Court Opinion

ID: 2658425
Source: CourtListenerOpinion
Date Created: 2014-03-28 18:45:50.811507+00
Date Added: 2024-06-11T13:04:17.280474
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                November 6, 2013 Session

          LINDA F. COFFEY ET AL. v. TYLER N. HOFFMAN ET AL.

                  Appeal from the Circuit Court for Hawkins County
                    No. 09CV0276      Kindall T. Lawson, Judge

               No. E2013-01109-COA-R3-CV-FILED-MARCH 28, 2014

The issue presented in this appeal is whether the plaintiffs’ uninsured motorist insurance
carrier preserved its rights to a jury trial and subrogation interest under Tenn. Code Ann. §
56-7-1206 (2008). This statute allows an uninsured motorist insurer to “elect to decline
binding arbitration and preserve its subrogation rights” under certain prescribed
circumstances. Tenn. Code Ann. § 56-7-1206(k). The trial court held that the uninsured
motorist insurance carrier failed to comply with a local circuit court rule that requires a
response to a motion to be filed and served on the movant no later than 30 days after the
motion is filed. Pursuant to that local rule, the trial court treated the plaintiffs’ motion to
compel arbitration as “unopposed.” The trial court further held that the uninsured motorist
insurance carrier “did not strictly comply with the requirement of T.C.A. § 56-7-1206
objecting to arbitration” and ordered the parties to submit to binding arbitration. We hold
that the uninsured motorist insurance carrier complied with the statute, thereby preserving
its rights to a jury trial and subrogation, and that the local rule does not operate to abrogate
these rights. The judgment of the trial court is vacated and this case is remanded to the trial
court for further proceedings.

        Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
                             Vacated; Case Remanded

C HARLES D. S USANO, J R., C.J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.

Thomas L. Kilday and Brandy M. Burnette, Greeneville, Tennessee, for the appellant,
Tennessee Farmers Mutual Insurance Company.

Phillip L. Boyd, Rogersville, Tennessee, for the appellees, Linda F. Coffey and C. Wayne
Coffey.
                                          OPINION

                                                I.

        On June 11, 2009, Linda F. Coffey and her husband, Wayne Coffey, (“plaintiffs”)
filed this lawsuit against Tyler N. Hoffman, Heather White Brewer, and Travis Brewer
(“defendants”), for injuries allegedly resulting from an automobile accident. Plaintiffs
notified their uninsured motorist insurance carrier, Tennessee Farmers Mutual Insurance
Company (“plaintiffs’ UM carrier”), of the accident, and alleged in their complaint that
defendants were uninsured or underinsured. There are no undisputed facts pertaining to the
issues on this appeal. In an attempt to reach a settlement, defendants offered plaintiffs
$25,000 – the policy limit of their liability insurance coverage. Plaintiffs accepted the offer,
invoking the governing statute, Tenn. Code Ann. § 56-7-1206, which provides in pertinent
part as follows:

              (f) . . . [I]f a party or parties alleged to be liable for the bodily
              injury or death of the insured offers the limits of all liability
              insurance policies available to the party or parties in settlement
              of the insured’s claim, the insured . . . may accept the offer,
              execute a full release of the party or parties on whose behalf the
              offer is made and preserve the right to seek additional
              compensation from the insured’s uninsured motorist insurance
              carrier upon agreement of the insured . . . to submit the insured’s
              uninsured motorist claim to binding arbitration of all issues of
              tort liability and damages . . .

                                     *      *         *

              (g) Parties proposing to accomplish a settlement pursuant to this
              section shall comply with the following requirements and
              conditions:

              (1) Upon request, the insured . . . shall provide the liability
              insurance company or companies providing coverage to the
              party or parties to be released, the name and address of the
              insurance company or companies providing the insured with
              uninsured motorist coverage, the policy number or numbers and
              the limits of uninsured motorist coverage available to the
              insured;

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             (2) The liability insurance company or companies providing
             coverage to the party or parties to be released shall give written
             notice of the offer to the insured’s uninsured motorist insurance
             carrier or its attorney, provide verification of the coverage upon
             request and confirm to the uninsured motorist insurance carrier
             or its attorney that the party or parties to be released will agree
             in writing to cooperate with the uninsured motorist insurance
             carrier in connection with the arbitration of the uninsured
             motorist claim; provided, that the uninsured motorist insurance
             carrier will agree to waive its subrogation rights against the
             party or parties to be released;

