### IN THE COURT OF APP EALS OF TENNESS EE AT KNOXVI LLE Se pte m be r 13, 200 5 S es sio n JAS ON SI MMS v . INSURANCE COMPANY OF NORTH AMERI CA

Appeal f romthe Circ uit Court for Rhea County No. 22031 J. Curtis Sm ith, Jud ge

No. E2005-00062-COA- R3-CV - F ILED OCTO BER 14, 2005

The issue in this case is whether the trial court c orre ctly g rante d the Defenda nt I nsuranc e Company of No rth Ame ri c a (“ I CN A” ) sum mary jud g me nt ba se d on its fin din g that the c la ima nt, Jaso n Si mms , faile d to fo llo w the los s p ro vis ion s o f the ins ur a nc e po lic y and th at I CN A’ s a g e nt d id n ot p os se ss authority to waive the loss pr o visions. W e hold there exis ts a g enuine issue of materia l fac t reg arding the appa

rent authority of I CNA’s age nt, and ther efor e vac ate the summary judgme nt and rema nd for tria l.

Te nn. R . A pp. P . 3 App e al a s o f Rig ht ; J udgm e nt of t he Ci r c uit

Co ur t V ac at e d; Ca se Rem anded

S HAR ON G. L EE , J

. , d el ivere d the opinion of the court, in which H ER SCH EL P. F RAN KS , P.J ., and C H A RLES D. S US ANO , J R ., J ., joined.
J. Arno ld F itzg e ra ld andAn dr e w F . T uc ke r, Day ton , T e nn e sse e , f or the Ap pe lla nt, Jaso n Si mms
. Thomas E. L eQuire and Rob er t C. Denny , Chattanoog a, Te nnessee , for the A ppellee, Insuranc e Company of North Ame rica

.

OP IN ION
I.
Mr. Simms purcha sed a multi-peril c rop insurance policy from I CNA throug h its ag ent, Dean Pay ne, in t he spring of 2000. Acc ording to the aff idavit of Mr. Simms, a droug ht in the y ear 2000 c aus e d h is t ob a c c o c ro p to fail. Mr . Si mms ’ a ff ida vit fu rthe r s ta te s a s f

oll ow s:-2- I hav e b e e n in v o lv e d ing r o w in g to b a c c o s e v e r a l y e ar s p rior to the claim fo r loss of [thi s] y ear 2000 tobacc o crop. Eve ry y ear I have pla nted a tobac co cr op, I have pur chase d tobacc o crop in s u r ance. I have ne ver ma de a c rop i nsuranc e claim of any sort prior to the y ear 2000. Dea n Pay ne, an i n s u ranc e ag ent for D efe ndant, I nsuranc e Company of North Americ a and Mr. Pay ne’s supervisor, both visited my fa rm in the su mme r of 19 99 a nd sp ok e wi th m e re g ard ing mul tiperil crop insurance

. On the day Mr. Pay ne and his supervisor visited my farm, I agr ee d to sign up for multi-peril crop insura nce f or the y ear 2000 tobacc o crop w ith Defe ndant. I n the spring of 2000, I

met with Dean Payne. . .to sig n crop insurance applicationd o c u me n ts f o r mu lt i- p eril cr op insurance for the y ear 2000 tobacc o crop. He personally filled out the application for the multi-peril crop insurance.
After his 2000 tobacco c rop fa iled, Mr. Simms mad e a claim under his multi-peril crop insura nce po lic y . A c c or din g to h is a ff ida vit , Prior to October 5, 2000, I contac ted ag ent Dean Pay ne, who had sold me the insurance , to r eport this loss claim. Mr. Pay ne stated that I could g o ahea d and bush hog the fields whe re the tobacc o was loc a te d a ndthat a n a dju ste r w ou ld c ometo m e a su re a c re a g e . O nly afte r rec eiving consent of ag ent Dean Pay ne did I bush hog the cr op.
The a bove-quote d statements from Mr. Simms’ aff idavit arenot i n d i s p u t e. I CNA denied Mr

