IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

October 4, 2004 Session

DOT BUSH GOOT ET AL. v. METROPOLITAN GOVERNMENT OF

NASHVILLE AND DAVIDSON COUNTY

Appeal from the Circuit Court for Davidson County

No. 01C-3841 Thomas Brothers, Judge

No. M2003-02013-COA-R3-CV - Filed November 9, 2005

This appeal involves a dispute between the surviving spouses of five disabled city employees and

the Metropolitan Government of Nashville and Davidson County over the amount of life insurance

benefits payable after the employees died. The surviving spouses filed three separate lawsuits

asserting that the city had breached theirspouses’ employment contracts as well as its fiduciary duty

and had committed fraud by concealing information and by knowingly providing false information

regarding a waiver of premium benefit that would have greatly increased their death benefits. These

suits were consolidated in the Circuit Court for Davidson County. The trial court granted a summary

judgment dismissing all the surviving spouses’ intentional tort claims because they were barred by

the Governmental Tort Liability Act. The remaining breach of contract claims of three of the

surviving spouses were tried to a jury, and the trial court directed a verdict for the city at the close

of the plaintiffs’ proof. Thereafter, the trial court granted a summary judgment dismissing the

remaining claims of the other two surviving spouses. All the surviving spouses have appealed. We

affirm the summary judgment orders dismissing the surviving spouses’ intentional tort claims and

the breach of contract claim of one surviving spouse. We reverse the directed verdict with regard

to three of the remaining surviving spouses’ breach of contract claims, as well as the summary

judgment dismissing the other surviving spouse’s breach of contract claim.

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

And Reversed in Part

WILLIAM C. KOCH, JR., P.J., M.S., delivered the opinion of the court, in which WILLIAM B. CAIN,

J., joined. PATRICIA J. COTTRELL, J., not participating.

Dan R Alexander, Nashville, Tennessee, for the appellants, Dot Bush Goot, Norma Taylor, Bobby

Duke, Joe Reese, and Faye Jackson.

Karl F. Dean, Michael B. Bligh, and John L. Kennedy, for the appellee, Metropolitan Government

of Nashville and Davidson County.
Metropolitan Gov’t of Nashville & Davidson County, Tennessee Code § 3.20.010 [hereinafter Metro. Code] 1

provides covered employees with life insurance benefits “during all times that he [or she] is an eligible employee. . . .”

Metro. Code § 3.20.030(C) states that “[w]aiver of premium benefits for disability occurring prior to age sixty 2

shall be included [in the “life contract”]. The word ‘disability’ shall have the definition as is customary with the insurer

and not as otherwise defined in the system.” 

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OPINION

I.

METROPOLITAN GOVERNMENT’S GROUP LIFE INSURANCE BENEFIT

The Metropolitan Government of Nashville and Davidson County, like most large public and

private employers, provides group insurance benefits to its employees. Ever since 1965, it has

provided life insurance coverage to active employees and former employees who are receiving

disability or retirement benefits. The New York Life Insurance Company issued the first group term 1

life insurance policy in 1965, and Aetna Life Insurance Company replaced New York Life Insurance

Company in 1999. The Metropolitan Government is responsible for paying the premiums for this

policy, and the insurance companies are responsible for determining eligibility and paying the claims.

At all times relevant to this case, the group term life insurance policy provided active city

employees with life insurance coverage equal to twice their annual salary to a maximum of $50,000.

Former employees receiving a disability or service pension were entitled to $7,500 in coverage.

However, the policy also contained a waiver of premium provision that entitled employees who

became disabled before their sixtieth birthday to maintain their life insurance coverage at the same

level they had as active employees without continuing to pay the premiums that had been paid by

the Metropolitan Government while theywere active employees. To be eligible for this benefit, the 2

disabled former employee was required to be “disabled” as defined in the insurance policy, and the

employee seeking the waiver of premium benefit was required to apply to the insurance company

for this benefit within two years after being found eligible for a disability pension.

The life insurance benefits payable to the spouses of eligible disabled employees differed

significantly depending on whether the employee established his or her right to the waiver of

premium benefit. The spouses of disabled employees who had not qualified for the benefit received

$7,500 upon the death of their spouse. However, the spouses of disabled employees who qualified

for the benefit and who had earned $25,000 or more when they were active employees received

$50,000 upon the death of their spouse. 

II.

THE CLAIMS OF THE SURVIVING SPOUSES

The three lawsuits giving rise to this appeal involve the surviving spouses of five employees

of the Metropolitan Government who became disabled and took disability retirement between 1985

and 1996. Roy Bush, a budget director, began drawing disability benefits in January 1985 following

his second open heart surgery. Following his death in April 14, 1992, his widow, Dot Bush Goot,

received life insurance benefits in the amount of $7,548.75. Blant Duke, a civil warrant processor
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in the Davidson County Sheriff’s Department, qualified for disability benefits in February 1985.

When he died, his widow, Bobbie Jane Duke, received $7,544.68. Gene Jackson, an employee of

the Department of Public Works, was a member of the old Davidson County pension plan because

he had declined to become a member of the Metropolitan Employee Benefit System. He qualified

for a disability pension in January 1987 because of heart problems. After he died on June 18, 1998,

his widow, Wanda Faye Jackson, received $7,543.88. Clyde Taylor, a sergeant with the

Metropolitan Police Department, qualified for a disability pension in 1992. Following his death on

April 7, 2000, his widow, Norma H. Taylor, received $7,500. Finally, Marilyn Reese, an employee

at General Hospital, qualified for disability in February 1996 after injuring her back. After she died

on April 9, 2001, her surviving husband, Joe Lloyd Reese, received $7,500.

The surviving spouses of these five employees later discovered that they would have received

a much larger death benefit had their deceased spouse qualified for the waiver of premium benefit

within two years after being found eligible for a disability pension. Two of the surviving spouses,

Ms. Goot and Ms.Jackson, attribute their former husbands’ failure to qualify for the benefit to their

ignorance of the benefit because employees of the Metropolitan Government had not provided their

husbands with timely information about this benefit. 

Two other spouses, Ms. Duke and Ms. Taylor, assert that their former husbands did not

qualify for the waiver of premium benefit because employees of the Metropolitan Government

provided them with false information regarding their eligibility. Ms. Duke asserts that her husband

inquired about the waiver of premium benefit and was told that he was not eligible for the benefit

because he was in the wrong department. Ms. Taylor asserts that her husband applied for the benefit

after he had been disabled for one year but that he was told that his application was too late. 

The remaining spouse, Mr. Reese, concedes that his wife received two documents explaining

the waiver of premium benefit when she qualified for a disability retirement in 1996 and that she did

not apply for the benefit within two years after she became eligible for disability payments. He also

concedes that her July 1999 application for the benefit was turned down because it was too late.

However, he asserts that the Metropolitan Government should have given his wife another chance

in 2000 to apply for the benefit after Aetna Life Insurance Company suggested to the Metropolitan

Government that it offer a one-time grace period to permit disabled employees who had not

requested the waiver of premium benefit to submit their applications.

On July 18, 2001, Mmes. Goot, Taylor, and Duke filed a complaint in the Chancery Court

for Davidson County seeking to recover the death benefit they would have received had their

husbands qualified for the waiver of premium benefit. They alleged that they were third-party

beneficiaries of their husbands’ group life insurance contracts and that the Metropolitan Government

had breached its contractual and fiduciary duties to their husbands “by concealing and failing to

inform Plaintiffs of contract provisions that inure to their benefit . . . and by intentionally lying to

the Plaintiffs to the detriment of the Plaintiffs and to the benefit of the insurance companies . . . .”

Mr. Reece, represented by the same attorneywho was representing Mmes. Goot, Taylor, and

Duke, filed his complaint in the Chancery Court for Davidson County on July, 30, 2001 seeking the

death benefit he would have received had his wife qualified for the waiver of premium benefit. He
The attorney representing Mmes. Goot, Taylor, and Duke had overlooked Tenn. Code Ann. § 29-20-307 3

(2000) vesting circuit courts with exclusive jurisdiction over claims filed under the Governmental Tort Liability Act.

Mmes. Goot, Taylor, and Duke filed an amended complaint on October 8, 2001 containing allegations similar

4

to those contained in Ms. Jackson’s complaint. Mr. Reese filed a similar amended complaint on January 14, 2002. 

The Metropolitan Government never filed an answer to the complaint filed by Mmes. Goot, Taylor, and Duke,

5

but no one discovered this oversight until the second day of trial on June 18, 2003. This revelation prompted the

Metropolitan Government to file an answer to Mr. Reese’s complaint on June 30, 2003.

