Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerKeep Right Traffic LawsLaws Regarding Using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For Stolen VehiclesPayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Total Loss Thresholds (75%).
Damage to vehicle equal to or more than 75% of retail market value as determined by current published retail costs. T.C.A. § 55-3-211(9)(A).
Automobile and Property: No applicable statute, Administrative Code provision or case law exists.
Diminution of Value
First Party: The Tennessee Court of Appeals refused to apply diminution in value in Tennessee auto policies finding the wording unambiguous and limiting the insured to repairs. Black v. State Farm Mut. Auto. Ins. Co., 101 S.W.3d 427 (Tenn. App. 2002); Senter v. Tennessee Farmers Mut. Ins. Co., 702 S.W.2d 175 (Tenn. App. 1985).
Third Party: The measure of third-party damages is either repair costs or the difference in market value immediately before and after the accident. It is not both. There is no definitive case law indicating that a diminution in value measured after the repair is a recognized element of allowable damages in Tennessee. GEICO v. Bloodworth, 2007 WL 1966022 (Tenn. App. 2007). Although Bloodworth did not specifically pronounce that post-repair diminution in value claims are viable in Tennessee (it was a class action suit and the issue had to do with certification as such), it did say that in in order to prove residual diminution in value, the owner has to prove (1) the vehicle’s pre-accident condition and value (taking into consideration, e.g., other damage to the vehicle); (2) the vehicle’s post-accident value; and (3) proof that the repair did not restore the vehicle to substantially the same value it had before the accident. Government Employees Ins. Co. v. Bloodworth, 2007 WL 1966022 (Tenn. App. 2007).
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
If one plaintiff’s damages exceed the liability carrier’s policy limits and other claimants’ damages do not, they cannot pool their damages and later subject the insurer to liability for bad faith for rejecting a combined settlement offer equal to the insurer’s per occurrence coverage. Clark v. Hartford Acc. & Indem. Co., 457 S.W.2d 35 (Tenn. App. 1970).
Funeral Procession Traffic Laws
Tennessee law gives the procession the right-of-way if the lead vehicle has a flashing amber light or is led by a “properly identified” escort. The lead vehicle must comply with traffic lights and signs, and the other vehicles may follow without stopping if their headlights are on. Also, the procession must yield to emergency vehicles or when directed by a police officer. The procession must drive on the right side of the roadway and be as closely spaced as safely possible. It must proceed at no less than 45 miles per hour on a limited access highway and no less than five miles per hour below the posted limit on other roads. Vehicles following the procession on a two-lane road are prohibited from attempting to pass it. Other drivers are prohibited from driving between vehicles in the procession, unless directed by a police officer. Tenn. Code Ann. § 55-8-183.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Contributory negligence of driver should not be imputed to an owner/passenger, absent a showing of a master/servant relationship or a joint enterprise. Cole v. Woods, 548 S.W.2d 640 (Tenn. 1977).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
Tennessee recognizes the Family Purpose Doctrine. In order for the Family Purpose Doctrine to apply in Tennessee (1) the head of the household must maintain the vehicle for the purpose of providing pleasure or comfort to his or her family and (2) the driver must have been using the motor vehicle at time of the injury in furtherance of that purpose with permission, either express or implied, of owner. Droussiotis v. Damron, 958 S.W.2d 127 (Tenn. Ct. App. 1997).
Sponsor Liability for Minor’s Driving: T.C.A. § 55-50-312: Adult or guardian signing minor’s drivers’ license application will be jointly and severally liable for the motor vehicle negligence of the minor, and must also file proof of financial responsibility on behalf of minor.
Keep Right Traffic Laws
Statute: T.C.A. § 55-8-115 and T.C.A. § 55-8-117.
Summary: Drivers must drive in the right lane except when passing another vehicle; when the right lane is closed to traffic while under construction or repair; upon a roadway with three marked traffic lanes; or upon a roadway designated for one-way traffic. Slower traffic must keep right.
Flow of Traffic: Drivers proceeding slower than the normal speed of traffic must drive in the right lane. Except when overtaking and passing on the right is permitted, the driver of an overtaken vehicle shall give way to the right in favor of the overtaking vehicle on audible signal.
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: Effective July 1, 2019, drivers may not do the following while driving: Hold a cell phone or mobile device with any part of your body while driving; Send, write or read any messages; Reach for a device in a way that requires the driver to no longer be in a seated position or properly restrained by a seat belt; Watch a movie or video; or Record or broadcast video. T.C.A. § 55-8-199
Other Prohibitions: No Applicable Laws.
Comments: No driver possessing a learner’s permit or intermediate license shall operate a motor vehicle in motion while using a hand-held cell phone, cell car phone, or other mobile phone, unless there is a bona fide emergency. T.C.A. § 55-50-311
Loss Of Use
Loss of Use: Yes. Loss of use damages are available to a plaintiff only when the vehicle is repairable. Prewitt v. Brown, 525 S.W.3d 616 (Tenn. Ct. App. 2017). Tennessee courts have recognized an exception to the above rule when commercial property has sustained irreparable damage and cannot be replaced within a reasonable time. Tire Shredders, Inc. v. ERM-N. Cent., Inc., 15 S.W.3d 849 (Tenn. Ct. App. 1999). In determining the amount of loss of use, you may consider the reasonable rental cost of the property for that period of time and the use or lack of use the plaintiff would have made of it except for the incident. Id.
Lost Profits: Yes. A plaintiff can recover lost profits when the plaintiff’s personal property has been negligently destroyed by the defendant and the property cannot be replaced within a reasonable period of time. Waggoner Motors, Inc. v. Waverly Church of Christ, 159 S.W.3d 42 (Tenn. Ct. App. 2004). Lost profits are not recoverable when the plaintiff’s property has been completely destroyed and is not capable of being repaired. Tire Shredders, Inc. v. ERM-North Cent., Inc., supra.
Comments: Loss of use damages must be true losses and not something the damaged party could have reasonably avoided. Scott v. Houston, 2010 WL 680984 (Tenn. Ct. App. 2010). Loss of use or lost profits damages are recoverable for the reasonable amount of time that it takes to put a replacement vehicle into service that can equally perform as opposed to simply being “replaced.” DKB Trucking Co., LLC v. JNJ Express, Inc., 2012 WL 3866462 (Tenn. Ct. App. 2012). (Damaged truck up to date with all Federal/State guidelines to haul hazardous waste. Replacement vehicle had to meet these same guidelines).
Med Pay/PIP Subrogation
Med Pay: Subrogation allowed only if so provided for in policy. Subrogation is simplest when the policy provides for complete assignment of the insured’s claim against third-party tortfeasor. When the policy doesn’t provide for subrogation of the insured’s entire claim against tortfeasor, the insurer has a right to reimbursement from any recovery the insured obtained in suit instituted by insured against tortfeasor and any subrogation agreement isn’t void as an unlawful assignment of a personal injury cause of action. Wilson v. Tenn. Farms’ Mut. Ins. Co., 411 S.W.2d 699 (Tenn. 1966).
