suit on behalf of Tip’s Package Store, I nc. and Wa yne Tipton. Obviously, if someone does not defe nd this suit on behalf of thes e p arties, I will undertake same and will be looking towardyour car

rier for pay ment of the

fees and expensesinvolved in sameas well as indemnification of any judgment that may be rendered against these insureds. I appreciate

a prompt response from y our carrier.
Three years a

nd six da ys a

fter the date of this letter, on April 16, 1993, the present lawsuit was filed i n t he Knox County Chancery Court. Defendant George P. Tay lor d/b/a/ Consolidated Insurance Service s immediately filed a motion to dismiss or for summary judgmen t, claiming that Consol

idated I nsuranc e Servic es was a

partner ship cre ate d on January 1, 1990, and thereforecould not possibly have had any involvement with Tip’s or the events complained of in the
co mplaint. Commercial filed an answer deny ing the pertinent allegations contained within the complaint and aver ring that Plaintiffs were fully a ware that the policy

issued through Great American
was an “occurrence” policy . Commercial did not assert a statute of limitations defense in its answer. An Agreed Order

was ente red in Au gust of 1 993, by the Chanc ery

Court gr anting G eorge P. Taylor d/b/a/ Consolidated Insurance Company ’s motion to dismiss or for summary judgm ent. A ltho ugh George P. Tay

lor d/b/a/ Consoli dat ed I

nsuranc e Company

was no lon ger a d

efenda nt, Geor ge P. Taylor re mained a defendant in the lawsuit but never filed an answe r.
On February

5, 1996, the Mobergs and Jordans entered into a Settlement Agreement and Release (“Agreeme

nt”) with Tip’s andTip to n. In that Ag reemen t, Tip’s a nd Tipton a

greed to the entry of a

judgment against Tip’ s fo r compensatory damages with a stipulated amount of damage s. The Mobergs and Jordans released any

claims for punitive damages and fully releas ed all claims they

had ag ainst Tipto n individua lly. The par

ties to the

Agree ment a lso ag reed tha

t, notwithstanding the fac t that a jud gment f or compe nsatory damage s would

be enter ed aga inst Tip’s, the Mobergs and Jordans would:

relinquis h and releas e any and all r ights to execute

agains t the asse

ts of Tip’s, or in any other wa

y seek to legally

satisfy the judgme

nt for compensatory

damage s to be re ndered a gainst T ip’s with th

e sole exception that t he Mob ergs and the Jor dans ret ain their rights as third party beneficiaries of the c laim cur rently pending in the Chancery Courtfor Knox County, Tennessee, a gainst the errors and

omissions carrier of the insuran c e agent for Tip’s who failed to secur e appropriate liquor liability cove rage....2 Since t he sta tut e of li mitat

ions def ense was decided on the merit s by the Chancery Court at a lat er ti me, we will treat the C hanc ery Co urt’s reso lution o f this issue as a n imp licit rejec tion of P laintiffs argument that thi s defens e was not asserted in a t

imely fas hion. -5- Five da ys l at er , o n F eb ru ar y 1 5, 1996, the Knox County Circuit Court found Guhy 66.67% liable for the injuries and deaths of Ms. Moberg and Ms. Jordan, and a lso found Tip’s 33.33% percent liable. Thelawsuit against Tipton was dismissed with prejudice. After determ inin g: ( 1) the pecu

niary value of the lives o f the dec eased y oung la dies based on stipula

te d exper t te st im on y; and (2) t

he amount

of medic al and fu

neral e xpenses, th

e Circuit Court pror

ated th e damages based on the respective degrees of fault of the defendants. The Circuit Court then entered judgment in favor of the Mobergs ag ainst Tip’s in the amount of $812,226.06, andin favor of the Jordans against Tip’s in the amount of $547,806.40.

With the Circu

it Court judgment in

hand, the Moberg s and Jorda

ns then sought to intervene in the Chan

cery Court law suit, claiming

they had a dir ect pecuniary

interest in this lawsuit which was not be

ing adequately

protect ed by the existi ng p arties. They a lso claimed they wer

e intended beneficiaries and/or otherwise entitled to the benefits of the insurance contract which Tip’s and Commercial “attempted” to enter into. The Chancery

Court granted the motions to intervene. Plaintiffs then amended their complaint to substitute new couns el, change certain alleg ations regarding costs and attorneys f

ees, and bring to the Chancery Court’s attention the judgment entered in the Circ

uit Court. Commerci al filed a n answer to the amended complaint. Again, no statute of limitations defense was asserted, and no answer was f iled by Tay

lor.
Commercial filed an

“Amende d Answer

to Amende d Complaint

” , on March 27, 1998, almost five year s after this litigation began . In th is pleading, Comme

rcial alleged f

or the fir st time that Plaintiffs’ claims of negligence and f raudulent misrepresentation were barred by the applica ble statute of limitations, although no mention was made as to what that statute of limitations actually was. Five day s later, Commerc ial filed a motion to dismiss the claims of negligence and fraudulent

misrepresentation, asserting that the allega tions of negligence and fra udulent misrepresentation were we ll known to Tip’s and Tipton on April 10, 1990, the date of the letter set forth at length above. According to Commerc ial, the “Statute of Limitations for tor t acti ons involving negligence or fra udulent misrepresentation (T.C.A. § 28-3-104 - in1997 Supple

ment) is
one (1) year f

rom the date of the occurrence.” Commercial averred that since the present lawsuit wa s filed three y

ears and six day s after A

pril 10, 1990, t

he one y ear sta tute of lim

itations on

these cl aims had lo ng si nc e e xp ir ed , t he re by l ea vi ng th e b re ac h o f c on tr ac t c la im as th e o nl y remaining viab le claim. Tay

lor did not

join in this m

otion. Plaintiffs filed a res ponse arguing, inter alia, that the motion to dismiss should be denied pursuant to R ules 8 and 12 o f the Ten n. R. Civ. P. b ecause Commercial waived any statut e of limitations defense since it was not timely asse rted. Commercial’s motion was denied, but the Chan cery Court specifically

