### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE May 7, 2001 Sess

ion

TENNESSEE F

ARMERS MUT

UAL INSURA

NCE CO. v. ROBERT WESTMORELAND, ET AL


### .

Appeal from the Chancery Court for Rhea County No. 9317 Jeffrey F. Stewart, Chancellor

FILED MAY 30, 2001

No. E2000-02693-COA-R3-CV

Tennessee Farmers Mutual Insurance Compa ny ( “Plaintiff”) filed a declaratory judgment action claiming that the homeowne r’s insurance po

licy iss ued to Robert and Elizabeth Westmoreland (“Defendants”) was void due to material misrepresentations made on the application for insurance by Mr. Wes tmo reland. Defendants claim they provided the correct infor mation, but it was incorrectly

recorded by the insurance agent. The T rial Court granted Plaintiff’s motion for summary judgment. We affirm.

Tenn. R. App. P. 3 Appeal as of Right;

Judgment of the Chanc

ery Court Affirm

ed; Case Remand

ed.

D. M ICHAEL S WINEY , J., delivered the opinion of the court, in which H OUSTON M. G ODDARD , P.J., and C HARLES D. S USANO , J R ., J., joined.

J. Arnold Fitzgera

ld, Dayton, T

ennessee, for th

e Appellants Rober

t Westmoreland and

Elizabeth Westmoreland.

David R. Swa fford, Pikeville, Tennessee, for the Appellee Tennessee Farmers Mutual I nsurance Com pan y.1 Any claim by the loss payee on the insurance poli

cy, RheaCounty N ational Ba nk, was settled p rior to this litigat ion and is not at

issue here.

2 Mr. Westmoreland a

lso tes tifi ed that h e had a fi re loss on a stora

ge buildi ng someti

me around Sept

ember of 1999, but this woul

d have occurred afte

r he completed the appl ication f or insurance i

n the present case.

-2- OPINION

Background

This lawsuit arises out of a fire which occurred at Defendants’ home. Plaintiff filed suit seeking to void the homeowner’s insurance policy beca

use of material mi

srepresentatio

ns inthe

answers to three of the que stions contained in

th e insuran ce application dated June 25, 1999. Defendants

denied any material misrepresentations had been mad e, and filed a counter- claim seeking the pro ceed s fr om t he i nsu ranc e po lic y. 1

Defendants

obtained a homeowner’s insurance policy from Plaintiff on their h

ome approximately

six months prior to the fire. The three questio ns at issue involved whether Mr. Westmoreland had suffered a fire loss in the pas t, w het her h e had ever been con vic ted of a f elo ny, andwhether a business was being operated out of his home. The answers on the application stated that Mr. Westmoreland had no previous fire loss, that he had no felony conviction, and that he was not operating a business out of his home. After the fire occurred, Mr. Westmoreland stated under oath that he had a home in Mississippi which had been completely destroye d by fire and this loss was paid through Farm Bureau in Mississippi. He also had a fire claim on a Jeep. 2 Mr. Westmoreland had tw o prior felony convictions, although he apparently received a pardon on one of the s e convictions. The se f ire los ses and fel ony c onv ictions were prior to the date the application was completed. Mr. Westmoreland also was operating a used car busines s out of his h ome when the application was completed. In fact, he sold 44 used cars in just one month during 1999.

The insurance application provides: “I declare the foregoing

statements

provided by

me are true, correct, and complete for all proposed insureds. I unde rstand that any misrepresentations will void this insurance.” The application was signed by Mr. Westmoreland.

The disputed facts center around who was responsib

le for the incorrect answers on the application. In support of its motion for summary judgment, Plaintif

f filed the affid

avit of Justin Wilson (“Wilson”), Plaintiff’s sales agent who assisted Defendants in obtaining the homeowner’s insurance policy. Wilson stated that he met with Mr. Westmoreland in person at his (Wilson ’s) office where he asked Mr. Westmoreland each question contained on the one page application and recorded his responses. Af

ter the applicati

on was completed,

it was given to Mr.

