Court Opinion

ID: 9644681
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:01:47.972685+00
Date Added: 2024-06-11T18:11:16.439190
License: Public Domain

*356HENRY, Justice
(dissenting).
We confront an unfortunate collision between considerations of conscience and controlling concepts of law. The majority reconciles the conflict by a strained construction of the consistent holdings of our courts, leaving a clear rule of law on the one hand, and this case on the other. This decision will be productive of chaos, confusion and litigation. If this, or any other established rule of court-made law is unjust, it should be discarded forthrightly and a more just rule substituted.
I.
A threshold matter, ignored by the majority, might be addressed.
The pleadings in this case will not support a judgment. The complaint simply alleges that Bituminous issued a specific policy (made an exhibit to the complaint), insuring plaintiffs against all risk of loss. It was upon this contract, and this contract alone, that plaintiffs sought to recover. And this contract restricted coverage to “a radius of 500 miles of Hendersonville, Tennessee”.
Plaintiffs did not plead estoppel or waiver and did not seek to reform the policy. The defendant, by answer, affirmatively pleaded the 500 mile coverage provision. Thus, the basic issue tendered by the pleadings, was whether plaintiffs sustained a loss within a radius of 500 miles of Henderson-ville. They did not. Under no known principle of pleading and practice, may the issue of estoppel arise to permit a recovery in this action.
Inherent in the majority’s opinion is a holding that the coverage provided in a liability insurance policy may be extended by estoppel. We disagree.
II.
It is a familiar principle of our law that estoppel may be relied upon to protect a right, but never to create one. It could be said that it is a shield, not a sword. It may not be invoked to broaden the coverage of an insurance policy. To permit its invocation, in such a case, would be to create a new contract for which no additional premium is paid. Inland Mut. Ins. Co. v. Hightower, 274 Ala. 52, 145 So.2d 422 (1962). It must be borne in mind that there is a distinction between the coverage afforded by an insurance contract and an exclusionary provision. An estoppel may be relied upon to protect an insured against the enforcement of an exclusion in the contract under a proper factual setting; however, it is the prevailing view — followed in the overwhelming majority of the jurisdictions of this country — that the use of the doctrine will not be sanctioned to broaden the policy coverage or to provide protection against risks not specified in the policy.1 The majority opinion is in the very teeth of this overwhelming view of the law.
In 16A Appleman, Insurance Law and Practice, Sec. 9090, 341-42 (1968), the general rule is stated thusly:
It has been repeatedly held that the doctrines of waiver and estoppel cannot be used to extend the coverage of an insurance policy or create a primary liability, but may only affect rights reserved therein. . . . [Ujnder no conditions can the coverage or restrictions on coverage be extended by waiver or estoppel. (Emphasis supplied).
The immediate question for our consideration is whether the policy provision in the instant case constitutes coverage or an exclusion. In our view it is clearly coverage since it limits and defines the circumstances under which coverage will attach. Of course, in a very broad sense, it can be stated that every circumstance or condition not specifically included in the contract automatically operates to exclude every other circumstance or condition and, therefore, the fact that the policy limits coverage to 500 miles would automatically operate as an exclusion of all coverage beyond 500 miles. While this is true, broadly speaking, it is not correct within the meaning of the law *357of estoppel as applied to insurance contracts.
In D’Angelo v. Cornell Paperboard Products Co., 59 Wis.2d 46, 207 N.W.2d 846 (1973), the Court points out that an exclusion serves the purpose of taking out persons or events otherwise included in the defined scope of insurance coverage, and coverage refers to the sum of the risk against which the policy provides protection.
We have examined the decisional law of this jurisdiction in the light of these general principles and, upon examination, find that our cases, when properly construed, have generally followed the prevailing view.
A significant case, often cited by the courts of other states and in treatises, is Henry v. Southern Fire & Cas. Co., 46 Tenn.App. 335, 330 S.W.2d 18 (1958). The insureds, who were engaged in the logging business, sustained a loss and incurred substantial liability when a trailer became disengaged from the truck by which it was being pulled and crashed into an oncoming vehicle, killing one person, injuring others and causing considerable property damages. The company denied liability on the grounds that the trailer was not described in the policy. The trailer was not listed in the policy and it contained a specific exclusion of “any trailer owned or hired by the insured and not covered by like insurance in the Company”. The insurance agent was familiar with the insureds’ business activity, and gave them full assurances that they had complete liability coverage on their usual logging operation. The Court of Appeals, in a most excellent opinion by Judge Carney, reversed and remanded the ease for a new trial, holding that if the insureds could convince the jury that the agent “assured them of full liability coverage, they are entitled to recover” under the policy, and “the company will be estopped to rely upon the terms of the Exclusion clause as a defense.” 330 S.W.2d at 32. After reciting the claimed conduct of the agent the Court made this observation:
The result was the same to the complainants. They were lulled into a false sense of security. They were misled to their prejudice.