Tenn. R. Civ. P. 7.02(1) requires that motions “state with particularity the grounds therefor. . . .” See Jennings

6

v. Sewell-Allen Piggly Wiggly, ___ S.W.3d ___, ___, 2005 WL 2513976, at *1 (Tenn. 2005).

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too alleged that he was a third-party beneficiary of his wife’s group life insurance contract and that

the Metropolitan Government had breached its contractual and fiduciary duties by failing to notify

either his wife or him of Aetna Life Insurance Company’s July 20, 2000 proposal for the grace

period. Like Mmes. Goot, Taylor, and Duke, Mr. Reese accused the employees of the Metropolitan

Government of “concealing and failing to inform” and of “intentionally lying.”

On December 7, 2001, the Chancery Court for Davidson County transferred the complaint

filed by Mmes. Goot, Taylor, and Duke to the Circuit Court for Davidson County. On December 3

21, 2001, Ms. Jackson, represented by the same attorney who was representing the other four

surviving spouses, filed her complaint in the Circuit Court for Davidson County. She asserted that

the Metropolitan Government had breached its fiduciary duties and its employment contract with her

husband by “concealing and failing to inform” her of the “waiver of premium option” that would

have provided her with a larger death benefit and by “intentionally lying” to her and her husband.4

On May 3, 2002, all three complaints were consolidated in the Circuit Court for Davidson

County for “pre-trial and discovery purposes only.” At this point, the Metropolitan Government had

filed an answer to Ms. Jackson’s amended complaint but had not yet filed answers to either Mr.

Reese’s complaint or the complaint filed on behalf of Mmes. Goot, Taylor, and Duke. On October

5

15, 2002, the Metropolitan Government filed identical motions for summary judgment in all three

cases. While none of these motions complied with Tenn. R. Civ. P. 7.02(1), we glean from the 6

record that the motions asserted that the surviving spouses’ intentional tort claims based on the

alleged misrepresentations by employees of the Metropolitan Government were barred by Tenn.

Code Ann. § 29-20-205(6) (2000). The surviving spouses responded by insisting that their claims

sounded in contract rather than in tort. On January 15, 2003, following a hearing on December 13,

2002, the trial court entered an order granting partial summary judgments in all three cases because

“the . . . [plaintiffs’] tort claims arise out of alleged misrepresentations by employees of the

Defendant and are therefore barred by the Governmental Tort Liability Act.” However, the court

permitted the cases to continue because “the facts put forth by the . . .[surviving spouses] arguably

state a claim for breach of contract and will require a trial.”

On June 17, 2003, the trial court empaneled a jury to try the remaining breach of contract

claims of Mmes. Goot, Taylor, and Duke. The Metropolitan Government moved for a directed

verdict on numerous grounds at the close of the plaintiffs’ case-in-chief. It was at this point that the

parties and the court discovered that the Metropolitan Government had never filed an answer. The
The trial court is referring here to Aetna’s proposal for the one-time grace period permitting disabled 7

employees who had not qualified for the waiver of premium benefit to apply for the benefit. 

Act of May 4, 1973, ch. 345, 1973 Tenn. Pub. Acts 1243. 

8

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trial court decided to direct a verdict for the Metropolitan Government after concluding that Mmes.

Goot, Taylor, and Duke had “failed to prove an essential element of their claim.” The court

concluded that the plaintiffs had “failed to prove the terms of the insurance contract under which

they claim they would have benefited [sic] had they been informed ofitsterms” and that without this

proof the jury would be unable to determine whether their spouses “would have qualified for the

waiver of premium benefit” or “to determine Plaintiffs’ damages.” The trial court entered an order

granting the directed verdict on July 15, 2003.

On August 29, 2003, the Metropolitan Government filed new motions for summary judgment

seeking dismissal of the remaining claims of Mr. Reese and Ms. Jackson. Following a hearing on

October 10, 2003, the trial court entered separate orders on October 23, 2003 granting the motions

and dismissing all remaining claims. The court concluded that Ms. Jackson’s breach of contract

claim was “barred by the applicable statute of limitations.” With regard to Mr. Reese’s remaining

claim, the court determined that his deceased wife had been properly notified of the waiver of

premium benefit and that “the July 20, 2000 letter from Aetna US Healthcare did not merge with 7

Mrs. Reese’s contract of employment so as to require the Defendant to notify her of its contents.”

The five surviving spouses have appealed. All five take issue with the summary judgment

dismissing their intentional tort claims. Mmes. Goot, Taylor, and Duke challenge the directed

verdict dismissing their contract claims. Finally, Mr. Reese and Ms. Jackson take issue with the

summary judgments dismissing their contract claims. 

III.

THE SURVIVING SPOUSES’ INTENTIONAL TORT CLAIMS

Despite their insistence in the trial court that their claims sounded in contract rather than tort,

all five surviving spouses take issue with the trial court’s decision to grant the summary judgment

dismissing their intentional tort claims on the ground that they were barred by Tenn. Code Ann. §

29-20-205(6). They assert that the trial court erred because their complaints contain claims based

on intentional torts other than misrepresentation and that these claims are permitted under Tenn.

Code Ann. § 29-20-310(c) (Supp. 2004). We have concluded that the trial court properly dismissed

these intentional tort claims.

The doctrine of sovereign immunity, embedded in Tenn. Const. art. I, § 17, provides that

suits for money damages may not be brought against the State of Tennessee or other governmental

entities without their consent. Doyle v. Frost, 49 S.W.3d 853, 857 (Tenn. 2001); Hawks v. City of

Westmoreland, 960 S.W.2d 10, 14 (Tenn. 1997). When the Tennessee General Assembly enacted

the Governmental Tort Liability Act in 1973, it consented to suits for money damages being filed 8

against counties, municipalities, and other local government entities. The Governmental Tort

Liability Act must be construed strictly because it is in derogation of the common law. Limbaugh
After all, negligence provides a basis for liability independent of intent. RESTATEMENT (SECOND) OF TORTS

9

§ 282 cmt. b (1965); W. PAGE KEETON ET AL. PROSSER AND KEETON ON THE LAW OF TORTS § 28, at 160-61 (5th ed.

1984) [hereinafter PROSSER AND KEETON ON THE LAW OF TORTS]. 

The court’s discussion of continuation of immunity from suit for intentional torts was limited to Tenn. Code 10

Ann. § 29-20-205(2). The statute, however, lists other intentional torts for which immunity is preserved. Tenn. Code

Ann. § 29-20-205(5) (malicious institution of judicial or administrative proceedings); Tenn. Code Ann. § 29-20-205(6)

(intentional misrepresentation). Presumably, a local government would also be immune from suit arising out of an assault

or battery committed by a government employee in the context of a riot, unlawful assembly, or civil disturbance. See

Tenn. Code Ann. § 29-20-205(7). 

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v. Coffee Med. Ctr., 59 S.W.3d 73, 79 (Tenn. 2001). Where immunity from suit has been waived,

the government entity is the proper defendant, not the government employee whose conduct caused

the injury. Tenn. Code Ann. § 29-20-310(b) (Supp. 2004); Sallee v. Barrett, 171 S.W.3d 822, 826

(Tenn. 2005). 

Tenn. Code Ann. § 29-20-205 expressly removes immunity from suit “for injury proximately

caused by a negligent act or omission of any employee within the scope of his [or her] employment.”

However, the statute contains exceptions to waiver. While it had been believed for decades that the

Governmental Tort Liability Act did not authorize suits for damages caused by a local government

employee’s intentional tort, the Tennessee Supreme Court has now held that the Act does not 9

embody a blanket prohibition against suits seeking damages for all intentional torts. Rather, the

Court has limited the immunity to the intentional torts enumerated in Tenn. Code Ann. § 29-20-205.

Limbaugh v. Coffee Med. Ctr., 59 S.W.3d at 84. 

10

The Governmental Tort Liability Act explicitly provides that local governments retain

immunity for injuries caused by their employees “deceit,” Tenn. Code Ann. § 29-20-205(2), and for

injuries caused by “misrepresentation by an employee whether or not such is negligent or

intentional,” Tenn. Code Ann. § 29-20-205(6). The issue we must decide is whether the tort claims

of the five surviving spouses fall within the scope of these two provisions. We are guided in our

analysis of this question by the customary rules of statutory construction, as well as our

understanding of the state of the law when the Governmental Tort Liability Act was enacted. Sallee

v. Barrett, 171 S.W.3d at 826-29; Limbaugh v. Coffee Med. Ctr., 59 S.W.3d at 83. 

