FILED

January 21, 1998

Cecil Crowson, Jr.

Appellate C ourt Clerk

IN THE COURT OF APPEALS OF TENNESSEE

WESTERN SECTION AT JACKSON

 ______________________________________________

WILLIAM KENNETH SIMS and wife,

EDNA W. SIMS, 

Plaintiffs-Appellees,

Gibson Circuit No. 7177

Vs. C.A. No. 02A01-9706-CV-00123

EDDIE STEWART, JR., and

TENNESSEE FARMERS MUTUAL 

INSURANCE COMPANY, 

Defendants-Appellants.

____________________________________________________________________________

FROM THE GIBSON COUNTY CIRCUIT COURT

THE HONORABLE DICK JERMAN, JR., JUDGE

Wesley A. Clayton and Robert B. Vandiver, Jr.;

Waldrop & Hall, P.A., of Jackson

For Appellant, Tennessee Farmers Mutual Insurance Company

T. J. Emison, Jr., of Alamo

For Appellees

VACATED AND REMANDED

Opinion filed: 

W. FRANK CRAWFORD, 

PRESIDING JUDGE, W.S.

CONCUR:

ALAN E. HIGHERS, JUDGE

ROBERT A. LANIER, SPECIAL JUDGE

This case involves a dispute concerning the amount due under an uninsured/underinsured

motorist insurance policy. OnSeptember 27, 1993, William Kenneth Sims (hereinafter, “Sims”),

while engaged in the scope of his employment as a Deputy Sheriff in Gibson County, was
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injured when he was struck by a motor vehicle driven by Defendant Eddie Stewart (hereinafter,

“Stewart”). Sims suffered compound fractures of the left tibia and fibula as well as resulting

complications to his preexisting diabetic condition. 

Sims’ complaint seeks $250,000 damages, and his wife, Edna W. Sims, seeks $50,000

damages for loss of consortium. Sims served Tennessee Farmers Mutual Insurance Company

(hereinafter, “Tennessee Farmers”), his uninsured motorist carrier, with a copy of the complaint.

Tennessee Farmers’ answer avers policy limits of $100,000 per person and $300,000 per

accident and pursuant to the policy provision seeks a credit or reduction for the amount of any

workers’ compensation benefits paid to Sims. Defendant Eddie Stewart filed an answer denying

the material allegations of the complaint. 

The case was tried on a written stipulation of facts which we quote:

The parties to this cause, by and through their counsel of record,

hereby stipulate as follows:

1. All issues relating to Plaintiff Edna W. Sims’ loss of

cosortium claim have been resolved. Edna W. Sims has settled

her loss of consortium claim against Eddie Stewart, Jr. for

$6,000.00, payable by his liability insurer. The Sims’ UM

coverage with TFMIC includes loss of consortium in the per

person limits for William Kenneth Sims’ bodily injury claim and

Edna W. Sims can make no separate recovery for her loss of

consortium from TFMIC’s UM coverage. See Exhibit 1, page 28.

2. Defendant Eddie Stewart, Jr.’s auto liability coverage has

limits of $25,000.00 per person, $50,000.00 per accident. A copy

of the dclaration sheet of his policy is attached as Exhibit 2.

3. William Kenneth Sims has settled his bodily injury claim

against Eddie Stewart, Jr., for the $25,000.00 limits of his liability

coverage.

4. William Kenneth Sims and Edna W. Sims had in full force and

effect at the time of the accident, an automobile insurance policy

with Tennesee Farmers Mutual Insurance Company which

provided uninsured/underinsuredmotoristcoverage in the amount

of $100,000.00 per person. A certified copy of the Sims’ policy

is attached Exhibit 1.

5. The injuries sustained in the accident by William Kenneth

Sims were incurred by accident and arose out of and in the course

of his employment and were compensable under the Tennessee

Workers’ Compensation Act.

6. William Kenneth Sims’ employer’s workers’ compensation

insurer has paid temporary total disability, medical and permanent

partial disability benefits totalling $61,862.57.

7. The workers’ compensation carrier, cannot as a matter of law,
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reach any recovery made by William Kenneth Sims from his UM

coverage.

8. The workers’ compensation carrier has agreed to accept the

$25,000.00 payable to William Kenneth Sims from Eddie

Stewart, Jr.’s liability insurer, less a one-third attorney’s fee,

$8,333.00 to Jim Emison, in full satisfaction of its subrogation

claim.

