Insurances represent an interesting subset of contract law based on general law and specific statutes, namely those included in Section 56 of the Tennessee Code Annotated. Litigation that raises a question regarding the scope of insurance coverage under a specific insurance is a legal issue that requires interpretation of contract language. 1 In fact, Tennessee courts have long agreed that “insurance is at its core, contract. " 2
This concept of using the traditional contract law doctrines stems from the idea that insurance is only an agreement that represents the intention of the parties, ie. the insurance company and the insured. And in interpreting those agreements, Tennessee courts are trying to "determine and enforce the intentions of the parties." 3 Doctrines that aid in the interpretation of contracts and Tennessee's insurance policies include the notion that the terms of an insurance policy should be given their "simple and common sense." 4 However, this simple and common meaning is taken within the framework of the entire agreement. 5
Insurances are also adhesion agreements drawn up by insurance companies on standardized forms that the insured had no role in preparing, at all. 6 An "adhesion agreement" is a special term meaning the court's understanding that contracts, such as insurance, are not the result of negotiations and concessions between the parties, as insurance companies and their policyholders. Instead, these adhesion agreements contain conditions determined by the insurance company that the insured has no choice but to follow if they want insurance coverage. it is a "take-it-or-leave-it" contractual relationship. 7 The effect of such a general benefit is that Tennessee courts, like most other courts, find that "insurance contracts are interpreted strictly in favor of the insured [as to provide coverage] and if the disputed provision is susceptible to more than one credible significance, controls the significance that is favorable to the insured. ” 8 Therefore, the coverage, where it is ambiguous, is interpreted broadly while any exceptions can be taken narrowly.
For more information on general knowledge of adhesion contracts, see my colleague's latest post on the subject, When Words Collide: Insurance Policies as Contracts of Adhesion . 9
Although the main insurances are only contracts, additional consequences apply in their interpretation. traditional doctrines of contract law cannot determine whether a particular claim is covered by a particular insurance policy, and regardless of the beneficial consequences of insurance policies that insurance contracts, insured persons seeking cover under their insurance should be prepared to provide details of the specific facts supporting their right to cover in order to overcome any ambiguities.
2 Allstate Ins. Co. v. Tarrant 363 S.W.3d 508, 527 (Tenn.2012) (Koch, J., deviating).
4 U.S. Bank, N.A. against Tennessee Farmers Mut. Ins. Co. 277 S.W.3d 381, 386-87 (Tenn. 2009).
5 Cocke Cnty. Bd. of Highway Comm’rs v. Newport Utils. Bd. 690 SW2d 231, 237 (Tenn. 1985).
6 See e.g. Alcazar v. Hayes 982 SW2d 845, 851 (Tenn. 1998) ( with reference to Bill Brown Const. V. Glens Falls Ins. 818 SW2d 1, 12 (Tenn. 1991)); Bill Wilson, When Words Collide: Resolving Insurance Coverage and Claims Disputs 85 (2018).
7 Alcazar 982 SW2d at 851–52 ( citing  Brandt v. Mutual Ben. Health & Acc. Ass & # 39; n 202 SW2d 827 (Tenn. Ct . App. 1947)); Wilson at 102.
8 Southern Trust Ins. Co. v. Phillips 474 SW3d 660, 664-65 (Tenn. Ct. App. 2015), cites Garrison v. Bickford 377 SW3d 659, 663-64 (Tenn. 2012) ( internal citations omitted).
9 Anthony Orlando, When Words Collide: Insurance Policies as Contracts of Adhesion Property Ins. Coverage Law (December 23, 2020), https://www.propertyinsurancecoveragelaw.com/2020/12/articles/insurance/when-words-collide-insurance-policies-as-contracts-of-adhesion/