### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE November 6,

1998 Session
RICKIE L. HEATHERLY, ET AL 

### . v. MERRIMACK MUTUAL FIRE INSURANCE COMPANY, ET AL 

### .

Appeal from the Circuit Court for Sumner County No. 16660-C Thomas Goodall, Judge

No. M1998-00906-COA-R10-CV - Filed November 15, 2000

This extraordinary appeal involves a dispute between two homeowners whose house wasdamaged by fire and the tw

o insuranc e adjusting compa nies hired by

the homeowners’ insurance carr ier to investigate

their claim. Believing that their claim had been fraudulently processed, the homeowners filedsuit in the Circuit Cou rt for Sumner County

against their

insurance carrier and

the two adjusting companies. The three defenda nts moved to dismiss the compla int as to the adjustin

g companies. After the trial court d enied the motions and declined to grant an interlocutory appeal, the two adjusting companies petitioned for a Tenn. R. App. P. 10 extraordinary appeal

. We granted the application and now reverse the trial court’s denial of the motion to dismiss because the homeowners have conceded that they

have n o breach of contract claim against the adjusting companies and because we hav

e concluded that

the homeowners’ claims are barr ed by the sta

tute of limitations.
Tenn. R. App. P. 10 Extraordinary Appeal; Judgment of the Circuit Court Reversed

W ILLI AM C. K OCH , J R ., J., delivered the opinion of the court, in which B EN H. C ANTRELL , P.J., M.S., and W ILLI

AM B. C AIN , J., joined.

John O. Threadgill, Knoxville, Tenn essee, andParks T. Chastain, Nashville, Tennessee, for the appellants, Mutual Fire Insurance Association of New England, I nc.

David B . Scott, Nashville, Tennessee, for the appellant, The Professional Company I nsuranc e Adjusters, Inc.
Joseph Y. Longmire, Hendersonville, Tennessee, for the appellee s, Rickie L. He

atherly an d Ronelle M. H eat herl y.

OPINION

On August 26, 1995, a

n accidental ele

ctrical fire ca

used extensive dama

ge to a house in Hendersonville

owned by Ric

kie and Ronelle Heath

erly. The H

eatherlys notified their

homeowners insurance carrier, Merrimack Mutual Fire Insurance Company (“Merrimack”) of the fire and later filed a timely

claim for damag

es. Due tothe dam age t o th e ho use and its con ten ts, the Heat herl ys were forced to move into a rented apartment and even to rent furniture.1 Merrim ack is not a pa rty to this appea l.

-2-

Merrimack did not employ its own adjusters in Nashville when it received theHeatherly s’ claim. Instead, it

hired two adjusting companies, Mutual Fire Insurance Company (“Mutual”) and The Professional Company I nsurance Adjuste

r, Inc. (“Pr

ofessional”) to in

vestigate the H

eatherlys ’ claim. Following the investigation, Merrimack offered to pay the Heatherlys $76 ,900.15 under “Coverage A” of their homeo wners policy

and submitted to the

Heatherly

s a completed proof

of loss form prepared by Mutual for their signature.

The Heatherly

s declined to acc

ept Merrimack’s

settlement offer

and, in stead , provided M errimack

with a modified proof of loss form stating that their covered lossesamounted t o $88,551.19. Merr

imack rejected

the Heatherly

s’ claim on November 27, 1995, but tendered them $76,900.15, the amount it had originally offered in settlement of their Coverage A claim. Merrimack also requested the Heatherlys to fill out a proof of loss form for their claims under “Coverage C” of the policy. Afte

r they rec eived the proof o

f loss form for the

ir Coverage C c

la im, the Heather lys retained counsel who promptly threaten ed to sue Merrimack, Mutual, and Professional if the Heatherly s’ claims were not pr

omptly settle

d. Eventually

, Merrimack paid

the Heatherly

s the limits under eachcomponent of their

homeowners policy, including $99,500 under Coverage A, $69,650 under Coverage C, and $15,373.52 under Coverage D.

