### IN THE COURT OF APP EALS OF TENNESS EE AT JAC KSON A PR IL19, 200 4 S es sio n DELO RES M. KI NG v . TENNESS EE FARMERS I NSURANCE COMPANY, ET AL 

### . Direc t Appeal fromthe Chancer y Court for Henderson County

No. 14420 Joe C. M orris, Chancellor

No. W2003-00168-C OA-R3-C V - F iled Jul y 15, 2004

This case involves payment of an insurance c lai m d em an d ed by Appelleefrom Appe llant after Appe l l ee ’s belong ings w eredestroy ed in a f ire. Appe llant refuse d payment on the basis that Appelleefailed to notify

Appellant of an addre ss chang e. Af ter a h ea ri ng , the trial court awar ded Ap pe lle e $3 2, 00 0, re pr e se nti ng he r c la im u nd e r the ins ur a nc e po lic y , an d $8, 00 0 a s a 25 % b a d f

a ith pe na lty . F or

thefo llo wi ng re a so ns , w e a ff irm inpa rt a ndva c a te thea wa

rd re pr e se nti ng a ba d f

a ith p e n a l t y. Tenn. R. App . P . 3; Appeal as of Right; Judgme nt of th e Chancer y Court Affi rm ed in Par t and Vacated in Par t
A L AN E. H I G H ERS , J ., delivere d the opi nion of the c ourt, in which D AVI D R. F ARMER , J ., and H O LLY M. K I RBY , J ., joined.
Carthe l L . Sm ith , Jr. , L e xing ton , T N f or Ap pe llants
J ames R. Kre nis, J ackson, TN , for Appe llee
OP IN ION
F acts and P roce dural Hi story
Delore s King (“A ppellee” ) held a policy insuring thecontents of a mobile home in the amount of $32,000 with Tenne ssee F arme rs Insuranc e Company (“A ppellant”)

. T he period of ins ur a nc e fo r the po lic y

wa s f ro m Ma rc h 1 8, 19 99 , to Mar c h 18, 20 00 , andlis ts the ins ur e d’ s a ddre ss as 1243 White h al l Street, L ot 10, J ackson, Te nnessee 38301. Howeve r, at the e nd of Jul y 1999, Appellee and her son moved t he mobi le hom e and its contents to a new addr ess at 777 Mills Darde n Road, L exington, Tenne ssee. Althoug h unsure of the exact date, A ppellee te stified that she wa s certain she telephone d Appellant in September 1999 to notif

y Ap p el l an t of the a ddress c hang e. Appelleestated that she spoke with a fema le rec eptionist on the phone and aske d to speak with her-2-

insuranceag ent. In addition, A ppellee testified that, af ter notifying the rec eptionist of her policy and thea ddre ss ch a ng e , the re c e pti on ist inf orme d h e r that he r a g e nt w a s o ut o f the of fi c e bu t said “ I ’l l take c are of thi s a ndg ivethi s to y ou r a g e nt. ” Ap pe lle e ’s so n, Jaso n King , f urthe r c or ro bo rate d th is testimonyand stated that he was pr esent whe n Appelleecalled A ppellant’s off ice to notify

Appellant of the address chang e. Appellee rec eived no further corr espondenc e from Appellant conf irming the addre ss chang e on the policy

. On J anuary 4, 2000, an electrical shortag e in the bedr oom of the mobile home re sulted in a fire, w hich destroy ed the c ontents therein. An e mploy ee fo r Ap p el lant, J eff Hall (“ Hall”) , i n v e s t i g a t e dth e f

i r e a n df o u n dth a tth e a d d r e s s w a s n o t th e s a m e a s th e a d d r e s s f o u n d o n t h e p o l i c y. After noticing this discre pancy , Ha l l chec ked the c ompany ’s re cords and interviewe d the offic e employ ees to de termine if Appelleecalled and notified Appellant that he r addr ess chang ed. Af ter his investigation, Hall found no evidenc e, other than Appellee ’s statement, that Appe llee g ave notice of the a ddress c hang e. B ased on H all’s re commendation, Appe llant, up o n rec eiving Appellee ’s formal de mand for pay ment under the terms of the policy on J anuar y 7 , 2 0 0 0 , denied Appe llee’s claim. As a r esult, Appelleefiled a c omplaint on October 12, 2000, f or the re covery