Substantial overlapping exists in modern tort law with regard to the concepts of deceit and

misrepresentation. Misrepresentation is the keystone in the architecture of the tort law of fraud and

deceit. 9 STUART M. SPEISER, THE AMERICAN LAW OF TORTS § 32:11, at 228 (1992); see also

Robinson v. Omer, 952 S.W.2d 423, 426-27 (Tenn. 1997) (recognizing three separate torts based on

misrepresentation, including fraud or deceit); Holt v. Am. Progressive Life Ins. Co., 731 S.W.2d 923,

927 (Tenn. Ct. App. 1987). For the most part, the common-law tort of deceit is limited to cases

where there was an intent to mislead. 2 FOWLER V. HARPER, THE LAW OF TORTS § 7.1, at 381 (2d

ed. 1986); PROSSER AND KEETON ON THE LAW OF TORTS § 107, at 740. The concept of

misrepresentation which can be traced to the common-law action of deceit, RESTATEMENT (SECOND)

OF TORTS Chapter 22 Scope Note, at 54 (1977); First Nat’l Bank v. Brooks Farms, 821 S.W.2d 925,

927 (Tenn. 1991), is a broader concept than deceit. PROSSER AND KEETON ON THE LAW OF TORTS

§ 105, at 727. 
Metro. Code § 3.08.030(A). 11

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Every one of the tort claims included in the five surviving spouses’ complaints contain

allegations involving “concealing and failing to inform,” “intentionally lying,” and “fraud, fraudulent

concealment, deceit and fraudulent misrepresentation by concealing information . . . and by

providing false and incorrect information known by the [d]efendants to be false.” Each of these

claims easily fits within the scope of the Governmental Tort Liability Act’s exclusion of claims

based on “deceit” and “misrepresentation.” Therefore, the trial court properly granted the

Metropolitan Government’s motion to dismiss the surviving spouses’ tort claims.

IV.

MS. JACKSON’S BREACH OF CONTRACT CLAIM

Ms. Jackson takes issue with the trial court’s decision to grant the Metropolitan

Government’s summary judgment motion based on the statute of limitations. She insists that the

discovery rule should apply to her breach of contract claim. We agree.

A.

Ms. Jackson’s breach of contract claim, like the claims of the other surviving spouses, arises

from the employment relationship between the Metropolitan Government and her deceased spouse.

Her complaint embodies essentially two theories. First, she asserts that the Metropolitan

Government breached its specific obligation to explain the benefit system and infringed upon her

husband’s rights by failing to inform him of the existence of the waiver of premium benefit. Second,

she asserts that the Metropolitan Government’s failure to inform her husband of this benefit also

violated its obligation of good faith and fair dealing.

The relationship of employer and employee arises out of contract. Vargo v. Lincoln Brass

Works, Inc., 115 S.W.3d 487, 491 (Tenn. Ct. App. 2003). It is based on the mutual assent of the

parties, and it is the product of an agreement or series of agreements between the employer and

employee regarding the scope and nature of the work to be performed, the duration, terms, and

conditions of employment, and the compensation for performing the work. Hamby v. Genesco, Inc.,

627 S.W.2d 373, 375 (Tenn. Ct. App. 1981). An employment agreement may be written, oral, or

a combination of the two, and the terms of the agreement may either be specifically bargained for

or may be supplied by applicable legal requirements.

1.

The Metropolitan Government’s Contractual Obligations With Regard To

Providing Its Employees with Life Insurance Coverage Containing

a Waiver of Premium Provision

The Metropolitan Government is required to provide its employees with a “program of

benefits . . . to provide for specific kinds of needs upon death, upon hospitalization and sickness and

upon retirement because of disability or old age.” Included among these benefits are “benefits 11

payable upon the death of the employee which are not inconsistent with group life insurance plans
Metro. Code § 3.08.030(B)(1). 12

Metro. Code § 3.20.010. 13

Metro. Code § 3.20.010. 14

Metro. Code § 3.20.030(C). 15

Metro. Code § 3.08.040(A)(3). 16

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in general use by businesses and industries in Davidson County. . . .” Accordingly, employees who 12

are members of the Metropolitan Employee Benefit System are entitled to be “covered for life

insurance benefits during all times that he [or she] is an eligible employee. . . .” In order to provide 13

this benefit, the Metropolitan Employee Benefit Board is required to enter into a group contract with

a life insurance company to “underwrite” the required insurance benefits. This contract must 14

include a “[w]aiver of premium benefits for disability occurring prior to age sixty. . . .”15

The Metropolitan Government’s obligation to its employees does not end with simply making

arrangements to provide group benefits to its employees. Because of the complexity of group

benefits, the Metropolitan Employee Benefit Board must also take steps to make sure that the

employees are aware of and understand what their benefits are. Accordingly, the Metropolitan

Employee Benefit Board must “[d]irect the preparation of and approve a booklet explaining the

metropolitan employee benefit system in full detail, and make available in the pension office to

metropolitan employees full information concerning a metropolitan employee’s status and his [or

her] rights concerning the system. . . .”16

2.

The Metropolitan Government’s Duty of Good Faith and Fair Dealing

Under Tennessee Law, every contract carries with it an implied covenant of good faith and

fair dealing. Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684, 686 (Tenn. 1996); Elliott v.

Elliott, 149 S.W.3d 77, 84-85 (Tenn. Ct. App. 2004). As a result of this covenant, each contracting

party promises to perform its part of the contract in good faith and, in return, expects the other party

to do the same.

The purpose of the implied-in-law covenant is two-fold. First, it honors the contracting

parties’ reasonable expectations. Bayou Land Co. v. Talley, 924 P.2d 136, 154 (Colo. 1996); Cox

v. CSX Intermodal, Inc., 732 So. 2d 1092, 1097 (Fla. Dist. Ct. App. 1999); Cenac v. Murry, 609 So.

2d 1257, 1272 (Miss. 1992); Sons of Thunder, Inc. v. Borden, Inc., 690 A.2d 575, 586 (N.J. 1997).

Second, it protects the rights of the parties to receive the benefits of the agreement they entered into.

Winfree v. Educators Credit Union, 900 S.W.2d 285, 289 (Tenn. Ct. App. 1995); see also

Wagenseller v. Scottsdale Mem’l Hosp., 710 P.2d 1025, 1040 (Ariz. 1985); Guz v. Bechtel Nat’l,

Inc., 8 P.3d 1089, 1110 (Cal. 2000); Habetz v. Condon, 618 A.2d 501, 505 (Conn. 1992). The

implied obligation of good faith and fair dealing does not, however, create new contractual rights
See, e.g., PepsiCo, Inc. v. Central Inv. Corp., 268 F. Supp. 2d 962, 967 (S.D. Ohio 2001); Dunlap v. State

17

Farm Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005); Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 805

N.E.2d 957, 964 (Mass. 2004); Oakwood Village LLC v. Albertsons, Inc., 104 P.3d 1226, 1240 (Utah 2004).

Fields v. Thompson Printing Co., 363 F.3d 259, 271 (3d Cir. 2004); Witt v. State, Dep’t of Corr., 75 P.3d 18

1030, 1034 (Alaska 2003); Grossman v. Columbine Med. Group, 12 P.3d 269, 271 (Colo. Ct. App. 1999); Gilbert v.

El Paso Co., 575 A.2d 1131, 1143 (Del. 1990).

Crews v. Buckman Labs. Int’l, Inc., 78 S.W.3d 852, 858 (Tenn. 2002); Baines v. Wilson County, 86 S.W.3d 19

575, 578 (Tenn. Ct. App. 2002).

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or obligations, nor can it be used to circumvent or alter the specific terms of the parties’ 17

agreement.18

Despite the seemingly broad application of the implied duty of good faith and fair dealing

to all contracts, this court is not of one mind regarding its application to employment contracts. The

Eastern Section has held that the duty of good faith and fair dealing is part of every employment

contract. Hooks v. Gibson, 842 S.W.2d 625, 628 (Tenn. Ct. App. 1992); Williams v. Maremont

Corp., 776 S.W.2d 78, 80-81 (Tenn. Ct. App. 1988). However, the Western Section has held that

there is no implied duty of good faith and fair dealing in employee-at-will contracts. McGee v. Best,

106 S.W.3d 48, 67 (Tenn. Ct. App. 2002); Randolph v. Dominion Bank, 826 S.W.2d 477, 479 (Tenn.

Ct. App. 1991). The Middle Section has held that the employment agreements include the implied

duty of good faith and fair dealing, Dunn v. Matrix Exhibits, Inc., No. M2003-02725-COA-R3-CV,

2005 WL 2604048, at *3 (Tenn. Ct. App. Oct. 13, 2005), but has also held that employers do not

breach their implied duty of good faith and fair dealing when they fire an at-will employee.

