# FILED

July 12, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE

GRE INSURANCE GROUP, ) ) Plaintiff/Appella

nt, ) Coffee Chancery No. 96-284

) v. ) ) Appeal No. 01A01-9806-CH-00300 DOUGLAS KEITH “RON JON” REED, ) CHRISTOPHER LORANCE, WILLIE ) LORANCE, and JERRY A. JONES, )

) Defendants/App

ellees. )

APPEAL FROM THE CHANCERY COURT OF COFFEE COUNTY

AT MANCHESTER, TENNESSEE THE HONORABLE JOHN W. ROLLINS, CHANCELLOR

For the Plaintiff/Appellant : For the Defendant/Appellee, Jerry A. Jones : Barbara J Perute

lli Marian L. Kohl Christina Henley Duncan Ashley N. Arnold Manchester, Tennessee Nashville, Tennessee For the Defendan

ts/Appellees, Christopher Lora

nce and Willie Lorance : John R. Colvin Winchester AFFIRMED

HOLLY KIRBY LILL

ARD, J.

CONCUR: BEN H. CANTREL

L, P.J., M.S. WILLIA M BRYAN CAIN, J.OPINION

In this case, one of the insureds on an automobile liability insurance policy allowed a third party to use his vehicle.

The thir d party then committed an intentional act while operating the vehicle. The insurance c ompany sought decl

aratory judgment

to determine whet

her its p olic y

re quired it to defend and pr ovide liability cove

rage for the insu

reds. The trial c

ourt h eld that th e third party committed a n intentional act which excluded coverage to him under the terms of the po licy. The trial court a

lso held that the insu

reds did not commit a

n intentional act,

and that th

e insurer must provide a defense and liability coverage to the insureds. The insurer appeals as to the insureds; the issue

is one of first impr

ession in Tennesse

e. We affirm. Appellant GRE Insurance Company (“GRE Ins uranc e”) issued an au tomobile liability insurance policy to Christopher Lorance (“Lorance”)and Willie Gene Lorance (“Willie Lorance”), Christopher Lorance’s father. The policy provided coverage for a 1997 Hyundai Excel owned by Christopher Lora

nce. The policy pr

ovides: COVERAGES A & B - LIABILITY COVERAGE We will pay damages for bodil y injury . . . or property damage . . . which any insured person becomes legally responsibl e be cause of an auto accident . . . . We have no duty to defend any suit o

r settle any claim

for bodily injury or property damage not covered under this policy. EXCLUSIONS: We do not provide Liability Coverage for any person: 1. who intentionally causes bodily injury or property damage . . . . On June 11, 1995, Christopher Lorance and Appellee Dougl as Keith “Ron Jon” Reed (“Reed”) were together. They had been drinking. Reed drove the insured vehicle with Lorance’s permission. While driving around that evening, the tw o men saw Appellee Jerry Jones (“Jones”) sitting alone on a concrete bridge . Reed s topped and got out of the car; Lorance stayed in the vehicle. After approxima tely ten minutes, Re

ed returned to

the vehicle, placed it in reverse, shifted it into drive, and hit Jone s with the c ar. Reed drove away from the scene. As a result, Jones sustained serious injuries requiring several surgeries. On April 17, 1 996, Ree d pled guilty to aggravated ass

ault. Jones filed suit against Reed, Christopher Lorance and Willie Lorance s eeking medical expenses, loss of wages, and pain and suffering. G

RE Insurance pro

vided a defense

for the Lorances under a reservation of rights. Subsequently, GRE Insuran ce filed a d eclaratory judgment action against Reed, the Lorances, and

Jones, contending

that it is not requir

ed to provide eithe

r a defense or liability coverage to Reed or the Lorances for a tort action arisin

g out of Reed’s inte

ntional act.1 Under Rule 13(b) of the Tennessee Rules of Appellate Procedure, appellate review