PIP: Coverage not applicable.
Made Whole: Doctrine applies. Cannot be overridden with policy language. York v. Sevier County Ambulance Auth., 8 S.W.3d 616 (Tenn. 1999).
Statute of Limitations: The one (1) year personal injury statute of limitations runs from date of insured’s accident. T.C.A. § 28-3-104 (2000).
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: T.C.A. § 55-8-162.
Common Law Rule: A vehicle owner can be held liable for injuries to a third party caused by a thief who stole the car if the owner left the keys in the car. McClenahan v. Cooley, 806 S.W.2d 767 (Tenn. 1991); Newman v. Jarrell, 354 S.W.3d 309 (Tenn. Ct. App. 2010).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: Sales tax is payable on the value of the damaged auto at the time the loss is owed on all losses. TN Bulletin 9-1-89 (#3).
Third-Party Claims: Third-party insurers must follow the same rules as first-party insurers. TN Bulletin 9-1-89 (#3).
Pedestrian and Crosswalk Laws
T.C.A. § 55-8-134: When traffic signal is not in place, vehicles must yield to pedestrian in crosswalk on vehicle’s half of road or close to it. Pedestrians must not step off curb and into path of vehicle when vehicle does not have time to stop.
T.C.A. § 55-8-197: Any person that injures or kills a pedestrian while violating T.C.A. § 55-8-134 is guilty of a misdemeanor.
T.C.A. § 55-8-135: Pedestrians must yield to vehicles when crossing outside crosswalk. Pedestrians must use crosswalk at intersections with traffic control devices.
Summary: Failure of pedestrian to see approaching vehicle does not always constitute negligence as a matter of law. DeRossett v. Malone, 239 S.W.2d 366, 34 Tenn. App. 451 (1950). Drivers violation of statutory duty to yield right-of-way to pedestrian at crosswalk was negligence per se. Hunter v. Stacey, 141 S.W.2d 921, 24 Tenn. App. 158 (1940).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers regulated by statute. Tenn. Stat. § 56-7-1110. Rental agreement must advise renters that the purchaser of the insurance coverage or collision damage waiver offered may be covered for such claims on the purchaser’s personal motor vehicle insurance policy, and that if such insurance coverage exists under the renter’s personal insurance policy, and the coverage is confirmed, the renter may require the rental car company to submit any claims to the renter’s personal insurance carrier as the renter’s agent.
Recovery From Third-Party: No law specifically dealing with recovering loss of use for loss of rental vehicle. Where no other vehicle is available, lost profits may be recovered if proved with certainty, but an award of lost profits is erroneous in the absence of a showing that no other vehicle could be had. Lance Prods., Inc. v. Commerce Union Bank, 764 S.W.2d 207 (Tenn. App. 1988). As a general rule, lost profits are not recoverable when the plaintiff’s personal property has been completely destroyed and is not capable of being repaired. However, lost profits were recoverable when a shredding machine was in use when it was destroyed by a fire. Courts recognize the logic of a recovery of loss of use until a commercial vehicle can be replaced while rejecting the recovery when there was “no evidence that plaintiff could not have bought a new car promptly after the accident.” Tire Shredders v. ERM, 15 S.W.3d 849 (Tenn. 1999).
Rental Car Company’s Liability Insurance Primary or Excess
Summary: When the car rental agreement provides that coverage for the vehicle must be provided by the renter, the agreement controls. Tenn. Stat. § 56-7-1101(c).
Sudden Medical Emergencies While Driving
Sudden Loss of Consciousness Defense. The operator of a vehicle has a defense to a negligence action when the sudden loss of consciousness was not reasonably foreseeable to a prudent person. Beasley v. Amburgy, 70 S.W.3d 74 (Tenn. App. 2001); Schwandner v. Higdon, 2011 WL 1630982 (Tenn. App. 2011).
Defendant’s blackout was not reasonably foreseeable after taking Tylenol and two or three shots of Novocain for a tooth infection. Beasley v. Amburgy, 70 S.W.3d 74 (Tenn. App. 2001).
Suspension of Drivers’ Licenses
Administrative Suspension: If the driver fails to provide proof of financial responsibility in the form of proof of insurance, and has been issued the appropriate amount of fines for lack of a proof of insurance, their license may be suspended. T.C.A. § 55-12-210(c). License may be reinstated if the driver provides proof of financial responsibility and pays the appropriate fee. T.C.A. § 55-12-211.
Judgment: If a judgment is not satisfied within 60 days, the Commissioner will suspend the license of the judgment debtor until the judgment is paid, discharged, or satisfied. T.C.A. § 55-50-501(8)(b). Suspension will last until the judgment has been completely paid and/or discharged. T.C.A. § 55-50-501(8)(b).
Contact Information: State of Tennessee, Department of Safety, Financial Responsibility Section, 1150 Foster Avenue, P.O. Box 945, Nashville, TN 37202, (866) 903-7357, https://www.tn.gov/safety/driver-services.html.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: Tenn. Comp. R. & Regs. 0780-01-59-.01 to .06.
Summary: All non-OEM parts specified for use by the insurer must be marked with either the logo or name of the part manufacturer and the logo or name should remain visible after installation whenever possible. The written estimate must identify which parts are non-OEM parts and include a statement informing the insured that the part’s manufacturer, not the auto manufacturer, warrants the part. Lastly, non-OEM parts may not be used on vehicles from the current model year or the previous model year unless express permission is given from the insured to the insurer.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Tennessee Governmental Tort Liability Act: Tenn. Code § 29-20-201, et seq. (1973). General immunity granted to counties, municipalities, and other local governmental agencies, unless waived.
Notice Deadlines: None. Action must be brought within twelve (12) months. Tenn. Code § 29-20-305.
Claims/Actions Allowed: Exceptions to immunity: (1) Negligent operation of motor vehicles; (2) Negligent construction or maintenance of streets, alleys or sidewalks; (3) Negligent construction or maintenance of public improvements; (4) Discretionary functions; and (5) Failure to make or negligent inspection. Tenn. Code §§ 29-20-202 to 29-20-205.
Comments/Exceptions: Local government employees may be individually liable. If government liable, employee is immune, unless intentional. Tenn. Code § 29-20-310(b)(c). City responsible for keeping streets and sidewalks in safe repair and is liable for injuries caused by negligence. Shepherd v. City of Chattanooga, 76 S.W.2d 322 (Tenn. 1934).
Damage Caps: Damages may not exceed local government’s insurance coverage. Tenn. Code § 29-20-311.
Governmental entity must purchase insurance with minimum limits of:
Personal Injury: $300,000 Per Person. $600,000 Per Occurrence.