On March 25, 1997, the

Heatherly

s filed suit again

st Merrimack, Mutu

al, andProfessional in the Circuit Court for Sumner County, alleging breach of contract, neg ligence, and violation of the TennesseeConsumer Protectio n Act. They sought damages for, among other things, $27,502.10 in compensatory

damages, the cost of

debris removal, t

he twenty-

five percent ba

d faith penalty

under Tenn. Code Ann. § 56-7-105(a) (1994), treble damages, $1,000, 000 in punitive damages, and attorney’sfees. Merrimack, Mutual, and Profe ssional filed a join

t Tenn. R. Civ. P. 12.02(6) motion to dismiss the claims against Mutual and Professional. The trialcourt denied the m otion and also deniedthe adjusting companies’ separate motions for a Tenn. R. App. P. 9 interlocu tory appea l. Thereafter, we granted Mutual’ s and Professiona l’s petition for a T

enn. R. App. P. 10 extraordinary appeal. 1

I.

T HE S COPE OF THIS E XTRAORDINARY A PPEAL

As a threshold matter

, we must determine

which iss ues are properly before this court for decision. In the ir application for an extraordinary

appeal, Mutual an

d Professional foc

used their argument on the trial court’s refusal to deny their joint motion to dismiss the Heatherlys’ contract clai m. However, in their brief filed afte

r this court gra

nted the extraordi

nary appe al, Mutual an d P rofessional have also taken is sue with the trial c ourt’s denial of th

eir motions to dismiss th e Heatherly s’ negligenc

e and Tennessee

Consumer Protectio

n Act claims.

The scope of

the issues raised

on Tenn. R. App. P.

9 and 10 appeals differs from the scope of the issues that can be raised on appeals as of right under Tenn. R. App. P. 3. Subject to the limitations in Tenn. R. App. P . 3(e) an d 13(b), both the appellant and the appellee have broad latitude with regard to th e iss ues they can ra

ise on a direct appeal. The same is not the case for-3-

interlocutory

appeals under Te

nn. R. App. P. 9 or extraordinary appeals under Tenn. R. App. P. 10. For interlocutory

appeals, the only

issues that can be

raised are th

ose certified in the trial court’s order granting permission to seek an interlocutory appeal and in the appellate court’s order granting the interlocutory

appeal. Tennessee Dep’t of Mental Health & Mental Retardation v. Hughes , 531 S.W.2d 299, 300 (Tenn. 1975); Montcastle v. Bair d , 723 S.W.2d 119, 122 (Tenn. Ct. App. 1986); Pass v. Shelby Aviation, Inc. , No. W1999-00018-COA-R9-CV, 2000 WL 388775, at *6 (Tenn. Ct. App. Apr. 13, 2000) (No Tenn. R. App. P. 11 application filed). For extraord inary appe als, the issues are limited to those specified in this court’s order granting the extraordinary appea l. Gibson

v. Prokell , No. 02A01-9908-CH-00237, 1999 WL 1097848, at *1 (Tenn. Ct. App. Oct. 5, 1999) (No Tenn. R. App. P. 11 application filed).

The applicat i on for an extraord inary appe

al filed by M

utual and Professi

onal dealt exclusively

with the trial cour

t’s refusal to

dismiss the Heathe

rlys’ brea ch of contract c

laim against them. However, in the statement of relief being sought, the two adjusting companies requested that this court “enter an opinion reversing the trial court’s findings and dismissing the plaintiffs’ causes of action against t

hem on all counts.”

This court’s order granting the extraordinary appe al did not specifically

delineate the issue s that would be addressed on appeal. Thereafter, Mutual and Professional filed a brief addressing not only the trial court’s re

fusal to dismiss

the breach of contract claim, but also the trial c

ourt’s refusal to

dismiss the negligence and Tennessee Consumer Protection Act claims. The Heatherlys did not object to the issues being raised by the adjusting companies and fileda brief respondi

ng to all these

issues. We have determined that it is appropriate for this court to address all three issues briefed by Mutual and Professional because this court’s order granting the interlocutory

appeal did not set out

the issues to be addressed and because the Heatherlys have filed a brief address

ing these issues.