Whittaker v. Care-More, Inc., 621 S.W.2d 395, 396 (Tenn. Ct. App. 1981). 

We have determined that the Western Section went too far when it completely excised the

implied duty of good faith and fair dealing from at-will employment contracts. The cases before the

Western Section involved at-will employees who believed that they had been fired unfairly. They

asserted that their termination was a breach of the employment agreement because it violated their

employer’s implied duty of good faith and fair dealing. The Western Section resolved the claim in

the employer’s favor by holding that employment-at-will contracts do not contain an implied duty

of good faith and fair dealing.

Employees-at-will have no contract right or expectation of continued, indefinite employment

because they can be terminated at any time for any reason. However, they may have other contract 19

rights and expectations, such as the right and expectation to be paid the agreed-upon wage and the

right and expectation of having work hours consistent with applicable federal and state law.

Williams v. Maremont Corp., 776 S.W.2d at 81. Because the implied obligation of good faith and

fair dealing does not create new rights or modify existing contract rights, it would have been more

appropriate for the Western Section to hold that the implied duty of good faith and fair dealing

cannot modify the employment-at-will doctrine and, therefore, that an employer does not breach its

implied duty of good faith and fair dealing when it discharges an at-will employee for any reason.
For example, this court held that Tenn. Code Ann. § 56-7-601(c) [now codified at Tenn. Code Ann. § 56-7- 20

2305(a)(2)(H) (2000)] required an employer to notify its employees of their right to convert their group life insurance

coverage to an individual policy. Estate of Saffles v. Reliance Universal, Inc., 701 S.W.2d at 823-24. 

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Accordingly, we find that the Metropolitan Government’s employment agreement with its

employees includes an implied obligation of good faith and fair dealing on the part of both the

Metropolitan Government and its employees. This obligation required both parties to act in good

faith or “to act in word and deed, in a responsible manner.” Williams v. Maremont Corp., 776

S.W.2d at 81 (quoting HENRY R. GIBSON, GIBSON’S SUITS IN CHANCERY § 34, at 34 (William H.

Inman ed., 6th ed. 1982)).

3.

The Metropolitan Government’s Performance of Its Contractual Obligations

Regarding the Waiver of Premium Benefit

When employers procure group insurance policies to cover their employees, they are acting

for themselves and as agents for their employees. Boseman v. Conn. Gen. Life Ins. Co., 301 U.S.

196, 204-05, 57 S. Ct. 686, 690 (1937); Hale v. Am. Home Assurance Co., 224 Tenn. 650, 656, 461

S.W.2d 384, 386 (1970); Bates v. Jim Rule Chevrolet, Inc., No. 16, 1990 WL 51295, at *6 (Tenn.

Ct. App. Apr. 26, 1990) (No Tenn. R. App. P. 11 application filed); Nidiffer v. Clinchfield R.R. Co.,

600 S.W.2d 242, 246 (Tenn. Ct. App. 1980). Accordingly, they have a duty to act in good faith and

with due diligence in obtaining insurance for their employees. Estate of Saffles v. Reliance

Universal, Inc., 701 S.W.2d 821, 823-24 (Tenn. Ct. App. 1985); Nidiffer v. Clinchfield R.R. Co., 600

S.W.2d at 246. The surviving spouses are not taking issue in this case with the manner in which the

Metropolitan Government obtained the group life insurance policies first from the New York Life

Insurance Company and later from Aetna 

Life Insurance Company. Accordingly, for the purpose of this appeal, we presume that the

Metropolitan Government breached no obligation to its employees when it obtained the group life

insurance policy.

However, an employer’s duty to inform its employees of their rights and benefits under a

group insurance policy is independent from its obligation to procure the policy. The source of this

duty may be statutory or contractual or may even be imposed by the common law. Burnette v. 20

Purolator Courier Corp., No. 1284, 1990 WL 801, at *2 (Tenn. Ct. App. Jan. 9, 1990), perm. app.

denied (Tenn. Mar. 26, 1990). In this case, Metro. Code § 3.08.040(A)(3) required the Metropolitan

Government to explain the employee benefit system “in full detail” and to make available in the

retirement office “full information” concerning the employees’ “status and . . . rights concerning the

system. . . .” Accordingly, the Metropolitan Government, as part of its employment agreement with

its employees, had an obligation to fully inform its employees of their rights and status with regard

to the waiver of premium benefit.

The surviving spouses have presented evidence that calls into question whether the

Metropolitan Government has acted reasonably in discharging its contractual obligation to inform

its employees of the waiver of premium benefit. Even though the group life insurance policy has

been in place since 1965, there is evidence that prior to 1992, the Metropolitan Government either
Mmes. Goot and Jackson, whose spouses took disability retirement in 1985 and 1987 respectively, have 21

testified that the Metropolitan Government did not inform them or their spouses of this benefit.

Mmes. Duke and Taylor, whose spouses took disability retirement in 1985 and 1992 respectively, have 22

testified that their spouses inquired into their eligibility for the waiver of premium benefit when they retired but were told

that they were not eligible for the benefit.

Me News is a publication of the Metropolitan Employee Benefit Board. 23

-11-

failed to inform disabled employees of the existence of this benefit or misinformed the employees 21

who asked about it. While there is some evidence that the Metropolitan Government was 22

informing disability retirees of the existence of this benefit in 1996, general notice of this benefit was

not given until the publication of ME News in July 2001. This evidence is sufficient to create an 23

issue for the jury regarding whether the Metropolitan Government has breached its duty to notify its

employees of their benefits as well as its duty of good faith and fair dealing.

B.

The Metropolitan Government asserts that Ms. Jackson’s breach of contract claim is timebarred because she failed to file her complaint withing six years after the purported breach of the

contract in 1987 when it failed to inform her spouse of the existence of the waiver of premium

benefit. Ms. Jackson concedes that the six-year statute of limitations in Tenn. Code Ann. § 28-3-

109(a)(3) applies. However, she insists that the discovery rule should apply and that if it does, her

complaint is timely because she filed it withing six years after discovering that her husband would

have been entitled to the waiver of premium benefit had the Metropolitan Government explained it

to him when he took disability retirement in 1987. The trial court concluded that Ms. Jackson’s

complaint was time-barred, and thus we must determine whether the discovery rule may be invoked

with regard to Ms. Jackson’s breach of contract claim.

1.

The discovery rule is a limited exception to the statute of limitations. Pero’s Steak &

Spaghetti House v. Lee, 90 S.W.3d 614, 621 (Tenn. 2002) (characterizing the discovery rule as an

“equitable exception” to the statute of limitations). It tolls the running of the statute of limitations

until the plaintiff knows or, in the exercise of reasonable care and diligence, should know that the

plaintiff has a legal cause of action against the defendant. Terry v. Niblack, 979 S.W.2d 583, 586

(Tenn. 1998); Hunter v. Brown, 955 S.W.2d 49, 51 (Tenn. 1997).

The rationale underlying the discovery rule is that injured parties should not be placed in the

anomalous situation of being required to file suit before they know they have been injured.

McCroskey v. Bryant Air Conditioning Co., 524 S.W.2d 487, 490 (Tenn. 1975); Teeters v. Currey,

518 S.W.2d 512, 515 (Tenn. 1974). The rule alleviates the intolerable result of barring a cause of

action by holding that it “accrued” before the plaintiff discovered the injury or the wrong. Foster

v. Harris, 633 S.W.2d 304, 305 (Tenn. 1982). However, the rule applies only in cases where the

plaintiff did not discover and reasonably could not have been expected to discover the existence of

a right of action, Hunter v. Brown, 955 S.W.2d at 51, and it tolls the running of the statute of
McCroskey v. Bryant Air Conditioning Co., 524 S.W.2d at 492. 24

Quality Auto Parts Co. v. Bluff City Buick Co., 876 S.W.2d 818, 821-22 (Tenn. 1994). 25

Pero’s Steak & Spaghetti House v. Lee, 90 S.W.3d at 624-25. 26

-12-

limitations only as long as the plaintiff has no knowledge at all that a wrong has occurred and, as a

reasonable person, would not have been put on inquiry. Potts v. Celotex Corp., 796 S.W.2d 678, 680

(Tenn. 1990). 