“extend[s] only to those issues presented for review.” Tenn. R. App. P. 13(b). GRE Insurance frames the issue on appeal as follows: “The trial court erred as a matter of law in holding that GRE Insurance Group must provide a defense and liability coverage for the defendants pursuant to their automobile liability policy in view of the fact that the permissive driver committed an intentional act not covered under the automobile policy.” Consequently, we do not address the trial court’s fin

ding as to Reed, the

permissive driver

, that GRE Insuran

ce was not obligat

ed to provide Reed a defense or liability coverage under the policy. 2 The trial court he

ld, in part: 1. [T]hat the ac

t of Douglas Keith “

Ron Jon” Reed in stri

king Jerry A. Jone

s with the Lorance automob

il e is a n intentional act excluded from coverage under the automobile

policy; and therefore, t he plaintiff, GRE, does not have to provide insurance coveragefor

the defendant, Reed . . . 2. The Court finds that there was no intentional act on the part of defe ndants, Christopher Lorance and Willie Gene Lorance; and therefore, plaintiff, GRE, shall provide a defense and liability coverage for defendants, Christopher Lorance and Willie Gene Lorance . . . . GRE Insurance now appeals the trial court’s decision as to the Lo rances. Jones and the Lorances filed briefs in thi

s appeal. There are two issues on appe al: (1) whe ther GRE Insurance has a duty to defend the Lorances under the policy when a th ird party, a permissive driver, committed an intentional act excluded by the policy, (2) whether the policy at issue affords liability coverage to the Lorances for

a negligent entrustment claim when Reed, the entrustee, committed an intentional act excluded by the policy. The second issue on appeal is an issue of first impression in Tennessee. Since this case was tried by the trial court sitting without a jury, we review the case de novo upon the record with a presumption of correctness of the findings of fact by the trial court. Tenn. R. App. P. 13(d). Questions of law are reviewed without any presumption of correctness. Presley v. Bennett , 860 S.W.2d 857 (Tenn. 1993). GRE Insurance firs

tcontends that, because Reed’s actions were intentional, and the policy excludes coverage for in

tentional acts, it

has no duty to

defend the Lora

nces. 1 GRE Insurance cites Allstate Insurance Company v. Freeman , 443 N.W.2d 734 (Mich. 1989), and argues that the duty to defend the Lorances is derivative and inseparable from its duty to defend Re ed. The Lorances argue that an insurer’s duty to defend an insured is broader than its obligation to indemnify. They argue that Jones’ cla

im agains t the Lorances is a negligent entrustment claim and that they committed no intentional act . Jones also

argues on appeal that the cause of action for negligent entrustment

is a separate and

distinct cause of action which “does not rest on imputed negligence but his [Lorance’s] own independent negligence in the entrustment.”3

The general rule in Tennessee is that an insurer’s duty to defend an action against the insured depends on the allegations in the underlying tort complaint against the insured. First Nat’l Bank

v. South Carolina Ins. Co. , 341 S.W.2d 569, 570 (Tenn . 1960); see also Drexel Chem. Co. v. Bituminous Ins. Co. , 933 S.W.2d 471, 480 (Tenn. App. 1996); I. Appel Corp. v. St. Paul Fire & Ma rine Ins. Co. , 930 S.W.2d 550, 552 (Tenn. App. 1996); Graves v. Liberty Mut. Fire Ins. Co. , 745 S.W.2d 282, 283 (Tenn. App. 1987). This Court in Drexel Chemical Comp any v. Bituminous Insurance Company , set forth the guideline for determining a n insurer’s duty to

defend its insured: It is accepted in the overwhelming majority of jurisdictions that the obligation of a liability insurance company to defend an action brought against the insured by a third partyis to be determined solely by the allegations contained in the complaint in [the underlying] action . . . . Accordingly, if the allegations . . . are within the risk insured against and there is a potential basis for recovery, then [the insurer] must defend . .