of the insurance proce eds in the amount of $32,000 and a bad faith penalty

pursuant to Tenn. Code A nn. § 56-7-105 (2000) in the amount of $ 8 , 0 0 0

. Ap p ellant answe red and claimed that Appe llee neve r notified Appellant of the addre ss c hang e as re quired by the insuranc e policy . After a hea ring on the matter in September 2002, the t rial court rende red a judgme nt in favor of Appe llee and a war ded Appe llee $32,000 as proceeds under the insurance policy and an additional $8,000 as a bad faith penalty

. The parties pr esent the f

ollowing issues, a s we pe rce ive them, for our revie w:
I

. Whether the trial c ourt err ed whe n it found that Appellee complied with the p ro v i s i o n s o f t h e i n s u ra n ce p o l i cy , i n cl u d i n g th e n o t i ce p ro v i s i o n re gar d i n g a c h an ge of addr ess; and I I

. Whether the re cord s upports the trial court’s imposit ion of a ba d faith penalty on Appellant pursuant to Tenn. Code Ann. § 56-7- 105 (2000).
F o r t h e f o l l o w i n g r e a s o n s , w e a f

f i r mi n p arta n dv a c a t e th e a w ar do f a b a df a i th p e n a l t y. Stand ard of Review “[ R ] ev i ew o f fi ndings of fac t by the trial court in civil actions shall be de novo upon the rec ord of the trial court, a ccompanied by a presumption of t he cor rec tness of the finding , unless the pr e po nd e ranc e of the e vid e nc e is o the rw ise .” Te nn . R. Ap p. P. 1 3( d) ; see also Mc Colgan v. AutoOwners Ins. Co. , N o. W20 02 -0 01 14 -C OA -R 3- CV , 20 02 Te nn . A pp . L EX I S 72 0, a t *8 (T e nn . Ct

. App. Oct. 11, 2002) . Conclusions of law of the tria l court re ceive de novo revie w by this Court and are aff orded no such pre sumption of corre ctness. Union Carbide Corp. v. Huddleston , 854 S.W .2d 8 7 , 9 1 (T en n
. 1 9 9 3 ) ( ci t i n g E s ta te o f A d k in s v
. W h ite Co n s o l. I

n d u s
. Inc. , 7 8 8 S

. W .2d 815, 817 (Tenn. Ct. App. 1989))

.-3- Co m plia nc e with P oli c y a nd C hang e of A ddr e ss
I n its brie f, Appellant contends that Appellee did not comply with the notice provision of the insurancep o l icy , requiring that notice be g iven to Appellant whe never Appelleechang ed her addre ss. Appellant furthe r ar g ues that the policy was not in full forc e and e ffe ct bec ause A ppellee failed to c omply with the provisions of the policy conce rning occupancy , conce alment, and misrepres en tation. We beg in by noting that, a fter our

revie w of the e ntire re cord, this sec ond arg ument, conce rning the occ upancy , conce alment, and misrepr esentation provisions, wa s n o t r aise d a t tria l a ndha s b e e n f

ir st r a ise d o n a

pp e a l. Ap pe llant doe s n ot a pp e ar t o r a iseno nc omp lianc e wi th the se pr ov isi on s intheple a din g s o r at th e he ari ng . Ind e e d, weno te that inAppe llant’ s ans we r t o Appellee ’s complaint, Appellant “ den[ies] the policy was i n fu l l force and e ffe ct bec ause the [Appellee] had moved the [mobil e home] to another location without notify ing the[Appellant] and obtaining [ Ap p ell ant’s] consent there to . . . .” Additionally , the trial court found that Appellant denied pay ment of Appe llee’s c laim only on the basis t hat s he did not properly g ive Appellant notice of thec hang e of

a ddre ss. Th e re fo re , wede c lin e to a ddre ss this se c on d is su e that A pp e lle e faile d to comply with the occupancy , conce alment, and mis repr esentation provisions of the insurancepolicy on the basis that such i ssue was first raised by Appellant on appe al to this Court. See Sm ithwi ck v