stated tha t this defe nse could be raise d again

by m otion at a n approp riate time during t rial. 2
After a five day

jury trial, the Chancery

Court issued an Opinion based in large part
on interrogatories answered by the jury . The Chan

cery Court dismis sed the br

each of contract claim-6-

basedon the jury’s conc lusion that Taylor ag reed to obtain continuous liquor liability covera ge and that he provided this coverage. I n a subsequent Opini on issu ed by the Chance ry Court, the jury ’s conclusion on this issue was discussed in more detail. The Chancery Court stated that the jury was askedto determine the contractua l d ut y assumed by Def

endants and “apparently

believed that the definition submitted by defendants, that ‘c ontinuous coverage’ meant cover age with n o break in time, was all that was offered by the defendants and ultimately accepted by Tipton.” The Chancery Courta lso f

ound that while the jury conc luded Taylor ha d informed Tipton that the policy to be issued was an “ occurr

ence po li cy” a

n d not a “claims made” policy , it also found that Taylor had failedto make sure Tipton knew and appreciated the differe nces betwee

n these tw o ty

pes of pol icies. According to the Chancery Court , this was sufficient to support a judgment against Tay lor and Commercial for professional negligence. The Chanc ery Court also

address ed the one

ye ar statut

e of limitations defense, concluding that the action was timely filed because thestatute of limitations didnot begin to run u nti l the judgment was entered in the Circuit Court in February of 1996, at which ti me Pl ai nt if

fs su ff er ed a “ le ga ll y co gn iz ab le ” i nj ur y. The Chancery Court then determined t hat Plaintiffs were entitled to a judgment in the amount of $1,000,000.00 for the professional negligence

of Tay lor which was imputa

ble to Comme

rcial un der ag ency

prin ciples . A Final Judgmentwas e ntere d in accordance with the Chancery Court’s Opinions, at which time the Chancery Court awarded judgment in favor of Tip’s and Tipton ag ainst Taylor and Commerc ial “jointly and severally ” in the amount of $1,000 ,000.00 “ for inde mnificat ion aga inst the judg ments awarded to the intervening Plaintiffs, the Jordans and the Mobergs, by judgment entered in the Circuit Court for Knox County, Tennessee, on Fe bruary 15, 1996.”
Both Defendants then filed

a motion and amended motion for new trial and motion to alter or amend the final judg ment and f

indings o f fact a

nd conclu sions of la

w. Defe ndants assert ed the re were a pprox imat ely sevent y-eight err ors, t he fir st on e bein g:

The Court erred

in failing to dismiss the Plaintiffs’ and Intervening Plain tiffs’ Complaints on the issues of alleged negligenc e, on t h e ground that the Complaints were filed after the ap plic able one (1) year Statute of

Limitations had run.
Since Taylor had ne

ither filed an answer nor joined in the previousmotion to dis miss filed by Commercial

pertaining to the statute of limitations defense, this post-trial motion was the first time this de

fense was rai sed on T aylo r’s beh alf . In addition to the statute of limitations defense, and as pertinent

to this appeal, five other issues were raised in Defe ndants’ motion for new trial and motion to alter or amend the finaljudgment and findings of fact and conc lusions of law. These other five issues, which we take verbatim from Defe ndants’ brief on appeal are: (1) The Trial Cour

t erred in not dismissing the c omplaint on the basis that the Settlement Agreement & Release entered

into by the original Plaintiffs and I

nterven ing Plain tiffs elim inated the liabil ity

of the Defend ants;-7- (2) The Tria

l Court er

red in not

dismissing

the claim s of the Intervening

Plaintiffs due to their lack of standing and in not ordering a new tri al; (3) The Trial Court erred in not dismissing the complaint on the basis that the Knox Coun

ty Ci rcuit Cour

t Final Judg

ment is null , void, and of no leg al effect; (4) The Trial Court erred in not ordering a new trial on the basis of inconsistencies in the jury’s answe rs to the special inter

ro gatori es; and ( 5) Th e Trial Co

urt erred in not re ducing the judg ment ag ainst Defendants to Three Hundred Thousand Dollar s ($300,000).
Plaintiffs also appeal the amount of the judgments they

were awarded, claiming that Defend ants should be required to pay the entire amount

of t he Circuit Court judgment as tort damage s.
Discussion

First, we address the statute of limitations issue. During the course of this litigation, at least unti l this appe al, the ma in focus o n this argum ent by the parties w as when the one y ear statute of limitations began to run. Defendants claimed that the one yea

r statute of limitations began to run no later

than Apr il 10, 1990, the date

on which Pl aintiffs ’ counsel sent Defendants the letter informing them of

their alleged neglige

nce and requesting that they notify their errors and omissions carrier of the situ ation . Pla inti ffs argu ed, and the Chancery Court agreed, that the statute of limitations began

to run on th

e date the Circuit

Court judgment was entered, at which time Plaintiffs suffered a “legally

cognizable” injury

. We believe

the statu te of limita

tions issue is resolved by a deter mination of which statute of limitations applies, as opposed to when it began to r un. The a

pplic able statute of limitations is determinedaccording to the grava men of the complaint, rather than its designation as
an action for tort

or contract. Keller v. Colgems-EMI Music, Inc. , 924 S.W.2d 3 57, 359 (Tenn. Ct. App. 1996). In order to do this, the c ourt must lo ok to the ba sis for wh ich the da mages a re soug ht. Id

. In Te nnessee , it is well e stablishe d that a n insuranc e agent employed to maintain insurance
covera ge for a client “may be held li able on a

neglig ence the ory

if the ag ent failsto use rea sonable
care and diligence in continuingthe insurance, either by obtaining a renewal

or replacement policy
or by properly

maintaining an existing policy.” Wood v. N ewman, H

ayes & Dixon Insurance Agency , 905 S.W.2d 559, 562 (Tenn. 1995) . In the present case, r ely ing on the

jury ’s answe

rs to interrog atories, the Chancery Courtconcluded that Tay lor was guilty of

professional negligence, but3 Several juri sdict ions al low cla ims su ch as those asserted i n the pres ent case to be g rounde d in n egli gence or

in con tract, or both

. See Ro bin C heryl M iller, J.D ., Anno tation, Liabi li ty of Insur ance Agent

or Broker

on Ground of Inadequacy of Liabil ity- Insurance Coverage Procured , 60 A .L.R.5 th 16 5 (1 998 ) at § 4

