Summary
finding coverage for an innocent co-insured under an automobile policy because the intentional destruction of the vehicle was accidental from the perspective of the innocent spouse
Summary of this case from Tuturea v. Farmers Mut. Ins.Opinion
Filed November 9, 1989.
HAMBLEN LAW C.A. #131, HON. BEN K. WEXLER, JUDGE.
AFFIRMED IN PART; REVERSED IN PART; REMANDED.
DAVID M. TILSON OF MORRISTOWN FOR APPELLANT.
J. RANDALL SHELTON OF MORRISTOWN FOR APPELLEE.
OPINION
Tennessee Farmers Mutual Insurance Company, Defendant-Appellant, appeals from a finding of coverage on an automobile insurance policy with its insured, Anita Musser, Plaintiff-Appellee. In March 1987, the Plaintiff obtained an automobile insurance policy from the Defendant. The policy was in her name and insured a 1984 Nissan Stanza which was titled in her name as well. Subsequently, the Plaintiff married William Musser who, according to the Plaintiff, suffered an "insane attack" which resulted in an assault upon her and the firing of at least 30 rounds from a semi-automatic machine gun into her car. She testified that her car was essentially destroyed as a result of numerous bullet holes throughout the interior and exterior of the vehicle.
The Plaintiff reported the loss to the local and the district offices of the Defendant. In both instances, she was informed that the claim was not covered by her policy. The reason, according to the claims adjustor, was that the loss was not "accidental" for purposes of coverage when considered with the definition of "your covered auto." That is, since Mr. Musser was covered under the policy (because he was a spouse in the same household) and because his actions were not "accidental," the claim was denied.
The comprehensive section of the policy states in pertinent part: "We will pay for: (1) direct and accidental loss to your covered auto caused by the breakage of glass. . . missiles. . . malicious mischief or vandalism. . ." Under the definitions section of the policy "your" refers to the named insured "and spouse if a resident of the same household."
The Plaintiff filed suit in the General Sessions Court of Hamblen County where coverage was found to encompass the facts as set forth above. On appeal to the Circuit Court, the Trial Judge held that the Plaintiff was entitled to recover $6700 as the fair market value of the car, $1675 as a bad faith penalty, and $921.25 in pre-judgment interest.
The first issue raised by the Defendant is whether the Trial Court erred by finding coverage. The insuror's argument is that there should be no coverage because Mr. Musser was a resident spouse and because his actions were intentional.
We choose to analyze this case under the "Innocent Spouse Rule" as announced in Ryan v. MFA Mut. Ins. Co., 610 S.W.2d 428 (Tenn.App. 1980). In Ryan, the Court permitted the husband, a co-insured, to recover for his property which was destroyed by a fire intentionally set by his wife. The Court found that the "Innocent Spouse Rule," followed by a majority of jurisdictions, was better reasoned and produced a more equitable result than the older rule which denied recovery to an innocent co-insured.
In another intentional loss case by a co-insured in the context of an automobile policy, it was said that "injuries are effected by accidental means if they are injuries which [the] insured could not have reasonably expected or anticipated even though they were intentionally inflicted by a third person. . . ." Central National Ins. Co. of Omaha, Nebraska v. Adams, 45 Tenn.App. 23, 319 S.W.2d 486 (1958).
We are persuaded that the Trial Court was correct in finding coverage. The policy was in the Plaintiff's name and was purchased when she was single. Moreover, the car was titled to her alone and she had absolutely nothing to do with the destruction of the insured property. This seems to us to be a classic case in which the "Innocent Spouse Rule" should be applied. Since the destruction to the car was accidental toher denying coverage would produce an inequitable result. There is no evidence in the record that the Plaintiff could have reasonably expected her husband of six weeks to undergo an "insane attack" and spray her car with rounds from a semi-automatic machine gun. Thus, the loss was accidental.
The second question for our review is whether it was error to assess a 25 percent bad faith penalty against the Defendant as contemplated by T.C.A. 56-7-105. In this regard we note that our appellate decisions have required the insured to make a formal demand for payment before there can be recovery for bad faith. Walker v. Tennessee Farmers Mut. Ins. Co., 568 S.W.2d 103 (Tenn.App.1977). The purpose served by a demand is to provide the insuror with notice of the bad faith claim and to give it a period of time to dwell upon the consequences of non-payment. Walker, supra. Finally, it is the insured's burden to show that a formal demand has been made. Walker, supra.
56-7-105. Additional liability upon insurers and bonding companies for bad-faith failure to pay promptly. — (a) The insurance companies of this state, and foreign insurance companies and other persons or corporations doing an insurance or fidelity bonding business in this state, in all cases when a loss occurs and they refuse to pay the same within sixty (60) days after a demand shall have been made by the holder of the policy or fidelity bond on which the loss occurred, shall be liable to pay the holder of the policy or fidelity bond, in addition to the loss and interest thereon, a sum not exceeding twenty-five percent (25%) on the liability for the loss; provided, that it shall be made to appear to the court or jury trying the case that the refusal to pay the loss was not in good faith, and that such failure to pay inflicted additional expense, loss, or injury upon the holder of the policy or fidelity bond; and provided further, that such additional liability, within the limit prescribed, shall, in the discretion of the court or jury trying the case, be measured by the additional expense, loss, and injury thus entailed.
Applying the above to the facts here, we hold that no fomal demand for payment was made. While it is true that the Plaintiff contacted the Defendant to report the loss, we do not equate this with a formal demand for payment for purposes of involving the bad faith statute. Because the Plaintiff has failed to carry the burden on this question as required by the case law, it was error to award the bad faith penalty.
The third question is whether the Trial Court erred in setting the fair market value of the vehicle at $7500 (less $800 which represents the sale price upon repossession by the lien holder). The Plaintiff testified that the car was worth $7500 before the loss which is what she paid for it approximately one year prior. Not surprising, the adjustor testified to a much lower figure of $5000 before the loss and $1200 after the loss. The problem with the Plaintiff's estimate is that she did not allow for a year's depreciation. The value of the car probably falls somewhere between the two estimates. Thus, we set the value of the car at $6250, less the $800 for which it was sold, or $5450.
The final question is whether it was error to award pre-judgment interest. Pre-judgment interest may be awarded in accordance with equitable principles. T.C.A. 47-14-123. Our appellate decisions have stated that trial courts have discretion to award such interest as an element of damages, though not as a penalty, and that discretion will not be disturbed on appeal unless there is a "manifest and palpable abuse." Schoen v. J.C. Bradford Co., 667 S.W.2d 97 (Tenn.App.1984). The Defendant does not set forth the manner in which there has been a manifest abuse of discretion and we are unable to identify any. For this reason, the Trial Court's award of pre-judgment interest which will be calculated on the $5450 awarded herein is affirmed.
For the foregoing reasons the Trial Court is affirmed in part and reversed in part and the cause remanded for collection of the judgment herein rendered. The costs are adjudged against the parties equally. The Plaintiff's request for damages for a frivolous appeal pursuant to T.C.A. 27-1-122 is denied.
HERSCHEL P. FRANKS, J., T. EDWARD COLE, SP.J., concur.