### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Decemb er 5, 2001 Session TRAVELERS INDEMNITY COMPANY v. KENTON FREEMAN, ET AL 

### .

Appeal from the Chancery Court for Davidson County No. 00-497-III Ellen Hobbs Lyle, Chancellor

No. M2001-00657-COA-R3-CV - Filed February 28, 2002

Travelers Indemnity Company [Travelers] filed a complaint for a declaratory judgment respecting its liability to pay UM coverage for the minor child of its policyholder who was divorced from the child’s mother, with joint custody ha ving been awarde d. Mother

was kille d in a tra

ffic accide

nt in Alabama; her passenger child was injured. Mother owned and

was driving her automobile, and she also had UM coverage. The adverse driver had

split liabil it y covera

ge all of which wa s paid, in equal parts, to the Administrator of the mother’s estate, and to the minor child. Mother’s UM carrier pa id its entire policy proceeds to her administrator. Travelers obje cted, inter alia, to the lack o f allocation of the proceeds of mother’s UM covera ge. Travelers’ i nsured, on behalf of his minor child, filed a counter-claim against Travelers f or the entire UM cove rage, notw ithstanding an amount certain had never been

determined. The court found that Travelers had never disputed that the va lue of the minor c

hil d’s claim exc eeded th

e UM cove

rage and render

ed a summa

ry judgme

nt agains t Travelers for an amount certain. We vacate and remand. Tenn. R. App.P. 3 Appeal as of Right ; Judgment

of the Cha

ncery Court Vaca

ted and Remanded
H OUSTON M. G ODDARD , P.J., deliv ered the opinion of

the cour t, in which H ERSCHEL P. F RANK S and D. M ICHAEL S WINEY , JJ. , joined. John D. Schwalb, Nashville, Tennessee, for the appellant, Tra velers Indemnity Company.
S teven A. Riley, Gregory S. Reynolds and Chris L. Vlahos, for the appellee Kenton Freema n, individually, and as next friend of Will Freeman.
OPINION
This litigation began as a complaint for a declaratory judgment. The plaintiff [Trave lers] allegedthat on May 12, 1999 , it issued a policy of liability in surance

to Kenton

Freeman in Davidson County, wh

ich provi ded UM co verage of $500,0 00.00 tohim and any family member, who is described as a blood relative residing in Freeman’s household.-2-

Travele rs furth er alleged that on August 4, 1999, in Alabama, Alice Freeman, the f ormer wife of Kenton Fr

eeman, w as killed w

hen anoth er vehic le struck her automobile, and that Will Freeman, age 11, the son of Kenton and Alice Freeman, was se verely injured in the accident. Travelers further alleged that the vehic le owned and driven by Alice Freeman was insured by Progress ive Insur ance Company [Progressive] which provided UM cover age of $500,000.00. The vehicle

which struck the Freeman automobile was insured by Nationwide Insurance Company, with limits of $100,000.00 per claimant, which was paid.
Travelers further alleged that the Estate of Alice Freema n has demanded the entire amount of UM coverage from Progressive, and that a c laim has been made on behalf of Will Freeman under Kenton Freeman’s policy with Travelers. It is alleged that the Progressive policy is primary to that of Travelers as to any claim of W ill or Ken ton Freeman, and th at Trave lers has no liabilit

y to them under its policy, or alter natively, t hat Travelers is entitled to offset any payments made by Progressive.
Travelers sought a ju dgment tha t it did not provide coverage to Will Freeman, or in the alternative, that the Progressive policy is primary to the policy of Travelers, and that Progressive be directed to make no payments to the Estate of Alice Freeman until the right of the parties has been determined.
Kenton Freeman filed a response for himself and as next friend of Will Freeman. He alleged that Will Freeman, his son, resided with him in Franklin, Tennessee, and at the time of the acc ident, Will resided with both of his parents. The allegations respectingliability insurance were admitted. By way of counter-claim against Traveler s, Freeman alleged that Alice Freeman was driving her automobile northboundon I-65 in Chilton County, Alabama, when she was struck head on by an a utomobile dr iven by John Watson who was traveling southbound on I-65, and crossed the median. Watson was killed instantly, and Alice Freeman died within three hours. It is alleged that Will Free man susta ined fra ctures o f both leg s, skull, r ibs, and ot

her injur ies. The counter claimants alleged that Nationwide, on behalf of Watson, paid its po licy limits of $100,000.00, each, to the Estate of Alice Freeman , and to the Circuit Court Clerk of Alabama for the benefit of Will Freeman.
Counter claimants further al leged that Kenton Freeman, as Administrator of the Estate of Alice Freeman , demanded of Progr essive itspolicy limits of