Property Damage: $100,000 per act or occurrence.
Tenn. Code § 29-20-403.
State Sovereign Immunity And Tort Liability
Tort Claims Act: None applicable to the State.
Tennessee Claims Commission created to hear and adjudicate claims against State. T.C.A. §§ 9-8-301 to 307 (1984). Established State’s liability in tort based on traditional concepts of duty and reasonably prudent persons’ standard of care. Act restricts State to the defense of absolute immunity only as an exception to Act’s broad abrogation of sovereign immunity. Lucas v. State, 141 S.W.3d 121 (Tenn. App. 2004).
Notice Deadlines: Written notice of claim must be filed (on Claim For Damages Form) with Division of Claims Administration (DCA) within applicable statute of limitations. DCA has 90 days to approve or deny. Then that jurisdiction transfers to Tennessee Claims Commission. T.C.A. § 9-8-402.
Claims/Actions Allowed: Claims Commission has exclusive jurisdiction to hear claims against State, it is limited to those claims listed in § 9-8-307(a). Common law negligence rules apply. Otherwise State is immune.
(1) operation of motor vehicle;
(3) dangerous conditions on real property (foreseeable and notice);
(4) legal/medical malpractice;
(5) negligent care of persons or property;
(6) negligent construction of sidewalks/buildings;
(7) design and construction of roads;
(8) highway conditions;
(9) negligent operation of Machinery; and
(10) many others.
Comments/Exceptions: Purchase of liability insurance does not waive sovereign immunity. 1984 Tenn. Pub. Acts 972; Op. Tenn. Atty. Gen. 85-087 (1985). Tennessee Governmental Tort Liability Act (§ 9-8-307) not applicable to State. Lucas v. State, 141 S.W.3d 121 (Tenn. App. 2004). If State is liable, employee is immune, unless outside scope of employment, intentional, or done for personal gain. T.C.A. § 29-20-310(b).
Damage Caps: $300,000 for bodily injury or death of any one person in any one accident, occurrence or act. $700,000 for bodily injury or death of all persons in any one accident. T.C.A. § 9-8-307(3)(e). No punitive damages. Bowden Bldg. Corp. v. Tennessee Real Estate Comm’n, 15 S.W.3d 434, 446 (Tenn. App. 1999). If claim exceeds $25,000, Tennessee Claims Administration turns it over to State Attorney General to investigate.
General Tort Laws/Statutes
Prohibits Broad Indemnity. Applies to Construction Contracts or Agreements. Tenn. Code § 62-6-123.
Not only applicable to architects and engineers.
Pure Several Liability. Generally several liability, except when defendants act in concert or for products liability cases. Banks v. Elks Club Pride of Tenn., 1102, 301 S.W.3d 214 (Tenn. 2010).
Where two (2) or more persons are jointly or severally liable in tort for the same injury to person or property, joint tortfeasors have a right of contribution, unless intentional. The right of contribution exists only in favor of a tortfeasor who has paid more than the proportionate share of the shared liability between two (2) or more tortfeasors for the same injury or wrongful death, in accordance with the procedure set out in § 29-11-104, and the tortfeasor’s total recovery is limited to the amount paid by the tortfeasor in excess of this proportionate share. Contribution action can be brought in original action or in a separate action. T.C.A. § 29-11-102; Velsicol Chem. Corp. v. Rowe, 543 S.W.2d 337, 340 (Tenn. 1976). A tortfeasor who enters into a settlement with a claimant is not entitled to recover contribution from another tortfeasor whose liability for the injury or wrongful death is not extinguished by the settlement nor in respect to any amount paid in a settlement which is in excess of what was reasonable. A liability insurer, who by payment has discharged in full or in part the liability of a tortfeasor and has thereby discharged in full its obligation as insurer, may be subrogated to the tortfeasor’s right of contribution to the extent of the amount it has paid in excess of the tortfeasor’s proportionate share of the shared liability between two (2) or more tortfeasors for the same injury or wrongful death, in accordance with the procedure set out in § 29-11-103. This provision does not limit or impair any right of subrogation or assignment arising from any other relationship and causes of action for contribution or indemnity are fully assignable and transferable. T.C.A. § 29-11-102(d)(e). The statute of limitations is one year after payment (judgment or settlement). Security Fire Protection v. City of Ripley, 608 S.W.2d 874 (Tenn. App. 1980).
Contributory Negligence/Comparative Fault
Modified Comparative Fault: 50% Bar. McIntyre v. Balentine, 833 S.W.2d 52 (Tenn. 1992). Damaged party cannot recover if it is 50% or more at fault. If 49% or less at fault, it can recover, although its recovery is reduced by its degree of fault. Plaintiff’s right to damages may be reduced by his own liability, but he will not be barred from recovering. McIntyre v. Balentine, 833 S.W.2d 52 (Tenn. 1992).
Dog Bite Laws
Dog owner is liable for all damages, regardless of prior knowledge of dog’s vicious propensities. Trespass is a defense. Tenn. Code Ann. § 44-8-413.
Economic Loss Doctrine
Majority Rule In a contract for the sale of goods where the only damages alleged are damages to the product itself, the rights and obligations of the buyer and seller are governed exclusively by the contract. Trinity Indus., Inc. v. McKinnon Bridge Co., Inc., 77 S.W.3d 159 (Tenn. Ct. App. 2001). Tennessee accepts the ELD as a “crude proxy” for the dividing line between what is tort and what is not. The Tennessee Supreme Court decided a case involving a farmer who had used a product on tomato plants in an attempt to protect plants from frost damage, resulting in economic loss in the form of lost profits due to damage to the tomatoes. Because the plaintiffs sued for “lost profits” instead of damage to the tomatoes, the Court held they could not proceed on tort theories – only warranty and contract. Ritter v. Custom Chemicides, Inc., 912 S.W.2d 128 (Tenn. 1995). In Ritter, the door appears to have been left open to pursue a tort action for damages to the product only when “the plaintiff has been exposed to an unreasonable risk of injury to his person or his property” as opposed to mere failure of the product to perform as expected. However, the Tennessee Supreme Court more recently announced that Tennessee does not adopt exceptions for unreasonably dangerous products or sudden, calamitous events. Lincoln Gen. Ins. Co. v. Detroit Diesel Corp., 293 S.W.3d 487 (Tenn. 2009). Following that decision, a federal court for the Middle District of Tennessee ruled that a refrigerator contained within an RV was not a “component” of the RV such that the ELD blocked a tort claim against the manufacturer of the refrigerator. Ratner v. Norcold, Inc., 2011 WL 1789967 (M.D. Tenn. 2011). The court determined that a refrigerator contained within an RV was not a “component” of the RV and would not bar a tort claim against the manufacturer of the refrigerator for damages caused to the RV itself or the RV owner’s personal property contained within the RV. The court held that the plaintiff’s claims were not for “self-destruction” of the product, but rather, damages to the RV and the plaintiff’s personal property. The court denied the defendant’s Motion for Summary Judgment.