9. TFMIC’s policy of insurance with the Sims contains a

provision on page 29, Exhibit 1, reducing the amount of coverage

under three circumstances. The policy language is quoted below:

“Damages payable under this coverage to or for a

covered person shall be reduced by:

1. The amount paid under the liability and

medical payments coverages of this policy or any

other automobile insurance policy;

2. The amount paid or payable under any

workers’ compensation law, disability benefits

law, or any similar law;

3. A payment made by or on behalf of the owner

or operator of the uninsured motor vehicle, or by

or on behalf of the person or entity who may be

legally liable.

10. TFMIC has agreed to pay to William Kenneth Sims the limits

of its UM coverage, $100,000.00, less the amount to which it is

legally entitled to credit pursuant to its policy language and

Tennessee law.

11. The only issue remaining in this case is whether TFMIC gets

credit for the entire amount paid by workers’ compensation,

$61,862.57, and must pay William Kenneth Sims $38,137.43; or

whether TFMIC gets credit for the $61,862.57 less the

$25,000.00 recovered from Stewart, a net of $36,862.57, and

must pay William Kenneth Sims $63,137.43.

This stipulation entered this 8th day of March, 1997.

The trial court concluded that Tennessee Farmers was entitled to a credit of $61,862.57

less $25,000 for a total credit of $36,862.57, and that Tennessee Farmers was obligated to pay

Sims $63,137.43, which is the $100,000 coverage limit less the $36,862.57 credit. Tennessee

Farmers timely filed a notice of appeal on May 12, 1997. Thereafter, Tennessee Farmers paid,

and Sims accepted, the sum of $38,137.43 in partial satisfaction of the judgment. Tennessee

Farmers arrived at that amount by deducting from the $100,000 policy coverage limits the

$61,862.57 paid by the workers’ compensation carrier, in order to obtain the full credit to which

Tennessee Farmers contends that it is entitled. 
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The sole issue for review is whether Tennessee Farmers is entitled to a credit for the total

sum paid to Sims as workers’ compensation benefits. This issue is a question of law because the

facts are not in dispute. Under such circumstances, the Court’s scope of review is de novo upon

the record with no presumption of correctness accompanying the trial court’s conclusions of law.

T.R.A.P. 13 (d); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). 

Tennessee Farmers’ Uninsured Motorist policy, which is at issue in this case, contains

the following, relevant language: 

Ourlimit of liability for this Uninsured MotoristCoverage

shall be reduced by the sum of the limits payable under all

liability and/or primary uninsured motorist insurance policies,

bonds, and securities applicable to the bodily injury or death of

the covered person.

Damages payable under this coverage to or for a covered

person shall be reduced by:

1. the amount paid under the LiabilityandMedical Payments

Coverages of this policy or any other automobile insurance

policy;

2. the amount paid or payable under any workers’ 

compensation law, disability benefits law or any similar law;

3. a payment made by or on behalf of the owner or operator

of the uninsured motor vehicle, or by or on behalf of the person

or entity who may be legally liable. 

(emphasis added).

The first paragraph addresses coverage limitations,providing for a reduction in uninsured

motorist coverage if other liability or uninsured motorist policies are available to the insured.

There are none in this case. 

Under the terms of the policy, workers compensation benefits reduce only the amount

of damages payable to the insured. Clauses in insurance contracts which limit the amount of

damages payable are valid. Hudson v. Hudson Mun. Contractors, Inc., 898 S.W.2d 187, 189

(Tenn. 1995); Terry v. Aetna Casualty Ins. Co., 510 S.W.2d 509 (Tenn. 1974). 

There is a distinction between provisions regarding reduction of coverage amounts and

those addressing reduction of damages, both of which may be contained in an insurance policy.

This distinction is illustrated in Dwight v. Tennessee Farmers Mutual Insurance Co., 701

S.W.2d 621 (Tenn. App. 1985). In that case, Ms. Dwight was injured, during the course of her

employment, in an automobile accident with an uninsured motorist; however, she did not seek

damages under workers’ compensation. Rather, Dwight sued the other motorist who was the

tortfeasor and obtained a $2,500 judgment, which included $2,218.74 in medical expenses.
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Dwight then sued Tennessee Farmers, her uninsured motorist carrier, to recover the entire

judgment. Tennessee Farmers relied upon damage limiting language in its policy which is

identical to that found in the instant case. Tennessee Farmers asserted that it was liable only for

the $281.26 difference between the $2,500 jury verdict and the $2,218.74 in medical expenses

which could have been paid under workers’ compensation had Dwight pursued that remedy. The

trial court held in favor of Tennessee Farmers. 