. regardless of th

e actual facts o

r the ultima

te grounds on which . . . liability to the injured party is predicated . . . . In any event, the pleading test for determination of the duty to defend is based exclusively on the facts as alleged rather than on the fac

ts as they actually ar

e . . . . Drexel Chem. Co. , 933 S.W.2d at 480 (quoting American Policyholders’ Ins. Co. v. Cumberland Cold Storage Co. , 373 A.2d 247 (Me. 1 977)) (emphasis a dded). Lik

ewise, if any one of the allegations is covered under the policy, the insu

rer has a duty

to d efend the insured. Id. at 480 (citing U.S. Fidelity & Guar. Co. v. Murray Ohio Manuf. Co. , 693 F. Supp. 617 (M.D. Tenn. 1988). In Dempster Brothers, Inc. v. U.S. Fidelity & Guarant y Company , 388 S.W.2d 153, 156 (Tenn. App. 1964), this Court held that, where the allega tions of the underlying complaint are ambiguous and there is doubt as to whether the allegations state a cause of action sufficient to

require insurer to defend, the doubt should be resolved in favor of the insured. See also Marsh Furniture Co. v. Pennsylvania Manuf acturers A ssn. Ins. Co. , No. 02A0 1-9505-CV-00103, 1996 WL 328713, at *3 (Tenn. App. June 17, 1996). In this case, the allegations in the underlying tort complaint

include allegations of negligence and recklessness on the part of Reed in the operation of the vehicle. Jones alleged that the Lorances

were guilty of negligence and reckless conduct in the negligent entrustment of

the vehicle to Reed.4

The GRE automobile

liability policy issue

d to the Lorances

provides: We will pay damages for b odily injury . . . or property damage . . . for which any insured person becomes le gally responsible

because of an a

uto accident . . . . We will settle or defend, as we

consider approp

riate, any claim o

r suit asking forthese damages. In addition to

our limit of liability,

we will pay all

defense costs we incur. Our duty to settle or defend ends when our limit of liab ilit y for this coverage has been exhausted. We ha

ve no duty to defen

d any suit or settle

any claim

for bodily injury or property damage not covered under this policy.

*** EXCLUSIONS: We do not provide Liability Coverage for any person: 1. who intentionally causes bodily injury or property damage . . . . GRE Insurance argues that it has no duty to defend the Lorances because the negligent entrustment claim again st the Lorances is based on the intentional act of Reed, a permissive driver, and that damages as the result of an intentional act ar e exc luded by the policy. The underlying complaint alleges that Reed’s actions were negligent and reckless. In analyzing the insurer’s dut

y to defend,

we look only to the allegations in the underlying complaint. Drexel , 933 S.W.2d at 480. The Drexel Courtnoted that when one of the allegations is covered under the policy, the insurer has a duty

to defend the insured “irrespective of the number of allegations that may be excluded by the policy.” Id. at 480. Since the Com plaint alleges tha

t Reed was neglige

nt, to determine GRE’s duty to defend, we need not reach the issue of whether an intentional act by a third party such as Reed means that

a claim of negligent entrustment against the nam ed insureds is excluded from c overage. Clear

ly GRE Insurance has a duty to provide a defense to the Lorances in the underlying tort action. The decision of the trial court is affirmed on this issue. GRE Insurance also argues that the policy does not provide liability coverageto the Lorances basedon the intentional act exclusion under the policy. GRE Insurance notes that the trial court found that Reed’s act was intentional and a rgues that the negligent entrustment claim against the Lorances is based on the intentional act of Reed, and that the policy does not provide coverage for intentional acts. The Loranc es argue that the

y did not commit an inte

ntional act and tha

t the claim against them is a negligence claim which is not precluded under the policy. The Supreme