. -8- there had bee

n no brea ch of con tract. 3 The judgment ag ainst the Defendants was thus predica ted in tort.
Since there is no specif ic statute of limitati ons governing Plai ntiffs’ neglig ence cl aim,
we must decide if it is a personal tort action pursuant to Tenn. Code Ann. § 28-3-104(a)(1) which has a one year sta

tute of limitations, or a property tort action pursuant to Tenn. Code Ann. § 28-3- 105(1) which has a three year statute of limitations. A similar situation was addressed by this Court in Bethlehem Steel Corporation v. Ernst & Whinney , 1989 WL 1397 01 (Tenn. Ct. App. Nov. 21, 1989), which involved a claim of professional negligence ag ainst an accounting firm. In Bethlehem , the plaintiff

claimed it reasonably

reliedon a yea

r end audited financial statement prepared by the defendant with regard to one of the companies to which the pla intiff supplied steel. The plaintiff claimedthis report was negligently prepared and it relied

on the report to its financial detriment. The jury returned a verdict for the plaintiff in the amount of $500,000. On appeal, oneof the issues was which statute of limitations applied, the one yea r statute of limitations in Tenn. Code Ann § 28-3- 104(a), or the three y ear in Ten n. Code Ann. § 28-3-105(1). In conc luding that the action was gover ned by the thre e y ear sta

tute of lim

itations, t his Court st

ated as f ollows:
The one yea

r limitations period found in T.C.A. § 28-3-104(a) is not restr

icted to bodily injuries. The Tennessee Sup reme Court has stated that "injuries to the person" include actions brought

for injuries resulting from "i nvasi ons of righ ts that inhere in man by r eason of being a person in the eyes of the law." Brown v. Dunstan, 219 Tenn. 291, 295, 409 S.W. 2d 365, 367 (1966). T he Supre me Court, howe ver, has also h

eld that in

jury to proper

ty isnot limited

to p hysical injury to property

. Vance v. Schulder , 547 S.W.2d 927 (Tenn. 1977). Appellant contends that it is claimin g an inju

ry agains t prop erty and therefore the three y ear statute of limitations fo und i n T.C.A.§ 28-3-105(1) is controlling in this case.
"The applicable statute of

limitationsin a part

icular c ause will be determined according to the gravamen of the complaint." Vance
v. Schulder , at 931. In Brown v. Dunstan , supra, the plaintiff alleged that the defendants entered into a conspiracy to defra ud and disc

redit him. The court

held that the gravamen of the action wa s damag es to the plaintiff's reputation as a business man, father, and respected man of society and conc luded that such damages were for injuries "to the pers on." In Vance v. Schulder , supra, the court held that the gravamen of the pla

intiff' s a ctio n was fraud in the inducement of a contract resulting in a financial loss of almost $35,0 00 . The court4 Subsequent to th e Bethlehem deci sion , Tenn. Code Ann. § 28-3- 104(a) w as ame nded t o speci fi call y prov ide that malpract ice act

ions aga inst

att orneys and accountan ts wer e governed by a on e year stat ute of li mitations. The legisl ature di d no t include pro fessiona l negligen ce ac tions ag ainst insura nce a gents in this a men dme nt. Th e result in Bethlehem reach ed b y this Cour t a nd af fi rmed by t

he Su preme Court i s, t

herefor e, st

illinst ructi ve in t

he present

case. -9- concluded

that the loss in

value sustained by plaintiff f rom the alleged tortof fraud was included withi n the phrase "injuries to personal propert y" as conte

mplated b y the three

ye ar statut

e of limita

tions.

In light of the Supreme Court's opinions mentioned above, we
are required to examine the complaint in o rder to determine if the gravamen of appellant's c laim is one of injury to the person or injury to pers onal

prop erty . Weare of the opinionthat appe llant'sclaim is for injury to personal prope

rty as contemplate d by t

he court in Vance
v. Schul d er , supra and therefore we ar e in agreement with the trial court that the three year statute applies in this case.
Bethlehem , 1989 WL 1397 01 at *4 (Tenn. Ct. Ap p. 1989). On appea

l to the Te

nnessee Supreme Court, the decision of

this Court a s it perta

ined to the

applica ble statut e of limitations was affirmed “for the reasons stated in

its opinion”. See Bethlehem Steel Corporation v. Ernst &Whinney , 822 S.W.2d 592, 596 (Tenn. 1991).

In the present case, the damage s alleged by Plaintiffs are economic losses resulting from having to pay a judgment which they would not have had to pay but for the

negligence of Taylor. In our

opinion, Plaintiffs’ claim is for injury to property and the three y ear statute of limitationsfound in T enn. Code Ann. §28- 3-105(1)applies. 4
Since we hold the one yea

r statute of limitations does not apply, the Chancery Court’s conclusion that the one yea r statute of limitations had not run is of no consequence. We, therefore, express no opinion o n the prop riety of the Cha

ncery Court’s c onclusion

as to whe

n th e one yea

r statute of limitations began to run.

In Commerci al’s motio n to dismiss a nd aga in in Defe

ndants’ m otion for new tria l, it was arg ued that t he neg ligenc e claim

was barred by

the applicable statute of limitations, and that the applicable statute of limitations was one y ear. It never w as argued by

Def endants at the trial court level that the negligence c laim, or any other c laim for that matter, was barred by the three ye ar statute of limitations. This three year statute of limitations argument was advanced for the f irst time on appeal.