The Tennessee Products Liability Act governs product liability in Tennessee. It says that a “product liability action” includes all actions brought for or on account of personal injury, death or property damage caused by or resulting from the manufacture, design, and marketing of any product. “Product liability action” includes, but is not limited to, all actions based upon the following theories: strict liability in tort; negligence; breach of warranty, express or implied; and breach of or failure to discharge a duty to warn or instruct. Tenn. Code Ann. § 29-28-102(6).
The ELD prevents recovery under tort law of (1) direct economic losses, i.e., injuries to the defective product itself, and of (2) consequential economic losses, i.e., losses stemming from the inability to use of the defective product as expected. Charter Oak seeks to distinguish these two types of non-recoverable economic loss from lost profits, which stem from tangential circumstances, i.e., from harm to “the plaintiff’s property other than the defective product itself.” When a defective product causes no personal injury and no property injury other than to the product itself, only purely economic loss has been sustained. However, Tennessee recognizes the “other property” exception to the ELD, noting that although tort victims cannot recover for physical damage caused to the defective product itself, they can recover for physical damage the product caused to “other property.” Charter Oak Fire Ins. Co. v. Broan Nutone, LLC, 2006 WL 8435269 (W.D. Tenn. 2006). However, it uses the “integrated package” approach in labeling the entire “product itself” defective if an integrated component part is defective. Tennessee Farmers Mut. Ins. Co. v. Ford Motor Co., 2002 WL 1332492 2002 WL 1332492 (Tenn. App. 2002). However, in Corporate Air Fleet of Tennessee, Inc. v. Gates Learjet, Inc., 589 F. Supp. 1076 (M.D. Tenn. 1984), the court allowed the plaintiff jet owner to sue in strict liability for faulty repairs to the jet after it had crashed, noting that although the only damage was to the defective product itself, recovery based on a theory of negligence.
In Charter Oak Fire Ins. Co., subrogee Charter Oak sued for damages to a building and lost profits, maintaining that losses resulting from the tortious failure of a product which are unrelated to the functional purpose of the product, such as lost profits due to business interruption caused by the inability to use one’s premises, can be recoverable under tort law. It noted that a bathroom fan is not an integrated component of the entire building. The court allowed recovery, noting that the fan was not a mechanical part of the building that was critical to its function. Instead, it was an addition, separate from the building, which independently constituted “other property.”
On August 2, 2021, the Tennessee Supreme Court in Milan Supply Chain Sols., Inc. v. Navistar, Inc., 2021 WL 3283067 (Tenn. Aug. 2, 2021), declined to announce a broad rule either extending the ELD to all fraud claims or exempting all fraud claims from the ELD. It held that for situations involving a contract between sophisticated commercial business entities and a fraudulent inducement claim seeking recovery of economic losses only, the Economic Loss Doctrine applies if the only misrepresentation[s] by the dishonest party concerns the quality or character of the goods sold. Under such circumstances, the court held that the other party is still free to negotiate the warranty and other terms to account for possible defects in the goods.
Willful Misconduct. Liability imposed on parents when child willfully or maliciously injures person or property. T.C.A. § 37-10-101. Cap on damages does not apply when parents know, or should know, of child’s propensity to commit injurious acts. T.C.A. § 37-10-103.
Minor’s Driving. Adult or guardian signing minor’s drivers’ license application will be jointly and severally liable for the motor vehicle negligence of the minor, and must also file proof of financial responsibility on behalf of minor. T.C.A. § 55-50-312.
The limit of liability is $10,000.00 unless there is a propensity to commit injurious acts. Child must be under 18-years-old.
Adverse Inference: The doctrine of spoliation of evidence permits a court to draw a negative inference against a party that has intentionally, and for an improper purpose, destroyed, mutilated, lost, altered, or concealed evidence. Foley v. St. Thomas Hosp., 906 S.W.2d 448, 453-54 (Tenn. Ct. App. 1995); Bronson v. Umphries, 138 S.W.3d 844, 854 -855 (Tenn. Ct. App. 2003). In Tatham v. Bridgestone Americas Holding, Inc., 473 S.W.3d 734 (Tenn. 2015), the Tennessee Supreme Court addressed whether intentional misconduct is a prerequisite to imposing sanctions for spoliation of evidence. The Supreme Court held that a finding of intentional misconduct is not a necessary prerequisite to imposing sanctions. Its presence, however, is a relevant factor in the totality of the circumstances to consider when determining whether to impose sanctions.
Statute of Limitations
Personal Property3 YearsT.C.A. § 28-3-105
Personal Injury/Death1 YearT.C.A. § 28-3-104
Breach of Contract/Written6 YearsT.C.A. § 28-3-109(a)(3)
Breach of Contract/Oral6 YearsT.C.A. § 28-3-109(a)(3)
Breach of Contract/Sale of Goods4 YearsT.C.A. § 47-2-275
Statute of Repose/Products10 YearsT.C.A. § 29-28-103*
Statute of Repose/Real Property4 YearsT.C.A. § 28-3-202**
Breach of Warranty/U.C.C.4 YearsT.C.A. § 47-2-725(1)
Workers’ Comp Third Party Case1 YearT.C.A. § 50-6-112
Strict Product Liability/Personal Injury1 YearT.C.A. § 28-3-104
Strict Product Liability/Property Damage3 YearsT.C.A. § 28-3-105
Statute of Limitations Exceptions
*Shorter of 10 years from first purchase date or use or within 1 year from expiration of useful life. T.C.A. § 29-28-103.
**4 years from substantial completion of improvement to real property. If injury occurred during 4th year after substantial completion, action must be brought in one (1) year after injury. Action involving real estate must be brought within five (5) years after substantial completion. T.C.A. § 28-3-202. If the loss occurs in the 4th year, repose runs one year from the date of loss. T.C.A. § 28-3-203. Exceptions: Fraud or person in possession as owner or tenant of property. T.C.A. § 28-3-205. “Improvement to real property,” not defined but courts have several approaches. Cartwright v. Presley, 2007 WL 161042 (Tenn. App. 2007). (1) a common-law fixture analysis, (2) the common-sense approach, and (3) as in Black’s Law Dictionary. State Farm Fire & Cas. Co. v. Pentair Filtration, Inc., 2011 WL 2118658 (E.D. Tenn. 2011).
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 1 Year. T.C.A. § 28-3-104.
Subrogation of Medical and Disability Benefits are allowed. York v. Sevier County Ambulance Auth., 8 S.W.3d 616 (Tenn. 1999). Made Whole and Common Fund Doctrines apply. Health Cost Controls, Inc. v. Gifford, 239 S.W.3d 728, 731 (Tenn. 2007); Kline v. Eyrich, 69 S.W.3d 197 (Tenn. 2002).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: Tenn. R. Evid. 702
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: No.