. Simm s’ claim on F ebrua ry 26, 2001, on g rounds, inter alia, that he destroy ed the c rop without prese rving a re prese ntative sample prior to inspection and apprai s al o f t he loss by I CNA, thus alleg edly violating the te rms of the policy and voiding cover ag e.
Mr. Simms filed this action on Fe bruary 21, 2002, alleg ing I CNA wrong fully denied cover ag e under

the pol icy

. I CNA moved for summary judgme nt, which the trial c ourt g rante d. The tr ia l c ou rt

he ld “ the re i s n o g e nu ine ma te ri a l f a c tua l di sp ute that pl a int if f f a ile d to fo llo w l os s pr ov isi on s o f the po lic y , th a t de fe nd a nt’ s a g e nt [M r. Pa y ne ] pos se sse d no au tho ri ty to wa ive the los s provisions and t h e fa i l u re to follow the loss provisions absolves def endant of liabilityunder the policy as a matter of law .”
II.
Mr . Si mms app e a ls, raisi ng the iss ue , w hic h w e re state , o f w he the r the trial cou rt e rr e d in g ranting I CNA summary

judgme nt.-3-

Our standa

rd of r eview r eg arding summary judgme nt is well settled. A motion for summary judgme nt should be g rante d when the mova nt demon s trates that ther e ar e no g enuine issues of ma te ri a l f a c t a nd that the mov ing pa rty is en tit le d to a ju dg me nt a s a ma tte r o f l a w. Te nn . R. Civ . P. 56.04. The pa

rty moving f or summary

judgme nt bear s the burden of demonstrating that no g enuine issue of material fac t exi sts. Ba in v . W e lls , 936 S.W .2d 6 1 8 , 6 2 2 (Tenn. 1997). On a motion for summary judgme nt, the court must take the strong est leg itimate view of the evidence in fa vor of the nonmoving pa

rty , allow all re asonable infere nc e s in favor of that party , and disca

rd all counte rvailing evidenc e. By rd

v . H all , 847 S.W .2d 208 (Tenn. 1993)

.

III
. Th e Te nn e sse e Sup re me Cou rt ha s state d a s fo llo ws re g ard ing ho w ou r c ou rts gener a lly c on str ue ins ur a nc e po lic ie s: I t is a g ener al principle, pe rvading the law of all forms of insura nce, that po lic ie s sh a ll be lib e ra lly c on str ue d in f a vo r o f the ins ur e d. Th is beca use courts do not shut their ey es to r ealities; they know that the policy is a contra ct of " adhesion," i.e. not one which the parties ha ve re a c he d b y

mutua l ne g oti a tio n a ndc on c e ssion , not on e wh ic h tr uly expresses any

ag ree ment at which they h av e arrived, but one which has bee n fix ed by the i nsurer and to which the insured mus t adher e, if he c h o o ses to have insurance...A s such, we attempt to construe insurance contra cts so as to provide c overa g e.
Alcazar v. Hay es, 982 S.W .2d 845, 851-852 (Te nn. 1998)(internal citations omitted).

Th e la ng ua g e of

the ins ur a nc e po lic y

up on wh ic h I CN A r e lie s p ro vid e s a s f oll ow s: 14 . D ut ie s in the Eve nt

of D am ag e orLos s. Your duties - (a ) In c a se of

da ma g e to any

ins ur e d c ro p y ou mus t:
*** (3 ) L e a ve re pr e se ntativ e sa mpl e s inta c t for e a c h f ie ld of the da mag ed unit as may be re quired by

the Crop Provisions; and (4) Cooper ate with us i n t he investig ation or se ttl e me nt o f the c la im, a nd , a s of te n a s w e re a so na

bly require : (i) Show us the dama g ed cr op; (i i) Allow us to remove sa mples of the insured cr op; and-4- (i ii) P rovi deus wi th r e c or ds a nddo c ume nts we re qu e st andpe rm it u s to make c op ie s. (b) You must obtain conse nt from us befor e, and notify us afte r y ou: (1) De stroy