II. T HE T ENN . R. C IV . P. 12.02(6) M OTION TO D ISMISS

All three defendants filed a joint Tenn. R. Civ. P. 12.02(6) motion to di smiss the Heather

lys’ claims against

Mutual and Profess

ional. They argued that the complaint failed to state a claim upon which relief

could be granted because the Heatherly s, by their own

admission, did not have a contract with either Mutual or Professional a nd because

Mutual and Professional were acting as agents for

a disclosed principal. Accordingly, they argued that there could be no claim for breach of contract

or a cla im under the Tennessee Consumer Protection Act. They also argue d that the lack of a contract doomed the Heatherlys’ ne gligenc e claim because there was no other law in Tennessee imposing a duty to insureds on adjusting companies retained by an insurance carrier.

The motion to dismiss did not assert any sort of

statute of limitations defense. However, each defendant’s answer to the complaint contained an affirmat ive defense based on the statute of limitations with regard to the Heatherlys’ negli gence and Tennessee Consumer Protection Act claims. Two of these

answers had been filed by the time the trial court conducted the hearing on the jointmotion to dismiss, but there is no indication i n this reco rd that the trial court addressed the statute of limitation s questions in the co ntext of its consider

ation of the motion to

dismiss. Acco rdi ngly, we must limit the scope of the motion to dismiss to the grounds specifically contained in the motion.2 In the context of negligence cas

es, “duty”

connotes an oblig ation to act reasonabl

y to prot ect anot her from an
unreasona

ble ris k of harm. McCall v. Wilder , 913 S.W.2d 150 , 153 (Tenn. 1995). Determining whether a d uty exists in the circumstan ces of a par ticular case is a q uestion of law, Staples v. CBL & Assocs., I nc. , 15 S.W.3d 83, 89 (Tenn. 2000), that

requires th

e court to deter

mine whether t

he plainti

ff has a legal interest whi ch is entitled to protecti on at the hands of the defendan t. Bradshaw v. Daniel , 854 S.W.2d 865 , 869-70 (Tenn. 1993).

3 Tenn. R. App. P. 13(b) states: “Review generally will extend only to those issues presented f or review. The appellate court shall

al so consi der whether the trial and appellate court[ s] have jurisdiction over the subject matter, whether or not presented for r

eview, and may i

n its dis cretion consi

der other iss

ues in order,

among other

reasons: (1)
t o prev ent needless litigat ion, (2) to prevent injury to t he interests of the publi c, and (3) to prevent prejudice to the judicial pro cess.”

4 Tenn. R. App. P. 36(a) stat es that the appellate courts “s hall grant

the relief on the law and f acts to which the party is entitled or the proceeding otherwis e requires and may grant any relief . . . provi

ded, however, rel

ief maynot be granted in co ntravention o f the province of the trier of fact.”

-4- The H eatherlys

have conceded

in their appellate

brief that their c

omplaint fails t

o state a breach-of-contract

claim against Mutual and Professional bec au se their contrac t was with Merrimack. Accordingly, we need not address the breac h of contract claim further. However, the absen ce of a contract doe s not necessarily

defeat the Hea

therlys’ ne

gligence and

Tenness e e Consumer

Protection Act claims against Mutual and Professional. Privity of contract is not required fo r consumer protection act claims, see generally Maillet v. ATF-Davidson Co. , 552 N.E.2d 236, 242 (Mass. 1990) (stating that “nonprivity plaintiffs can also maint ain an action in a prod

ucts liability

case. ”); Metro

politan Life Ins. Co. v. Haney , 987 S.W.2d 236, 242 (Tex. App. 1999) (noting that “[t]he plaintiff, however, need not establish contractual privity with th e defendant.”) , and contracts

are n ot the so le source of duty in negligence

cases. 2 However, we ha ve determined tha

t this case does not present an ap

propriate vehic

le for determinin

g whether i nsureds may maintain either negligence

or Tennessee Con

sumer Protection A

ct claims again

st adjusting companies because the Heatherlys’ claims, even if they had them, are clearly time-barred.