Failure To Disclose A Basis For Bad Faith: An insurer’s refusal to discuss settlement may be considered in the determination of a bad faith claim. Further, the failure of an insurer to disclose policy limits is relevant in determining if an insurer refused to discuss a settlement. State Auto. Ins. Co. of Columbus, Ohio v. Rowland, 221 Tenn. 421, 427 S.W.2d 30 (1968). Even though there is no pre-suit duty to disclose policy limits, an offer of settlement made within policy limits triggers an insurer’s duty to make a good faith effort to resolve a claim such as making counteroffers or disclosing limits. Id.
One-Party Consent: It is not unlawful for an individual who is a party to or has consent from a party of an in-person or electronic communication to record and or disclose the content of said communication unless the person is doing so for the purpose of committing a tortious or criminal act. An individual may also disclose the content of any electronic communication that is readily accessible to the general public. Tenn. Code Ann. § 39-13-601; Tenn. Code Ann. § 39-13-604; Tenn. Code Ann. § 40-6-303.
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 1 year for personal injury and wrongful death. T.C.A. § 28-3-104. Property damage is 3 years. T.C.A. § 28-3-105. Breach of Warranty is 4 years. T.C.A. § 47-2-725(1). Discovery Rule Applies. Statute of Repose is 10 years. T.C.A.§ 29-28-103.
Liability Standards: Negligence, Strict Liability, Warranty.
Fault Allocations: Modified Comparative. McIntyre v. Balentine, 833 S.W.2d 52 (Tenn. 1992).
Non-Economic Caps/Limits On Actual Damages: Yes.
Punitive Y/N and Limits: Yes (Limits).
Heeding Presumption?: No. Payne v. Novartis Pharmaceutical Corp., 767 F.3d 526 (6th Cir. 2014).
Innocent Seller Statute: Yes, T.C.A. § 29-28-106.
Joint and Several Liability: Limited.
Available Defenses: Misuse; Alteration; Learned Intermediary; State of the Art; Compliance With Government Standards; Seatbelts; Alcohol/Drugs.
Restatement 2nd or 3rd?: Restatement 2nd
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Statute/Regulation: Tenn. Comp. R. & Regs. 0780-01-05-.10(1)(b). Standards for Prompt, Fair, and Equitable Settlements Applicable to Fire and Extended Coverage Type Policies with Replacement Cost Coverage.
Caselaw: Where the insured had a replacement cost policy, it was appropriate for the insurer to bear the costs associated with replacing undamaged shingles for aesthetic reasons. Hutcherson v. Tennessee Farmers Mut. Ins. of Columbia, 1986 WL 9608 (Tenn. App. Ct., Sept. 3, 1986).
Comments: Chapter 0780-01-05-.10(1)(b) provides that in a Replacement Cost policy, “when replaced items do not match in quality, color or size, the insurer shall replace items so as to conform to a reasonably uniform appearance.”
Condominium/Co-Op Waiver of Subrogation Laws
Associations shall maintain property insurance and general liability insurance as to the common elements. Additionally, the insurer must waive rights to subrogation against any unit owner or member of their household unless it can be shown that the individual intended to cause the loss. T.C.A. § 66-27-413.
Damage to Property Without Market Value
Service Value: “…the only value … placed on such equipment is the reasonable cost of replacing it with like equipment which will perform the same function, less the salvage value of the replaced equipment, and does not involve any depreciation.” Middle Tennessee Elec. Membership Corp. v. Barrett, 410 S.W.2d 914 (Tenn. Ct. App. 1966).
Intrinsic Value: “One criterion of damages is the actual value to who owns it, and this is the rule when the property is chiefly or exclusively valuable to him; such articles, for instance, as family pictures, plate, and heirlooms.” Bateman v. Ryder, 64 S.W. 48 (Tenn. 1901).
Sentimental Value: “…the primary measure of damage for loss of property is the cost of replacement on the open market if the article is obtainable in the open market, but, if not, the useful value to the owner, as distinguished from “sentimental value.” Merritt v. Nationwide Warehouse Co., Ltd., 605 S.W.2d 250 (Tenn. Ct. App. 1980).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment And Depreciation Of GCOP/Sales Tax: No applicable case law, statutes, administrative rules, or other guidance with regard to the calculation and/or depreciation of GCOP.
According to a U.S. Federal District Court, a tenant’s liability to the landlord’s insurer for negligently causing a fire depends on the intent and reasonable expectations of the parties to the lease as ascertained from the lease as a whole. Tate v. Trialco Scrap, Inc., 745 F.Supp. 458, 467 (M.D. Tenn. 1989) (subrogation was denied because the lease required the lessor to purchase insurance coverage on the building). In 2007, however, the Tennessee Court of Appeals decided that determining the intent and expectations of the parties is not the best approach and indicated that absent an express agreement to the contrary, a tenant should be considered a “co-insured” under the landlord’s property casualty insurance policy, and the insurance carrier should therefore be precluded from asserting subrogation rights against the tenant. Dattel Family Limited Partnership v. Wintz, 250 S.W.3d 883 (Tenn. App. 2007). Federal court decisions have followed suit, and confirmed that the “express-agreement exception” to the general rule that a tenant is an implied coinsured under landlord’s fire insurance policy only applies where the lease includes a clear expression of intent that insurance be for benefit of the lessor only. Am. Reliable Ins. Co. v. Addington, 559 F. Supp. 3d 656 (M.D. Tenn. 2021). In other words, the “Sutton Rule” prohibits subrogation actions against tenants whose leases are “silent” with regard to insurance. Allstate Ins. Co. v. Watson, 2005 WL 457846 (Tenn. App. 2005), aff’d, 195 S.W.3d 609 (Tenn. 2006). A lease silent regarding fire insurance coverage cannot “express[ly]” exclude tenants from that coverage. However, where the parties responsible for starting the fire were not the direct tenants of the landlord, the Sutton Rule will not apply. Am. Reliable Ins. Co. v. Addington, 2022 WL 17413579 (M.D. Tenn. 2022), the court considered whether a tenant’s live-in partner and the partner’s adult son constituted a “family” in the underlying lease and, in turn, were to be considered “implied co-insureds: under the Sutton Rule. The District Court determined that the arrangement did constitute a “family” and that the Sutton Rule barred subrogation.