any of the i n s ured c rop that is not harve sted; (2 ) P ut the ins ur e d c ro p to a no the r u se ; (3) Put the ac rea g e to another use; or (4 ) A ba nd on a ny po rt ion of the ins ur e d c ro p. We w ill not give consent for

any of the a ctions in sections 14(b)( 1) throug h (4) if it is prac tical to re p l ant t he crop or until we have ma de an a ppraisal of

the potential production of the c rop.
I n addition, the “Multiple Peril Crop I nsuranc e Quota T obacc o Crop Provisions” portion of the po lic y pr ov ide s:
12 . D ut ie s In The Eve nt of D am ag e orLos s. I n ac c or da nc e wi th the re qu ir e me nts of se c tio n 14 of the B a sic Provisions, any

repr esentative samples we may requireof eac h unharve sted tobacc o type mus t be at least 5 feet wide ( at le a st t wo ro ws ) and ex tend th e e nti re le ng th o f e a c h f ie ld i n the unit. The samples must not be har vested o r destroy ed until after our

inspection.
As alre ady

noted, it is u n d i s p u t ed that, notwithstanding the above provisions, when Mr. Simm s called I CNA ag ent Dean Pay ne to re port the loss, Mr. Pay ne told Mr. Simms to “g o ahea d” a ndbu sh ho g t he f

ie lds c on ta ini ng the faile d to ba c c o c ro ps . M r. Simm s a rg ue s th a t un de r the se c ir c ums ta nc e s, I CN A s ho uldbe e qu ita bly e sto pp e d fr om de nying c ov e ra g e fo r doi ng that w hic h it s ag ent told him to do, i.e., bush hog the fields and r eplant with wheat.
I CNA’s re sponse to this estoppel arg ument is t wo fo l d

. First, it arg ues that the following pr ov isi on of

the ins ur a nc e po lic y

pr e c lud e s Mr . Si mms fr om a sse rt ing su c h a n a rg ume nt:
This insurance policy

is reinsured bythe Fe dera l Crop I nsuranc e Corporation (F CI C) under the provisions of the Fed er al C rop I ns ur a nc e Ac t, a s a me nded (7 U. S.C. 15 01 e t se q. ) ( Ac t) . A ll provisions of the policy

and rig hts and responsibilities of the parties are specific ally

subject to the Ac t. The provisio ns of the policy are pu bli sh e d inthe F e de ra l Re g ist e r andc od if ie d inc ha pte r IV o f t itl e 7 o f th e Co d e o f

F e d e r a l R e g u lati o n s ( CF R) u n d e r th e F e dera l Reg ister Act (44 U.S.C. 1501 et s eq
. ), an d may not be waive d or-5- v ar ie d in an

y wayby the c ro

p in su ra nc e ag e nt o r an

y oth e r a ge nt or employ ee of

FCI C or the company

. [Emp ha sis a dd e d. ] Sec on d, I CN A a rg ue s th a t Mr . Pay ne wa s w ith ou t a c tual or app are nt a

uth ority to authorize Mr. Simm s to destroy the tobacc o crop prior to its ins pection of the fields.
We first addre ss the waiver arg ument. The policy at issue is a standar dized crop insuranc e policy issued in acc ordanc e with t he F eder al Crop I nsuranc e Ac t (“F CI A”) . As the Supreme Court of Ke ntucky

rec ently stated in a c ase similar to this one,

The F CI A was e nacte d in 1938 as part of t h e second Pre sident Roosevelt' s "N ew De al." I ts main pur p o s e was "to promote the national welf

are by improving the economic st ab i l i ty of ag riculture throug h a sound sy stem of cr op insurance and providing t he mea ns for the r esea

rch and exper ience helpful in devising and esta blishing such insuranc e." 7 U.S.C. § 1502(a). The FCIA also established the FCI C. 7 U.S.C. § 1503. Fa rmers can obtain crop insurance unde r the FCIA by either be ing issued insurance direc tly throug h the FCI C, or by rec eivi n g i nsuranc e fr om a private company reinsure d by

the F CI C. 7 U

. S. C. § 1 5 0 8 ( a ) ( 1 )