$500,000.00 for the wrongful death of Alice Freeman, offset by the $100,000.00 paid by Nationwide and that the Administrator has agreed to acce pt the policy limits subject to the c ourt’s a pproval.
Counter claimant s furthe

r allege d that Tra

velers p rovid ed Kenton Freeman with UM coverageof $500,000 .00 for any fa mily membe r, to which Will Free

man, or a family me

mber, is entitled, but which Travelers has refused to pay , thereby br eaching its contract with Kenton Freeman, and is guilty of bad faith under Tenn. Code Ann. §56-7-105.-3-

In its respon se to the c ounter- claims, th e Progre ssive Casu alty Insur ance Company relied upon its policy provisions, and affirmatively pleaded the defense of r elease, alleging that

Kenton and Will Freeman entered into a compromise and settlement with the under insure d motorist, and releas ed the tor

t-feaso r from an y liability for the a ccident

. In its response to the counter-claim Travelers denied that Will Freeman is an insured under the policy, denied the right of K enton Fre eman torecover under the policy, and denied the r ight of Will Freeman to recover under the policy. Tra velers further denied that Kenton Freeman “ had a claim for bad faith.” Progressive movedthe court that it be allowed to deposit $400,000.00 with the treasury of the court and thereupon be dismissed from the case and adjudged to be without further liability. The motion was granted and Progressive thereupon deposited $400,000.00 w ith the court, such action being without prejudice to the rights of Tra velers, bu t not const ituting a gr

ant for d enial of Will Freeman’s entitlement to coverage under the policy Tra velers issued to Kenton Freeman. Thereupon, Kenton Freeman, as guardian of Will Freeman, moved for summary judgment “on all claims in the amended complain t and coun ter-cla imon the grounds that there are no disputed issues of fact . . . ”
Travelers then moved for summary judgment on “plaintiffs negligence claims,” alleging that there a re no gen uine issue s of mater

ial fact

. The motion of K

enton Fre eman, asguardia n of his s on, Will, was granted and he was “awarded a judgmen

t in the amo

unt of $400 ,000.00, p lus pre- ju dgment interes t at the rate of 10 percent per annum from January 4, 2000.” Tr

aveler s appeal s. Appella

te review is de novo on the record. We presume the judgment is correct, Tenn.R.App.P. Rule 13(d), but not as to questions of law.
The appellate standard of review of a gr ant of summary judgm ent is set out in Staples v. CBL & Associates 15 S.W.3d 8 3, 89 (Te nn. 2000) , as follo ws: The standard s governing the assessment of evidence in the summary judgmentcontext a

re also w ell established. Courts must view the evidence in the light most f

avo rable to

the nonmov

ing party and must a

lso draw a

ll reason able inferences in the nonmoving party’s favor. See Ro bins on v. Omer , 952 S.W.2d at 426; Byrd v. H

all , 84 7 S.W.2d at 210-11. Courts should grant a summary judgmentonly when both the facts and the inferences to be dra

wn from th

e facts permit a reaso nable pe

rson to reach only one conclusion. See McCall v. Wilder , 913 S.W.2d 150 , 153 (Te nn.1995) ; Carvell v. Bottoms , 900 S.W.2d 23, 26 (Tenn.1995). Travelers propounds the following issues for review:1 Pres umably, Wil l would i nheri t the funds recei ved by the Administ rat or of his mother’ s es tat e, as suming that she di ed int est ate and unmarri ed. He was apparent ly an onl y chil d.
2 $500 ,000.0 0 less $10 0,000 .00 pa id by N ationw ide in acco rd with p olicy pro visions. -4- 1. Did the court below commit error in granting summary judgment to the defenda nts in the amount of $400 ,000.00 th ereby, in effect, allocating allof the primary uninsured motorist coverage to cover pun i tive dama