A statute of limitati ons defense must be specifically pled or generally

it will be considered

waived. See Tenn. R. Civ. P. 8.03. No waiver will occur, however, if the opposing party is given fair notice of the defens e and an opportunity to rebut it. George v. Building M aterials-10-

Corporation of America , 44 S.W.3d 481, 486-87 (Tenn. 2001). Since it was never specifically pled
or argued to the Chancery

Court by Defenda

nts that the three ye arstatute of limitations had run, Defend ants cannot a ssert thisargume nt for the first time on appea l. See Smith v. Harriman Utility Board, 26 S.W.3d 879, 887 (Tenn. Ct. App. 2000)(“Our jurisdiction i s appellate only, T.C.A. § 16-4-108(a)(1), and thus the rule has long been well-settled that [t]his Court can only consider

such matters as were brought to the attention of the trial court and acted upon or [pretermitted] by the trial court.”). It lik

ewise ca nnot be ar

gued th at Plaintif

fs had fa ir no tice of this defense because it was never pled or raised by

Defendants in the Chancery Court.
We hold th e one ye ar statute of limitations does not apply. We further hold that b ecause Defendants never pled or arg ued in the Chancery

Court that the three ye ar statute o f limitation had run, this defense is waived. We, therefore, c annot dismiss this suit as being barred by either the one yea

r or three y ear statute of limitations. Plaintiffs’ argument that Tay lor never asserted or pr op er ly r ai se d t he on e ye arstatute of limitationsdefense

thus beco mes moot. Defendants’ position concerning the statute of limitations is without merit.

The next argument advanced by Defendants is that the Chancery Courterred in not dismissing the complaint because the Agree ment effectively

extinguished any liability on the part of Tip’s and T ipton. In making this arg ument, Defendants rely

upon several cases from other jurisdict ions, most n ot ab ly F reeman v. Schmidt Real Estate & Ins., Inc. , 755 F.2d 135 (8 th Cir. 1985)(applying

Iowa law). Freeman involved a claim against Schmidt Real Estate & Ins., I

nc., and others alleging neglig ent failure to procure liability insurance for Russell Catron. Free man and Catron were in an automobile accident, and in settlement of that litigation, Catron confessed judgment and assig ned his rights agains t the insur ance agent to Fr

eeman in exchang e for a p

romise notto execute

on the judgment. The magistrate gr anted summary

judgmen t, conclu ding tha

t becaus e of the agr eeme nt not to execute and the “indemnity na ture” of insurance gene

rally, Fr eeman had gained no enforceable r

ights through the assignment from Catron. Id . at 136.
The United States Court of Appeals for the Eigh th Circuit affirmed. In so doing, the Eighth Circuit acknowledged the split of authority among the various states which have addressed this issue. The Eighth Circuit noted tha t some stat

es hold that a co venant not to execute is merely
a co nt ra ct an d n ot a r el ea se , s uc h t ha t t he un de rl yi ng tort liability remains intact and a bre ach of contract action lies if the injured party see ks to collect on the judgment. The tortfeasor is, therefore, still legally

obligated to the injured party , and the insurer m ust make g ood on its c ontract ual promis e to pay. 755 F. 2d at 1 37, 13 8 (cit ing State Farm Mutual Automobile Insurance Co. v. Paynt er, 122 Ariz. 198, 593 P.2 d 948, 953 ( Ct. App.19 79); Globe Indemnity Co. v. Blom

field , 115 Ariz. 5, 562 P.2d 1372, 1375 (Ct. App.1977 ); Critz v. Far mersInsurance Group , 230 Cal. A pp.2d 788, 41 Cal. Rptr. 401, 410 (19 64)(agr eement h olding to rtfeaso r harmle ss as to judgment in excess of

his insurance covera ge does n't foreclose suit against insurer for bad- faith fa

ilure to se ttle)). U nder this th eo ry, an uninsured party would be injure d by the insurance agent's neglig ence in failing to procure
a policy beca

use he or she would have the outstanding "liability " against which he or she sought to insure. 755 F.2d at 138.-11- The Freeman Court note d that o ther stat es reac h the s ame con clusi on ut iliz ing a different rationale. These cases focus on the right of the insured t o protec t himself f

rom bad f aith conduct o f his insur

er: For example, the Nebraska Supreme Court has held that an insured, and thus the insur

er, is " legall

y ob ligate d to pay " within the meaning of the po licy desp ite an agr eementnot to execute when the insured enters into such an agreement to protect hims elf fro m the i nsure r's denial of cov erage and refusal to defend under the policy. Metcalf v. Hartford Accident & Indemnity Co. , 176 Neb. 468, 126 N.W.2d 471 (1964). The Nebraska court stressed that the insurer had "repudiated its obligation" to the insured, id. , 126 N.W.2d at 476, and some element of miscon duct by

the insur er gen erally has been present in the cases in

which courts have

follo wed M

etcalf

. E.g. , American Family Mutual In surance C

o . v. Kivela , 408 N.E.2d 805, 813 (Ind. Ct. Ap p. 1 980) (ins urer " abandoned" insu red whe n it refus ed to de fend on t he ground that the policy had bee n revoke d for fa

lse statemen ts on the app lication) ; Griggs v. Bertram , 88 N.J. 347, 443 A.2d 163 (1982) (insurer

failed to promptly notify insured that it was denying coverage). Even those c ourts which ba se their findings of liability on the distinction between a release a nd a cove

nant not to execute acknowl edge th

e policy implicatio ns of an op posite conclusion– settlements such as the one here would no longer se rve their intended purpose. E.g. , Paynter , 593 P.2d at 953.

Freeman , 755 F.2d at 138.

Freeman also discussed the cases reachi ng a contrary conclusion. These courts give the “legally

obligated to pay ” languag e the pract ic al co ns tr uc ti on : “ An in su re d p ro te ct ed by a covenant not to execute has no compelling obligation to pay any

sum to the injured party; thus, the insurance poli cy impose s no ob liga tio n on t he ins urer.” Id. (cit ing Stubblefield v. St. Paul Fire & Marine Insurance Co. , 267 Or. 397, 517 P.2d 262, 264 (1973) ( en banc ); Bendall v . Whit e , 511 F. Supp. 793, 795 (N.D. Ala . 1981); Huffman v. Peerless Insurance Co. , 17 N.C. App. 292, 193 S.E.2d 773, 774, cert. denied , 283 N.C. 257, 195 S.E.2d 689 (1973)). An individual who is uninsured due to an agent 's negligence then will have suff ered no damages, as he

would have had no rights under the policy any

way. Freeman , 7 55 F.2d at138. See also Far West Federal Bank, S.B., v

. T ransamerica Title Insurance Company , 99 Or. App. 340, 345, 791 P.2d 1259, 1262 (O r
. App.1989)(a

promise to

execute o nly

to the extent t

hat an ins urer is liable terminates the insured’s liability and there is no loss that the insured could sustain.).