Westmo reland which he signed. Wilson stated that Mr. Westmoreland never told him about the pr

evious fire losse

s, the prior felony con

victions, or the fa

ct that he was ope

rating a used c

ar business

out of his home. Wilson swore that had these qu estions bee n answered accurately by Mr. Westmoreland, the insurance policy would not have been issued.-3- Plai ntiff also filed the aff

idavit of Vickie K

night (“Knight

”), Plaintiff’s V

ic e

President of Prope

rty Underw

riting. Knight s

tated that:

If Mr. Westmoreland’s application had indicated an affirmative response to any one or any combination

of the three questions ... the application would have been decl ined. Tennessee Farmers Mutual Insurance Company

was deprived of theopportunity t o fairly as sess the risk presented si

n ce th e fire loss history

, the felony

convictions, andthe presence of a used car b usiness on the premises were not revealed.

In respo nse to the summary judgment motion, Mr. Westmoreland filed his own affidavit. Mr. Westmoreland claimed that he did explain the pre viou s prior fire losses to Wilson, butWilson did not read ba ck to him the answ

ers Wilson a ctually was writing down on the application. He further claimed that he answered all questions truthfully and he remembered signing the application. Mr. Westmorelandstated under oath that he did

not read the application after it was filled out by

Wilson. The crux of Mr. Westm oreland’s testimo

ny is that Wilson

incorrectly

wrote down his responses, and Mr. Westmoreland didn’t read the completed application before signing it.

The Trial Court granted Plaintiff’s summary judgment motion. In its order, the Trial Courtindicate d tha t after considering the affidavits, sworn testimony of Mr. Westmoreland, Plaintiff’s summary judg

ment motion and Def

endant’s response , and assuming Mr. Westmoreland’s statements

in his affidavit to b

e true, it was req

uired to follow th

is Court ’s holding in Giles v. AllstateInsurance Company , 871 S.W.2d 154 (Tenn. Ct. App. 1993) and grant Plaintiff’s summary judgment motion. D

efendants appe

al.

Discussion

The standard for review of a motion for summary judgment is set forth in Staples v. CBL & Associates, Inc. , 15 S.W.3d 83 (Tenn. 2000):

The standards governing an appellate court’s review of a motion for summary

judgment are we

ll s ettl ed. Since our inquiry involves purely a question o f law, no presumptio

n of correctnes s attaches to the lower cour t’s judgment, and

our task is confine

d to reviewing the record

to determine whether the requirements of Tenn. R. Civ. P. 56 have been met. See Hunter v. Brown , 955 S.W.2d 49, 50-51 (Tenn. 1997); C owden v. Sovran Ba nk/Central South , 816 S.W.2d 741, 744 (Tenn. 1991). Tennessee R u le of Civil Procedure 56.04 provides that summa ry judgmen

t is appro priate where: (1) there is no genuine issue with regard to the material facts relev ant to the claim or defense contained in the motion, see Byrd v. Hall , 847 S.W.2d 208, 210 (Tenn. 1993); and (2) the moving par ty is en titled-4- to a judgment as a matter of law o n the un disputed facts. See Anderson v. Standard Register Co. , 857 S.W.2d 555, 559 (Tenn. 1993). The moving p arty has the burden of proving that its motion satisfies these requirements. See Do wnen v. Allstate Ins. Co. , 811 S.W.2d 523, 524 (Tenn. 199 1). When the party se eking s ummary judgment makes a properly supported motion, the burden shifts to the nonmoving party

to set forth specific facts establishing the existence of disputed, material facts which must be resolved by the trier of

fact. See Byrd v. Hall

, 847 S.W.2d at 215.