The discovery rule was first invoked by the Tennessee Supreme Court over thirty years ago

in a medical malpractice case. Teeters v. Currey, 518 S.W.2d at 515. It has since been applied to

other tort actions, McCroskey v. Bryant Air Conditioning Co., 524 S.W.2d at 491, including legal

and dental malpractice claims. Carvell v. Bottoms, 900 S.W.2d 23, 28 (Tenn. 1995) (legal

malpractice); Foster v. Harris, 633 S.W.2d at 305 (dental malpractice). However, the Tennessee

Supreme Court has declined to apply the discovery rule in cases involving breach of warranty claims

governed by Tenn. Code Ann. § 47-2-725 (2001), defamation actions, and claims for conversion 24 25

of a negotiable instrument absent fraudulent concealment.26

The Tennessee Supreme Court has yet to address whether the discovery rule may apply to

breach of contract claims and, if so, the circumstances warranting its application. However, this

court appears to have endorsed the application of the discovery rule in a breach of contract case

involving a lease of real property. McFarlin v. City of Murfreesboro, No. 86-124-II, 1987 WL

17728, at *3 (Tenn. Ct. App. Sept. 30, 1987) (No Tenn. R. App. P. 11 application filed). The

property owner leased his property to a city for a landfill. The contract required the city to cover the

top of the landfill with soil in accordance with applicable environmental regulations. The city

abandoned the landfill, but the owner did not discover for many years that the city had failed to cover

the landfill with the amount of soil required by the environmental regulations. The property owner

sued the city for breach of contract within one year after discovering the condition but more than six

years after the city had abandoned the property. The trial court dismissed the property owner’s claim

because it was not filed within the six-year statute of limitations in Tenn. Code Ann. § 28-3-

109(a)(1) (2000).

This court reversed the order granting the city’s motion to dismiss. We framed the issue as

follows: “whether late discovery of a contract violation resulting in injury to property may effectively

delay the running of the statute.” McFarlin v. City of Murfreesboro, 1987 WL 17728, at *3. In the

process of overruling the motion to dismiss, “despite the apparent running of the statute of

limitations,” this court noted:

The resolution of the issue under discussion is not without doubt. It

is insisted that no Tennessee authority applies the discovery rule to

actions for breach of contract. . . . It is arguable that a party to a

contract knows (or should know) his [or her] rights under the contract

and should be alert to discover any non-feasance, misfeasance or

malfeasance under the contract. While this would ordinarily be the

case, in the present situation the opportunity to observe and discover
The discovery rule is intended to prevent the inequity that a strict application of the statute of limitations

27

would produce. Pero’s Steak & Spaghetti House v. Lee, 90 S.W.3d at 621.

All statutes of limitations are intended to preserve fairness and justice by preventing undue delay in filing

28

lawsuits and thereby ensure that evidence is preserved and facts are not obscured by the passage of time. Potts v. Celotex

Corp., 796 S.W.2d at 681; Owen v. Summers, 97 S.W.3d 114, 123 (Tenn. Ct. App. 2001).

April Enters., Inc. v. KTTV, 195 Cal. Rptr. 421, 436 (Ct. App. 1983) (“In the typical contract for purchase

29

of widgets, for example, the buyer is well aware the contract has been breached when the date for delivery arrives and

he has not received his widgets. Similarly, the seller knows when payment is due under the contract. If that time passes

without receipt of the amount due he is easily aware that the contract has been breached.”). 

-13-

violations was less obvious, for the contract was a lease in which the

owner surrendered possession to the lessee for the term of the lease.

Moreover, the very nature of the lease contract was such as to enable

the lessee to conceal the breach of contract. That is, the contract

required the lessee to cover (conceal) the rubbish with a sufficient

layer of earth. Once the rubbish was covered, the depth of coverage

would not be observable until the passage of time and the operation

of the elements caused the deficiency to be visible.

McFarlin v. City of Murfreesboro, 1987 WL 17728, at *4.

We now directly address the application of the discovery rule to breach of contract actions

using the criteria fashioned by theTennessee Supreme Court to determine whether the discovery rule

may be invoked with regard to a particular cause of action. Pero’s Steak & Spaghetti House v. Lee,

90 S.W.3d at 620; Quality Auto Parts Co. v. Bluff City Buick Co., 876 S.W.2d at 820. We must first

consider the language of the specific statute of limitations applicable to the claim and then we must

balance the policies supporting the discovery rule against the policies supporting the strict 27

application of the statute of limitations.

28

2.

The six-year statute of limitations in Tenn. Code Ann. § 28-3-109(a)(3) applies to this case.

That statute simply provides that contractual causes of action not otherwise expressly provided for

“shall be commenced within six(6) years after the cause of action accrued. . . .” This language is

quite similar to the other statutes of limitations to which the Tennessee Supreme Court has applied

the discovery rule, and the statute contains no other language that would otherwise be inconsistent

with the invocation of the discovery rule in proper circumstances.

As a general matter, there will be little need for the discovery rule in most breach of contract

cases. A buyer is immediately aware of a breach upon the delivery of nonconforming goods, and a

seller knows of the breach when payment is delinquent. However, it is not difficult to envision 29

circumstances in which a party to a contract would not be aware that the other party has breached

the contract. In those circumstances, just as in tort claims involving personal injuries, it would be

unjust to hold that a plaintiff’s claim for breach of contract accrues before the plaintiff knew or

should have known that the contract had been breached. 
See, e.g., Hunton v. Guardian Life Ins. Co., 243 F. Supp. 2d 686, 698-99 (S.D. Tex. 2001); City of 30

Philadelphia v. One Reading Ctr. Assocs., 143 F. Supp. 2d 508, 526 (E.D. Pa. 2001); Bauman v. Day, 892 P.2d 817,

827-28 (Alaska 1995); Walk v. Ring, 44 P.3d 990, 999 (Ariz. 2002); April Enters, Inc. v. KTTV, 195 Cal. Rptr. at 437;

Marcucilli v. Boardwalk Builders, Inc., No. CIV.A. 99C-02-007, 2002 WL 1038818, at *4 (Del. Super. May 16, 2002);

Dovenmuehle, Inc. v. Lawyers Title Ins. Corp., 478 So. 2d 423, 424-25 (Fla. Dist. Ct. App. 1985); Strauser v. Westfield

Ins. Co., 827 N.E.2d 1181, 1185 (Ind. Ct. App. 2005); Poffenberger v. Risser, 431 A.2d 677, 680 (Md. 1981); Snortland

v. State, 615 N.W.2d 574, 577 (N.D. 2000); Maher v. Tietex Corp., 500 S.E.2d 204, 207 (S.C. Ct. App. 1998); Gibson

v. Ellis, 58 S.W.3d 818, 823 (Tex. App. 2001); Architechtonics Constr. Mgmt., Inc. v. Khorram, 45 P.3d 1142, 1147

(Wash. Ct. App. 2002).

The inherently undiscoverable requirement is met when the injured party is unlikely to discover the wrong 31

during the limitations period despite due diligence. To be inherently undiscoverable, the wrong and injury must be

unknown to the plaintiff because of their very nature and not because of any fault of the plaintiff. In re Coastal Plains,

Inc., 179 F.3d 197, 214-15 (5th Cir. 1999).

-14-

Many courts now apply the discovery rule to breach of contract claims and hold that a cause

of action for breach of contract begins to run when a party either discovers the breach or could have

or should have discovered the breach through the exercise of reasonable judgment. 31 SAMUEL

WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 79:14, at 304 (Richard A. Lord ed., 4th ed.

2004) [hereinafter WILLISTON ON CONTRACTS]. These courts have invoked the discovery rule in 30

cases where (1) the breach of contract was difficult for the plaintiff to detect, (2) the defendant was

in a far superior position to comprehend the breach and the resulting damage, or (3) the defendant

had reason to believe that the plaintiff remained ignorant that it had been wronged. El Pollo Loco,

Inc. v. Hashim, 316 F.3d 1032, 1039 (9th Cir. 2003). Stated another way, the discovery rule applies

in cases where the breach of contract is inherently undiscovervable. April Enters., Inc. v. KTTV,

31

195 Cal. Rptr. at 437; J.M. Krupar Constr. Co. v. Rosenberg, 95 S.W.3d 322, 329 (Tex. App. 2002).

There are, however, at least two circumstances in which the invocation of the discovery rule

would be improper, even when the breach of contract is inherently undiscoverable. First, as the

Tennessee Supreme Court has pointed out, the discovery rule cannot be invoked when it is

inconsistent with the terms of the applicable statute of limitations. In these circumstances, the

Tennessee General Assembly has already weighed the competing policies involving the accrual of

the cause of action and the tolling of the statute. Second, the discovery rule cannot supercede a

contractually agreed upon limitations period as along as the agreed upon period affords a reasonable

time within which to file suit. See New Welton Homes v. Eckman, 830 N.E.2d 32, 35 (Ind. 2005);

3 ERIC MILLS HOLMES, CORBIN ON CONTRACTS § 9.9, at 278 (Joseph M. Perillo ed., rev. ed. 1996).

In these circumstances, the parties themselves have weighed the competing considerations, and their

bargain should be enforced as long as it is consistent with public policy. 