The Freeman decision was a diversity case apply

ing Iowa law. A

t the time of that decision, the issues ha

d not been

squarel y decided by

the I owa Supre

me Court. Unfortunately f or Defend ants, once this happened, the Iow a Supre me Court re ached a different conclusion. I n Red-12-

Giant Oil Company v. Lawlor , 528 N.W.2d 524 (Iowa 1995), the issue waswhether “an insurer may be liable to the injur

ed party when the insured b efore j udgmen

t is protected by

an agr eement n ot to execute.” Id . at 529. Rejecting the rationale of Freeman , the Iowa Supreme Court conc luded that such agreements were per mitted in that state. Id . at 531. More specifically , t he Red Giant court determinedth at th e c ov en an t n ot to ex ec ut e w as “m er el y an agre ement” and “not a release”. The underlying

tortliability therefore r

emained. Id. at 532. See also Kobbeman v. Oleson , 574 N.W.2d 633, 636 (S. D. 1998)(“After considering the gamut of decisions . . . we find ourselves in agreement withthose courts upholding assignments of a cause o f actio n in exchange for a coven ant not to execute in instances of failure to procure reque sted insurance.”).

In the pres ent case , there i s no appli cable i nsuranc e policy , so we ar e not directly confron ted with “ legall

y obligated to pay ” policy lang uage. The decisions from the various states do, however, provide valuable guidanc e. While we located no Tenne ssee aut

hority directly on point, Wolff & Munier, I

nc., v. P rice-W

aterhouse , 811 S.W.2d 532 (Tenn. Ct. App. 1991) is h elp ful . In anticipation of the entry

of a judgment, Wolff & Mu nier ent ered int o a settle ment ag reemen t with Samuelson whereb y Sa

muelson a

greed to pay a total of $175,000 in a se ries of monthly pay ments. Id. at 533. In return, Wolff & Munier agreed to refrain from executing on the judgment until it was paid off, at w hich time a

releas e infavor of Samuelson would be executed. Id. Defendant Price Waterhou se argued that the settlement agreement precluded recovery against all defenda

nts pu rsuant to the Uniform Contribution Among Tort-Feasors Act, Tenn. Code Ann. § 29- 11-10 1. The trial court agreed and dismissed

the lawsuit. In vacating the dismissal, this Court stated that under the terms of the settlement agreement, there w as no release at the present time. “The only thing in effect

... is an agree

ment by [Wolff & Mu

nier] not to

execute on the judg

ment while

Samuelson

is not in default of the terms of the settlement agree ment.” Id . at 535.
After consider ing the v arious is sues and r amifications thereof, we agree with the conclusion reached by

Iowa Supreme C ourt i n Red Gia nt . We h old t hat ba sed on the la nguage containedwithin the Agreement at issue in this case, the cove nant not to execute ente

red into between the Mober

gs, Jordans, and Tip’s was a contract between these par ties which did not extinguis h the underlying

liability of Tip’s for

compensa

tory damage s. Tip’s isthus an inj ured par ty because it has outst

anding liability against which it sought to insure. The Defendants’ argument on this issue as to Tip’s is without merit.

Notwithstanding this conclusion, the clear language of the Agreement

did in fact releas e any

and all c laims against Tipton indi vidually , and Tipto n was thusdismissed, with prejudice, from

the Circu it Court lawsuit. The Agreement did operate as a full release as to Tipton. Since Tipton was fully relea sed from any pote ntial liability and because he has suffered no damages since he was dismissed from that lawsuit, we believe the Chancery Court was in error in enteringa judgment in favor of Tipton. The en tryof the judgment in favor of Tipton is, therefore, re versed.
The third argument advanced on appea l by Defenda

nts is that the Mobergs and Jordans are not third party beneficiaries and

should not h ave bee

n allowed to intervene as plaintiffs in this action. Defendants assert that they were prejudiced by

this imprope r interven tion beca use-13-

Plaintiffs and Inte

rvening Plaintiff s were th us allowe d to “marshal their combined forces ag ainst the Defendants” at trial.

In resol ving this issue, we are guided by the decision of this Court in Waddell v. Davis , 571 S.W.2d 844 (Tenn. Ct. App. 1978). Wadd ell involved a passenger in an automobile suing the automobile owner’s insurance agent f or negligently

failing to obtain uninsured m otori st cov erage on the owner’s vehicle. The Wadd ell plain tiffs claimed they were third party bene

ficiaries to the contract to obtain uninsured m ot orist coverage between the insura nce agent and the owner of the vehicle. In concluding that the pa ssenger could be a third party ben eficiary , this Court stated as follows:
It

must b e here noted that the plaintiffs' lawsuit is not based upon a contract of insurance; no policy was issued. The plaintiffs sue the agent Davis for damage s based up on his negligent failure to have the policy issued. Plaint iffs sue Cotton Belt Insurance Company under the theory of respondeat

superior , seeking damages as a res ult of the negligent failure to ac t on the part of Cotton Belt 's ag ent, Davis.
* * * *
The plaintiffs argue that

they are thir d-party benefic iaries to the contract betw een the owner of the vehicle and Davis where by Davis was to obtain uninsure d motorist coverage for the owner. Third-pa rty beneficiary

contracts are recognized and e nf orced in Tennessee at the suit

of the third-party be

neficiary

. National Sur

ety Corp. v. Fischer Steel Corp. (1964), 213 Tenn. 396, 374 S.W.2d 372. Further, we hold that wherea promise is made to

benefit a third-p arty on t he happening of a contingency, the third-party may sue on t

h e contract upon the occurrence of the co nt in ge nc y. Compare Johnson
v. Holmes Tut

tle Lincoln-M

ercury (1958), 160 Cal.App.2d 290, 325 P.2d 193.
This cause ispresently being considered only upon the