III. T HE H EATHERLYS ’ N EGLIGENCE AND C ONSUMER P ROTECTION A CT C LAIMS

Even though Mutual and

Professional did not assert statute of limitations defenses in their motion to dismiss, they included them in their answers, and thereby, put the Heatherly s on notice that they were asserting that the negligence and Tennessee Consumer Protection Act claims weretimebarred. Mutual and Professional included lengthy argument s suppo rting these def

enses in their appellate brief. While

the Heatherlys have

argued that this court should not address the statute of limitations issue for

procedural rea

sons, they ha

ve also briefed t

he statute of limita

tions issues.

As a general matter, appellate court s will decline to

consider issues r

aised for the fir

st time

on appeal that were not raised and considered in the trial court. Reid v. State , 9 S.W.3d 788, 796 (Tenn. Ct. App. 1999). However, Tenn. R. App. P. 13(b) 3 and 36(a) 4 give appellate courts considerable

discretion to consider issues that have not been properly presented

in order to achieve fairness and justice. Aaron v. Aaron , 909 S.W.2d 408, 412 (T enn. 1995). Take

n together, the

se rules permit appellate courts to grant complete relief to the parties as long as they have been given fair notice and an opportunity to be heard on the dispositive issues. Realty Shop, Inc. v. RR Westminster Holding, Inc. , 7 S.W.3d 581, 608 (Tenn. Ct. App. 1999).5 If we were to d ecline to add ress the statute of lim itations issues, the d efendants wo uld raise them as soon as the case was remanded. The trial court wou ld then be required to address the question. No matter how the trial court ruled, one side or the o ther would b e entitled to pu rsue a seco nd appe al to this court. Taking up the issue at this juncture
saves t he parti es and the

courts t he time a

nd resources that

would be cons

umed if al

l thes e steps were pursu ed.

-5- Despite the inference i

n Mutual’s and Prof

essional’s reply

brief that the statute of limitations defense was presented to the trial court, the appellate record contains no basis upon which we can conclude t hat it w as. Accordingly, we must conclude that it was not. However, this procedur al shortcoming will not prevent us from addressing the statute of limitations issues on appeal for four

reasons. First, both Mutual and Professional asserted statute of limitatio

ns defenses in the

ir answers. Second, the appellate

record, particularly the Heatherly s’ complaint and the exhibits to Merrimack’s opposition to motion to quash, provide the eviden ce needed to consider these motions. Third, Mutual, Professio nal, and the Heat herlys have

already br

iefed the statute

of limitations issues

. Fourth, addressing the

statute of limitations issues at this state of the proceeding will prevent further needless litigation in this case. 5

Private Tennessee Consum

er Protection Ac

t claims and negl

igence claims m

ust b e filed within one year after the cause of action accrues. Tenn. Code Ann. § 28-3-104(a)(1) (Supp. 1999) (time limitations on actions for injuries to the person); Tenn. Code Ann . § 47-18-110 (1995) (limitations on private consumer protection actions). For both claims, the cause of action accrues when the action g

iving rise to the claim is

discovered. Tenn. Code Ann. § 47-18-110 (stating that the running of

the statu te is triggered by “a person’s discovery of the unlawful act or practice”); McCroskeyv. Bryant Air Conditioning Co. , 524 S.W.2d 487, 491 (Tenn. 1975); Teeters v. Currey , 518 S.W.2d 512, 517 (Tenn. 1974). The Heat herlys file

d their complain

t again st the adjusting companies on March 25, 1997. Accordingly, they must eithe r have sustained or discovered their injuries within one year prior to March 25, 1997.
According to the Heatherly s’ complaint, the defendants did no t provide them with t

he forms needed to submit their claim even though almost two months had elapsed since the August 26, 1995 fire. Instead, on October 25, 1995, Merrimack provided them with an already completed proof of loss form supporting a $76,900.15 claim under Coverage A of t heir h omeowners policy. The Heat herl ys alleged in their complaint that this form had been completed by Mutual and that the information on the form was “false and fraudulent.” The Heatherly s declined to sign this form but later submitted a corrected form claiming loses in the amount of $88,551.19 under Coverage A. They also demanded tha

t Merrimack pay

the benefits due t

hem under their po

licy within sixty

days.