To properly su

pport its motion, the m

oving party

must either affirmatively

negate an

essential element of the non-moving party’s claim or conclusively

establish an affirmative defense. See McCarley

v. West Qual i ty Food Serv. , 960 S.W.2d 585, 588 (Tenn. 1998); Robinson v. Omer , 952 S.W.2d 423, 426 (Tenn. 1997). If the moving party fails to negate a claimed ba sis for the suit, the non-moving party’sburden to pr o duce evidence establishing the existence of a genuineissue f

or trial is not triggered and the motion for summary judgment must fail. See McCarley v. West Quality Food Serv. , 960 S.W.2d at 588; Robinson v. Omer , 952 S.W.2d at 426. If the moving party successfully negates a clai med basis for the action, the nonmoving party may

not simply res

tupon the pleading

s, but must

offer proof to establish

the existence of

the essential ele

ments of the claim.

The standards gove

rnin g the assessment of evidence in the summary judgment context are also well estab lish ed. Courts must view the evidence in the light most fa vorable to the non

moving party andmust also dra w all reasonable inferences in the nonmoving party’sfavor. See Robinson v. Omer , 952 S.W.2d at 426; Byrd v. Hall
, 847 S.W.2d at 210-11. Courts sh ould grant a summary ju dgment only when both the facts and the inferences to be draw n from t he fact s permit a reasonable person to reach only one conclusion. See McCall v. Wilder , 913 S.W.2d 150, 153 (Te n n. 1995); Carvell v. Bottoms , 900 S.W.2d 23, 26 (Tenn. 1995).

Staples
, 15 S.W.3d at 88-89. A fact is “material” for summary judgment purposes, if it “must be decided in order to resolv

e the substantive c

laim or defense a

t which the motion is

directed.” Luther v. Compton , 5 S.W.3d 635, 639 (T enn. 1999)( quoting Byrd v. Hall, 847 S.W.2d at 211).

In State Farm

General Insurance Co. v. Wood

, 1 S.W.3d 658 (Tenn. Ct. App. 1999), this Court concluded th

at the insured’s f

ailure to disc

lose a re cent fire loss in her application for insurance rendered thepolicy void. In Wood , this Court explained the applicable

Tennessee law as follows:-5- T.C.A. § 56-7-103 provides that

[n]o written or oral misrepres ent ation or warran ty ther einmade in the negotiations of a contract or policy of insurance, or

in the application therefor, by the insured or in

the insured’s behalf, shall be deemed material or defeat or void the policy or p revent its atta chi ng, unless such misrep resentation or wa

rranty is made with actua l intent to deceive, or unless the matter represe

nted increases t

he risk of loss.
(Emphasis

added.) It is c lear that the lang uage of the sta

tute is disj unctive, i.e. , the insurer may show either 1) that the misrepresentation was made with the intent to deceive, or 2) that the matter represented increased the risk of loss. Id .; see Cling a n v. Vulcan Life Ins. Co. , 694 S.W.2d 327, 331 (Tenn. App. 1985). In this
case, it is not disputed that the representation in the application regarding prior losses was f

alse; thus, the question for the court was whether, as a matter of law, the misrepresentation increas ed State Farm’s risk of loss.

Wood
, 1 S.W.3d at 661. Wood went on to explain

that a misreprese

ntation increase

s the risk of loss when “it i s of such importanc e that it ‘natural

ly and reas

onably influ

ences the judgm

ent o f th e insuror in making the contract.’” Id . at 661, 66 2 (citing Sine v. Tennessee Farmers Mut. Ins. Co. , 861 S.W.2d 838, 839 (Tenn. Ct. App. 1993); Seaton v. National Grange Mut. Ins. Co. , 732 S.W.2d 288, 288-89 (Tenn. Ct. App. 1987); Loyd v. Farmers Mut. Fire Ins. Co.
, 838 S.W.2d 542, 545 (T enn. Ct. App. 1992)). Moreover, Wood held that:

[i]t is not necessary to find that the policy would not have been issued if the truth had been

disclosed. It i

s sufficient that t

he in su rer was deniedinformati on which it sought in go od faith and which was deem ed n eces sar y to a n ho nes t ap prai sal of i nsu rabi lit y.