. Y oung , 623 S.W .2d 284, 292-93 (Te nn. Ct. App. 1981).
For Appellant’s f

irst arg ument, it challeng es the suff iciency of the e videncesupporting the trial co u rt’s finding that Appellee did giveAppellant notice of the addr ess chang e in September 1999. I n this case, the trial court he ard the testimony of Appellee and Appellee ’s son and both stated that at some point in September 1999, Appe llee telephone d Appellant’s o fficeand notified a r e c e p t i o n i s t th a t th e a d d r e s s f o r t h e m o b i l e h o m e h o l d i n g A p p e l l e e ’ s p o s s e s s i o n s h a dc h a n g e d

. In addition, in one of the Appellant’s log books, there was a notation that Appellant’s off ice r ece ived a phone call i n September 1999 reg arding the renting of a mobi le hom e and the trial court found that this further c orrobor ated Appellee’ s testimony

. Appellant contends that, beca use thereis a lack of any rec ord of a p h one call by Appellee , she must not have telephone d to notify Appellant of the a d d r e s s c h a n g e
. W h e n r e s o l v i n g i s s u e s th a tn e c e s s ar i l y h i n g e o n a n e v a l u a t i o n o f w i t n e s s c r e d i b i l i t y, t h i s C o u rth as s t at ed th e f o l l o wi n g: Unl i k e ap p el late courts, trial courts ar e ableto observe w itnesses as they te sti fy a ndto a sse ss the ir

de me a no r, wh ich best situate s tria l ju dg e s to e va luate witness cre dibilit y
. Se e Sta te v . P ru e tt , 7 88 S.W. 2d55 9, 56 1 ( Te nn . 1 99 0) ; Bowman v. Bowman , 836 S.W .2d 563, 566 (Tenn. Ct. App. 1991). T hus, trial courts ar e in the mos t f a vo ra blepo sitionto res ol ve fa c tual di sp ute s h ing ing onc re dib ili ty determinations. See Tenn- Tex Properties v . Brownell-Electro, Inc

. , 778 S.W .2d 423, 42 5- 26 (T e nn . 1 98 9) ; Mi tc he ll v . Arc hib ald , 971 S.W .2d 25, 29 (Tenn. Ct. App. 1998). Ac cording ly , appellate courts will not r e-e valuate a trial judg e’s a ssessment of witness cr edibilityabsent c lear and co n v i n ci ng evidenc e to the contr ary
. See Humphreyv. Dav id W

itherspoon, Inc. , 7 34 S.W .2d 315, 315-16 (Te nn. 1987); Bingham v. Dy ersburg Fabrics Co., Inc. , 567 S.W .2d 169, 170 (Tenn. 1978)

.A p p e llan t ar g u e s tha t t h e c irc u m sta n c e s o f th is c a se a re a n a lo g o u s to the fac ts o f A m er i can Just i ce 1 Ins ur ance Rec i

pr ocal v
. H ut chi s on , 15 S. W

. 3d 811 ( T en n
. 2000)

. T hat c ase co ncer n ed t h e as s i s t an ce of t h e K n ox C ount y Sher i f

f an d t wo deput i es wi t h Scot t Co un t y l aw enf orce ment i n re mo val o f M ax C ar pent er f

r om hi s t r ai l er home. H ut chi s on , 15 S. W

. 3d a t 813. Car pen t er di ed as a res ul t o f th e con f

r on t at i on a n d, s u bs equ en t l y , h i s e s t at e f i l ed a w ro n g ful d e a th la w su it a g a ins t th e la w e n fo rc e m e n t o ff ic ia ls in v o lve d in the sie g e
. Id