. I n th e in s tan t c a s e , th e p o li c ywas ob ta ine d f ro m a private c omp a ny , Ame ri c a n Gr ow e rs . I n ad dit ion , a ll r e i n s u r e d p o l i c i e s m u s tc o m p l y w i t h t h e r e q u i r e m e n t s o f t h e F C IA and the r eg ulations of the FCI C. 7 C.F.R. § 400.164.
Dailey v . American G rowers Insurance , 103 S.W .3d 60, 64 (Ky . 2003). The Dailey Court rejec ted the de f e n d a n t i n s u r a n c e c o m p a n y ’ s ar g u m e n t t h a t t h e U n i t e d S t a t e s S u p r e m e C o u r t ’ s o p i n ion in Fede ral Crop Insurance Corp. v. Me rrill, 33 2 U. S. 38 0, 68 S.Ct

. 1, 92 L .E d 10 (1 94 7) pr ote c te d it fr om a waive r o r e sto pp e l c la im, statin g : Americ an Gr ower s contends that application of this princ iple in the context of crop insuranc e is prec luded by the " Me rri ll

d o c t r i n e
. " In Fede ral Crop Insurance Corporati on v. Me rrill, s upra, the FCI C had issued insurance on a spring wheat crop that ha d been r esee ded on winter whe at ac rea g e in violation of fede ral whe at cr op insurance reg ulations. Id. at 382, 68 S.Ct

. at 2. R ely ing on the doctrine of estoppel, the plain tiff in Me rri ll claimed that the F CI C should be re qu ir e d to ho no r h is c la im be c aus e the F CI C' s a g e nt h a d a dv ise d h im prior to writing the policy that the entire crop w as insurable

. Id. The United States Supreme Court disag ree d, holding t h at t he F CI C was not bound by "the rules of law whereby private insurance c ompanies are ren dere d l iab le f

or t he act s o f t hei r agent s .
.. ." Id. at 383 n. 1, 68 S.Ct . at 3 n. 1. Noting that "[m]en must turn square corne rs when they-6- deal w i t h the Government," the Court held that the FCI C's a g ent could not bind the public trea sury in contrave ntion of fede ral law

. Id. at 384-85, 68 S.Ct. at 3-4 ( quoting Rock Island, A. & L

. R

. Co. v. Un ite d S tate s, 254 U.S. 141, 143, 41 S.C t. 5 5 , 5 6 , 6 5 L .Ed. 188 (1920))

. Americ an Growers claims that beca use i t insures crops and is r e g ulate d a ndre ins ur e d b y the F CI C, i t e njo y s Me rri ll protec tion.
Dailey , 103 S.W .3d 60, 68-69 (Ky . 2003)(Cooper , J ., concur ring ). I n a we ll-rea soned conc urre nce j oined by five membe rs of the se ven-Justi ce panel, the Court held that “[t]he Me rri ll doctrine, howeve r, gene rally does not apply to private insure rs.” Id. at 69. We a g ree with the rea soning in the Dailey concur

renc e, see id. at 69-70, and w ith the Court’s conclusion that “[t] he mer e fa ct that the F CI C pr ov ide s r e ins ur a nc e c ov e ra g e to p ri vate c ro p in su ranc e c omp a nie s a ndhe a vil y re g u l at e s tho se companies doe s not entitle them to Me rri ll protec tion.” Id. a t 70 ; accord Rain & Hail I ns. Servs. Inc

. v. Vickery, 618 S.E.2d 111 (Ga. Ct. App. 2005). Thus, the Me rri ll de c isi on , h old ing that st a te me nts made by ag ents of the FCI C c annot bind the FCI C by operation of waiver

or estoppel, doe s not bar Mr . Si mms ’ e sto pp e l or

waive r a rg ume nt in this c a se be c aus e the De fe nd a nt, I CN A, is a private insurer.