Wood
, 1 S.W.3d at

662 (quoti ng Loyd v. Farmers Mut. Fire Ins. Co. , 838 S.W.2d 542, 545 (Tenn. Ct. App. 1992)). Untr

ue statements as to

a prior fire loss

a re material on an application for fire insurance coverage an d will preclude recovery. Id.; Loyd , 838 S.W.2d at 545 (qu oting 45 C.J.S. Insurance , § 534).

In the present case, we conclude that the incorrect responses on t he application for insurance increased Plaintiff’s risk of loss. This has been established by the affidavits of Wilson and Knight, and Defendants have offered no proof to the contrary

.-6- We n ow turn to Defendants’ argument surrounding the reason for the incorrec t responses. Defendants asse rt that Mr. Westmore

land gave acc

urate responses, but the answers were incorrectly

recorded by Wilson. Thereafter, Mr. Westmorel and signed the application without reading it and verifying the accuracy of the responses. In reviewing the grant of summary ju

dgment, we will assume, as we must, that Defendants’ factual allegations are true.

We agree with the Trial Court that resolution o f this i ssu e is con tro lle d by Giles v. AllstateIn surance Co. , 871 S.W.2d 154 (Ten. Ct. App. 1993). In Giles , the insured brou ght suit seeking to recover under her homeowner’s insurance po licy for items that were sto len. Allstate claimedthat the policy was void due to misrepresentations made by G iles on the application. Spe cif ica lly, Giles did not reveal a previous fire loss on the home. As in the present case, the insured andthe insurance agent in Gi les blamed each other for the inaccurate response on the insurance application. Likewise, the insured did not read but did sign the completed application. In affirming the trial court’s verdict for Allstate, this Court stated that if, without bei

ng the victim of f

raud, a party

fails to read the contract or otherwise to learn its contents, he signs the same at his peril and i s estopped to deny his obl iga tion, will be conclusively

presumed to know th

e contents of the contract,

and must suffer the consequences of his own negligence. Beasley v. Metropolitan Life Ins. Co. , 190 Tenn. 227, 229 S.W.2d 146 (1950) at 148. Also see DeFord v. National Lif e & A ccident Ins. Co. , 182 Tenn. 255, 185 S.W.2d 617, 621 (Tenn. 1945); Hardin v. Combined Insurance Company , 528 S.W .2d 31 (Ten n. App. 1975); Montgomery v. Reserve Life I

ns. , 585 S.W.2d 620 (Tenn. App. 1979).

Giles v. Allstate Insurance Co. , 871 S.W.2d 154, 156 (Tenn. Ct. App. 1993). This Court in Giles further noted that to allow a

party to admit he signed a contract, but deny it expresses the agreement he made, or to allow him to admit he signed it but did not read it or kno w its stipulations “w ould absolutely

destroy the value of all contracts.” Giles , 871 S.W.2d at 157 (citations omitted). There is no proof in the record that Mr. Westmoreland failed to read the application or learn its conte

nts because of fraud by Wilson. Thus, we must presume Mr. Westmoreland knew the contents of the application, including the inaccurate responsesto the three quest ions at issue, and D

efendants must suffer the consequences of same.

Vi ewing the evidence in th e light most favor

able to Defenda

nts and drawing a

ll reasonable

inferences in their favor, we conclude there is no genuine issue as to any material fact and summary judgment was properly g ranted to Plaintiff as a matter of law.-7- Conclusion

The judgment of the Trial Court is affirmed. This case is remanded to the Trial Court for such further pro

ceedings as ma

y be requir

ed, if any, consistent with

this Opinion. Costs of

appeal are t axe d to the App ell ant s Ro bert and Eli zab eth Wes tmo rel and and the ir s uret y.

____________________________________ D. MICHAEL SWINEY