             (3) The insured . . . shall give written notice to the uninsured
             motorist insurance carrier or its attorney of the insured’s intent
             to accept the offer and agreement to submit the uninsured
             motorist claim to binding arbitration;

             (4) After receipt of both of the notices referred to in
             subdivisions (g)(2) and (3), the uninsured motorist insurance
             carrier shall have thirty (30) days to give notice to its insured . . .
             and the liability insurance carrier . . . that it consents to the
             settlement, that it will agree to binding arbitration of the
             insured’s uninsured motorist claim and that it will waive its
             subrogation rights against the party or parties to be released in
             exchange for their written agreement to cooperate in connection
             with the arbitration;

                                    *       *         *

             (k) Notwithstanding the provisions of this section relating to
             binding arbitration, after receipt of both of the notices referred
             to in subdivisions (g)(2) and (3), the uninsured motorist
             insurance carrier, at its option, may elect to decline binding
             arbitration and preserve its subrogation rights; provided, that
             within thirty (30) days after receipt of both of the notices, it pays
             the insured the full amount of the offer made by the liability
             insurance company or companies providing coverage to the
             party or parties seeking the release.

Tenn. Code Ann. § 56-7-1206(f),(g), and (k) (emphasis added).

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        In accordance with the statute, the attorney for Direct Insurance Company, the liability
insurance carrier for the defendants, sent a letter to plaintiffs and their UM carrier that stated
the following in pertinent part:

               Pursuant to Tenn. Code Ann. § 56-7-1206(g)(2), this shall serve
               as written notice of Direct Insurance and the Defendants’ offer
               of the applicable policy limits of $25,000.00 which is inclusive
               of all claims brought by [plaintiffs].

                                     *       *         *

               Tom, [plaintiffs’ UM carrier’s counsel], it was also my
               understanding that pursuant to § 56-7-1206(g)(3), [plaintiffs]
               must give written notice to you as the uninsured motorist carrier
               of their intent to accept this offer and agreement to submit the
               uninsured claim to binding arbitration.

               Thereafter, you, Tom, pursuant to § 56-7-1206(g)(4), shall have
               thirty (30) days in which to give notice to both [plaintiff’s
               counsel] and to me whether you consent to the settlement; agree
               to binding arbitration with waiver of the subrogation rights.
               Pursuant to § 56-7-1206(k), you have other options. However,
               Direct Insurance is desirous of handling this matter in this
               fashion and makes the foregoing tender of its limits along with
               the cooperation of its insureds.

       In response, plaintiffs’ counsel sent a letter to counsel for plaintiffs’ UM carrier and
counsel for defendants’ liability carrier stating that plaintiffs were providing notice under
Tenn. Code Ann. § 56-7-1206(g) that plaintiffs “accept the offer of settlement made by
Direct [defendants’ liability carrier] in the amount of $25,000 and agree to submit the
uninsured motorist claim to binding arbitration.”

      Counsel for plaintiff’s UM carrier responded with a letter to counsel for plaintiffs and
counsel for defendants’ liability carrier, stating:

               In follow-up to your letter . . . regarding [plaintiffs’] agreement
               to accept the defendants’ offer under TCA § 56-7-1206, you will
               find attached herewith the check of [plaintiffs’ UM carrier] in
               the amount of $25,000 made payable to [plaintiffs’] order. This
               check is submitted to you and your clients in preservation of the

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               right of my client of a jury trial as well as its right of
               subrogation under the policy contract with respect to this
               payment as well as any other payments made thereunder and in
               conformity with the provisions and requirements of TCA § 56-
               7-1201 et seq.

(Emphasis added).

       Shortly after receiving the letter from plaintiffs’ UM carrier, plaintiffs filed a motion
asking the trial court to order the parties to binding arbitration upon, inter alia, the following
alleged ground:

               [Plaintiffs’ UM carrier] has not complied with and violated
               Tennessee Code Annotated § 56-7-1206(k), by failing in its letter
               . . . to decline binding arbitration. . . . Having failed to decline
               arbitration, [plaintiffs’ UM carrier] has not complied with the
               requirements of the statute. As a result, the Court must order the
               parties to binding arbitration for failure of [plaintiffs’ UM
               carrier] to fully comply with its duties under Tennessee Code
               Annotated § 56-7-1206(k).

(Underlining and italics in original).

