# FILED April 3, 1996 Cecil Crowson, Jr. App ellate C ou rt Clerk I N TH E C O U R T O FA PPEA LSO FTEN N ESSEE EA STER N SEC TI O N

ALLSTATEI NSUR

ANC ECOM PANY, ) C

/ A N O . 03A 01- 9512- C

- 00426 ) Pl a i ntif f

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pp e lla nt , ) C LAI BOR NELAW ) v. ) HON. CONR AD TR OUTM AN, ) J UDGE M AR Y LOUI SEDAVI S , J OHN ) R ASNI C, C

AR OLYN R ASNI C, a n d ) TEN N ES SEE FA

R M ER SM U TU A L ) I NSUR ANC ECOM PANI ES , ) R EV ER SED ) AND D e f e n d a nt s - A

pp e l l ees . ) R

EM ANDED

PAUL E. DUNN, DUNN M

AC DONALD &

COLEM AN, P. C. , Kn o x v i l l e , f or Pl a i ntif f

- A

pp e lla nt . J A M ESD . ESTEP, I I I , ESTEP& ESTEP, Ta z e w

e l l , f or D

e f e n d a nt - A pp e l l ee, Te nn e s s ee Fa r m e r s M ut u a l I n s ur a n ce C o m p a ni e s .

O PI N I O N

Fr a nks . J .

I n t hi s de c l a r a t or y j udgm e nt a c t i on, pl a i nt i f f , i ns ur a nc e c om

pa ny, s ought a de c l a r a t i on t ha t i t s i ns ur e d, J ohn H . R a s ni c , w

a s not a n i ns ur e d unde r i t s pol i c y f or t he a c c i de nt oc c ur r i ng be t w e e n t he R

a s ni c a nd D

a vi s m ot or v e hi c l e s . S p e c i f i c a lly , th e c o m p l a i nt a lle g e dth a t R a s ni c h a d vi ol a t e d t he pol i c y pr ovi s i on:

? W e m us t be not i f i e d pr om pt l y of how

, w he n a nd w he r e t he a c c i de nt or l os s ha ppe ne d. N ot i c e s houl d2 a l s o i nc l ude t he na m e s a nd a ddr e s s e s of a ny i nj ur e d pe r s ons a nd of a ny w i t ne s s . ?

A lls t a t e w

o u l da s s e r t t h a t w hi l e t h e acci de nt o ccur r e do nD ecem b e r 1 , 1993, t he y di d not r e c e i ve not i c e unt i l J une 24, 1994. The i s s ue w

a s t r i e d be f or e a j ur y, a nd a t t he c onc l us i on of a l l t he pr oof , t he C our t ? di r e c t e d a ve r di c t i n f a vor of t he de f e nda nt s ?

a nd ? f ound t ha t t he c ont r ol l i ng i s s ue w a s a s t a t e of m i nd of t he i ns ur e d, J ohn R a s ni c . W

i t h r e ga r d t o s uc h i s s ue , t he C

our t f ound t ha t M r . R a s ni c r e a s ona bl y be l i e ve d t h a t the c o llis i o ninqu e s tio nw a s a tr i v i a l m

a tte r a n dth a t , ba s e d upon s uc h be l i e f , M r . R a s ni c w

a s j us t i f i e d i n not i m m e di a t e l yr e p or t i n gthe a c c i de nt t oA l l s t a t e . Th e C

o ur t f ur t he r f ound t ha t , due t o hi s s t a t e of m i nd, M r . R a s ni c ’ s de l a yinr e p or tin gth e a c c i de nt toA lls t a t e u ntil a f t e r h e h a d be e n s ue d, c om

pl i e d w

i t h t he pr om

pt not i c e pr ovi s i ons of A lls t a t e ’ s in s ur a n c e p o lic y . ?

O n a ppe a l , A

l l s t a t e doe s not que s t i on t he Tr i a l C our t ’ s t a ki ng t he i s s ue a w a y f r om

t he j ur y, but i ns i s t s t ha t a s a m a tte r o f la w

it is e ntitle dtoa ju d g m e nt inits f a v or . I t is c l e a r f r o m

the Tr i a l C

o ur t ’ s a n a l y s i s th a t it e r r one ous l y a ppl i e d a s ubj e c t i ve t e s t r a t he r a n obj e c t i ve t e s t , w

hi c h i s w

he t he r a r e a s ona bl e a nd pr ude nt pe r s on w oul d b e l i e v e t h a t t h e acci de nt m i g ht g i v e r i s e t oa cl a i m f or d a m a g e s . N

at i onwi de M

ut ual I ns ur anc e C om pany v . Shannon , 701 S . W . 2d 615 ( Te nn. A

pp. 1985) . R a s ni c te s tif i e dth a t he ? bum pe d? t h e r ear o f t h e D a v i s car an dt h a t t h e o ccup a nt s an s w e r e d ? no ? w he n a s ke d i f t h e yw e r e hur t. H

e te s tif i e dth a t he a dv i s e dif the v e hi c l e w a s d a m a g e dtole t hi m

kn o w . M r s . D a v i s in s i s t e dth a t the y s houl d ?

