# 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-Appel

lees, Gibson Circuit No. 7177 Vs. C.A. No. 02A01-9706-CV-00123 EDDIE STEWART, JR., and TENNESSEE FARMERS MUTU AL INSURANCE COMPANY, Defendants-Ap

pellants.

______________________ _____________________________________________________ _ FROM THE GIBSON COUN TY 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, SPEC IAL JUDGE This case involves a dispute concerning the amount due under an uninsured /underinsured motorist insura nce policy. On September 27 , 1993, William Kenneth Sims (hereinafter, “Sims”), while engaged i n th e scope of his employment as a Deputy Sheriff in Gibson County, was2

injured when he was struck by a motor vehicle driven by Defendant Eddie Stewart (hereinafter, “Stewart”). Sims suffer e d 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 Far mers”), his uninsu

red 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 ben efits 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’ los s o f cosortium claim have been resolved. Edna W. Sims has settled her loss of consortium claim against Eddie S tew art, Jr. for $6,000.00, payable by his liability insurer. The Sims’ UM coverage with TFMIC include s loss of consortium in the per person limits for William Kenne th Sims’ bodily injury c

laim and Edna W. Sims can make no separ ate recovery for her loss of consortium from TFMIC’s UM coverage. See Exhibit 1, page 28. 2. Defendant Eddie Stewart, Jr.’s auto liability cover a ge 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 bodi

ly 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 accide

nt, an automobile insurance policy withTennesee Farmers Mutual Insurance Company which provided uninsured/under in sured motorist coverage in the amoun t of $100,000.00 per person. A certified copy of the Sims’ policy is attached Exhibit 1. 5. The injuries susta

ined in the accide

nt by William Kenne

th Sims were incurred by accident and arose out of and in

the course of his employment and were compensable und er t he Tennessee Workers’ Compen

sation Act. 6. William Kenneth Sims’ employer’s workers’ compensation insure r has paid temporar

y total disability, me

dic al and permanen t partial disability benefits totalling $61,862.57. 7. The workers’ compensation carrier, cannot as a matter of law,3 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 pa yable to William Kenneth Sims from Eddie Stewart, Jr. ’s liability insurer, less a one-third attorney’s fee, $8,333.00 to Jim Emis on, in full satisfaction of its subrogation claim. 9. TFMIC’s poli cy o f insurance with t he 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 t he 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 , dis abi lity 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 w ho may b e 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 l egally entitled to credit pursuant to its policy langua ge an d 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 wheth er TFMI C 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 entit

led 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 su m 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.4 The sole issue for re

view is whether Te

nnessee Farmers

is entitled to

a credit for

the total

sum paid to Sims as worke rs’ compensation

benefits. This

issue is a question of law because the facts are not in dispute. Under such circumstanc

es, the Court’s sco

pe 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, rel

evant language: Our l imit of liability for this Uninsured Motor ist Coverag e shall be reduced by the sum of the limits payable under al l liability and/or primary uninsured motor ist insurance polic ies, bonds, and securities ap plicable 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 Liability and Medica l Payments Coverages of t his 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 paragrap

h addresses coverage limitations, pr oviding for a reduction in uninsured motorist coverage if othe

r liability or unin

sured motorist policies are available to the insured. There are none in this case. Under the terms of the policy, workers compensation benefits redu ce 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 dama ges, both of which may be contained in an insurance policy. This distinction is illustrated in Dwight v. Tennesse e Farmer s 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 notseek damages under workers’ compensation. Rather, Dwigh t sue d the other motorist who was the tortfeasor and obtain

ed a $ 2,500 judgment, whic h included $2,218. 74 in medical expe nses.5

Dw ight then sued Tennessee Farmers, her uninsured motorist carrier, to recover the entir e judgment. Tennessee Farmers relied upon damage limiting language in i ts policy which is identical to that found in

the instantcase. 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 becaus

e she had made no c

laim for workers’ compensation. This Court affirmed the trial court, findi

ng th at the po licy operated to r educe the damag

es where worke

rs’ compensation benefits were available. Dwight was entitle d to workers’ com

pensation benef

its, though she elected not to take them. The Court held that the insured’s unilate ral 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 specif

ically provides that red

uction for worke

rs’ compensation benefits applies to damages and in no way affects the coverage available. Sims’ damages should be reduced by the amount of workers’ compensation benefits paid, and a judgment should then be rendered against Tennessee Farm ers fo r 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. § 50-6-11 2 (1991). The tria l c ourt ordered Tennessee Farme rs 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 c redit 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 am ounts t o 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 Te

nnessee Farmers

policy, damages a

re to be reduce

d by workers’6

compensation benefits and also by the amount paid under other liability policies. The workers’ compensation carrier has ac cepted in paymen

t of its subrogation c

laim the amount paid by Stewart’s $25,000 settlement . Tennessee Farm

ers does not seek

a double offset. S

uch 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)(insure

d should not suffer

a double reductio

n in his benefits

as the result of a

single payment made by the tortfe

asor’s insuranc

e company). That

is, Te nnessee 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 provide s that wo rkers’ compensation benefits will reduce the damages payable under the coverage. The issue pre sented to the trial court was whether Tennessee Farmers “gets credit for

the entire amount

paid by workers’ compe

nsation.” To answ

er 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 th

at wor kers’ compensation benefits reduce the amount of recovery. The problemin the instant case, however, is that theparties triedthis 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 stipulat ion covers j ust about everything but damages, although, under the terms of the policy, a determination as to the amount of damages is cruci

al. 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 sha ll also, in all cases, wh er e, in its opinion, complete justice cannot be had by reason of some defect in the record, want of proper parties, or oversight without culpable n

egligence, rema

nd 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 am ou nt of damages to which Sims is entitled, reduce the damages pur suant t o the provisions of the Tennessee Farmers policy, and enter7

judgment against Tennesse e Farmers for the

resulting amount no

t t o exceed pol icy limits of $100,000.00. Costs of the appea

l are assessed on

e-half to Sims and o

ne-half to Tenne

ssee Farmers.

_________________________________ W. FRANK CRAWFORD, PRESIDING JUDGE, W.S. CONCUR:

____________________________________ ALAN E. HIGHERS, JUDGE

____________________________________ ROBERT A. LANIER, SPEC IAL JUDGE