I n the seminal ca se of Bill Brown Constr. Co., Inc. v. Glens Falls I ns. C o
. , 818 S.W .2d 1 (T e nn . 1 99 1) , th e Te nn e sse e Sup re meC o u r t r e a f f i rm e d th e “ lon g -s ta nd ing ru le in T e nn e sse e that any contra ctual provision of a

policy of i nsuranc e, whether part of an insuring, exclusi onary , or for feiture clause , may

be waived by

the ac ts, repre sentations, or knowledg e of the insurer’ s ag ent.” Id. at 13 (empha sis in original). T his rule is supported by an ag ency

statute, Tenn. Code Ann. § 56-6-115(b) , wh ic h p ro vid e s in re le va nt p art :

An insuranc e produc er w ho soli cit s or neg otiates an a pplication for insurance shall be re g arde d, in any controve rsy

ari sing f rom the app lic a tio n f

or ins ur a nc e or

a ny po lic y iss ue d inc on ne c tio n th e re wi th betwee n the insured or

insured' s b enef

iciary and the insure r, as the a g e nt o f the ins ur e r a nd no t the ins ur e d or ins ur e d' s b e ne fi c iary . T his pr ov isi on sh a ll n ot a ff

e c t th e app are nt a

uth ority of a n a g e nt.

Our c ourts construe this statute libera lly in favor of

the insured in o rd er t o “pre vent the insuranc e company from deny ing r esponsibilityfor r epre sentations and ac tions from the ag ent from whom applications ar e voluntarily acc epted a nd to pr otect an applicant who relies on such re prese ntations or ac tions.” Ralph v. Pipkin, No

. W20 04 -0 17 9- CO A- R3- CV , 2 00 5 WL 12 20 13 2 at *6 (T e nn . Ct

. Ap p. W.S. , fi le d Ma y 17 , 2 00 5) ; Bill Brown C onstr. Co., 81 8 S.W.2 d at 4; se e als o M ar y lan d Ca s. Co. v. McTyie r , 266 S.W . 767, 769 (Tenn. 1924)

. The Bill Brown Court further stated t hat “[ a]n ag ent acting within t he scope of his appar ent authority , though exceeding his authority , binds his principal.” Id., 8 1 8 S

. W

. 2 d at6 (q u o t i n g Dixon-7-

v. Pick le, 32 7 S.W. 2d 50 (T e nn
. Ct. Ap p. 19 59 ))

. Ap pa re nt auth ority in a n a g e nt is su c h auth ority as t h e p ri n ci p al k n o wi n gl y p er m i t s t h e a gen tt o as s u m e o r w h i ch t h e a gen ti s p re s en t ed as h av i n g, su c h that a re a so na

bly pr ud e nt pe rs on , us ing dil ig e nc e a nd dis c re tio n in vie w of the pa rty ’s c on du c t, would natura l l y s u p p o se the a g ent to possess. V.L. Nicholson C o. v. Transcon Inv estment and Financial Ltd., Inc., 595 S.W .2d 474, 483 (Tenn. 1980). “Ge nera lly , to prove a ppare nt ag ency

one must establish (1) the p ri n ci p al actua lly or neg lige ntly

acquie sced in a nother pa rty ' s exercise of authority ; (2) the third pe rson had knowle dg e of the fac ts and a g ood faith belief that the appa

rent ag ent possessed suc h authority ; and (3) the third person re lied on this appar ent authority to his or her detriment.” W

hite v. Me thodist Hosp. South, 844 S.W .2d 642, 646 (Tenn. Ct. App. 1992). Turning to the fac ts of this case, it is undisputed that when Mr. Simms lost his tobacco c rop, he called I CNA’s ag ent, Mr. Pay ne, who was the repr esentative that had visited his farm and f illed ou t th e ins ur a nc e app lic a tio n, a ndwi th w ho m Mr