Court noted in St. Paul Fire & Marine Insurance Company v. Torpoco , that the standard in determining indemnification or ultimate liability of the insurer is

not based upon the facts as alleged, but rather upon the true facts. St. Paul Fire & Marine Ins. Co. , 879 S.W.2d 831, 835 (T enn. 1994). In this case, the facts are undisputed. Lorance testified that he gave Reed2 The majority of courts have interpreted “the insured” in an exclusionary clause to refer to

a particular insured and extended liability coverage to an innocent insured. See American States Ins. Co. v. Borbor , 826 F.2d 888, 894 (9 th Cir. 1987); Western Cas. & Sur. Co. v . Aponaug Mfg. Co. , 197 F.2d 673 (5th Cir . 1952); Arenson v. Nat’l Automobile & Cas. Ins. Co. , 45 Cal. 2d 81, 286 P.2d 816 (1 955); Fire Ins. Exchange v. A ltieri , 235 Cal. App. 3d 1352, 1 Cal. Rptr. 2d 360 (1991); National Union Fire Ins. Co . v. Lynette , 228 Cal. App. 3d 1073, 279 Cal. Rptr. 394 (1991); Pawtucket Mut. Ins. Co. v . Lebrecht , 104 N.H. 465, 190 A .2d 420 (1963); Unigard Mut. Ins. Co. v. Argonaut Ins. Co. , 20 Wash. App. 261 , 579 P.2d 1015 (1978 ); Hedtcke v. Sentry Ins. Co. , 109 Wis. 2d 461, 326 N.W.2d 727 (1982) ; but see White v. LeG endre , 359 So. 2d 652 (La. Ct. App. 1978); McBride v. Lyles , 303 So. 2d 795 (La. Ct. App. 1974). 5 permission to drive the vehicle. Lorance stated that they saw Jones sitting on a bridge and that Reed stopped and got out

of the car to talk

to Jones. Lorance testified that Reed returned to the vehicle, placed it in reverse, shif

ted it into drive, and s truck Jones with the car. Reed pled gu

ilty to aggravated assault. The trial court found that Reed’sact was intentional, and there is not an issue on appeal as to whether this factual finding was in error. Therefore, we must determine whether Reed’s intentional act precludes liability coverage to the Lorances when the claim against them is one of negligent entrus tment a rising out of Reed’s intentional act. In support of its argument, GRE In surance c ites Allstate Insurance Company v. Freeman , 443 N.W.2d 734 (Mich. 1989) (concurring and dissenting opinions filed). In Freeman , Alonda Freeman, one of the insureds under a homeowner’s policy, shot Mary Kelly. Freeman , 443 N.W.2d at 746- 47. Kelly fil

ed a tort suit against Mrs. Freeman and her husband, Marshall

Freeman, a co-insured under the policy. Id. at 747. Kelly alleged that Mr. Freeman negligently entrusted the firearm to Mrs. Freeman. Id. The homeowner’s policy contained

a provision excluding coverage for “any bodily injury or prop erty dama ge which may rea

sonably be expected to result from the intentional or criminal acts of an insured person or which is in fact intended by an insured person.” Id. at 748. Allstate, the insurer, filed a declaratory judgment action, and the trial court granted Allstate’s motion for summary judgment, holding that Allstate had no duty to defend or indemnify Mr. Freeman. Id. at 747. The Michigan Supreme Court held t ha t Allstate’s duty to defend Mr. Freeman was solely derivative of its duty to defend Mrs. Freeman. Id. at 754. The Freeman court foundfirst that the inten tional and crimina

l acts exclusion applied

to Mrs. Freeman, thus precluding coverage. Id. at 750. The court also he ld that Allstate had

no duty to defend or indemnify Mr. Freeman. Id. at 754. Mr. Freeman argued that the exclusion was ambiguous as applied to him, and that the policy therefore should be construed in his favor. Id. at 751. Mr. Freeman argued that “an insured” could mean “that insured,” “the i nsured, 2 ” or“any3 Some courts interpret the language “any insured” in similar exclusions to mean any