. Af t e r t h r e e y e a r s f

r om t h e t i me t hey wer e s er ved t he com pl ai nt , t he K nox Count y Sher i f f an d t he t wo deput i es demanded t he l i abi l i t y i ns ur anc e c ar r i er fo r S c o tt C o u n ty l a w e n fo rc e m e n t, A m e ric a n J u stice In su ra n c e R e c ip ro c a l, p ro v id e the m b e n e fit s u n d e r t h e p o licy w ith
re g a rd to th e ir p o te n tial liab ili ty in the C a rp e n te r la w su it. Id

. at 813- 14. Amer i ca n Ju s t i ce ch al l en g ed t h i s de man d on t he b asi s t hat the K no x C o unt y S heri f f a nd two d ep ut i es d i d no t give t i m el y no t i ce o f the i nci d ent o r t he l awsui t ari si ng fro m the inc id e n t. Id

. at 814

. Suc h i ns ur anc e pol i cy he l d a provi s i on wh i ch s t at ed “ [ T he i ns ur ed] mus t se e t o i t t hat [A m e ric a n J u stice In su ra n c e R e c ip ro c a l i s] no tif ie d in w riting a s so o n a s p ra c tica b le o f a n y o c c u rr e n c e w h ic h m a y re su lt i n a c l ai m. ” Id

. at 815

. T he H ut chi s on co urt noted t hat T enness ee ad o p t ed t he ap p roac h of “once i t i s shown t hat t he i nsur ed has b reached t he no t i ce p rovis i o n, a rebut t ab l e p res um p t i o n exi st s t hat t he i nsur er has been p rejudi ced by t he del ay
. . . . ” Id

. at 81 7 (quo t i ng A l caz ar v. H ayes , 9 8 2 S .W .2 d 8 4 5 , 8 5 3 (T e n n
. 1 9 9 8 )) . A p p e llan t ar g u e s tha t, in th is case, s uch rebutt ab l e p res um p t i o n ap p l i es beca use of A p p el l ee’ s f ai l ure t o gi ve no t i ce o f t he ad d res s c h a n g e, causi ng A pp el l ant pre

j udi ce. B eca us e we hol d t hat t he evi dence does not pre po nder at e a gai ns t t he t r i al cour t ’ s f i ndi ng t hat A p p el l ee gave A p p el l ant no t i ce, we need not ad d res s whe the r th e ru le o f Al caz ar ap p l i es t o a noti ce p rovis i o n fo r a ch an ge o f

ad d ress. -4- W e lls v . Te nn . B d. of R e ge nts , 9 S

. W

. 3 d7 7 9 , 7 8 3 (T en n
. 1 9 9 9 ). I mp l i ci t i n th e tri al co u rt ’s fi n d i n g, that Appellee g ave notice of the addr ess chang e to Appellant, is a de termination that Appelleeand her son wer e cre dible witnesses. As such, we cannot say , afte r our revie w of the r ecor d, that there is c lear and convincing evidenc e to sug g est the contra ry
. There fore , afte r review i n g t h e evidence in the rec ord, we hold that the evidenc e does not pre ponderate ag ainst the trial court’s finding of fa ct that the Appelleeg ave A ppellant notice of the address chang e of the m obile home. For this reason, 1
we a ffirm the tria l court’s a war d of $32,000 to Appellee

. Bad Faith
The sec ond issue Appellant raises is wh et h er t h e evidenc e supports a de termination that Appellant’s de nial of Appe llee’s c laim was in bad faith. Specifically , Tenn. Code Ann. § 56- 7- 1 0 5 (a ) s t at es th e f

o l l o wi n g: (a) The insurance c ompanies of this state, and fore ign insurancecompanies and other persons or corpor ations doing an insuranc e or f idelity bonding busine ss in this state, i n a l l c a s e s w h e n a l o s s o c c u r s a n d th e y r e f u s e t o p a y th e l o s s w i th i n s i x t y ( 6 0 ) d a ys afte r a demand ha s been ma de by the holder of

the policy

or fidelity

bond on which thelos s o c c ur

re d, sh a ll b e lia

bleto p a y theho lde r o f the po licy or fi de lity bo nd , in addition to the loss and interest there on, a sum not exceeding tw enty -five pe rce nt (25%) on the liability for the loss; provided, that it is made to appe ar to the c ourt or jury trying the casethat the ref usal to pay the loss wa s not in g ood faith, and that such failureto pay

inflicted additional expense, loss, or injury including attorney

fee s upon the holder of

the policy

or fidelity

bond; and provided f

urt h er , t hat such a dditional liability , within the limit pr escribed, shall, in the discre tion of the court or jury trying the ca se, be me asure d by

the additional ex pense, loss, and injury including attorney fee s thus entailed.-5-