3.

According to Ms. Jackson, neither she nor her husband were aware of the waiver of premium

benefit in 1987 when her husband qualified for disability retirement. Accordingly, the Jacksons were

not aware that the Metropolitan Government had breached its contractual obligation to inform Mr.

Jackson of the existence of this benefit. It would be unreasonable and unrealistic to impute either

to Mr. Jackson or Ms. Jackson independent knowledge of the details of the group life insurance
After all, the Metropolitan Council imposed on the Metropolitan Government the obligation to notify

32

employees of their rights and benefits because the Council appreciated the complexity of the benefit plans and understood

that most employees would be unable to discover the information on their own.

-15-

policy that the Metropolitan Government had purchased or of the provision in the Metropolitan Code

requiring that a waiver of premium benefit be included in the group life insurance contract.32

Thus, for the purposes of the discovery rule, it would have been difficult for the Jacksons to

be aware of or discover that the Metropolitan Government had breached its contract in 1987 by

failing to inform them of the existence of the waiver of premium benefit. The Metropolitan

Government was in a farsuperior position when compared to the Jacksons, and because of its failure

to notify them of the existence of this benefit, the Metropolitan Government had reason to believe

that the Jacksons were unaware of both the existence of the benefit and the Metropolitan

Government’s breach.

Ms. Jackson first learned of the existence of the waiver of premium benefit in July 1998

when she applied for benefits following her husband’s death. She was told at that time that she was

ineligible for this benefit because Mr. Jackson had failed to apply for and qualify for the benefit

within two years following his disability retirement in 1987. Ms. Jackson filed her lawsuit against

the Metropolitan Government in December 2001, within six years following her discovery of the

existence of the benefit and the Metropolitan Government’s breach of contract. We have determined

that Ms. Jackson may invoke the discovery rule and, therefore, that her complaint was timely filed.

Accordingly, we reverse the summary judgment dismissing her breach of contract claim on the

ground that it was not timely filed.

V. 

MR. REESE’S BREACH OF CONTRACT CLAIM

Mr. Reese’s claim stands on a factual footing far different from the claims of the other

surviving spouses because his wife is the only employee who received timely notice of the waiver

of premium benefit. Ms. Reese took disability retirement in February 1996, and in April 1996 she

received two documents from the Metropolitan Government informing her of the waiver of premium

benefit and the steps to be taken to qualify for it. Despite this information, Ms. Reese did not apply

for the benefit until July 1999. Her application was rejected because it had not been filed within two

years after she qualified for disability retirement.

Up to this point, the facts clearly do not support a breach of contract claim because the

Metropolitan Government fulfilled its obligation under Metro. Code § 3.08.040(A)(3) to provide Ms.

Reese “full information” regarding her rights and status. However, Mr. Reese relies on events

occurring after July 1999 to support his breach of contract claim. On July 20, 2000, Aetna Life

Insurance Company’s manager of the Metropolitan Government’s account wrote a letter to the

Metropolitan Government proposing a “one time exception” for employees currently on disability

who had failed to qualify for the waiver of premium benefit within two years of taking disability

retirement. TheMetropolitan Government declined this offer, apparently because it would have cost
-16-

over $10,000,000. The Metropolitan Government never informed the persons on disability

retirement of Aetna’s offer or of its decision to reject the offer.

Ms. Reese died in April 2001. In his complaint filed in July 2001, Mr. Reese asserts that the

Metropolitan Government breached its contract by failing to inform Ms. Reese of Aetna’s proposal

to offer employee’s like his wife an opportunity to qualify for the waiver of premium benefit. This

claim fails on three grounds. First, the Metropolitan Government does not have either the statutory

or contractual obligation to inform its employees of its negotiations and discussions with insurance

companies regarding changes in group insurance benefits. Second, while the Metropolitan

Government has an obligation to act reasonablywhen it is procuring group health insurance benefits

for its employees, it was not acting unreasonably when it declined to incur an additional $10,000,000

expense in order to offer employees a “one time exception” to the requirements to qualify for the

waiver of premium benefit. Third, the Metropolitan Government had no obligation under Metro.

Code § 3.08.040(A)(3) to inform disabled employees of the “one time exception” because it never

became part of the employee benefit plan. Accordingly, the trial court properly determined that the

Metropolitan Government was entitled to a dismissal of Mr. Reese’s breach of contract claim as a

matter of law.

VI.

THE BREACH OF CONTRACT CLAIMS OF MMES. GOOT, TAYLOR, AND DUKE

We now turn to the breach of contract claims of Mmes. Goot, Taylor, and Duke. The trial

court granted a directed verdict for the Metropolitan Government at the close of their proof on the

ground that they had failed to prove “the terms of the life insurance contract.” Mmes. Goot, Taylor,

and Duke assert that the trial court erred because the terms of the waiver of premium provision in

the life insurance contract were not in dispute. For its part, the Metropolitan Government insists that

the trial court erred by failing to direct a verdict on the ground that Mmes. Goot, Taylor, and Duke

were not third-party beneficiaries of their deceased spouses’ group insurance policies. We have

determined that the trial court properly declined to direct a verdict on the Metropolitan Government’s

third-party beneficiary claim but that the trial court erred by directing a verdict because of the

surviving spouses’ failure to prove the terms of the waiver of premium provision.

A.

The Surviving Spouses as Intended Third-Party Beneficiaries of Their

Spouses’ Group Life Insurance Benefits

The Tennessee Supreme Court has adopted the “intent to benefit” test as set forth in the

RESTATEMENT (SECOND) OF CONTRACTS § 302 (1981). The only third parties who may claim a

legally enforceable interest in a contract are persons who the contracting parties intended to benefit.

The court’s test for determining whether a third party is an intended beneficiary provides:

A third party is an intended third-party beneficiary of a contract, and

thus is entitled to enforce the contract’s terms, if

(1) The parties to the contract have not otherwise agreed;
-17-

(2) Recognition of a right to performance in the beneficiary is

appropriate to effectuate the intention of the parties; and

(3) The terms of the contract or the circumstances surrounding

performance indicate that either:

(a) the performance of the promise will satisfy an

obligation or discharge a duty owed by the promisee

to the beneficiary; or

(b) the promisee intends to give the beneficiary the

benefit of the promised performance.

Owner-Operator Indep. Drivers Ass’n v. Concord EFS, Inc., 59 S.W.3d 63, 70 (Tenn. 2001). An

intended beneficiary’s rights are measured by the contract itself, United States Fid. & Guar. Co. v.

Elam, 198 Tenn. 194, 213-14, 278 S.W.2d 693, 702 (1955), thus courts must analyze third-party

contract claims by construing the contract as a whole rather than in a piecemeal fashion. Benton v.

Vanderbilt Univ., 137 S.W.3d 614, 619-20 (Tenn. 2004).

The Metropolitan Government is obligated to provide all eligible employees with group life

insurance coverage that contains a waiver of premium benefit. A life insurance policy is a mixture

of contract and donative transfer, and when the policy is payable to someone other than the insured,

it is a classic example of a third-party beneficiary contract. Milbourne v. Conseco Servs., LLC, 181

F. Supp. 2d 466, 468 (D. Md. 2002); In re Estate of DeWitt, 54 P.3d 849, 859 (Colo. 2002); In re

Estate of England, No. WILLS FOLIO 114375, 2000 WL 128854, at *4 (Del. Ch. Jan. 4, 2000);

Chicago White Metal Casting, Inc. v. Treiber, 517 N.E.2d 7, 11 (Ill. Ct. App. 1987). Once the

insured names a beneficiary, there is no question that the employee, the employer, and the insurance

company intend to benefit the named beneficiary. 