In Patton v. Pearson, 2023 WL 3815062 (Tenn. App. 2023), Anita Pearson signed a lease agreement to rent a home from John Patton. Under the terms of the lease, the landlord was not responsible for damage to the tenant’s personal property in the event of a fire. The lease also provided that the tenant would be responsible for any damage to the premises caused by her misuse or neglect, although she was not responsible for any normal wear and tear. The lease was silent as to which party would maintain fire insurance for the premises itself and regarding implied co-insured status on any insurance policy. The tenant purchased fire insurance to protect her personal property. The landlord purchased fire insurance for the premises. The tenant’s cat caused a fire and the landlord sued her for the damages. The court noted that there were three approaches regarding when a tenant was an implied coinsured:
- Absent a clear contractual expression to the contrary, the landlord’s carrier can sue the tenant in subrogation. Dattel, supra. Unless the agreement expressly provides to the contrary, the tenant will not be considered a coinsured.
- Some jurisdictions “seeking to avoid a per se rule, hold that the applicability of the doctrine of subrogation should be assessed on a case-by-case basis and governed by the intent and reasonable expectations of the parties under the facts of the given case.”
- The Sutton Rule: the Sutton Rule: Absent a clearly expressed agreement to the contrary, the tenant is presumed to be a co-insured on the landlord’s insurance policy, and therefore the landlord’s insurance carrier has no right of subrogation against the negligent tenant.
The Dattel court rejected the first approach because the court found it to be “not consonant with the realities of residential leasing or expectations that would be reasonable for the parties.” Furthermore, the first approach “promotes economic waste by, in effect, requiring both the landlord and each tenant to obtain duplicate insurance on the tenant’s leased premises and the entire building.” Dattel, supra. Dattel also rejected the middle ground second approach. It adopted the Sutton Rule. However, the Sutton Rule sets a default for when the lease agreement is silent. Nothing in the Dattel decision itself prevents the parties from contracting so that the tenant would not be an implied co-insured and would be subject to a subrogation action brought by the insurer. See Patton v. Pearson.
In American Reliable Insurance Company v. Addington, 644 F.Supp.3d 453 (M.D. Tenn. 2022), the landlord’s carrier brought a subrogation suit against a tenant and the estate of the deceased tenant, seeking to recover amount paid to landlord for damages caused when tenants purportedly misused kerosene heater. The court reminded us that absent an express agreement to the contrary in a lease, a tenant and his or her landlord are implied coinsureds under the landlord’s fire policy; in those circumstances, the landlord’s insurer is precluded from bringing a subrogation action against negligent tenant. This means that the landlord is not allowed to subrogate when the lease is “silent” as to insurance, because a lease silent regarding fire insurance coverage cannot expressly exclude tenants from that coverage.
An insurer cannot subrogate against a wrongdoer if the wrongdoer is an insured under the same policy. Dattel Family, Ltd. Partnership v. Wintz, 250 S.W.3d 883 (Tenn. App. 2007) If a policy is taken out by the mortgagor for the mutual benefit of the mortgagor and mortgagee, mortgagor and mortgagee are co-insured parties and, therefore, subrogation is forbidden against either party. Miller v. Russell, 674 S.W.2d 290 (Tenn. Ct. App. 1983). The ASR does not prevent an insurer from bringing a subrogation claim against its own insured if the underlying policy does not cover the risk at issues. Phoenix Co. v Estate of Garnier, 212 S.W.2d 270 (Tenn. Ct. App. 2006). In Certain Underwriters at Lloyds, London v. Sunbelt Rentals, Inc., 790 Appx. 723 (6th Cir. 2019), the 6th Circuit ruled that in a builder’s risk policy, where the policy was ambiguous and could be understood in two ways as to whether Lloyd’s could sue the tortfeasor (additional insured under the policy), the question must be resolved in favor of the insured. Therefore, the court held that pursuing Sunbelt Rentals would violate the anti-subrogation rule.
Under the Tennessee statute, a court can award restitution to a “victim” of criminal defendant’s conduct. T.C.A. § 40‐35‐304 However, appropriate Tennessee case law has determined that an insurer will not qualify as a victim for purposes of restitution recovery. State v. Alford, 970 S.W.2d 944 (Tenn. 1998).
Made Whole Doctrine
Tennessee adheres and subscribes to the Made Whole Doctrine. Wimberly v. American Cas. Co. of Reading, Pa., 584 S.W.2d 200 (Tenn. 1979); York v. Sevier County Ambulance Auth., 8 S.W.3d 616 (Tenn. 1999); Abbott v. Blount County, 207 S.W.3d 732 (Tenn. 2006). An insurer’s contractual right to subrogation and reimbursement are both subject to the Made Whole Doctrine. York, supra. The Supreme Court in Wimberly established that the right of an insured to be made whole before subrogation rights could be enforced could not be waived or modified by the insurance policy. Whether an insurer’s right of subrogation is contractual or equitable only comes into play to determine “whether there is a right of subrogation in the first instance, rather than in the enforcement of such right.” Id. While an insurer can not contractually modify the common law Made Whole Rule, a failure on the part of the insured to obtain contractually required permission of the insurer to a settlement preserves the latter’s subrogation rights even if the insured is not made whole. Eastwood v. Glens Falls Ins. Co., 646 S.W.2d 156, 158 (Tenn. 1983); Rader v. Traylor, No. 03A01-9403-CV-00079, 1994 Tenn. App. LEXIS 418, at *4-5 (Aug. 1, 1994). Thus, where the insurer does not participate in the settlement negotiations between its insured and the tortfeasor or does not waive any subrogation rights, such rights must be honored and the Made Whole Doctrine is inapplicable. This exception to the Made Whole Rule is subject however, to a further caveat which provides that if the parties agree that the insured has not been made whole or the underlying facts make clear that the recovery is for less than full compensation, the insurer’s subrogation claim is extinguished. Doss v. Tenn. Farmers Mut. Ins. Co., No. M2000-01971-COA-R3-CV, 2001 Tenn. App. LEXIS 906, at *10-11 (Dec. 10, 2001).
However, it is the insured in Tennessee who has the burden of proving that he is not made whole by a particular settlement or recovery. Hamrick’s, Inc. v. Roy, 115 S.W.3d 468 (Tenn. App. 2002); Nelson v. Innovative Recovery Services., Inc., 2001 WL 1480515 (Tenn. App. 2001) (unreported decision); Abbott, supra. An insured must be made whole for damages before an insurer is entitled to either subrogation or reimbursement, even if the insurer claims that it made a payment because it did not know of a third-party’s liability. Healthcost Controls, Inc. v. Gifford, 108 S.W.3d 227 (Tenn. 2003). This is true regardless of the language in the insurance policy. Id.; Blount, supra. It is also true regardless of whether the insurer is asserting a right of subrogation or a right of reimbursement. Simpson v. Doe, 2006 WL 1627292 (Tenn. App. 2006). Whether an insured has been made whole is a matter of fact, upon which the insured has the burden of proof. Gillford, supra. Furthermore, whether or not an insured has been made whole must be determined by considering all benefits and recoveries received as a result of an incident. Id. Basically, this case means that if the insured recovers $100,000 and there is a lien of $101,000, it is not presumed that the insured has not been made whole. Instead, the court would say that the plaintiff suffered a minimum of $101,000 in damages but received $201,000 in compensation, improving the chances of recovery in spite of the made whole argument.