c a ll the la w

? . A p o l i cem

a ncam e af t e r t h e v e hi c l e s h a d3

be e n m ove d, a nd r e f us e d t o pr e pa r e a w r i t t e n a c c i de nt r e por t . ? Tw o t o s i x w

e e ks l a t e r ?

t he ow

ne r of t he ot he r ve hi c l e t ol d R a s ni c at a co nv e ni e n ce s t or e t h a t ? t h e yt o t a l e dt h e car ? whi c h R a s ni c unde r s t ood t o m e a n t he i ns ur a nc e c om pa ny. R

a s ni c m

a de no r e por t of t he a c c i de nt unt i l J une 23, 1994, a f t e r he r ecei v e ds u i t p a p e r s f r o m t h e D a vi s e s . Th e m

o s t t e l l i n g a dm i s s i on by M

r . R a s ni c c a m

e on c r os s - e xa m

i na t i on a f t e r he ha d t e s t i f i e d t ha t he ha d m a de pi c t ur e s of t he f r ont e nd of hi s v e hi c l e , s o m

e t w ow eek s af t e r t h e acci de nt : Q. M r . R a s ni c , i f you di dn’ t c ons i de r t hi s a c c i de nt w

or t h r e por t i ng w

ha t w oul d be your oc c a s i on f or t a ki ng phot ogr a phs of t he f r ont of y o ur v e hi c l e t w

ow eek s af t e r t hi s acci de nt t o s how t he r e w

a s no da m

a ge t o i t ? I di dn’ t unde r s t a nd. A. I t c oul d’ ve be e n f our w e e ks , but I s a i d I b o u g ht a n e w

cam e r a , Po l a r o i dI n s t a m a t i c , an d t ha t ’ s the f i r s t pi c t ur e s I ’ v e ta ke nw i t hit . A nd I ’ ve got s om

e ot he r ve hi c l e s I t ook pi c t ur e s of I c a n s how you.

. . . Q. I s n ’ t it a f a c t, s i r , th a t y o uju s t m a de the de c i s i on t o t r y t o ha ndl e t hi s your s e l f a nd go out s i de your i ns ur a nc e c om pa ny a nd ha ndl e i t ? A. I t hought t he da m a ge w a s m i nor e nough. Y

e s , s i r . Th e m a t e r i a l f act s ar e n o t i ndi s p ut e andt h e i s s u e i s a que s t i on of l a w

. R a s ni c ha d a dut y t o gi ve not i c e t o hi s i ns ur a nc e c om

pa ny of t he a c c i de nt , c e r t a i nl y no l a t e r t ha n t he t i m e t he ow

ne r of t he ot he r ve hi c l e a dvi s e d hi m t ha t t he v e hi c l e h a db een ? t o t a l e d?

. O ur la w is c l e a r th a t the c ont r a c t ua l r e qui r e m e nt of not i c e t o t he i ns ur e r i s a c ondi t i on pr e c e de nt t o r e c ove r y unde r t he pol i c y. Lee v. Le e , 732 S . W

. 2d 275 ( TN

1987) ; Phoe ni x C ot t on O

i l C om pany v . Roy al I nde m ni t y C om pany , 140 Te nn. 438, 205 S . W . 128 ( 1918) .4 Thi s i s e s s e nt i a l l y a di s put e be t w e e n t w o i ns ur a nc e c om pa ni e s , a nd w

e not e t ha t a n i ns ur a nc e c om pa ny w oul d s o m e t i m e s b e n e f i t if thi s ine qu i t a b l e r u l e w a s c h a n g e d , i.e . , de c l a r e f or f e i t ur e s of pol i c y c ove r a ge s onl y i n c a s e s w he r e t h e l a t e r e p or t i n go f t h e acci de nt r e s u l t e di nact u a l pr ej udi c e t o t he i ns ur a nc e c om pa ny. A

s w e obs e r ve d i n No r t h Ri v e r I ns ur anc e C om pany v . J ohns on , 757 S . W . 2d 334 ( Te nn. A

pp. 1988) , i ns ur a nc e pol i c i e s , unl i ke ot he r c ont r a c t s , a r e not pur e l y pr i va t e a gr e e m e nt s but a f f e c t t he publ i c ge ne r a l l y. O ur r ul e r e pr e s e nt s t he m i nor i t y vi e w

. Se e H os pi t al U

nde r w r i t i ng G

r oup, I nc . , v . Sum m i t H e al t h Lt d. , 63 F. 3d 486 ( 6t h C

i r . 1995) . C

ons um e r s a nd i ns ur a nc e c om pa ni e s a l i ke w

oul d be ne f i t i f t he Supr e m e C our t w oul d ove r t ur n t he m i nor i t y r ul e i n f a vor of t he e qui t a bl e m aj or i t y vi e w

. W e a r e c ons t r a i ne d t o r e ve r s e t he j udgm e nt of t he Tr i a l C

our t a nd t he c a us e i s r e m a nde d f or e nt r y of a j udgm e nt f or a ppe l l a nt , i n a c c or da nc e w i t h t hi s opi ni on. Th e co s t o f t h e app eal i s as s e s s e dt oapp e l l ees .

________________________ H e r s c he l P. Fr a nk s , J . CONC UR:

___________________________ H ous t on M

. G odda r d, P. J .5

___________________________ C l i f f or d E. S a nde r s , Sp. J .