        Shortly before the hearing on plaintiffs’ motion, counsel for plaintiffs’ UM carrier
filed a brief handwritten response stating as follows:

               Tennessee Farmers hereby opposes plaintiff’s motion seeking to
               compel arbitration inasmuch as it has conducted itself
               appropriately pursuant to TCA 56-7-1206 in opposition thereto.

The trial court granted plaintiffs’ motion in an order stating “[b]ecause no response was filed
within the time provided in Rule 7 of the Local Rules of the Third Judicial District, the
motion of plaintiffs is treated as unopposed and is hereby granted.” (Italics in original.) Rule
7.04 of the Third Judicial District of Tennessee Circuit Court Local Rules of Practice
provides as follows:

               Responses to motions, including counter-affidavits, depositions,
               briefs or any other matters being presented in opposition to
               motions must be filed and served on the movant no later than
               thirty (30) days after the filing of the motion. Unless the party

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              responding to the motion secures an extension of time in which
              to file a response, if no response is filed within the aforesaid
              period, the court shall presume that no response is to be filed
              and the motion shall be considered unopposed.

Plaintiffs did not move in writing for the application of Local Rule 7.04. Because there is
no transcript of the motion hearing, it is not clear whether the trial court acted sua sponte in
applying Local Rule 7.04 and granting plaintiffs’ motion.

       Plaintiffs’ UM carrier filed a motion to alter or amend. After a hearing, the trial court
denied this motion in an order stating in pertinent part:

              The response filed by [plaintiffs’ UM carrier] at the April 10,
              2010 hearing was found not to be timely filed . . . The Court,
              therefore, treated the motion presented on that day as unopposed
              and confirms the previous order of April 11, 2012.

              The letter . . . mailed by counsel for [plaintiffs’ UM carrier] did
              not strictly comply with the requirement of T.C.A. § 56-7-1206
              relating to arbitration; therefore, the order directing the parties
              to arbitration is hereby confirmed.

(Underlining and italics in original; numbering omitted.) The trial court denied plaintiffs’
UM carrier’s request for permission to take an interlocutory appeal.

        Following arbitration, the trial court entered an order in accordance with the
arbitrator’s decision, awarding plaintiffs Linda F. Coffey $45,000 and C. Wayne Coffey
$3,500. Defendants’ liability carrier was ordered to pay $25,000. Plantiffs’ UM carrier was
ordered to pay $23,500. Plaintiff’s UM carrier timely filed a notice of appeal.

                                              II.

        The issue presented is whether the trial court erred (1) in holding that plaintiffs’ UM
carrier did not preserve its rights to a jury trial and to subrogation because of its failure to
comply with Tenn. Code Ann. § 56-7-1206, and (2) in ordering the parties to binding
arbitration.

                                              -6-
                                               III.

        The issue before us involves the construction and application of a statute, which is a
question of law that we review de novo. Lipscomb v. Doe, 32 S.W.3d 840, 843-44 (Tenn.
2000). We first address the straightforward question of whether plaintiffs’ UM carrier
complied with the requirements of Tenn. Code Ann. § 56-7-1206(k) to object to binding
arbitration, seek a jury trial, and preserve its right to subrogation. As previously quoted
herein, the pivotal provision of the statute provides as follows:

               Notwithstanding the provisions of this section relating to
               binding arbitration, after receipt of both of the notices referred
               to in subdivisions (g)(2) and (3), the uninsured motorist
               insurance carrier, at its option, may elect to decline binding
               arbitration and preserve its subrogation rights; provided, that
               within thirty (30) days after receipt of both of the notices, it pays
               the insured the full amount of the offer made by the liability
               insurance company or companies providing coverage to the
               party or parties seeking the release.

Tenn. Code Ann. § 56-7-1206(k). Plaintiffs’ UM carrier, through its attorney, timely sent
a letter to plaintiffs’ attorney with a check for $25,000 – the policy limits of defendants’
liability coverage and the full amount of the offer made by defendants’ liability insurance
company – with a courtesy copy of the letter to counsel for the defendants’ liability carrier.
The letter stated the following:

               This check is submitted to you and your clients in preservation
               of the right of my client of a jury trial as well as its right of
               subrogation under the policy contract with respect to this
               payment as well as any other payments made thereunder and in
               conformity with the provisions and requirements of TCA § 56-
               7-1201 et seq.