insured under the policy, thereby excluding coverage for an innocent co-insured. See American American Family Mut. Ins. Co. v. Mission Medica l Group , 72 F.3d 645 (8th Cir. 1995); Allstate Ins. Co. v. Mc Cranie , 716 F. Supp. 1440 (S.D. Fla. 1989); Western Mut. v. Yamamo to , 29 Cal. App. 4th 1474, 35 Cal. Rptr. 2d 698 (1994). 6 insured. 3 ” Id. The insurance company argued that “an insured” meant “an y insured.” Id. The Freeman court held “that by excluding insurance coverage fo r inj ury or damage intentionally caused by ‘an insured person,’ Allstate unambiguously exclud ed cov erage for damages caused by the intentional wrongful act of any insured under the policies.” Id. (quoting Allstate Ins. Co. v. Gil bert , 852 F.2d 449 (9th Cir. 1988) ( citing Allstate Ins. Co. v. Condon , 199 Cal. App. 3d 148 , 243 Cal. Rptr. 623 (1988)) The Freeman court noted that “ we look to the under

lying cause of the

injury to determine coverageand not to the specific theory of liability.” Id. at 750. The court relied, in part, on several Michigan Court of Appeals decisions in which the insureds sought coverage under a homeowner’s policy for claims of negligent entrustment of a vehicle. Id. at 750-51. The homeowner’s policy excluded coverage for claims arising out of vehicle ownership, use, or operation. Id. at 751. The Michigan Court of Appeals in those cases held that there was no coverage for the claims of negligent entrustment

of a vehicle unde

r the homeowner’ s policy because the neglig ent entrustment theory originated from t

he o wnership, use, or operation of a vehicle, which was excluded by the policy. Id. See Allstate Ins u rance Company v. Goldwater , 415 N.W.2d 2 (Mic h. Ct. App. 1987); State Farm Fire & Cas. Co. v. Huyghe , 375 N.W.2d 442 (Mi ch. Ct. App. 1985); Michigan Mut. Ins. Co. v. Sunstrom , 315 N.W.2d 154 (Mich. Ct. App. 1981). To determine this issue on appeal, we first look to the language of the GRE policy issued to the Lorances: The analysis used in construing insur ance policies is well settled. "Insurance contracts like other contracts should be construed so as to give effe

ct to the intention and express languag

e of the parties. " Words in an insura nce policy are g

iven their common and ordinary me aning. W here language i n an insurance po

licy is susceptible

of more than one reasonab le interpretatio n, however, it is a

mbiguous. Wher e the ambiguous language limits the coverage of an insurance policy, that language must be construed against the insurance compan y and in favor of the insured. (citations omitted). Tata v. Nichols , 848 S.W.2d 649, 650 (Tenn.1993). If a contract is unambiguous, the meaning of the contract is a question of law for the co urt. Petty v. Sloan , 277 S.W.2d 355, 358 (Tenn. App. 1955).7

Unlike Freeman and th e cases cited therein, the policy language at issue in this case is as follows: “We do not

provide Liability Coverage for any person : 1. who intentionally c auses bodily injury or property dama

ge . . . .” (emphas

is added). We do n

ot find th e language “any person” ambiguous. See Tennessee Farm ers Mut. Ins. Co. v. Eva

ns , 1990 WL 64532, at

*2 (Tenn. App. May 18, 1990) (noting, in dicta, that the language“‘an insured person’” unambiguously expresses

a contractual intentto create joint obligations and to prohibit recovery by an innocent co-insured.”) (c iting Travelers Ins. Co. v . Blanchard , 431 So. 2d 913 (La. App. 1983); Allstate Ins. Co. v. Freeman , 4 32 Mich. 656, 443 N.W.2d 734 (1989)). See also Tennessee Farmers Mut. Ins. Co . v. Ev ans , 814 S.W.2d 49 (Tenn. 1991). The language in the GRE policy excludes coverage for a partic u lar person, not a particular injury. The person excluded is one who “intentionally causes bodily injury . . . .” In contrast, in Freeman , the policy excluded coverage for an injury “which is . . . intended by an insured person.” Freeman , 443 N.W.2d at 748. In Sunshine Birds & Supplies, Inc. v. United States Fidelity & Guaranty , 696 So. 2d 907 (Fla. Dist. Ct. App. 1997, the Flori da Court of Appea