It should be noted that where an insured settles directly with a tortfeasor, with full knowledge of an insurer’s subrogation rights, and that settlement, together with the benefits paid under the insurance policy, do not make the insured whole, no subrogation will be allowed because the insured was not made whole. Wimberly, supra; Farmer, supra. In the absence of a judgment or jury verdict establishing a specific dollar value of each element of an injury, a court can make an equitable determination as to whether an injured party has been made whole. Farmer, supra. Ordinarily, the injured party may make such determination by settlement. Failing that, it may be made by the jury or by the judge. Id. In extraordinary circumstances, equity may intervene and make such a determination. Id.
In the absence of a judgment or jury verdict establishing a specific dollar value of each element of an injury, a court can make an equitable determination as to whether an injured party has been made whole. Id. Ordinarily, the injured party may make such determination by settlement. Failing that, it may be made by the jury or by the judge. Id. In extraordinary circumstances, equity may intervene and make such a determination. Id.
The Made Whole Doctrine applies in both legal and conventional subrogation or reimbursement disputes between insurers and their insureds. Gifford, supra; York, supra.; Wimberly, supra. Thus, where the issue of whether the insured has been made whole is raised at the trial level the insurer’s subrogation claim is stayed until this issue is resolved.
Tennessee recognizes two methods for determining the subrogation rights of insurers in the context of statutory subrogation disputes. The primary objective of the court under both frameworks is to identify and give effect to the intent and purpose of the legislature. Blankenship v. Estate of Joshua, 5 S.W.3d 647, 651 (Tenn. 1999); Castleman v. Ross Eng’g, Inc., 958 S.W.2d 720, 724 (Tenn. 1997); Graves v. Cocke County, 24 S.W.3d 285, 289 (Tenn. 2000). Under one analysis, if the statute merely creates a subrogation right without embracing or abandoning the made whole rule the court is prone to conclude that the legislature “intended for the statute to reflect the equitable principle that subrogation is subject to the Made Whole Doctrine.” Blankenship, supra. This method is based on the idea “that subrogation is founded upon principles of equity and ‘not dependent upon statute or custom or … contract.”’ Wimberly, supra. The second method is used when the statute provides an insurer with a statutory lien, such as in workers’ compensation. Pursuant to this analysis, a statutory lien is not subject to the equitable requirement that the insured be made whole. Castleman, supra; Graves, supra.
In Abbott, the Tennessee Supreme Court determined that insurers may not bind the insured’s rights to settlements by using artful contract terms because “[c]ontract terms that require the consent of the insurer would allow the insurer to withhold consent from any settlement that does not make the insured whole and thereby compel the insured to seek a larger award at trial.” Abbott, supra.
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Common Law CSR. Plaintiff entitled to recover the “reasonable and necessary expenses” without regard to whether some or all medical expenses paid by insurance or another source. State Auto. Mut. Ins. Co. v. Hurley, 31 S.W.3d 562 (Tenn. 2000). Evidence of collateral source not admissible in evidence. Donnell v. Donnell, 415 S.W.2d 127 (Tenn. 1967). Follows Restatement (Second) of Torts § 920A. Nance ex rel. Nance v. Westside Hosp., 750 S.W.2d 740 (Tenn. 1988).
Recovery Of Medical Expenses Rule:
Private Insurance: CSR applies to evidence regarding medical expenses. Plaintiffs may use evidence of the full, undiscounted medical bills as proof of reasonable medical expenses, and defendants may not use discounted rates paid by an insurance company for any purpose. Defendants are free to use any other evidence to show that full medical expenses are not reasonable, so long as that evidence does not violate the CSR. Dedmon v. Steelman, 2017 WL 5505409 (Tenn. 2017).
Medicare/Medicaid: Evidence of Medicare or Medicaid write-downs not admissible under CSR. Frye v. Kennedy, 991 S.W.2d 754 (Tenn. App. 1998).
Medical Malpractice: CSR doesn’t apply in “health care liability actions.” T.C.A. § 29-26-119. (Limits damages, not evidence).
Workers’ Compensation: CSR doesn’t apply in workers’ comp cases. State Auto. Mut. Ins. Co. v. Hurley, 31 S.W.3d 562 (Tenn. Workers Comp. Panel 2000). In small claims, there is rebuttable presumption that medical bills of $4,000 or less, itemized and attached to complaint, are “reasonable and necessary.” Defendant must provide evidence to contrary. Only applies to personal injury actions. T.C.A. § 24-5-113(a). In larger claims, if itemized copies of medical bills of any amount served on party 90 days prior to trial, there is presumption of reasonableness, but not necessity. Must be rebutted at least 45 days prior to trial. T.C.A. § 24-5-113(b). Plaintiff must always establish causation. Iloube v. Cain, 397 S.W.3d 597 (Tenn. App. 2012).
Employee Leasing Laws
Tennessee has a specific statute dealing with professional employer organizations, also known as a “PEO,” “staff leasing company”, “registered staff leasing company”, “employee leasing company”, or “administrative employer.” T.C.A. §§ 62-43-102 to 114. It is known as the “Tennessee Professional Employer Organization Act.” This Act went into effect on May 21, 2012. Rules promulgated pursuant to the former “Tennessee Employee Leasing Act” that were in effect prior to May 21, 2012, remain in effect unless such rules are in conflict with the new Act. T.C.A. § 62-43-114.
The PEO and the client company are both entitled to the exclusive remedy protection based on the workers’ compensation policy secured by either party. T.C.A. § 62-43-113. Section 62-43-108 is part of the Tennessee Professional Employer Organizational Act and provides as follows:
(3) A client shall not be liable for the acts, errors, or omissions of a professional employer organization, or of any covered employee of the client and a professional employer organization when such covered employee is acting under the express direction and control of the professional employer organization;
(4) A professional employer organization shall not be liable for the acts, errors, or omissions of a client or of any covered employee of the client when such covered employee is acting under the express direction and control of the client.
Hospital Lien Laws
Statute: Tenn. Stat. §§ 29-22-101 to 29-22-107. Hospital Liens.
(1) Within 120 days of discharge, file verified statement with office of the clerk of circuit court of county in which hospital is located. Fee: $10.
(2) Include name, address of patient, name and address of agent or operator of hospital, dates of admission and discharge, the amount claimed, and (if known, the name and address of party responsible for causing injuries.
(3) Within 10 days of filing, send copy by registered mail, postage prepaid to each person named in notice, including attorneys.
(4) To challenge, person must file motion to quash or reduce in the same court.
(5) Notice filed after third-party settlement not valid against third-party insurer (not within first 30 days, however). § 29-22-102.
