Opinion ID: 2332373
Heading Depth: 1
Heading Rank: 6

Heading: Mr Scheele Had Coverage Under His Policy

Text: Hartford also argues that Mr. Scheele did not have coverage under his policy on the day of the accident because he had not paid the full premium due for such coverage. He had only paid the $750 deposit premium for a policy that covered zero employees on January 21, 2004, not the $4,121 additional premium due for coverage of him as a sole proprietor. This argument does not persuade us. First, we note that finding coverage in this case is consistent with an established principle of Tennessee insurance law: [t]he law will not permit the collection of a premium for insurance without the [insurer's] exposure to risk. Young, 354 S.W.2d at 786. If Hartford's argument were to prevail, Mr. Scheele would have paid a month's premium, but Hartford would have assumed no risk until January 30, 2004. Our law does not favor this outcome. When we construe the particular policy that Mr. Scheele held on January 21, 2004, the date of his accident, we conclude that Mr. Scheele enjoyed coverage. At the time of Mr. Scheele's injury, Hartford had not yet issued him a full insurance policy. Rather, it had only issued the binder quoted above. A binder is a temporary contract of insurance under which the insurer is liable for losses that occur during a period covered by it. Spangler v. State Farm Fire & Cas. Co., 221 Tenn. 37, 424 S.W.2d 191, 192 (1968). Though temporary, binders are fully valid insurance contracts and are interpreted as such. See, e.g., id. at 192-93; Polk & Sullivan, Inc. v. United Cities Gas Co., 783 S.W.2d 538, 541 (Tenn.1989). In construing an insurance contract, the paramount rule . . . is to ascertain the intent of the parties. That intent is to be derived from the four corners of the policy giving effect to all parts. Blue Diamond Coal Co. v. Holland-America Ins. Co., 671 S.W.2d 829, 833 (Tenn.1984) (internal citations omitted). Because the binder states that [t]he policyholder must comply with the terms and conditions of the Tennessee Workers['] Compensation Plan policy, we must examine the terms of the full insurance policy that Hartford ultimately issued to Mr. Scheele to determine whether the premium he had paid was sufficient to maintain coverage under it. [6] Under the heading, PART FIVE-PREMIUM, the full policy states that the premium shown on the Information Page, schedules, and endorsements is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered by this policy. On January 12, 2004, the premium listed on the Information Page was $750; Hartford did not issue any endorsements until after the accident. This policy provision plainly indicates that the existence of coverage at a particular point during the policy's effectiveness is not tied to the contemporaneous payment of the precise sums due to cover any risks assumed. Hartford's policy clearly postpones that day of financial reckoning until after the end of the policy's effective period. Therefore, we conclude that Mr. Scheele's $750 premium payment at the time of his accident was sufficient to maintain his coverage, even though he later was obligated to pay much more to compensate the insurer for the risk it assumed on his behalf. [7]