ls held that an intentional act exclusion did not preclude liabilit

y coverage for the insureds against claims of negligent supervision, training, and retention. In Sunshi ne Birds , United States Fidelity & Guaranty Company issued a commercial general liability

poli cy to Sunshine Birds & Supplies, excluding from coverage “bodily injury expected or intended from the standpoint of the insured.” Sunshine Birds & Supplies, Inc. , 696 So. 2d at 908. Two employees allegedly sexually abused two minor children. Id. The parents of the children sued Sunshine for negligent supervision, training, and retention of their employees. Id. at 908-09. The court held that the cl aims aga inst Sunshine were negligence claims “which are cognizable

causes of action existing under Florida law and none of which have been excluded from coverageunder the terms of the policy.” Id. at 912. The Sunshine Birds court found that the claims against Sunshine were not barred by the intentional acts exclusion. Id. See also Pru dential Property & Cas. Ins. Co. v. Boylan , 704 A.2d 597 (N.J. Super. Ct. 199 7); but see Mount Vernon Fire Ins. Co. v. Creative Housing , 66 8 N.E.2d 404, 406 (N.Y. 1996) (excluding coverage for negligent supervision and negligent hiring clai m beca use “the operative act giving rise to any recovery is the assault.”). Likewise, Tenne ssee has long recognized the tort of negligent entrustment of a vehicle by

an owner to an incompetent driver. See V.L. Nicholson Construction Co. v . Lane , 15 0 S.W.2d8

1069 (Tenn. 1941). In Nichols v. Atnip , 844 S.W.2d 655, 659 (Tenn. App. 1992), this Court noted the four elements of negl igent entrustm ent: “(1) an entrustment of a chattel, (2) to a person incompetent

to use it, (3) with kn

owledge that the p

erson is incompete

nt, and (4) that is

th e proximate

cause of injury or damage to another.” In Mathis v. Stacy , 606 S.W.2d 290, 292 (Tenn. A pp. 1980), this Court als o recognized tha

t “[t]he owner’ s liability does not r est on impute

d negligence but is based on his ow n negligence in e

ntrusting his automob

il e to an in competent driver.” See also Prater v. Bu rns , 525 S.W.2d 846, 850 (Tenn. App. 1975) (holding thata “parent’s liability rests alone upon whether there was a negligent entrust

ment of the weapo

n to the minor” in a negligent entrustment case). In Tennessee Farmers Mut ual Insurance Company v . Evans , 814 S.W.2d at 54, our Supreme Courtrecognized that the policy behind an intention al act exclusion i

s to “prohibit the us

e of insurance to provide indemni ty for civil tort liability that results from an insured’s intentional wrongdoing. Otherwise, a liability policy could be used to wreak havoc at will.” In this case, the Lorances did not commit a n intenti onal act. Therefore, finding liability coverage for a negligent entrustment claim based on the intentional act of another insured or a third party does not conflict with the policy considerations articulated in Evans

. The policy language in this case excludes coverage for a person “who intentionally causes bodily injury. . . .” The L

orances did

not intentionally cause bodily injury to Jones. Therefore, even if Reed’s act

was intentional, the policy exclusion does not apply to Jon es’ negligence c

laim against the Lorances. Accordingly, the trial court’s decision that GRE Insurance must prov ide liability coverage to the Lorances is affirmed.9

The decision of the tr

ial court is affir

med. Costs on appea

l are taxed to the

Appella nt, fo r which execution may issue if necessary.

HOLLY KIRBY LILLARD, J.

CONCUR:

BEN H. CANTRELL, P.J ., M.S.

WILLIAM BRYAN CAIN, J.