At this juncture, and

possibly at so

me time before, th

e Heatherly

s retained a la

wyer to represent them in their dealings with Merrimack. On November 27, 1995, Merrimack notified the Heat herl ys in writing that it rejected their $8 8,551.19 claim. Three days later, on November 30, 1995, the Heatherlys’ lawye r informed Merrimack in writing that he had been retained to represent the Heatherlys. He also informed Merrimack that there was no “valid basis” for rejecting the proof of loss and that Merr

imack would be ac

ting in bad faith i

f it did not pay the H

eatherlys ’ claim

within sixty days. While disclaiming a d esire toplay “hard ball,” the Heatherly s’ lawyer also informed-6-

Merrimack that his clients intended to seek statutory bad faith penalties and treble damages under the Tennessee Consumer Protection Act if their claims were not properly adjusted.

Based on the allegations in the Heatherlys’ complaint and the undisputedfacts in the record,

no oth er co ncl usi on c an b e dra wn o the r th an t hat the Heat herl ys haddiscovered the alleged w rongdoing by Merrimack, Mutual, and Professional at least by November

1995. They had rejected what they refer to as Merrimack’s “false and fraudulent” claim form and had retained a lawy er to represent themin their dealings with Merrimack. Their lawyer, acting on their behalf, informed Merrimac k

on November 30, 1995, that the company wa s acting wrongfully. Despite the threats by the Heatherl ys ’ lawyer, Merrimack did not adjust the Heatherly s’ claim within sixty days. On November 19, 1996, the Heathe

rlys’ lawy er sent another l

etter to Merrima

ck threatening

suit if the claim

was notresolved. When Merrimack did not respond to their satisfaction, the Heatherlys filed suit on March 25, 1997.

The Heatherly

s’ causes of act

ion against

Merrimack, Mutual, and Professionalaccrued when they discovered or sh

ould reasonably

have discovered their injuries and the cause thereof. See Potts

v. Celotex Corp. , 796 S.W.2d 678, 680 (Tenn. 1990); City State Bank v. Dean Witter Reynolds, Inc.
, 948 S.W.2d 729, 735 (Tenn. Ct. App. 1996). The allegations in the Heatherlys’ complaint and their lawyer’s November

30, 1995 letter leave little doubt that the Heatherlys believed that they had been injured because Merrimack had rejected their $88,551.19 claim under Coverage A and had delay ed in providing them the forms needed to pursue their other claims. It is equally clear that the Heat herl ys believed that Merrimack and its adjus ters were the cause of their injuries. Even if we

were to a ssu me t hat the Heat herl ys were not really “injured” until Merrimack de

clined to settle the

ir Coverage A claim within

six ty da ys of their lawyer’s November 30, 1995 letter, they certainly knew that they had been in jured by Janua ry 29, 1996, wh en Merrimack still had not settl ed their Co verage A claim to their satisfaction. These facts support only one conclusion – that the He atherlys had discovered

their causes of action against Mutual and Professional well in advance of March 25, 1997. Accordingly, the negligence and Tennessee Co

nsumer Protection

Act claims

against Mutual andProfessional in the Heatherlys’ March 27, 1997 complaint were time-barred and were subject to being dismissed either on a Tenn. R. Civ. P. 12.02(6) or 56 motion.

IV.

We reverse the trial court ’s ord er denying the motion to dismiss by Mutual Fire I nsurance Association of New England, Inc. and The Professional Company Insurance Adjusters, Inc. and remandthe case

to the trial court

for further proceedings consistent with this opinion. We tax the costs of this appeal join

tly and seve

rally to Rickie L. Heatherly and Ronelle M. Heatherly , for which execution, if necessary, may issue.

_________________________________ WILLIA M C. KOCH, JR., JUDGE