                  IN THE SUPREME COURT OF TENNESSEE
                             AT NASHVILLE
                                   June 3, 2010 Session

              KRISTEN COX MORRISON v. PAUL ALLEN ET AL.

           Appeal by Permission from the Court of Appeals, Middle Section
                        Chancery Court for Davidson County
                  No. 05-1489-1    Claudia Bonnyman, Chancellor


                No. M2007-01244-SC-R11-CV - Filed February 16, 2011




C ORNELIA A. C LARK, C. J., concurring in part and dissenting in part.

       I concur in Part I of the majority opinion, holding that the Plaintiff is entitled to a
judgment against the Defendants based upon their failure to procure a life insurance policy
not subject to contest. I also concur in Part III, reversing the trial court’s award of $300,000
against the Defendants for the cancellation of the First Colony policy; in Part IV, declining
to address whether damages under the Tennessee Consumer Protection Act might be
available based on the Defendants’ actions regarding the American General policy; and in
Part V, declining to address comparative fault. However, I respectfully dissent from the
majority’s conclusion in Part II that the Defendants are not entitled to a credit of $900,000.
Accordingly, I would find it unnecessary to address the issue of the ad damnum clause in Part
VI.

        As the majority recognizes, a successful plaintiff in a breach of contract action is
entitled to an award which will place her in the same position as if the contract had not been
breached. See, e.g., Simonton v. Huff, 60 S.W.3d 820, 828 (Tenn. Ct. App. 2000) (“It is well
settled that the purpose of awarding damages in an action for breach of contract is to place
the non-breaching party in the same position that he or she would have been in if the contract
had been fully performed.”). Thus, where an insurer wrongfully breaches a contract to pay
one million dollars, the insured is entitled to compensatory damages in the amount of one
million dollars. Yet, the majority holds that the Plaintiff in this case is entitled to
substantially more than that because she sued the insurer on multiple theories, only one of
which was breach of contract, and then settled her multiple claims without identifying
precisely the legal theory or theories upon which the insurer agreed to pay. I cannot agree
with this result, which, in my view, provides a windfall to the Plaintiff; encourages a “kitchen


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sink” approach to filing complaints; and adds an unnecessary bone of contention for parties
trying to negotiate a settlement. It is, moreover, contrary to the well-settled rule of law that
“an injured party may not profit from a defendant’s breach.” Adams TV of Memphis, Inc.
v. ComCorp of Tenn., Inc., 969 S.W.2d 917, 922 (Tenn. Ct. App. 1997). See also Hennessee
v. Wood Group Ents., Inc., 816 S.W.2d 35, 37 (Tenn. Ct. App. 1991); Action Ads, Inc. v.
William B. Tanner Co., 592 S.W.2d 572, 575 (Tenn. Ct. App. 1979).

        The majority recognizes that “under ordinary circumstances, an independent insurance
agent who is sued on a breach of contract claim for failing to procure an enforceable
insurance policy is entitled to an offset in damages by the insurance company’s settlement
on the policy.” The majority then goes on to conclude that this case presents something other
than ordinary circumstances because the Plaintiff sued American General not only for breach
of contract, but also for negligence, respondeat superior (which simply imputes the liability
for another’s tortious conduct), and for violating the provisions of the Tennessee Consumer
Protection Act (which has the potential for resulting in an award over and above
compensatory damages), and the record does not reveal upon which of these theories the
parties settled their litigation. In support of this novel conclusion, the majority relies on two
cases from the State of Washington: Pederson’s Fryer Farms, Inc. v. Transamerica Insurance
Co., 922 P.2d 126 (Wash. Ct. App. 1996), and Weyerhaeuser Co. v. Commercial Union
Insurance Co., 15 P.3d 115 (Wash. 2000) (en banc). In my view, these cases are inapposite
to this lawsuit.

        Pederson’s Fryer Farms dealt with an insured’s efforts to recover clean-up costs after
it discovered environmental contamination from a leaking underground gasoline tank.
Pederson’s, the insured, had policies with at least three insurance companies. It settled with
two of the insurers and obtained a jury verdict against the third, Transamerica. Transamerica
sought a credit for the amount of the settlement with the other two insurers. The trial court
refused to reduce the judgment and Transamerica averred error. The Washington Court of
Appeals found no error because the settlement released the two insurers from not only the
claim at issue, but from all liability for past and future environmental claims.1 Pederson’s
Fryer Farms, 922 P.2d at 139. Accordingly, it was impossible to discern the portion of the
settlement amount that was attributable to the clean-up costs that were the subject of the
jury’s verdict, and “[t]hus, no showing of double recovery was made.” Id. In stark contrast,
the settlement with American General in this case does not implicate any potential past or


        1
          Unlike a life insurance policy which is payable only upon a singular event – the death of the insured
– the policies at issue in Pederson’s appear to have been general liability policies. Obviously, it is entirely
feasible that the plaintiff in Pederson’s would be so unfortunate as to discover at some later date another
environmental contamination problem, arising perhaps from another buried but as yet undiscovered gasoline
tank that has been leaking for many years, or from a future above-ground spill of a hazardous substance.
From what we can ascertain from the opinion, the insurers with whom Pederson’s settled would be released
from these additional and distinct claims.