ge in violation of the uninsured motorist statute?
2. Did

the court below commit err or when it fa iled to dism

iss the de fendant s’ bad fait h claim?
3. Did

the court below commit error in denying Travelers and gr anting defe ndant s summary judgment when the primary policy of uninsured motorist coverage had not been exhausted?
4. Even assuming the primary uninsured motorist lim

its were exhauste d, did

the court below commit error when it failed to alloca te or pro rate the benefits of the p rimary uninsured motorist coverage on the basis of the value of the claims?
5. Did

the court below co mmit error in granting summary judgment for an amount certain when the v alue of the underlying claims had never [been] determined?
Will was sever ely inju red in the traffic accide nt in Alaba

ma. The in surer of

the adve rse driver paid him $1 00,000.00 ; his mother’s UM carrier paid him nothing, because it paid the policy limits [$500,000.00 less $100,000.00] to the estate of his mother. 1
Because the issues are intertwined, we elec t to discuss them collectively. At the outse t, it may be helpf

ul to a cle arer un derstan ding if the releva nt insura nce polic ies are

further identi fie d:
Watson was insured by Nationwide , who paid its spl it-policy limits equa

lly to the Administrator of the Estate of Alice Freeman and

to the Alabama Circuit Court Clerk on behalf of Will Freeman, a minor. The Nationwide policy is not implicated in this litigation.
Alice Fr eeman was insured by Progressive , which pa id its entire UM coverage 2 to the administrator of her estate. Will Freeman was paid nothing. He and the Administrator of his mother’s estate were repre sented by the same attorney.
Kenton Freeman’s policy with Travel ers was implicated owing to its UM coverageprovision. Initially, Travelers alleged that Will Freeman was not a member-5-

of Kenton Freeman’s household, which would negate the UM cover age afforded by Travele rs’ policy, but this position has been abandoned and Travelers now concedes that its UM coverage is exposed, as will hereafter a ppear. With two exce ptions, the

issues inv olved the

allocati on of the proceeds of the Progressive policy. The exc epted iss ues are those con

cerned with (1) a

lleged ba d faith o f Travelers in not promptly paying the UM coverage to Will Freeman, and (2) the summary judgment for an amount certain.
Before we reach the issues, a parenthetica l discussion of

po st-summary judgment proceedings is neces sary. Tr aveler s fil ed a Rule

59 motion to alter or amend “all orders entered within 30 days of

the filing of

this motion,” including (1) the denial of Travelers’ motion for summary judgment, (2) the granting of the defendants’ [Freeman’s] motion for summary judgment, (3) the granting of judgment against Travelers for $400,000.00, and (4) the award of prejudgment interest

. Counsel for

Travele rs argue d “that f

or liability to exist u

nder any UM policy t

here ha s to be some tort-fe asor to a

judgment o

r some typ e of agr

eeme nt or sett

lement . . . because the policy provides that we w ill pay all sums an insured is entitled to recover from the owner or ope rator of an uninsured motor vehicle. There has been nodetermin ation as to what the d amages f

or the de athof this lady were, nor has there been a dete rmination as to the damages for this young man.”
Counsel then pointed out the differences bet ween it [the amount of damages] not being argued and it being conceded, to which the trial judge agr eed. We also agree.
Travelers next point

ed out tha t, as t o Will Freem an, two c laims exis ted on ac count of h is minority: one by his f

ath er for m edical expenses, and Will’s claim for personal injuries, a nd that there was “not

hing in the

record that would

support a

determin ation by th

e court t h at that i s $400,000.00.” We agree.
Counsel for Travelers next argues “that the Tr avelers ’ policy is the secondary uninsured policy as it relates to Will Freeman, but that it is a primary UM policy as it may relate to his father’s claims which could still be asserte d becau se Alaba

