The Tennessee Supreme Court has held that a trial court had authority to decide coverage issues in a declaratory judgment action between an insurance company and its insured when a claimant, who had sued the insured but did not have a judgment against him, was not a party to the action.
This case arose out of an automobile accident on Interstate 24 in Hamilton County involving drivers Brandon DeBruce and Christina Wright. DeBruce was insured under an automobile insurance policy issued by Tennessee Farmers Mutual Insurance Company. Although DeBruce reported the accident to his insurance company, he did not notify Tennessee Farmers about a lawsuit filed against him by Wright in the Hamilton County Circuit Court as required by his insurance policy. DeBruce also failed to cooperate in the investigation and defense of the lawsuit also as required by his policy.
Tennessee Farmers sued DeBruce in the Bradley County Chancery Court under Tennessee’s Declaratory Judgments Act, asking the court to rule that it had no duty to defend DeBruce or pay damages on his behalf in Wright’s lawsuit because DeBruce had failed to comply with the terms of his insurance policy. After DeBruce failed to respond to the declaratory judgment action, the chancery court awarded Tennessee Farmers a default judgment. Nearly two years later, Wright moved to set aside the default judgment and to intervene as a party in the declaratory judgment action. Wright claimed that she should have been joined in the lawsuit as a necessary party because she had a direct interest in DeBruce’s insurance coverage to pay any damages awarded in her lawsuit against him. The chancery court denied Wright’s motion, finding that because she had not yet obtained a judgment for damages against DeBruce, she was not a necessary party to the declaratory judgment action. The Court of Appeals reversed, finding that Wright had been a necessary party and the chancery court’s judgment was therefore void.
In a unanimous opinion, authored by Justice Sharon G. Lee, the Tennessee Supreme Court reversed the Court of Appeals, holding that Wright was not a necessary party to the declaratory judgment action because she did not have an enforceable judgment against DeBruce. The Supreme Court found that the coverage dispute between Tennessee Farmers and DeBruce could be resolved with certainty and finality, which is the goal of Tennessee’s Declaratory Judgments Act, without Wright as a party.
The Supreme Court heard oral argument in this case on the campus of Lipscomb University in Nashville, Davidson County, Tennessee, as part of the American Legion Auxiliary Volunteer Girls State S.C.A.L.E.S. (Supreme Court Advancing Legal Education for Students) project. To read the opinion of the Court in Tennessee Farmers Mutual Insurance Company v. Brandon DeBruce, authored by Justice Sharon G. Lee, please visit the Opinions section of tncourts.gov.