Insurance carriers have a duty to act in good faith and not engage in unfair claims practices. The Tennessee legislature has promulgated this duty in T.C.A. § 56-8-105, which outlines 15 specific actions that constituted unfair claim practices that signify bad faith behavior.1 Such unfair claim practices include: (1) knowingly misrepresenting relevant facts or policy provisions relating to coverages at issue; (2) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies; (3) failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under its policies; and (4) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.2 When a violation of this statue occurs, what can an insured do?
Typically, an insured brings a lawsuit against the insurance carrier for its conduct, however, the Tennessee legislature has cut-off that avenue of recovery in T.C.A. § 56-8-101(c), which states that “the commissioner shall have sole enforcement authority for this part, and nothing in this part shall be construed to create or imply a private cause of action for a violation of this part.”3 This provision means that the insurance commission is the only person who can hold insurance carriers responsible for any bad behavior, not the people who are actually effected by the bad behavior.
How did we get to this point? Since 1901, insureds had multiple avenues of recovery, from breach of contract, bad faith, Tennessee consumer protection act (“TCPA”), and other tort remedies with punitive and/or consequential damages. But bad faith claims and claims under the TCPA are no longer available despite their successful implementation.4 In Brooks v. Tennessee Farmers Mutual Insurance Company, a tornado damaged the insureds home. Here, the Tennessee Court of Appeals upheld the trial court’s ruling favoring insureds award of general and consequential damages, treble damages, and attorneys’ fees and costs for breach of the insurance policy and willful and knowingly unfair and deceptive acts or practices in violation of the TCPA.5 If this loss and case had been filed two years later, the insureds would only receive general damages for breach of the insurance policy, despite the egregious actions of the insurance carrier discussed in the court’s opinion.
I have been in examinations under oath and working on a number of Tennessee claims this week. I want to remind Tennessee policyholders, public adjusters, and contractors that the one year policy shortened statute of limitations can be enforceable under Tennessee law.6 Insureds should pay special attention to the deadline to file suit, or they may find themselves with very little recourse.
1 Tenn. Code Ann. § 56-8-105(1)-(15).
2 Tenn. Code Ann. § 56-8-105(1), (2), (3), and (7).
3 Tenn. Code Ann. § 56-8-101.
4 Myint v. Allstate Ins. Co., 970 S.W.2d 920, 925 (Tenn. 1998); Gaston v. Tennessee Farmers Mut. Ins. Co., 120 S.W.3d 815, 823 (Tenn. 2003); Johnson v. Tennessee Farmers Mut. Ins. Co., 205 S.W.3d 365, 370 (Tenn. 2006); Brooks v. Tennessee Farmers Mutual Ins. Co., 2014 WL 6735129, No. M2013-02326-COA-R3-CV (Tenn. Ct. App., Nov. 26, 2014).
5 Brooks, 2014 WL 6735129.
6 Contractual Limitation Defense Using Equitable Estoppel against Tennessee Insurance Policies, PROPERTY INS. COVERAGE LAW BLOG (Dec. 26, 2020), https://www.propertyinsurancecoveragelaw.com/2020/12/articles/insurance/contractual-limitation-defense-using-equitable-estoppel-against-tennessee-insurance-policies/