(Emphasis added.) This language could hardly have been more clear in communicating the
intent of plaintiffs’ UM carrier to decline arbitration and preserve its jury trial and
subrogation rights. Plaintiffs’ UM carrier fully complied with the requirements of the statute.
While the letter did not expressly say that the UM carrier “elect[ed] to decline binding
arbitration,” it did make specific reference to § 56-7-1201 et seq., its right to a jury trial, and
its right to subrogation. It also transmitted its check to plaintiffs in an amount identical to
the amount of the offer by the defendants’ liability carrier. The only reasonable
interpretation of the UM carrier’s words and actions is that it was proceeding in full

                                                -7-
conformity with the provisions of Tenn. Code Ann. § 57-7-1206(k) in order to obtain all of
the rights available to it under this code section. This would have been true even in the
absence of any express reservation of any rights.

        Plaintiffs point to the following statement printed on the $25,000 check proferred by
plaintiffs’ UM carrier: “ENDORSEMENT BY PAYEE(S) ON REVERSE SIDE IS A
RELEASE OF ALL PERSONS OR ENTITIES INSURED UNDER THE POLICY
REFERENCED ABOVE, AND TENNESSEE FARMERS MUTUAL INS. CO. FOR ALL
CLAIMS ARISING FROM THE LOSS REFERRED TO ABOVE.” (Capital letters in
original). Plaintiffs argue that this language created a trap for the unwary, in that
“acceptance of the check with the release would have barred them from pursuing their
respective rights of action” against plaintiffs’ UM carrier and defendants’ liability carrier.

        The response of plaintiffs’ UM carrier is tri-fold: (1) the form release language on the
check was an inadvertent oversight, not a trap; (2) the release would not have been effective
anyway, because Tenn. Code Ann. § 56-7-1206(k) specifically provides that “[a]cceptance
of the amount by the insured shall not operate as a release of the liability insurance carrier’s
insureds, nor shall it prevent or preclude the insured from seeking additional compensation
from the insured’s uninsured motorist insurance carrier”; and (3) the issue is hypothetical,
because plaintiffs did not accept or endorse the check. The trial court did not consider the
language on the profferred check to be pertinent to the disposition of the case. Under the
circumstances presented here, neither do we.

       Plaintiffs’ UM carrier complied with the requirements of Tenn. Code Ann. § 56-7-
1206(k), thereby preserving its subrogation rights and its declination to submit to arbitration
under the statute. Moreover, “[t]he litigants in personal injury cases have a constitutionally
protected right to have the disputed factual issues in their case decided by a jury.” Duran
v. Hyundai Motor Am., Inc., 271 S.W.3d 178, 209 (Tenn. Ct. App. 2008). These statutory
and constitutional rights cannot be abrogated by operation of a local rule of court. See, e.g.,
Brown v. Daly, 884 S.W.2d 121, 123 (Tenn. Ct. App. 1994) (“[N]o rule of court is ever
effective to abrogate or modify a substantive rule of law”); Lady v. Kregger, 747 S.W.2d
342, 345 (Tenn. Ct. App. 1987) (“The Tennessee Rules of Civil Procedure are ‘laws’ and are
subject to being superseded in the same manner as statutes. . . . Thus, the specific provisions
in T.C.A. § 56-7-1206(e) prevail over the conflicting general provisions in T.R.C.P. Rule 3”);
In re Estate of Thompson, No. M2011-00411-COA-R3-CV, 2012 WL 912859 at *6 (Tenn.
Ct. App. W.S., filed Mar. 14, 2012) (“Local rules adopted by trial courts may not conflict
with the rules adopted by the Supreme Court or other substantive law”); May v. Woodlawn
Mem’l Park, Inc., No. M2001-02945-COA-R3-CV, 2002 WL 31059223 at *2 (Tenn. Ct.
App. W.S., filed Sept. 17, 2002) (“While trial courts of this state have the authority to make
and implement reasonable local rules of practice and procedure in their respective courts, the

                                              -8-
rules cannot conflict with substantive rules of law.”). Thus, the trial court erred in applying
Local Rule 7.04 to abrogate plaintiffs’ UM carrier’s preserved rights to subrogation and a
trial by jury.

                                             IV.

       The judgment of the trial court is vacated and the case is remanded to the trial court
for further proceedings consistent with this opinion. Costs on appeal are assessed to the
appellees, Linda F. Coffey and C. Wayne Coffey.

                                    _____________________________________
                                    CHARLES D. SUSANO, JR., CHIEF JUDGE

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