ma has a two-year statute of limitation . . . If the secondary UM carrier is to be liable there has to be an exhaustion of the primary UM policy . . . That policy was not exhausted.”
The argument continued that [Progressive] “payi ng $400, 000.00 into the court did not exhaust the limits of its policy because each claim must be examined separately . . . Progressive got out of this case for $100,000.00 less than they should have.”3 Camp bel l v . Wi ll ia ms , 638 So. 2d 804 (Ala. 1994) and a hos t of other case s. The is sue i s wellset tl ed. -6- Counsel then referen ced Ala bama’s wrongful death statute which allows the recove ry of punitive damages o nly in a wrongful death case. Compens atory damages are not recoverable. 3 Consequently, Travelers argues that Progr essive pa id $400,00 0.00 as c ompensat ory dama ges, thus entitling Trav elers to a credit for this amount. Travelers further asse rts that even if this argument is rejected the $400,000.00 paid by Progress ive must be pro-ra ted betwe en the wr ongful de athclaim and Will’ s claim fo

r person al injurie s.
We cannot consider

the provocative issue of the Alabama Wrongful Death Sta

tute bec ause the issue wasraised, for the f irst time, a

fter summary judgm

ent was g ranted. See, Bradley v. McLeod , 984 S.W.2d 929 (Tenn. Ct. App. 1998) [a Rule 59 mot ion is not available to raise new legal theories, or to introduce new evidence that wa s always available]. Contrary to the insistence of the appellees, however, we may consider the remaining issues raisedby Travelers respecting the non-allocation of the Progr essive policy proceeds and the award of a sum cer tain to Will Freeman. Tennessee law controls the interpretation of the issuance policy. Tenn. Code Ann. § 56-7-102.
Becaus e we c annot consider Travelers argument that the Progressive pa yment must be allocated to punitive damages only, as the Alabama Statute directs, we turn to the relevant Tennessee Statute, Tenn. Code Ann. §56-7-12 01. In doing so, we mu st ass ume that P rogressive’s policy payment to the Administrator of her estate was in settlementof his cla im for com

pensator y damage s. The statu tory sche me provid

es: (3) With

respec t to bodily in

jury to an insured w

hile occ upying an

automobile notowned by t

h e ins ured, the following priorities of recovery under uninsured motorist coverage apply: (A) The uninsured motorist coverage on the vehicle in which the insured was an occupant shall be the primary uninsured motorist covera ge: (B) If uninsure d motorist

coverage on the vehicle in which the insured was an occup ant is exhausted due to the extent of compensatory damages , then the uninsuredmotorist coverage provided by a policy under which the insured is a named insure d s hall be applicable as excess covera

ge to the p olicy des cribed i n subdivisi o n (b)(1); provided, that i f the insured is covered as a named insured unde r more than one (1) policy, then on ly such p olicy with the highe st limits of uninsured motorist coverage shall apply; (C) If the uninsured motorist coverage provided under the p ol icies described in subdivis ions (b)( 3)(A) a nd (B), if

applica ble, is exh austed due to the extent of compensatory damages, then th e uninsured motorist coverage provided by a p olicy under which the insured is covered other than as a name d insured

shall be a pplicabl e4 The motion of Travel ers to di squal ify c ounsel for t he cla imants becaus e of t he appar ent con flict of interest was deni ed. The i ssue is not bef ore us except

tange nti all y. 5 From the B ench, the Chan cellor comm ented that “the record indicates those [damages] are u ndisp uted ,” pos sibly owing to the i mportunations of counsel . The Chancellor reli ed on Spicer v. H illiard , 879 S. W.2d 858 (Tenn. Ct. App. 199 4) which w e find is inapposite t o the case at Bar. -7- as excess coverage to the policies listed in subdivisions (b)(3)(A) and (B); provided, that

if the insured is covered by more than one (1) such policy, then only s uch polic y with the h ighest limit s of uni nsured motorist coverage shall apply; and (D) In no instanc e shall the insured be entitled t o recei ve total b enefits from all polic ies listed in subdivision (b)(3)(A)-(C) in an amount gre ater than the l

imits of the

policy pr oviding the

highest lim

its o f uninsured motorist coverage.
The operative language is “if the UM coverage on [the Alice Freeman vehicle] is exhausted due to the extent of compensatory damages, then the UM cover age provided by a policy under which the insured i s a

named insured [the Kenton Freeman vehicle] sha ll be applicable as excess coverage . . . ”
The appellees argue that the UM coverage on the Alice Freeman policy wa s exhausted, thereby activating the exc ess cove rage. I t is admitte d that Prog

