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You only get what you pay for



Two insured persons, a married couple, brought an action against their insurance agent and agency after they were denied coverage by the insurance company. The trial court found that it was undisputed that the insured had paid the premium for the insurance in force and applied the Tennessee Code Annotated section 56-7-135 (b), which provides: “Payment of premiums for an insurance contract or amendment thereto by an insured shall create a rebuttable assumption that the coverage provided has been accepted by all insured under the agreement. ” Talat Parveen, Et Al. v. ACG South Insurance Agency, LLC, Et Al, No. E2018-01759-SC-R11-CV, Tennessee Supreme Court of Knoxville (December 4, 2020) The Supreme Court was asked to decide on the application of the statute to insurance agents and brokers .

FACTUAL BACKGROUND

This case is due to the purchase of a personal umbrella insurance. Dr. Speaking of Parveen and Mr. Khurshid Shaukat (collectively "insured"), a married couple, before moving to Tennessee, had an umbrella policy for State Farm that provided surplus uninsured motorist coverage as a separate item with a separate premium amount for such coverage.

Mr. Shaukat testified that during his approximately thirty-minute meeting with Agent Norris, he provided a copy of his State Farm umbrella policy, stating that the insured wanted exactly the same coverage in Tennessee. However, Mr Norris has consistently denied this claim. As relevant to this appeal, Mr. Norris Shaukat with a quote for a personal umbrella policy through Safeco Insurance Company of America ("Safeco"). A copy of the quote provided to Shaukat does not disclose a separate entry for excessively uninsured motorist coverage, and does not reflect the police premium for the introduction of such coverage. Shaukat accepted coverage and bought Safeco's umbrella policy, among other insurances. The insured received a copy of the insurance and a declaration page and paid the premiums, which did not include a fee for surplus of uninsured car insurance.

On November 10, 2015, while the Safeco policy was in effect, Dr. Parveen involved in a car accident. Dr. Parveen suffered personal injuries and her vehicle was totalized as a result of the crash. The insured then discovered that the driver of the wreck vehicle that caused the accident was underinsured. In a later meeting with Norris, they further discovered that Safeco's umbrella policy in practice did not include a surplus of uninsured motorist cover. At the time, Shaukat requested that such coverage be added to their umbrella policy and paid the premium, even though he was informed that the coverage was not retroactive.

The complaint alleges that Norris negligently failed to obtain the requested surplus. uninsured car insurance as part of Safeco's umbrella insurance. The insured claimed damages from the plaintiffs "in the amount of not less than one million dollars ($ 1,000,000)." The trial court granted the appellants' request for a summary judgment and found that it was undisputed that the insured had paid the premiums for the insurances applicable in 2013, 2014 and 2015, none of which contained cover for UM / UIM losses. The court ruled that the insured had not provided evidence to disprove the presumption and that a summary judgment was therefore appropriate.

ANALYSIS

Tennessee Code Commentary Section 56-7-135 provides:

(a) The signature of an applicant or party to an insurance contract on an application, amendment or other document specifying the type, amount or conditions of coverage, shall create a rebuttable assumption that the statements made by the person bind all insured persons under the contract and that the person signing such a document has read, understands and accepts the contents of such document.

(b) Payment of premiums for an insurance contract, or amendment thereof, by an insured shall create a rebuttable assumption that the insurance provided has been accepted by all insured under the contract. n against an insurance company or a proposed insurance company; in the event of failure to obtain a claim, the agent, rather than the insurance company, is independently liable. A question of first impression before the Supreme Court was whether section 56-7-135 (b) contradictory assumption of acceptance of the terms of insurance by paying premiums also applies to an insured act against an agent for negligent failure to obtain the requested coverage as well as for a measure against a carrier for coverage under the policy.

Returning the grant of a summary judgment by the Court of Appeal, the Court of Appeal focused specifically on the statutes' use of the phrase "under the contract." It stated: "When we analyzed the statutory sub – section in question, our General Assembly included the phrase 'under the contract' and that phrase must be given full effect. When looking at the charter as a whole, subsection (a) also includes language that is related to the insurance contract. “The Court of Appeal concluded that the rebuttable assumption does not apply to an action against an insurance agent who failed to obtain the insurance cover according to the insured's instructions.

The Supreme Court, which examined the facts and statutes, noted that the Court's reading of the statutory language emphasized the phrase "under the agreement". The expression "under the contract" immediately follows and simply changes the word "insured." According to the Supreme Court, the word clearly refers only to those against whom the rebuttable presumption applies – "all insured" – and not to the persons or entities through which the presumption can be asserted.

As applied in this case when Shaukat paid the annual premium, the disproven assumption was triggered that the coverage provided had been accepted by all the insured, Shaukat and Dr. Parveen, according to the agreement, Safeco's umbrella policy.

The Supreme Court concluded that if the legislature had intended to limit the rebuttable presumption to acts against certain persons or entities, it could have done so, but the Charter is silent on the types of legal claims to which the rebuttable presumption applies and on which people or entities who can trust it. The Supreme Court therefore concluded that the Court of Appeal erred in interpreting the language of the Tennessee Code Annotated Section 56-7-135.

As the insured failed to rebut the statutory presumption, the court granted the right to the appellants. summary judgment.

Insurance is not free. By definition, it is an agreement that only enters into force when compensation – payment of premiums – is given to the insurer. The complainants paid nothing for excessively insured car insurance and accepted, by paying the premium, for three years with an insurance that did not provide that coverage. By paying the premium based on an insurance without excessive coverage, the insured accepted the insurance provided that the insurance – after an accident – did not claim that it ordered. The assumption could be refuted, but the complainants had no evidence to disprove the assumption that they accepted through payment the policy issued three years in a row.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE now limits his practice to working as an insurance consultant specializing in insurance coverage, handling insurance claims, cheating and insurance fraud almost equally for insurance policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.

For the past 52 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become professionals in insurance claims.

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