Court Opinion

ID: 5079808
Source: CourtListenerOpinion
Date Created: 2021-10-01 12:06:48.009557+00
Date Added: 2024-06-11T08:20:09.877801
License: Public Domain

DAUGHTREY, Justice,
dissenting.
The underlying controversy in this case began when 5,925 Trane air conditioning units stored in the Ozburn-Hessey warehouse were damaged as a result of a leaky roof. As Ozburn-Hessey’s insurer, American Home represented Ozburn-Hessey in the dispute concerning the air conditioning units. The Trane suit was eventually settled for $450,000.
The controversy now before this Court concerns American Home’s insistence that it is entitled to a reimbursement of that $450,000 because, it claims, there were 5,925 separate “occurrences,” each of which is subject to a $10,000 deductible. Ozburn-Hessey asserts in response that American Home is precluded from making this assertion by its failure to file a timely “reservation of rights” that would allow it to take this position under the insurance contracts and yet continue the defense of the action.
The trial court granted Ozburn-Hessey’s motion for summary judgment on this issue, holding that American Home is es-topped to deny liability. The Court of Appeals reversed, specifically declining to espouse the rule set forth in the Restatement (Second) of Judgments § 58 (1982) that “[i]f the insurer defends the insured pursuant to a contractual duty to defend, the insurer must do so under a properly communicated reservation of rights to later litigate coverage.” Rather, the Court of Appeals held that under the facts in the record, American Home was obligated to provide a defense for their insured and that there was no presumed prejudice in their doing so without a reservation of rights. This Court granted permission to appeal, and the majority now proposes to reverse the decision of the Court of Appeals and affirm the trial court. For the reasons stated below, I cannot join in the majority opinion.
As noted, the issue we are asked to decide is whether American Home is estopped from asserting that the $10,000 deductible applies to each of the 5,925 damaged units. In answering this question in the affirmative, the majority has failed to mention certain pertinent facts in its opinion. The record indicates that after attempting to settle the Trane dispute itself, Ozburn-Hessey turned the matter over to American Home, its insurer, in the fall of 1981. America Home undertook the defense of the case, began discovery, and, in January 1985, with trial set for February, reached a tentative settlement. No one from Oz-burn-Hessey had been involved in the final negotiations with Trane, but prior to settling the case, American Home raised the question of the deductible clause with Oz-burn-Hessey. As a result, counsel for Oz-burn-Hessey and American Home entered into a written agreement on January 24, 1985, which in pertinent part provided:
As we have agreed, American Home Assurance Company is going to attempt to reach a settlement on behalf of Ozburn-Hessey Storage Company with Trane pertaining to the [Trane v. Ozbum-Hes-sey] lawsuit. There apparently exist some questions between [Ozburn-Hes-sey] and [American Home] as to how many insurance policies would be applicable to the above-mentioned lawsuit. Also, there appear to exist some questions about how many occurrences (as defined by the policies) may have happened with reference to the above lawsuit and the claim of Trane and therefore how many deductibles would be applicable to the loss and how much money should therefore be contributed to the settlement amount by Ozburn-Hessey under the provisions of their policies with American Home Assurance Company.
We have agreed that American Home Assurance Company may proceed to attempt to negotiate a settlement on behalf of Ozburn-Hessey Company with The Trane Company pertaining to the above-mentioned lawsuit without such action being a waiver on the part of American Home Assurance Company of its rights under the insurance policies with Oz-burn-Hessey Company. Ozburn-Hessey Company has therefore authorized you to sign this letter as an indication of its agreement that the issue of the number of insurance policies applicable to the lawsuit and the number of deductibles *678and total dollar amount which may be required of Ozburn-Hessey to be contributed to American Home Assurance Company after settlement are issues which are reserved for discussion and/or litigation between Ozburn-Hessey Company and American Home Assurance Company. Your client, of course, is also not waiving any of its rights under the policies pertaining to these issues by virtue of this agreement.
After entering into this agreement, counsel for American Home consummated the settlement of the Trane case for $450,000.
The majority correctly states the general rule of law on the question of whether a reservation of rights would normally be required for an insurer to continue defense of a lawsuit once the question of coverage arose. An insurer that undertakes defense of an insured without having made a reservation of rights is estopped to deny coverage after the insured has been cast in the suit so defended. Maryland Casualty Co. v. Gordon, 52 Tenn.App. 1, 10-12, 371 S.W.2d 460, 464 (1963). An argument can be made in this case that a reservation of rights was not required, because the dispute here concerns an interpretation of the deductible clause and not, essentially, coverage. Nevertheless, clear notice, made early on, of American Home’s contentions regarding the deductible clause would have protected the company from litigation concerning its capacity in this regard. See Hardware Mutual Casualty Co. v. Higgason, 175 Tenn. 357, 378, 134 S.W.2d 169, 176-77 (1939).
The general rule, however, is not disposi-tive of this case. This Court need not resolve the question of whether American Home properly made a timely notification of a reservation of rights, because timely or not, American Home and Ozburn-Hes-sey reached full agreement regarding the resolution of the deductible clause question prior to settlement of the Trane lawsuit. To borrow the words of the Court of Appeals, this agreement “ ‘froze’ the rights of the parties with respect to each other as they existed on ... the date of the [ajgreement.” Acting pursuant to this agreement, American Home finalized the settlement and paid Trane for its loss. Having agreed to allow American Home to settle the Trane lawsuit “without such action being a waiver on the part of American Home Assurance Company of its rights under the insurance policies with Ozburn-Hessey Company,” Ozburn-Hessey cannot now be heard to complain about American Home’s continuation of the settlement negotiations. Having further agreed that questions relating to the number of deductibles owed by Ozburn-Hessey to American Home “are reserved for discussion and/or litigation between Ozburn-Hessey Company and American Home Assurance Company,” Ozburn-Hessey cannot now assert that American Home is estopped from raising those questions.
Waiver is the voluntary relinquishment by a party of a known right. Chattem, Inc. v. Provident Life & Accident, 676 S.W.2d 953, 955 (Tenn.1984). It is proven by a clear, unequivocal and decisive act of the party, showing such a purpose. Springfield Tobacco Redryers v. City of Springfield, 41 Tenn.App. 254, 293 S.W.2d 189, 199 (1956).
By the clear and decisive act of entering into the January 1985 agreement with American Home, Ozburn-Hessey voluntarily relinquished rights relative to the Trane lawsuit. When faced with the questions regarding deductibles, Ozburn-Hessey had the option of delaying the settlement of the Trane lawsuit pending resolution of the deductible question, or retaining other counsel to continue the Trane lawsuit while discussing or litigating the question of the deductible. Ozburn-Hessey’s decision to accept American Home’s continued representation constitutes a waiver of the rights it now asserts in this action.
Because of the agreement entered into by the parties in January 1985, American Home should be allowed to raise the question of the deductibles under the policies. American Home did not “lay in ambush,” as the majority characterizes the company’s actions. It raised the disputed issue, and its insured, apparently with the assistance of competent counsel, agreed to set *679the question aside for resolution on another day. That day has now arrived, and I conclude that the trial court should have permitted the suit to proceed to trial. For this reason, I would affirm the judgment of the Court of Appeals.