Comments: Any hospital (private, public) has automatic lien up to 1/3 of the third-party recovery. § 29-22-101(b). Hospital lien subordinate to attorney’s fee lien, but only if recovery is insufficient to pay both lien and fees. § 29-22-101(b); Breazeale v. Hensley, 2009 WL 196026 (Tenn. App. 2009). It is also subordinate to mechanic’s lien if auto involved. § 29-22-101(b). Third-party release not valid unless lienholder joins and signs release. Lienholder has action against tortfeasor. Suit can be brought in lienholder’s county. § 29-22-104. Third party cannot include name of hospital/lienholder on settlement check. § 29-22-106. Hospital has no independent action against tortfeasor outside of lien on third-party action. § 29-22-107.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP.
Statutory Employer Law: A principal contractor, intermediate contractor or subcontractor is liable for compensation to any employee injured while in the employ of any of the subcontractors of the principal, intermediate contractor, or subcontractor and engaged upon the subject matter of the contract to the same extent as the immediate employer. T.C.A. § 50-6-113.
Comments: Creates “statutory employers” in situations where injured workers are covered by workers’ compensation insurance provided either by their immediate employers or principal contractors, intermediate contractors, or other sub-contractors. The principal contractor is not considered a “third party” subject to a common-law action by the employee under § 50-6-112, even if it did not pay benefits. Troupe v. Fischer Steel Corp., 236 S.W.3d 143 (Tenn. 2007); Scott v. AMEC Kamtech, Inc., 583 F.Supp.2d 912 (E.D. Tenn. 2008).
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? Undecided.
Statute/Case Law: None.
Rule Summary: There is no authority or precedent regarding the attempted recovery of damages for increased workers’ compensation insurance premiums by an employer from a third-party tortfeasor.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
“Employers may, at their own expense, utilize case management, and if utilized, the employee shall cooperate with the case management[.]” T.C.A. § 50-6-123.
Courts have disagreed with the position that case management services are primarily for the benefit of employees such as Ms. Watson. The case management system discussed by statute is clearly contemplated as a cost-control measure for the benefit of the employer. Memphis Light Gas & Water Division v. Watson, 584 S.W.3d 863 (Tenn. App. 2019).
In 2004, the Tennessee Supreme Court considered an employer’s subrogation interest under § 50-6-112(c). At that time case management services were required by law given the amount of medical costs involved, and yet, notably, there is no mention of the employer’s subrogation interest extending to any such services. Hickman v. Continental Baking Co., 143 S.W.3d 72 (Tenn. 2004).
Whether or not nurse case management fees could be recovered by a subrogated workers’ compensation carrier was addressed for the first time in Memphis Light Gas & Water Division v. Watson, 584 S.W.3d 863 (Tenn. App. 2019). That court held that an employer’s workers’ compensation subrogation lien, codified at §50-6-112(c)(1), does not include recovery of nurse case management fees, even though such expenses are required by law and constitute a clear benefit to the employee. The court noted that the use of management services is a discretionary matter.
Some have argued that the Commissioner of the Department of Labor retained a requirement for case management after it reached an appropriate threshold. Although this precise statement may have been true at one time following the 2004 statutory amendment pertaining to case management, in 2007 this regulation—which had at one time required case management in certain cases—was itself amended to state:
An employer or insurer is encouraged, but not required, to provide case management services. Tenn. Comp. R. & Regs. 0800-2-7-.03(1) (2007).
Because providing case management is not required under the statutory and regulatory framework the court held a subrogated carrier cannot recovery such fees and costs.
As of January 1, 2016, Tennessee requires compliance with ODG Guidelines. See the state of Kentucky and the Preamble above for an argument that the subrogated carrier can recover the “case manager’s” fee for development of a “treatment plan,” utilizing the ODG guidelines.
With regard to reimbursement of workers’ compensation case attorneys’ fees, the fees a workers’ compensation attorney in Tennessee receives are actually a percentage of his/her client’s recovery. Tennessee workers’ compensation law establishes 20% as what is allowable. In Rushing v. Crockett, 2005 WL 415177 (Tenn. App. 2005), the attorney (Rassas) tried the work comp case and obtained a disability award of $23,126.40. The court allowed a 20% fee ($4,625.28) “out of” that recovery to be paid to Rassas. Attorney Rassas then filed a third-party action and the employer (Montgomery County) intervened and participated, asserting a lien for the entire $23,126.40 plus medical expenses, for a total lien of $43,487.40. The trial court apportioned 90% of the 1/3 fee between Rassas and the attorney for the employer. The trial court also deducted the $4,625.28 (20% fee for trying the comp claim) from the 90% portion of the fee awarded to Rassas, because the trial court felt “that Mr. Rassas has already been paid the sum of $4,625.28 as a fee in the worker’s compensation matter and that this amount should be deducted so as to avoid dual fee recovery.” On appeal, the Court of Appeals said the deduction of the workers’ compensation case fee ($4,625.28) was inappropriate. Although the court doesn’t come out and address our issue, the holding implies that the $4,625.28 fee was included in the $43,487.40 lien.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: T.C.A. § 50-6-112
Waiver Allowed? Yes. Tennessee courts have recognized that a workers’ compensation carrier has the ability to waive subrogation against a third party without prejudice to the employee’s right to pursue a third-party action. International Harvester Co. v. Sartain, 222 S.E.2d 854 (Tenn. App. 1948).
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: The effect of a waiver of subrogation on the carrier’s rights, including its right to enforce its statutory lien, has not yet been decided.
Other Applicable Law: Caselaw allowing waiver refers to the insurer’s ability to waive subrogation, and not the employer’s ability to waive subrogation for the insurer and without the insurer’s consent.
Statute of Limitations: 1 Year. T.C.A. § 50-6-112.
Can Carrier Sue Third Party Directly: Yes, after 1 year. A carrier has an additional 6 months to file for a total of 18 months.
Right to Intervene: Yes.
Recovery from UM/UIM Benefits: No.
Subrogation Against Medical Malpractice: Yes.
Subrogation Against Legal Malpractice: Undecided.
Recovery Allocation/Equitable Limitations: No Special Formula. First Money.
Employer Contribution/Negligence: No, a defendant can introduce evidence to show employer cause in fact.
Attorney’s Fees/Costs: Pro-rata if no active participation by carrier.
Future Credit: Yes, but no credit against unknown or incalculable future med benefits, unless carrier proves likelihood and the amount of future medicals.
Auto No-Fault: No.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statute expressly includes illegal workers. Tenn. Code Ann. § 50-6-102(10)(A).
Case Law: Undecided
Comments/Explanation/Other: Although Dickey did not deal with an illegal alien, it did deal with the issue of “employment which has been obtained by the making of false statements…is still employment…illegality will not …destroy compensation coverage.” Fed. Copper & Aluminum Co. v. Dickey, 493 S.W.2d 463 (Tenn. 1973).