motion to dismiss which was filed by Davis. On motion to dismiss we take the averments of the complaint as true, thereforefor the purposes of the motion we find that a contract did exist between the owner of the vehicle and Davis whereby

the latter was to obtain a contrac t of uninsured motorist coverage for the owner, and

the defe ndant Da vis neglig ently

breached that contract. The issue is whether

the plaintiff,
an injured passenger in the owner' s automobile, can establish that she is a third-party be

neficiary to the contract between the owner and Davis.-14- The test is whether the plaintiff-passenger would have bee n an "insured" under the policy had it been issued as contracted for . In 12 Couch on I

nsuranc e 2d, § 45: 645 (2d Ed . 1964); it i s stated that the term "insured" under an uninsured motorist endorse ment includes the named insured, his spouse, relatives living in the same household, operators with permission and occupants of the insured vehicle. The policy that shoul d have been issued is not before the Court. We can notsay on mot

ion t o dismiss wh

ether th e plaintif f-passe nger w ould have been an insured under the policy contracted for, had it been issued. A fact question is presented which requires proof.
Wadd ell v. Dav is , 571 S.W.2d 844, 847-48 (Tenn. Ct. App. 1978).

In the present case, we are c onfronted with a similar di lem ma as wasfaced in Wadd ell . Specifically, we

are called

upon to decide whether, as a matter of law, the Mobergs and Jordans would have been considered third party beneficiaries under the

contract of insurance

which should have been

issued had Taylor not ne gligently failed to make sure Tipton knew and appreciated the differe

nces bet ween a “ claims made” and an “occurrenc e” policy. The policy that would have issued had there been no neglige nce obviously does not exist.
Defend ants argue that the languag e in the contracts with Lexington and Gr eat Americando not support the conclusion that the Mober

gs and Jor dans wer e third pa rty benefic iaries. The problem with this ar

gument i s that these

insu rance p olici es sim ply do no t affo rd any cove rage in t his case. We c annot rely on the lang uage of insurance policies which do not apply when
as certaining whether the Mobergs and Jordans would have bee n third party bene

ficiari es under a policy that should have been, but was not , i ss ued . In the absence of such a policy , we agree with the conclusion reached by

the Wadd ell Court that

such a de terminat ion, at le ast to some exten t, prese nts a fact question requiring proof. Perhaps i f this pre cise issue had bee n litigat ed at tria l and, if
ne ce ss ar y, posed to the jury, the fa cts would have supported a holding one way or the other that the Mober gs and Jordans woul d or would not have been intended third party beneficiaries. On the record before us, howev er, we a

re unabl e to conclude that the Chancery Court erred as a matter of law in denying D efendan ts’ m otion to dismiss the claims of the Intervening Plaintiffs. Since resolution of this issue would have involved a factual determination, the Moberg s and Jordans would
necessa rily have been allowed to participate in the trial until, or unless, either: (1) the facts were sufficient to support a motion for summary judgment by Defendants onthis issue, or (2) the question
was pr es en te d t o t he ju ry for re so lu ti on . A cc or di ng ly, Defendant s’ argument that they were prejudic ed by

the trial particip ation of th

e Moberg s and Jorda

ns is withou

t merit.
We also note that even though theMobergs and Jordans were allowed to intervene , they were not awarded a judgment in this case. As discussed above , judgment was awarded in favor of only Tip’s and Tipton. Our reversal of the judgment in favor of Tipton, supra , does not change
our an al ysi s i n a ny m aterial mann er, and neither does the fact that the judgment awarded to Tip’s will be us ed to sa ti sf

y, at least in part, Tip’s outstanding liability to the Moberg s and Jordans. Even-15-

if they improper ly w ere allo wed to intervene, when considering the record as a whole, we cannot say th at this error w ould have more pro

bably than not a

ffecte d the judgment or tha t it resulted in prejudice to the judicial process. For this reason alone, we would not reve rse or vacate the judgment because of the Chancery

Court’s decision to allow the Mobergs and Jordans to intervene. See Tenn. R. App. P. 36(b).

Ne xt, Defend ants a rgue th at the Chanc ery Court erred i n not dism issi ng the complain t on the basisthat the ju dgment e ntered in the Circuit Cou rt was null, void, an d of no leg al effect. Defend ants argue that the judgment was not entered in compliance with Tenn Code Ann. § 57-10- 101 and 102. These statutes provide:

§ 57-10-101. Proximate cause.
The general assembly

he re by finds and declares that the consumpt ion o f any alc oholic beverage or beer rather than the furnishing of any alc oholic beverage or beer i s the proxima

te cause of injuries inflicted upon another by an intoxicated person. § 57-10-102. Standard of proof.
N otwithstanding the provisions of § 57-10-101, no judge or jury may pronounce

a judgment awarding damag es to or on behalf of any party who has suf

fered personal injury

or death against any person who has so ld any alcoholic be verage or beer, unless suc h jury of twelve ( 12) pers ons has fi rst asc e rtained beyond a

reasonable doubt that the sale by

such per son of the

alcoholi c beverage or beer was the proximate

cause of th e personal injury or death sustained and that such person: (1) Soldthe alcoholic bev erage or beer to a pers on known to be under the age of twenty-one (21) years a nd such person caused the personal injury or

death as the direct result of the consumption of the alcoholic beverage or beer so sold; or (2) Sold the alcoholic beverage or bee r t o an o bviously intoxica ted person and such person caused the persona l injury or death as the dire ct result

of the consu mpti on of t he alco holi c bever age or beer so sold.
Defend ants argue that

the Circuit Court judgment is void because there was no determination made by a jury beyond a re asonable doubt that Tip’s sold the alcohol to a minor and such person caused the injury or dea

th.-16- Defend ants certainly we re aware as early

as 1990 that there wa s a substantial likelihood of litigation arising from the deaths of Moberg and Jordan, and that their clients, Tip’s and Tipton, probably were

not insured. They also we re aware that

Tip’s and Tipton would be seeking indemnification from them, per the letter of August 10, 1990. Defendants forwarde d the April 10, 1990 letter to their errors and omis sions carrier and informed Plaintiffs’ attorney of this via letter datedJune 17, 1990. By letter dated F ebruary 23, 1993, the errors and omissions carrier was given
an opportunity to participate in the settlement discussions and neg otiations, but refused to do so. From the rec ord, it ap

pears D efenda

nts took no a

ctio n duri ng t he pendency of the Circuit Court litigation to protect their interests or those of their clients, Tip’s and Tipton. After

the Circuit Court judgment was entered, however, Defend ants fina lly filed “a Motion to Intervene in the unde rlying
cases seeking an Order allowing the m to Intervene and file a