When group insurance policies are involved, the courts generally view the employee as the

intended third-party beneficiary of the contract for insurance between the employer and the insurance

company. Nidiffer v. Clinchfield R.R. Co., 600 S.W.2d at 246; see also Roworth v. Minnesota Mut.

Life Ins. Co., 674 F.2d 756, 758 (8th Cir. 1982); Aetna Life Ins. Co. v. Messier, 173 F. Supp. 90, 91

(D. Pa. 1959). Thus, the employees themselves have legally enforceable rights under the group

insurance contracts. The courts have also extended the same rights to any beneficiary named by the

employee as long as all the conditions of the policy have been fulfilled. Bass v. John Hancock Mut.

Life Ins. Co., 518 P.2d 1147, 1150 n.4 (Cal. 1974); Keane v. Aetna Life Ins. Co., 91 A.2d 875, 883

(N.J. Super. Ct. 1952); 13 WILLISTON ON CONTRACTS § 37:29, at 186.

One of the principle reasons for purchasing life insurance is to confer a benefit on a third

party following the death of the named insured. Accordingly, when the Metropolitan Government

included life insurance among the group benefits available to its employees, it knew and intended

that these death benefits would be paid upon the employee’s death to the employee’s beneficiary.

It follows, therefore, that both the employee and the Metropolitan Government knew and intended

that upon the death of the employee, the surviving spouse or other named beneficiary would be

entitled to receive the death benefits as long as all the requirements for receiving these benefits had

been fulfilled.
-18-

In light of the relationship between the employees and their beneficiaries, we conclude that

surviving spouses of employees, as intended beneficiaries of the group life insurance benefit, could

step into the shoes of their former spouse to pursue their claim that the Metropolitan Government

breached the employment contract by failing to provide “full information” regarding the waiver of

premium benefit as required by Metro. Code § 3.08.040(A)(3). Therefore, the trial court did not err

when it declined to grant the Metropolitan Government’s motion for directed verdict predicated upon

its claim that the surviving spouses were not intended third-party beneficiaries of their former

spouses’ group life insurance benefit.

B.

The Surviving Spouses’ Evidence Supporting Their Breach of Contract Claim

The final issue involves the trial court’s decision to direct a verdict for the Metropolitan

Government because Mmes. Goot, Taylor, and Duke did not introduce a copy of the group life

insurance contract containing the waiver of premium benefit. Mmes. Goot, Taylor, and Duke assert

that the trial court erred because the Metropolitan Government had never denied the existence of the

group life insurance contract containing a waiver of premium provision or what the terms of the

waiver of premium provision were. We agree, in light of the state of the pleadings and the

Metropolitan Government’s representations regarding the terms of the waiver of premium benefit

during the pretrial proceedings. Based on the facts of this case, Mmes. Goot, Taylor, and Duke were

not required to introduce a copy of the group life insurance contract in order to make out a prima

facie breach of employment contract claim.

1.

All three surviving spouses alleged in their amended complaint that the Metropolitan

Government provided its employees with group life insurance that contained a waiver of premium

benefit for disabled employees. They also alleged that their spouses were eligible for this benefit and

that their spouses would have qualified for it had they been told about it. In addition, they alleged

that the Metropolitan Government breached its employment contract with their spouses by failing

to inform them of the waiver of premium benefit in a timely manner and that as a result of this

breach of contract, they received only $7,500 in death benefits as opposed to the $50,000 in death

benefits they would have received had their spouse applied for the waiver of premium benefit in a

timely manner.

The Metropolitan Government never filed an answer to the amended complaint or any of the

earlier complaints filed by Mmes. Goot, Taylor, and Duke. However, in October 2002, it filed a

motion for summary judgment and statements of undisputed fact regarding each surviving spouse’s

claim. It supported the motion and statements with the depositions of each of the surviving spouses

and with the affidavit of its Assistant Director of Human Resources regarding the group life

insurance policy and the waiver of premium provision. In its statements of undisputed facts, the

Metropolitan Government asserted:
-19-

The Metropolitan Government provides life insurance

coverage for its employees and former employees receiving a

disability pension or a service pension.

Active employees receive life insurance coverage equal to

twice their annual salary to a maximum of $50,000. Former

employees receiving a service or disability pension receive coverage

of a [sic] $7,500.

Employees who become disabled before the age of 60 can

apply of [sic] a “waiver of premium” which, if approved, allows them

to maintain their life insurance coverage at the same level they had as

an active employee.

In order to receive approval for the waiver of premium and

maintain the higher coverage, a disabled former employee must be

disabled within the definition set forth in the insurance policy and

make application to the life insurance company within the appropriate

time frame. 

The determination of whether a former employee qualifies for

the waiver of premium benefit rests solely with the life insurance

company.

The surviving spouses responded to the Metropolitan Government’s statements of undisputed facts

by stating that they did not dispute these facts. The case proceeded to trial after the trial court

declined to find that the Metropolitan Government was entitled to a judgment as a matter of law on

the surviving spouses’ breach of employment contract claims.

At trial, the lawyer representing the Metropolitan Government conceded that the plaintiffs’

spouses received group life insurance coverage when they were city employees and that this life

insurance coverage contained a waiver of premium provision. However, the lawyer specifically

declined to stipulate that the employees did not receive adequate notice of the waiver of premium

benefit or that each of the surviving spouse’s damages amounted to approximately $42,500.

Thereafter, each of the surviving spouses testified (1) regarding her understanding of how the waiver

of premium provision worked; (2) that her spouse either did not receive timely information regarding

the waiver of premium benefit or received erroneous information regarding their eligibility for the

benefit; (3) that her spouse would have applied for the waiver of premium benefit in a timely manner

had he known about it; (4) that her spouse met all the requirements for the benefit; and (5) that as

a result of her spouse’s failure to submit a timely application for the waiver of premium benefit, she

received a death benefit of $7,500 rather than the $50,000 benefit she would have otherwise
While none of the surviving spouses testified about the income their spouse was earning when he became

33

disabled, their testimony that they would have received the $50,000 death benefit permits an inference that all of the

surviving spouses were earning $25,000 per year or more when they became disabled.

-20-

received. On cross-examination, each of the surviving spouses testified that they had not read the 33

group life insurance contract and that they had gained their understanding of the operation of the

waiver of premium provision from employees of the Metropolitan Benefit Board.

The surviving spouses also presented the testimony of two former employees of the

Metropolitan Benefit Board who described the Metropolitan Government’s haphazard approach to

informing disabled employees of the waiver of premium provision or how to qualify for it. During

its cross-examination of these employees, the Metropolitan Government introduced into evidence

one page of the thirteen-page letter purportedly given to all employees who qualified for a disability

retirement. This letter contained the following statements regarding the waiver of premium

provision:

With the effective date of your disability pension, your life insurance,

under coverage provided by The Metropolitan Government, will be

reduced to $7,500 unless you are totally disabled. If you are totally

disabled and are less than sixty (60) years of age, then you may apply

for a waiver of premium and the amount of insurance that you had in

effect as an employee will continue in effect. You are considered to

be totally disabled if you are completely prevented by injury or

sickness from doing, for pay or profit, any work for which you are

fitted by education, training, and experience. The amount of your

insurance coverage will be $7,500 at age 65.

Should you die within the first (1st) year of being on a disability

pension, the amount of insurance that was available to you as an

employee is still in effect if it can be shown that you were totally

disabled. If you are totally disabled, you may continue to be covered

for the amount that you received as an employee if you file proof of

your disability within one (1) year of going on disability. If you wish

to file such a claim, you should contact the Benefit Board Office and

we will assist you in processing that application.

Thus, when the surviving spouses closed their case-in-chief, the following proof was before

the jury: (1) that the Metropolitan Government offered group life insurance containing a waiver of

premium provision to its employees; (2) that all city employees received life insurance coverage

equal to twice their annual salary up to $50,000; (3) that the life insurance benefit for employees on

disability retirement was $7,500; (4) that employees who became totally disabled before their sixtieth

birthday were eligible for the waiver of premium benefit and that if they qualified for the benefit,

their life insurance coverage would continue at the level it was when they were active employees;

(5) that the spouses of each of the plaintiffs became disabled before their sixtieth birthday and that

they were totally disabled; (6) that the Metropolitan Government was required to provide all its
This decision appears to be premised on the best evidence rule, Tenn. R. Evid. 1002, even though the 34

Metropolitan Government did not make a best evidence objection during the surviving spouses’ case-in-chief.