Ibid. at 30.
But it will be remembered that the Court of Appeals, in that case, was dealing with an exclusion and not coverage.
The strongest Tennessee case we find in support of the insureds’ position in this lawsuit is Miller v. Monticello Ins. Co., 50 Tenn.App. 363, 361 S.W.2d 496 (1961). The insureds in that case were the owners and operators of a machine shop. Among other items of equipment, they owned a mobile welding machine that was insured against loss under a policy which restricted coverage to loss sustained on equipment while located or contained in certain described premises in Bruceton. The unit was destroyed by a fire at a point some seventeen miles away. The company denied liability on the basis that there was no coverage because, at the time of its destruction, it was not located at the place described in the policy. The agent of the company knew that this particular piece of equipment was used away from the place of business and the proof showed that he assured the policyholder that “his equipment was covered at all times and places and never called his attention to the fact that his equipment was not insured when away from his regular place of business.” 361 S.W.2d at 498.
The Court, again speaking through Judge Carney, held:
Under these circumstances we think a jury might well find that the defendant’s agent, Mr. Brower, and therefore the company itself, waived the restriction or limitation of coverage and also lulled Mr. and Mrs. Miller into a sense of false security by leaving them under the impression that they were fully covered under the terms of the policy which was issued. If such facts are true the company is estopped to rely upon this restriction or a limitation of coverage in the policy as a defense.
Ibid. at 499.
This case clearly addresses a matter of coverage as opposed to an exclusion, and is analogous to the factual situation in the *358case at bar; however, it is not in accord with the general rule and is out of harmony with the later opinion of the Court of Appeals for the Middle Section in E. K. Hardison Seed Co. v. Continental Cas. Co., 56 Tenn.App. 644, 410 S.W.2d 729 (1966).
In the Hardison Seed Company case, the policy obligated the company to pay as “damages because of injury to or destruction of property, . . . caused by accident.” The insured was sued for breach of warranty based upon failure of certain seed to germinate. Hardison called upon Continental Casualty to defend under a comprehensive general liability insurance policy. It declined, contending that loss or damage because of breach of warranty, was not within the coverage of the contract.
The Court, speaking through Judge Hum-phreys, later a Justice on this Court stated:
[I]n keeping with the doctrine many times enunciated and never departed from that estoppel is available to protect a right, but never to create one (citing eases) we have no case in Tennessee in which the doctrine of estoppel was made the basis of recovery except where the loss was within the coverage provided by the insuring clauses of the contract, (citing cases).
So, in order for there to be a recovery on the basis of an estoppel, a paramount condition must be met, the acts of the agent relied on for the estoppel and the estoppel arising on account of these acts must result in a liability which would be within the insuring clauses of the contract.
410 S.W.2d at 733.
The majority opinion passes over this significant language and all but ignores this case.
Along with E. K. Hardison Seed Company, the Court of Appeals, in the instant case, relied upon Bituminous Fire & Marine Ins. Co. v. Izzy Rosen’s, Inc., 493 F.2d 257 (6th Cir. 1974), where the Court spoke through an excellent opinion by the late Judge William E. Miller.
Judge Miller treats E. K. Hardison Seed Company as “an important clarification of Henry”, and observes:
When the Hardison and Henry decisions are read together it is clear that under Tennessee law a showing that an insurance agent told the insured that his policy contained full liability coverage is sufficient to estop the insurance company from relying on an exclusion in the policy to deny coverage. Similarly, if the agent mistakenly or negligently wrote a policy for the insured which the agent either knew or should have known did not provide the coverage that the insured wanted and needed, then the insurance company may not assert the exclusionary clauses. (Citing cases) But we have been unable to find any case in which a Tennessee court has used the doctrines of estoppel or negligence to write into an insurance policy coverage that was not specified in the contract. Instead, the cases are limited to the situation in which an insurance company is estopped to assert an exclusionary clause, thereby permitting the insured to rely on the coverage provisions in the policy. (Emphasis supplied).