ressive paid th e Admi nistrator the entire policy pr

oceeds, upon his demand, and paid Will Freeman nothing. Since the same attorney represen te d 4 both the A dministra tor and W

ill Freema

n, he cho se - we k

now of no o ther way

to expressthe fact - to apportion 100 percent of the proce eds to the Administrator’s claims as a matter of representative strategy , since an y apportionment might inure to the benefit of Travelers. The troubling aspect of this strategy is that the value of the claims of the Administrator and Will Freeman has never been determined. We infer that the trial court apparently assumed that the value of the claims to be in excess of the p olicy limits. We do not hesitate to hold that such an assumption cannot be indulge d; to do so w ould arr ogate, f irst to cou

nsel, and secondly , to the tr

ial court, t he authority to determine that the pecuniary or excessive value of Alice Fre eman’s li fe was, at a minimum, the

policy limits.
As we have seen, the summary judgment determined both t he iss ue of coverage and the amount of damag es to which Will Freeman was entitled under the contract of issuance . We hold that such determination was beyond the reach of the Chance llor 5 because the amount

of damages was not an issue for determination in an ex contr actu action in the absence of an agreement, stipulation, judgmentor some other final mechanism. There was some evidenc e that Will Freeman had incurred medical expenses - admitted over objection - and the affidavit of his father is clea rly hearsay. It

is true that the affidavit was not countervailed, but the amount of damages wa s not a prope r adjudicative issue.-8-

There is no evidence in the record that Will’s damages had been deter mined in any kind of proceeding or

had been agreed upon. Neither do we find in the record

any admission by Travelers that Will was entitled to receive any amount from Tra velers; we note th at counse l for Will repeat edly stated to the Chancellor - and in the brief - that Traveler s “has never di sputed tha t the valu e of Will Freeman’s claim e xceede d its policy limits.” This argument overlooks the point that the value of Will’s claim wa s never a

n issue; coverage was the issue. The determination of Will’s damages, or a determination that his damages were in excess of the po licy limits, was beyond the reach of the Chancer y Court.
The appelle e argue s that “ Travel ers did no t argue t hat the va

lue of his [Will’s] claim exceeded its policy l

imits but simp ly stood on it policy defense” and that it “cannot raise that issue for the first time on appeal.” The novelty of this argument is nota

ble, to sa y the lea st, and overlooks the fact that counsel for Travelers obj ected to a des cription of Will’s injuries as hearsay and irrelev ant. We further note that the Chancellor commented that “the record indicated thos e [damage s] are undispu ted.” It is worth repeating that the amount of damages had never been determined; moreover, we find no evidence in the rec ord that the amount of damages was undisputed. It is easy

to specul ate - impe

rmissibly - that Will’ s injurieswere so extensiv e as t o justify the assumption that the value of his claims exceeded the UM coverage

. The issue of the alleged bad faith cannot be resolved on the record before us. The trial judge held that this i ssue required a merit trial; Travelers did not include the issue in its motion for summary ju dgment an d thus we h ave no a uthority to

adjudica te it.
In sum, we hold that, given the posture of the case, the policy proceeds pa id by Progressive should be a lloc ated between the Administrator of the Estate of Alice Fre eman and Will Freeman after the value of each

claim hasbeen de

termined . The allo cation sh ould be pro-rated in accordance withthe amount of

damageseach cl aimant is a warded . See, 7 Am

. Jur. 2d, Automobile Insurance, Sec. 430, and 70 A.L.R. 2d 416, Sec. 3.
In light of the fact that Travelers belatedly conce ded that Will Freeman was an additional insured under its policy, we hold that in the event a proper determination is made of the valueof his claim, following the allocation of the Progressive policy, Travelers is liable therefor to the extent of coverage. The issue of in

terest is pretermitted in light of our disposition of this case. The judgment of the Chancery Court is vacated and the case is remanded

for all a ppropria te proceedings pur suant to this opinion. Co sts of app eal and costs below are assessed to the appellee s, Kenton Freeman, individually and as next friend for his minor son, Will Freeman.

_________________________________________ HOUSTON M. GODDARD, PRESIDING JUDGE-9-