. Simm s ha d a ll his prior de a lin g s. As Mr . Si mms po int s o ut , becau se the re is n o p ro vis ionin the po lic y , o r e lse wh e re in the re c or d b e fo re us , containing specific instruction for making a cla im, or directing a c l ai m an t to contact any other person, he called the person with w hom he had de alt. I t is also undisput ed that ag ent Pay ne, having be e n to ld that Mr . Si mms wa s makin g a c ro p los s c la im, tol d M r. Simm s to “ g o ahe a d” a ndbu sh ho g his tob a c c o fi e lds . O nly a ft e r r e c e ivi ng thi s c on se nt d id M r. Simm s d o s o, in a c c or da nc e wi th the terms of the policy

. I CN A fi l ed two affidavits supporting its mot ion for summary judgme nt, those of J eff Malcom, a vic e pre sident of Rain & Hail, LL C, the manag ing g ener al ag ent re sp o nsible for administration of the policy issued by

I CNA, and Way ne L ehman, the insurance adj u s t er for Mr. Simm s’ loss claim. Neither of these a ffidavits addr esses the issue of eit h er a ctual or a

ppare nt authority of ag ent Pay ne to instruct Mr. Simms t o dest ro y h i s cr o p , or to waive provisions of the insurance policy . The a ffidavits state only that “[n] o written conse nt was provided by [I CNA] or Rain & H ail, LL C, to Plaintiff authorizing him to destroy his crops” and “Plaintiff destroy ed the c rop without written c onsent of [I CNA] or Rain & Hail, LL C. . .” There is no evidence in the rec ord that ag ent Pay ne lac ked either appar ent or a ctual authority to take the a ctions at issue in this case.
Mr . Si mms ’ a ff

ida vit do e s n ot sp e c if

ic a lly state that he re lie d o n a g e nt P a y ne ’s dir e c tio n to de str oy his c ro ps . A lth ou g h it

wo uldha ve be e n b e tter p ract ice to inc lud e su c h a state me nt i n h is aff idavit, it require s no imag ination to draw the log ical infe renc e that Mr. Simms’ action, taken at ag ent Pay ne’s dire ction, was in re liance upon suc h direc tion. Our summary judgme nt standard require s us to dr aw rea sonable infe renc es in favor of the non-mova nt. By rd

v . H all , 847 S.W .2d 208 (T e nn . 1 99 3) ; see also W

hite v. Me thodist Hosp. South, 884 S.W .2d at 646-48 (finding g enuine issue of material fac t notwithst anding “no dire ct proof in the r ecor d reg arding plaintiff’s re liance.” ).
We believe that unde r these f acts a nd the aut

h o rit ies discussed above , the question of whe ther ag ent Pay ne had a

ppare nt authority

to authorize Mr. Simm s to bush hog his crop should be pre sented to a jury

. We f

urther find that a rea sonable c onstruction of the insura nce policy in favor of

providing c o v e r a g e to th e in s u r e d y ie ld s th e c o n c lu s io n th a t p r e s e r v in g a r e p r e s e n tati v e s a mp le o f th e failed crop would n o t n e c e s s ar il y ina ll c a s e s b e r e q u ir e d

. T h e p o li c y r e q u ir e s a

f ar me r to “lea ve-8-

r e p r e s e n t a t i v e s a m p l e s i n t a c t f o r e a c h f i e l d o f t h e d a m a g e d un it a s m ay b e required by the Crop Provisions,” and the Crop Provisions provide “a ny repr esentative samples we m ay require of ea ch unharve sted tobacc o type must be at lea st 5 feet wide . . .” (Empha sis added).
IV.
For the af oreme ntioned rea sons, the judgme nt of t h e t rial court gr anting I CNA summary judgme nt is vacated, and the case i s rema nded for trial. Costs on appea l are assessed to the A ppellee, I nsuranc e Company

of North Ame rica

.

_______________________________________ SHARON G. LEE, J UDGE