Petition to S et As ide the Judg ments entered in those cases pursuant

to Tennessee Rule of

Civil Procedure, rule 60.” The record on appea l does not contain the ruling of the Circuit Court on this motion, but based on the current posture of this case, we c an only

assume it w as denie d. Defe ndants now

seek in th

is lawsuit t

o collate rally attack the final judgment of the Circuit Court.

We believe the outcome of this issue i s resolve d by

our Supre

me Court’ s opinion in Jerkins v. McKinney , 533 S.W.2d 275 (Tenn. 19 76). In Jer kins , the Court discussed collateral attacks on judgme

nts and adopted the following reasoning by the United States Court of Appeals for the Tenth Circuit in

Winfield Associates, Inc. v. Stonecipher , 429 F.2d 1087 (10th Cir. 1970):
Ge ne ra ll y, such an independent action must show a re cogni zed g ro und, such as f

raud, ac cident, m

istake or the like, for equitable relief and that there is no other

availab le or adequate re

medy . It mu st also appear that the situation in which the party seeking relief finds himself is not due to his o wn fault, neglect or car elessne ss. In

this type of actio n, it

is fundamental that equity will not grant relief if the complaining party “ha s, or by exercising proper diligence would have had, an adeq

uate re medy at law, or

by p roceed ings in th e origin a l action * * * to ope

n, vaca te, modify or other wise obta in relief a gainst, the judgment.” The granting of relief i n this unusual type of proceeding lies largel y wi thin the discretion of the trial judge. 429 F.2d at 1090.
Jerkins , 533 S.W.2d at 281, 282.

De fendant s took no action to protect their interests or that of their clients in t h e Circuit Court law suit until a

fter the judgmen t w as render

ed, at wh ich time they

attempte d to intervene in the Circuit Court lawsuit and challenge the validity of that judgment. When they w ere unsucce ssful, they

were e ntitled to a

ppeal the denial o f tha t motion to this Court, which, from the record before us, they

did no t do. Def

endants t hus had a n adequa te remed y a vailable to them to chall enge the denia

l of their motion see

king to se t asid e the judgment, if indeed there was error

. Becau se they did not appeal the denial of their motion to intervene and have the judgment set aside,5 In th e Red Giant and other cases ci ted above, a n iss ue that is of ten discussed is t

he potential f

or fraud and coll usi on between the insured and the injured party when agreei ng to a sti pulated judgment which, in t urn, wi ll be u sed against the insurance carri er. This issue has no t been ad dressed o n appe al, and even if it had, we wo uld likewise concl ude that

it has been wai ved by not bei ng asse rted and/ or appealed in Defendant’s motion t o intervene and set asi de the judgment filed i n the Circuit Court action. W e, there fore, ex press no o pinio n as to w hen an d if a stipulated settlement agreement such as the one involved in this case can be coll aterally attacked on the basis of fraud or collusi on. -17- the determination by the Circuit Court is final and they cannot reassert that same arg ument in this
case in this app eal. 5 Defend ants had m ore than sufficie nt opportu

nity to protect their and their clients’ interests in the Circuit Court action, but chose not to do so. Defendants now ask much too late to be protected from their own choice.

Next, Defendants attack the jury ’s responses to interrogatories on the basis that they
are inconsistent and cannot be reconciled. The interrog atories posed to the jury a s well as the jury’s response s are asfollows:

1. Did

Taylor ag

ree to obtain continu ous liquor lia bility
covera ge for Tip’ s Pack age Sto re, I nc. without a gap

in coverage?

x
Yes No
2. Did

Taylor fai l to p rovid e the co verage he agreed to provide?

x
Yes No
3. Did

Tay lor fail to make sure Tipton knew and appreciated the differences between his then existing liquor liabi lity cov erage and th e new co verage t hat Ta ylor was p ropos ing?

x
Yes No
4. Did

Taylor inform

Tipton that the policy to be issued was an “o cc ur re nc e” po li cy a nd no t a “c la im s m ad e” po li cy?

x
Yes No-18- 5. Did

Tay lor ask Ti pton if there were any

potential claims made under the old “c laims made ” poli c y of which the L exington Insurance Company

had not been informed and on which no lawsuit had been filed?

x
Yes No
6. Did

Taylor tell Tipton about the ava ilability of “tail covera

ge” which would

protectTip’s Package Store, I nc., in the event that a claim was mad e a fter the “claims made” policy had expired?

x
Yes No
7. Did

Tipton and Tip’s Package Store, I nc. receive the letter datedJa nu ar y 3 , 1990 from Casey Jones I nsurance Group (Exhibit Number 7)?

x
Yes No
8. By using the term “apples for apples,” did Tipton mean tha t he wanted continuous insura nce c overag e with the same policy limits for liability as under t h e Lexington I

nsurance Co mp an y “c la im s m ad e” po li cy?

x
Yes No
Based on the jury’s an swers to the first two interrogatories, the Chancery Court concluded

there had been no breach of c ontract. The Chancery Court also made a specific finding that the jury’s answe

rs to the fourth, fifth, and sixth interrogat ories did not negate the affirmative findin g in the third interrogatory upon which the finding of professional neglig ence was based. Acc ording to the Chancery Court, “Taylor’s infor

ming Tipton of the issuance of an ‘occurre nc e ’
versus a ‘claims made ’ po licy, and his inquiry as to potential claims under the policy, w ould not prevent th e jury from f

i nding that Taylor did not make sure that Tipton knew and appreciated the-19-

difference between the two policies.”The Chancery Court further stated that

the failu re to advise of “ tail coverage” would only “support the finding of the jury”. In a subsequent opinion, the Chancery Court discussed the verdict, and found the jury “apparently

believ ed t hat the definition submitted by defenda

nts, that‘continuous coverage’ meant c overage with no break in time, wa s all that was offered by

the defendants and ultimately accepted by

Tipton.” Litig ants are entitled to have their rights settled by a consistent an d i ntelligi ble verdict