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future claims. The Plaintiff’s causes of action against American General in this case arise
out of a single transaction–the insurance policy–which was triggered by a single incident–Mr.
Morrison’s death. The entire amount of the settlement is therefore attributable to a single set
of unique facts.

        The majority declares that, like the settlement in Pederson’s, “the Plaintiff’s settlement
agreement also released American General from all past, present, and future claims.” I
disagree. As noted in footnote 7 of the majority opinion, the release pertains to causes of
action etc. “‘relating to claims in the matter of the arbitration’ in this case.” The “matter of
the arbitration” is the one million dollar life insurance policy issued on behalf of Mr.
Morrison. The release is therefore limited by its very terms to the single subject of this
particular lawsuit: the policy on Mr. Morrison’s life issued by American General upon the
application documents prepared by the Defendants. This release is simply not comparable
to the release obtained in the Pederson’s case, and the reasoning underlying the denial of an
offset in Pederson’s is not applicable here.

        The majority also asserts that “[w]e cannot assume . . . from the nature of this
[settlement and release] agreement that American General settled solely on the basis of its
failure to pay on the insurance policy.” I am mystified by this assertion. On what other basis
did the Plaintiff have a claim against American General except its failure to pay on the
policy? Regardless of whether the Plaintiff characterized American General’s refusal to
perform under the policy as a breach of contract or a tort, in this case the only duty American
General could have owed the Plaintiff was to perform under the policy by paying her one
million dollars on her husband’s death. Moreover, American General would have avoided
the Plaintiff’s claim under the TCPA had it paid on the policy without contest, even if, as the
Plaintiff averred, the coverage was otherwise “illusory.” See Tenn. Code Ann. § 47-18-
109(a)(1) (2001) (affording cause of action only where plaintiff “suffers an ascertainable loss
of money or property”).

       Similarly to Pederson’s Fryer Farms, the Weyerhaeuser case dealt with environmental
clean-up costs, although on a much grander scale and involving approximately 130 sites
across the nation. Weyerhaeuser, 15 P.3d at 120. As in the Pederson’s case, the plaintiff
insured settled with several of its insurers. Commercial Union (“CU”) sought to benefit from
these settlements by asking for a setoff against the verdicts rendered against it by the jury.
Citing Pederson’s, the trial court denied CU’s request on the basis that CU had failed to carry
its burden of proving that, absent the setoff, the plaintiff would benefit from a double
recovery. The Supreme Court of Washington affirmed, agreeing with the trial court that
substantial evidence supported Weyerhaeuser’s contention that it had not been made whole
by the settlements and that CU had “failed to carry its burden to demonstrate Weyerhaeuser
has been fully compensated for its liabilities.” Weyerhaeuser, 15 P.3d at 127. Weyerhaeuser
may therefore be read as supporting the basic principle that plaintiffs suffering from a breach


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of an insurance contract are to be placed in the same position as if the contract had been
performed through an award of compensatory damages, and are not entitled to more than
that.2 Weyerhaeuser does not stand for the proposition that, by suing on multiple theories,
and then settling without identifying the legal theory underpinning the settlement, the
plaintiff is not subject to the general rule regarding offsets.3

       In sum, the issue of offset in the instant case should not be determined on the basis
of these two cases from Washington State because the instant case neither involves the
potential for past or future claims, nor does it involve a complicated set of facts from which
to draw differing opinions about the total amount of damages suffered by the Plaintiff. When
American General refused to pay on its one million dollar policy insuring the life of Mr.
Morrison, the Plaintiff suffered compensable damages in the amount of one million dollars.
The Defendants proved that the Plaintiff recovered a settlement of $900,000 in compensation
for these damages. There is no mystery about what the $900,000 settlement proceeds
represent. There is no mystery about the total damages suffered by the Plaintiff. In my view,
the Defendants are entitled to an offset in the amount of $900,000. Therefore, I respectfully
dissent from Part II of the majority’s opinion.


                                                 ____________________________________
                                                 CORNELIA A. CLARK, Chief Justice




        2
       As noted in the opinion, Weyerhaeuser agreed “‘that “double recovery” should not be permitted.’”
Weyerhaeuser, 15 P.3d at 125.
        3
         Indeed, both Pederson’s and Weyerhaeuser are properly read as dealing with the issue of who has
the burden of proof in a case where a previous settlement followed by a jury verdict raises the potential of
a double recovery by the plaintiff.

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