Tenn. Code Ann. § 56- 7-105(a ) (2000)

. This statute is penal in nature and must be strictly construed. B efor e ther e can be a re c ov e ry of the pe nalty , (1 ) the po lic y of ins ur a nc e mus t, by its te rm s, ha ve be c ome due and pay able, (2) a formal demand for payment must ha ve been m ad e, (3 ) t he ins ur e d mu st h a ve waite d 6 0 d a y s a ft e r m akin g de ma nd befo re filin g su it ( un le ss there was a

ref usal to pay

prior to the expiration of the 60 day s), and (4) the re fusal to pay must not have bee n in good f aith. Pa lm e r v . Nat io nw id e Mu tua l F ire Insurance Co. , 723 S.W .2d 124, 126 (Tenn. A pp. 1986).
Minton v. Tenn. Farmers Mut. Ins. Co. , 832 S.W .2d 35, 38 (Tenn. Ct. App. 1992). A s the Tenne ssee Supreme Court has noted, thewords “not in g ood faith” “ implya lac k of g ood or moral intent as the motive f or the ref usal to pay a loss.” Silliman v. Int’l Life Ins. Co. , 188 S.W . 273, 273 (Tenn. 1915)

. An awa rd under this statute must be based upon some misconduct by the insurer

. See Sisk

v. Valley Forge Ins. Co. , 640 S.W .2d 844, 852 (Tenn. Ct. App. 1982).
I n this case, whe n a fire destroy ed the contents of the m obile home, t he poli cy became due and pay able. I t is undisput ed that Appe llee madea formal demand f or payment on J anuary

7, 2000. Appellan t d e n ie dA p p e ll e e ’ s d e man df o r p a y me n t an do n O c to b e r 1 2 , 2 0 0 0 , A p p e ll e e f

il e dh er c omp la int to r e c ov e r the a mou nt due un de r the po lic y . T he re fo re , th e on ly qu e stion befo re us i s wh e the r Ap pe llant’ s re fu sa l to pay wa s not in g oo d fa ith

. Af te r our re vie w o f the re c or d, weho ld that su c h r e fu sa l w a s ing oo d fai th

. App e llant p ro mpt ly a ssi g ne d o ne of

its e mpl oy e e s, Hall, to investigate Appellee ’s claim. Upon finding that Appellee ’s address in L exington did not match the addre ss list ed on the policy , Hall sea rche d the company ’s re cords, c hecke d the file for Ap pellee’ s policy , and interviewe d numerous people to de termine if Appellee had, in f act, g iven Ap pellant notice of the chang e of a ddress. The only person in Hall’s investig ation that asserted such notice was g iven was A ppellee. Subseque ntly , Appellant, based on H all’s re commendation, denie d payment un de r the po lic y . U nd e r s uc h c ir c ums ta nc e s, wec a nn ot s a y Ap pe llan t’ s refu sal t o p a y wa s n ot i n g oo d f a ith , w arr a nti ng a

pe na lty un de r T e nn
. Co de An n. § 5 6- 7- 10 5. Th e re fo re , w e va c a te thi s awa rd.
Conclusion
Ba sed on the for eg oing r easons, we aff irm the awa

rd of $32,000 as the loss cover ed by the policy and vac ate the ba d faith penalty of $8,000. C osts of t his appeal aretaxed equally to Appellee, Delore s King , and Appe lla n t , T ennesse e F arme rs Insuranc e Company , and its surety for whic h e x e c u t i o n m a y i s s u e i f

n e c e s s ary.

___________________________________ ALAN E. HI GHERS, J UDGE