Tenn. R. Civ. P. 8.04 provides that averments in a pleading to which a responsive pleading is required are

35

deemed admitted when not denied in the responsive pleading. However, when no responsive pleading is filed, the

opposing party must invoke the default judgment procedures in Tenn. R. Civ. P. 55 rather than wait until trial and invoke

Tenn. R. Civ. P. 8.04. Smith v. Smith, 643 S.W.2d 320, 323 (Tenn. 1982); Edwards v. Edwards, 501 S.W.2d 283, 290

(Tenn. Ct. App. 1973); see also Story v. Lanier, 166 S.W.3d 167, 182-83 (Tenn. Ct. App. 2004). 

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employees with “full information” of their rights and status regarding their benefits; and (7) that

neither the employee spouses nor the plaintiffs were provided “full information” regarding the

waiver of premium provision when they were approved for a disability retirement.

Following the close of the surviving spouses’ case-in-chief, the Metropolitan Government

moved for a directed verdict on six grounds. Two of these grounds were (1) that the plaintiffs had

failed to prove the “elements” of the group life insurance contract and (2) that the plaintiffs had

failed to present medical evidence demonstrating that their spouses would have qualified for the

waiver of premium benefit had they applied for it in a timely manner. The trial court granted the

Metropolitan Government a directed verdict on both ofthese grounds. While the court did not focus

on the absence of medical evidence, it held that the surviving spouses had failed to prove what the

qualifications for the waiver of premium benefit were and whether their spouses met these

requirements because they failed to introduce a copy of the group life insurance contract. The court 34

stated that it believed that the jury would be left to speculate regarding the amount of the surviving

spouses’ damages unless they had a copy of the group insurance contract containing the waiver of

premium provision.

2.

The preparation and trial of this case by both lawyers leaves much to be desired. The chief

shortcomings are the Metropolitan Government’s failure to file an answer to the surviving spouses’

complaint and the failure of the lawyer representing the surviving spouses to bring this significant

oversight to anyone’s attention before the close of the plaintiffs’ case-in-chief. The pleadings 35

required by Tenn. R. Civ. P. 7 and 8 are not vestigial appendages to litigation. Their purpose is to

provide notice of the parties’ claims and defenses. ROBERT BANKS, JR. & JUNE F. ENTMAN,

TENNESSEE CIVIL PROCEDURE § 5-4(a), at 5-41 (2004) (“TENNESSEE CIVIL PROCEDURE”). The

purpose of Tenn. R. Civ. P. 8.04 is to ensure that the defendant’s answer gives the plaintiff notice

of those allegations in the complaint that are uncontested and that will not be an issue at trial.

TENNESSEE CIVIL PROCEDURE, § 5-4(f), at 5-56. There is no question that the disputed factual and

legal issues in this case were not brought into sharp focus because of the Metropolitan Government’s

failure to file an answer. 

The shortcomings in the surviving spouses’ case-in-chief cannot, in fairness, be attributed

solely to the surviving spouses themselves. They are the result, in no small measure, of the

Metropolitan Government’s failure to file an answer and by the Metropolitan Government’s pretrial

assertions regarding the existence and terms of the group life insurance contract, particularly the

waiver of premium provision. Had the Metropolitan Government denied the existence of the group
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life insurance contract containing the waiver of premium provision for disabled employees, which

it did not, the surviving spouses would, most likely, have presented more detailed evidence regarding

the existence and terms of the contract. Had the Metropolitan Government denied that the surviving

spouses’ understanding and interpretation of the waiver of premium provision, which it did not, the

surviving spouses would, most likely, have presented more detailed evidence regarding the terms

of the waiver of premium provision. Had the Metropolitan Government denied that their spouses’

age or the extent of their spouses’ disability would not have been sufficient to qualify for the waiver

of premium benefit, which it did not, the plaintiffs would, most likely, have presented more detailed

evidence supporting claim that their spouses qualified for the benefit.

However, not only did the Metropolitan Government fail to take issue with the surviving

spouses’ understanding of the waiver of premium provision, its portrayal of the provision throughout

the proceedings leading up to the trial was essentially identical to the understanding of the surviving

spouses. The Metropolitan Government’s posture throughout the pretrial proceedings would have

led a reasonable person to infer that the Metropolitan Government was conceding the existence of

the group life insurance contract containing the waiver of premium provision for disabled employees

and the specific terms of the waiver of premium provision.

A court’s ability to address its workload fairly and efficiently depends in large measure on

the consistency and clarity of the parties’ claims and defenses. Monroe County Motor Co. v.

Tennessee Odin Ins. Co., 33 Tenn. App. 223, 231, 231 S.W.2d 386, 390 (1950) (holding that the rule

preventing litigants from taking inconsistent positions is “necessary to the orderly dispatch of

litigation”). Thus, litigants will not be permitted to play fast and loose with the courts or with their

adversaries by taking inconsistent or contrary positions. Johnston v. Cincinnati, N.O. & T.P. Ry.,

146 Tenn. 135, 159, 240 S.W. 429, 436 (1922); Webber v. Webber, 109 S.W.3d 357, 359 (Tenn. Ct.

App. 2003); Cothron v. Scott, 60 Tenn. App. 298, 304, 446 S.W.2d 533, 535-36 (1969).

The Metropolitan Government’s claim that it was entitled to a directed verdict because the

surviving spouses did not introduce a copy of the group life insurance contract containing the waiver

of premium provision is inconsistent with its position during all the pretrial proceedings. This suit

involves an alleged breach of an employment contract, not a group life insurance contract. There

was no dispute prior to the trial regarding the existence or the terms of the group life insurance

contract. The only possible disputes involved the adequacy of the employees’ notice of the waiver

of the premium provision, whether the plaintiffs’ spouses met the age and disability requirements

of the provision, and, if they did, the amount of the benefit. Thus, just as the Metropolitan

Government’s failure to file an answer prevented it from belatedly asserting a statute of limitations

defense, its failure to deny the existence of the group life insurance contract or the terms of the

waiver of premium provision should have undermined its request for a directed verdict on the ground

that the surviving spouses did not establish the existence of the waiver of premium benefit by

introducing a copy of the group life insurance contract.

The Metropolitan Government has always been in the best position to know the precise terms

of the group life insurance contract and the waiver of premium provision. After all, it is one of the

parties to the group life insurance contract, and the contract has been in its possession and under its

control throughout the litigation. Its own employees testified regarding the relevant provisions of
We have already pointed out that the surviving spouses’ testimony that they would have received $50,000 36

is premised on the reasonable inference that each of the spouses were earning $25,000 or more each year while they were

active employees.

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the contract, and their testimony was entirely consistent with the surviving spouses’ testimony

regarding their understanding of the contract. There was no material factual dispute regarding the

operative provisions of the group life insurance contract or the waiver of premium provision.

Accordingly, the Metropolitan Government was not entitled to a directed verdict on the surviving

spouses’ breach of employment contract claim.

During their case-in-chief, the surviving spouses presented proof (1) that each spouse was

less than sixty years of age when he became disabled, (2) that each spouse was disabled enough to

qualify for the waiver of premium benefit, (3) that each spouse would have qualified for the waiver

of premium benefit had they been informed of the benefit in a timely manner, and, therefore, (4) that

each spouse would have received the maximum $50,000 benefit rather than the $7,500 they actually

received had the Metropolitan Government fulfilled its obligation to provide their spouses with “full

information” regarding the waiver of premium provision in a timely manner. No speculation is 36

needed to arrive at the conclusion that the surviving spouses had been damaged by approximately

$42,500 by virtue of the Metropolitan Government’s alleged breach of the employment contract.

This evidence is sufficient to withstand the directed verdict and to place the burden on the

Metropolitan Government to prove (1) that the surviving spouses’ understanding of the terms of the

waiver of premium provision was incorrect, (2) that the employee spouses were too old to qualify

for the waiver of premium benefit, (3) that the employee spouses were not disabled enough to qualify

for the waiver of premium benefit, or (4) that the employee spouses’ salaries were too low to qualify

them for the maximum $50,000 benefit.

VII.

In summary, we affirm the dismissal of all surviving spouses’ intentional tort claims and Mr.

Reese’s breach of contract claim. We reverse the summary judgment dismissing Ms. Jackson’s

breach of contract claim, as well as the directed verdict dismissing the breach of contract claims of

Mmes. Goot, Taylor, and Duke. We remand the cases to the trial court for further proceedings

consistent with this opinion, and we tax the costs of this appeal to the Metropolitan Government of

Nashville and Davidson County. 

______________________________ 

WILLIAM C. KOCH, JR., P.J., M.S.