. Milliken

v. Smith , 405 S.W.2d 475, 477 (Tenn. 1966). It is theduty of the appellate court to reverse and remand for a ne w trial when the verdict is inconsistent. Id

. When determ ining whether a verdict is irreconcilable,

It is the duty

of the court in con struing verdict s to give the

m the most favora ble interpretation and

to give effect to the intention of the jurors if that intention be permissible under the law and ascertainable from the phraseology

of the verdict. If af

ter an examination of

the terms of the verdict the court is able to pl ace a c onstruct ion there on that will uphold it, it is encumbent (sic) upon the court to do so. Hogan v. D oyle , 768 S .W.2 d 259, 263 (T enn. C t. App . 1988 )(quo ting Templeton v. Quarles , 5 2 Tenn. App. 419, 432, 374 S.W.2d 654, 660 (1963)).

We believe the Chancer

y Court prope

rly reconc iled any

appare nt inconsi stencie s in the jury ’s interr

ogator y a nsw e rs. There certainly

is sufficient evidence to support a finding that Taylor was negligent in not making sure Tipton appr eciated the differences in the two ty pes of coverage. Assuming

this to be true, none of the jury ’s other responses to interrogatories negate this conclusion. For example, Taylor could have agreed to provide “continuous liquor liability covera ge” withno break in time (as opposed to break in coverag e) and have carrie d throug

h with that promise, all the while being negligent in not making sure Tipton apprec iated the diff erences in the two policies. We affirm the Chancery Courtjudgment as it gives effect to and reconciles any a pparent inconsistencies in the jury’s re sponses to interrogatories.

The final issues on appeal involve the amount of the jud gment a warded to Plaintiff

s. Both Plaintiffs and Defendants appeal the damag e award. The “claims made” policy with Lexington had policy limits of $300,000. The “occ urrence policy ” with Great American had policy limits of $1,000,00 0. As set f

orth abov e, one of

the inter rogato ries pose d to the jur

y w as as follows: By using the

term “ap

ple s for appl es,” did Tipton mean that he wantedcontinuou s insurance cove rage with the same policy limits for liability as under the Lexington I nsurance Compa ny “claims made” po li cy?
The jury responded “

yes.” At trial, Tipton claimed he told Taylor tha the wanted “apples for apples”, meaning that he wa

nted the s ame insur

ance co verag e with the

samelimits. Plaintiffs, however, did-20-

notget “apples for apples” bec ause what they got wasan “occurrenc e” polic y. D efenda nts argue that if Plaintiffs truly

had rec eived “a

pples for apples”as reque sted, the

y w ould have

obtained a “clai ms made” policy

in the amount of $300,000, as opposed to $1,000,000. Defend ants thus c laim that th eir maximum poten tial liabi lity is $ 300,0 00, ev en tho ugh Plaintiffs paid for policy limits of $1,000,000 with Great American.

Plaintiffs argue that the f ull pa noply of tort damag es should be applicable and Defendan ts should be required to pay the full amount of the Circuit Court judgment against Tip’s totaling $1,360,032.46 as indemnification for the negligenc e of Taylor. Intervening Plaintiff Jordan argues that

prejudgment interest should accrue from the d ate of e

ntry of the und

erly ing judgment in Circuit Court. Tips’ and Tipton adopted this argument and likewise request same.

At trial, Ta ylo r testified that he d

id not want to

make a proposal to Tipton based on the same amount of cov erage that was in ex istence with the Lexington policy (i.e., $300,000). Taylor stated:

I

did not wa

nt to make a proposal on the same coverag es that he had. If he wanted that, he was going to stay where he was. What I w as trying to do was give him an alternative to the p rogra m that he currently ha

d. Taylor was su ccessf

ul in propo sing a new alternative, including an incre ase in the

policy limits to $1,000,000. Tipton consequently obtained a policy with this higher policy limits. Had Taylor not been negl ige nt, Plaintiffs would have had a $1,000,000 policy w hich provided coverage for the wrongful deaths of Moberg and Jordan. We believe the Trial Court applied the pr oper measure of damages which fully compensa tes Tip’s for the tortious injury , but no mor e. The award of $1,000,000 puts Tip’sin the exact situation it would have been

in if Tay lor had not been ne glige

nt. At the same time, however, requiring Def endants to pay more

than that which naturally f lowed from the negligent conduct would be improper and result in a windfall to Tip’s. For these reasons, we affirm th e j ud gm en t o f t he Ch an ce ry Court in favor of Tip’s in its award of $1,000,000 for indemnification against the judgment awarded to the Jordans and the Mobergs in the Circuit Court action.
As to Intervening Plaintiff Jordan’s request for prejud gment interest , since Jordan wa s notawarded a j udgment in this action, there is no basis upon which to grant this request. Tipton likewise is not entitled to prejudgment interest since we have rev erse d the judgment which was awarded to him. Even though we have rejected Defendants’ a ttack on the valid

ity o f both judg

ments, we do not believe that the Chancery Courterred in its decis ion not to a ward pr ejudgme nt intere st on this disputed amount.-21- Conclusion The judgment of the Chancery Court is reversed insofar as it award s a judgm ent to Plaintiff Tipton. In all other respects, the judgment of the Chancer y Court is aff

irmed. Th

is case is remanded to the Chancery

Court for further pro ceeding s as requ ired, if a ny, consiste

nt with this Opinion, and for the c ollection of co sts below. Costs of ap peal ar e taxed one -half to A

ppellant s, Commercial Insurance

Manag ers, I

nc., and Georg e P. Tay

lor, I V, and the

ir surety , and one -half to the Appellees Tip’s Package Store, I nc., and H. Wayne

Tipton.

____________________________________ D. MICHAEL

SWINEY