On appeal, Dwight attacked the validity of the insurance policy’s workers’ compensation

offset provision because she had made no claim for workers’ compensation. This Court affirmed

the trial court, finding that the policy operated to reduce the damages where workers’

compensation benefits were available. Dwight was entitled to workers’ compensation benefits,

though she elected not to take them. The Court held that the insured’s unilateral waiver of

benefits may not operate to increase the contractual obligations of the insurer. Id. at 622. 

The policy provision at issue in the case before us is identical to the provision addressed

in the Dwight case. The policy language specifically provides that reduction for workers’

compensation benefits applies to damages and in no way affects the coverage available.

Sims’ damagesshouldbe reduced by the amount of workers’ compensation benefits paid,

and a judgment should then be rendered against Tennessee Farmers for the balance, up to the

coverage limits of $100,000. 

In this case, the workers’ compensation carrier paid Sims a total of $61,862.57, and the

carrier accepted the $25,000 settlement from Stewart pursuant to its subrogation rights provided

for in T.C.A. § 50-6-112 (1991). The trial court ordered Tennessee Farmers to pay Sims a

judgment of $63,137.43. The trial court arrived at that amount by determining that Tennessee

Farmers was entitled to a credit for the workers’ compensation benefits paid, $61,862.57, less

the $25,000 settlement from Stewart’s liability carrier for a total of $36,862.57. The trial court

then deducted the $36,862.57 from the $100,000 coverage limits of the Tennessee Farmers

policy to reach the $63,137.43 award. On appeal, Tennessee Farmers contends that to require

it to pay the additional $25,000 amounts to double recovery on the part of Sims. Tennessee

Farmers asserts that it should be entitled to offset the amount it must pay by the full $61,862.57

in workers’ compensation benefits that Sims received. 

Under the terms of the Tennessee Farmers policy, damages are to be reduced by workers’
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compensation benefits and also by the amount paid under other liability policies. The workers’

compensation carrier has accepted in payment of its subrogation claim the amount paid by

Stewart’s $25,000 settlement. Tennessee Farmers does not seek a double offset. Such would

be prohibited under this Court’s holding in Boyce v. Geary, No. 01A01-9409-CV-00410, 1995

WL 245389 (Tenn. App. April 28, 1995), affirmed upon remand, 1996 WL 12652 (Tenn. App.

Jan. 12, 1996)(insured should not suffer a double reduction in his benefits as the result of a single

payment made by the tortfeasor’s insurance company). That is, Tennessee Farmers does not

seek an offset of $61,862.57 in workers’ compensation benefits plus an additional $25,000 for

a total reduction of over $86,000. Instead, Tennessee Farmers seeks an offset of $61,862.57, the

amount of workers’ compensation benefits. 

The problem is that the issue framed by the parties in the trial court does not consider the

policy provision that provides that workers’ compensation benefits will reduce the damages

payable under the coverage. The issue presented to the trial court was whether Tennessee

Farmers “gets credit for the entire amount paid by workers’ compensation.” To answer this

question, we need only look to the holding of our Supreme Court in Terry v. Aetna Casualty &

Surety Co., 510 S.W.2d 509 (Tenn. 1974) and the decision of the Court of Appeals in Dwight

v. Tennessee Farmers Mutual Insurance Co., 701 S.W.2d 621 (Tenn. App. 1985). These cases

make it quite clear that workers’ compensation benefits reduce the amount of recovery. The

problem in the instant case, however, is that the parties tried this case in the trial court without

considering the fact that there must be an assessment of damages in order to determine a

reduction in damages. The stipulation coversjust about everything but damages, although, under

the terms of the policy, a determination as to the amount of damages is crucial. This appears to

be a case for the application of the provisions of T.C.A. § 27-3-128 (1980) which provides:

Remand for correction of record. - The court shall also, in all

cases, where, in its opinion, complete justice cannot be had by

reason of some defect in the record, want of proper parties, or

oversight without culpable negligence, remand the cause to the

court below for further proceedings, with proper directions to

effectuate the objects of the order, and upon such terms as may be

deemed right.

Pursuant to the above statute, we vacate the judgment of the trial court and remand this

case for further proceedings to determine the amount of damages to which Sims is entitled,

reduce the damages pursuant to the provisions of the Tennessee Farmers policy, and enter
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judgment against Tennessee Farmers for the resulting amount not to exceed policy limits of

$100,000.00.

Costs of the appeal are assessed one-half to Sims and one-half to Tennessee Farmers.

_________________________________

W. FRANK CRAWFORD, 

PRESIDING JUDGE, W.S.

CONCUR:

____________________________________

ALAN E. HIGHERS, JUDGE

____________________________________

ROBERT A. LANIER, SPECIAL JUDGE