493 F.2d at 260.
The majority opinion attempts to dilute the holding in this case and quotes no part of this language.
In Insurance Co. of No. Am. v. Federated Mut. Ins. Co., 518 F.2d 101 (6th Cir. 1975), the Court correctly summarizes our law as follows:
The Tennessee rule . . . appears to be that the determination whether an exclusion clause will be given effect depends, not only on the language of the provision, but also on whether, if the clause is given effect, the insurer, in light of its knowledge of the policyholder’s business, would fail to provide the coverage that might reasonably be expected. (Emphasis supplied).
518 F.2d at 105-06.
This case is not even alluded to in the majority opinion.
*359We now examine a few of the authorities from other jurisdictions.
In Albert v. Home Fire & Marine Ins. Co. of California, 275 Wis. 280, 81 N.W.2d 549, 553 (1957), the Court held that “the local agent’s oral misinterpretation of unambiguous provisions as to coverage can not work a modification of the contract by estoppel or otherwise.”
In Reeves v. New York Life Ins. Co., 421 S.W.2d 686, 688 (Tex.Civ.App.1967), the court held that “[a] contract cannot be created by estoppel, (citing cases) and estoppel and waiver cannot bring within the coverage of a policy a loss which is expressly excluded therefrom.”
In Imperial Cas. & Indem. Co. v. Carolina Cas. Ins. Co., 402 F.2d 41, 45 (8th Cir. 1968), the court recognizes that estoppel may not be “invoked to create a liability for benefits not contracted for at all,” and “that while there may be a waiver in matters of forfeiture the courts are unwilling to utilize es-toppel to create a new contract.”
In Looney v. Allstate Insurance Company, 392 F.2d 401, 408 (8th Cir. 1968), the court, speaking through Judge Blackmun, now Associate Justice on the United States . Supreme Court, applying Arkansas law, held that “waiver and estoppel usually cannot operate to extend coverage where none exists under the contract.”
In State Automobile Insurance Ass’n v. Kooiman, 143 F.Supp. 614 (D.S.D.1956), the court, applying South Dakota and Minnesota law, held that where the policy afforded coverage to loss or damage within a 50 mile radius, waiver or estoppel because of knowledge of the insurance agent, of use beyond that limit could not be utilized to provide extended coverage. In this regard, the Court said:
In the instant case the coverage is sought to be extended by the insured to include liability beyond the 50 mile radius without payment of additional premium. This risk was not included or contemplated by the terms of the policy, and the coverage may not be extended on the basis of waiver or estoppel because of knowledge by the agent of use beyond the express terms of the policy.
143 F.Supp. at 618.
To the same effect is Container Corp. of America v. Bituminous Cas. Corp., 252 A.2d 117 (Del.1969).
III.
The reasoning of the majority opinion is highly persuasive, but the fact remains that it is out of harmony with the overwhelming majority view and with the decisions heretofore announced by the courts of Tennessee.
While the dictates of fairness and justice might indicate a departure from the established rule that estoppel may not be relied upon to expand the coverage provided by an insurance contract, this doctrine is too indelibly impressed into our law to justify making an exception which would, in effect, destroy the rule of law. Rules relating to contractual obligations should not be tampered with absent most compelling considerations. The stability of the law must be a continuing objective. While we are somewhat less than enthusiastic about the practices and procedures followed by Bituminous in this case — and particularly with its failure to discuss either with its agent or with its insured, the operation as revealed by the monthly reports — we cannot depart from what we consider to be an established rule of law in order to correct an apparent injustice.
We, therefore, would hold that the doctrines of waiver and estoppel may not be invoked, as a general rule, to broaden or increase the coverage of an insurance contract; but that they may be invoked in cases involving forfeitures, limitations or exclusions.
We would affirm the judgment of the Court of Appeals.
In complete candor, I concede that the majority reached a just conclusion under the peculiar facts and circumstances of this case. This was a hard case and “hard cases make bad law”. I would be willing to change the rule of law so as to provide that *360coverage may be extended by estoppel, under proper pleadings, and pursuant to clear, cogent and convincing proof, but cannot be a party to circumventing the law as, I submit, the majority does in this case.

. See annotation, 1 ALR 3d 1139 (1965).