In an opinion released today, the Tennessee Supreme Court held that the rebuttable presumption of acceptance of an insurance policy’s terms by payment of premiums in Tennessee Code Annotated section 56-7-135(b) applies in actions against an insurance agent for failure to procure a policy in accordance with an insured party’s instructions. The Court of Appeals had previously held that the presumption did not apply to the agent because he was not a party to the insurance contract.
This Washington County case arose from the purchase of a personal umbrella insurance policy in 2013. Following an automobile accident three years later, the insured parties, Talat Parveen and Khurshid Shaukat, discovered that their umbrella policy did not include excess uninsured motorist coverage. The insureds filed suit against their insurance agent, Jeffrey Norris, and agency, ACG South Insurance Agency, LLC, (“ACG”) claiming that Mr. Norris negligently failed to procure the excess uninsured motorist coverage as Mr. Shaukat had allegedly requested. Mr. Norris and ACG filed a motion for summary judgment, citing the rebuttable presumption set forth in Tennessee Code Annotated section 56-7-135(b), which provides: “The payment of premium for an insurance contract, or amendment thereto, by an insured shall create a rebuttable presumption that the coverage provided has been accepted by all insureds under the contract.”
The trial court granted the motion for summary judgment, finding that it was undisputed that the insureds paid the premiums for the three years the policy was in effect and that the insureds had not presented evidence to rebut the presumption that they had thereby accepted the provided coverage, which did not include excess uninsured motorist coverage. However, the Court of Appeals reversed, concluding that the statutory presumption only applies to actions between the parties to the insurance contract, not to actions against an insurance agent. The Supreme Court granted review.
In its unanimous opinion, the Supreme Court considered the plain language of the statute and determined that the Court of Appeals over-emphasized and isolated the phrase “under the contract,” leading to an improper reading of the subsection at issue. The Court explained that the inclusion of the phrase serves to clarify that the statutory presumption only applies against those insured under the contract. It does not refer to the persons or entities by whom the presumption may be asserted. Thus, the Supreme Court held that the rebuttable presumption set forth in section 56-7-135(b) does apply in actions against an insurance agent for negligent failure to procure an insurance policy as directed. It further concluded that because the insureds presented no evidence to rebut the statutory presumption, summary judgment in favor of Mr. Norris and ACG was appropriate. Accordingly, the Supreme Court reversed the decision of the Court of Appeals and reinstated the trial court’s order granting the motion for summary judgment.
To read the Supreme Court’s opinion in Talat Parveen, et al. v. ACG South Insurance Agency, LLC, et al., authored by Justice Roger A. Page, visit the opinions section of TNCourts.gov.