                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                  August 8, 2013 Session

                          IN RE ESTATE OF CLENDENON

                  Appeal from the Chancery Court for Greene County
                  No. 2010P167    Thomas R. Frierson II, Chancellor




            No. E2013-00206-COA-R3-CV-FILED-SEPTEMBER 30, 2013


This case involves a claim filed against the Estate of Todd Clendenon. Elite Oncology
Medical Group filed the claim seeking payment for medical treatment and services rendered
to the decedent. Barbara Jean Clendenon, the decedent’s wife and his Personal
Representative, moved the probate court to designate as “exempt funds” the monies paid to
the decedent under his health insurance policy. The payments included those pertaining to
the treatment and services the decedent received from Elite. Following a hearing, the trial
court granted the motion. The court determined that payments made by the health insurance
carrier that were deposited into the Estate’s bank account after the death of the decedent were
exempt from the claims of creditors pursuant to Tenn. Code Ann. § 26-1-110 (2010). Elite
appeals. We affirm.

       Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                             Affirmed; Case Remanded

C HARLES D. S USANO, J R., P.J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.

Jessica C. McAfee, Greeneville, Tennessee, for the appellant, Elite Oncology Medical Group.

Ronald W. Woods and Brandy M. Burnette, Greeneville, Tennessee, for the appellee,
Barbara Jean Clendenon, Personal Representative of the Estate of Todd P. Clendenon.
                                          OPINION

                                               I.

       The salient facts are not in dispute. The decedent, a Tennessee resident who suffered
from cancer, died from his illness on August 21, 2010, at the age of 29. At the time of his
death, he was insured under a health insurance policy issued to him by BlueCross BlueShield
of Tennessee (“BCBS”). In the months before his death, the decedent was treated by
physicians affiliated with Elite at its facility in Los Angeles. Elite submitted claims to BCBS
for the services it provided. Under the terms of the decedent’s policy, the claims were
processed and paid at the rate provided for “out of network” care. Also pursuant to the
policy, BCBS sent the appropriate payments on the claims directly to the decedent rather than
to the out of network provider. Along with each payment by BCBS, the insurer sent the
decedent an “Explanation of Benefits” reflecting the submitted claim, the service provider,
the particular treatment or service provided, and the amount paid on the claim. In all, Elite
filed 16 claims in the total amount of $96,219 for “hyperthermia and radiation therapy”
services provided to the decedent between June 24, 2010, and August 9, 2010.

        On October 5, 2010, the Personal Representative sent written notice to Elite that it had
been identified as a potential creditor of the Estate. The letter instructed Elite that creditors
of the decedent were required to file their claims with the probate court on or before January
9, 2011. On October 19, 2010, Elite appropriately notified the probate court of its claims
against the Estate in the stated total amount. Elite further provided a copy of its “agreement”
with the decedent whereby it requested that the decedent “submit to Elite . . . within three
(3) business days of receipt check remittances from BCBS . . . with the accompanying
Explanation of Benefits . . . .” (Emphasis in original.) Decedent signed the document which
further stated: “It is understood that failure to do so will constitute non-payment of medical
obligations with us and, if such is the case, you will be held responsible for the payment of
your account.” As of the time of trial, Elite had received no payments toward the decedent’s
bill.

       On October 11, 2011, the Personal Representative filed a “Sworn Motion to Designate
Receipts as Exempt Funds Pursuant to T.C.A. § 26-2-110.” The motion requested that the
court deem all payments from BCBS to the decedent made under the terms of the decedent’s
policy as “exempt insurance benefits” pursuant to Section 26-2-110. As such, the monies
would be exempt from all creditors’ claims and would pass to the decedent’s heirs by
operation of law. According to a summary, BCBS sent checks totaling $46,629.04 to the
decedent as payment of his medical expense claims. The payments were deposited after his
death. Elite moved the court to dismiss the motion.



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      A hearing on the Personal Representative’s motion was held on December 4, 2012.
The only parties to appear were the Personal Representative and Elite, both represented by
counsel. At the conclusion of the hearing, the trial court held, in relevant part, as follows:

              [T]he Court finds that there is no contested issue as to the
              validity of the claim filed by Elite . . . as no exception was filed
              and that the sole contested issue . . . is a determination of
              whether or not funds received by the Personal Representative
              pursuant to the decedent’s health insurance policy with [BCBS]
              (the majority of which are attributable to medical services
              rendered by Elite . . . ) are exempt from the claims of creditors,
              including Elite . . ., pursuant to T.C.A. § 26-2-110. With respect
              to this issue, the Court finds that said funds (totaling
              $46,629.04) are exempt funds pursuant to T.C.A. § 26-2-110
              and that sworn motion should be granted.

              IT IS THEREFORE ORDERED, ADJUDGED AND
              DECREED that all benefits paid by [BCBS] to or for the benefit
              of the decedent pursuant to the terms and provisions of his
              health insurance policy are exempt insurance benefits under
              T.C.A. § 26-2-110 and are thus exempt from the claims of
              creditors and pass by operation of law to the decedent’s heirs at
              law.

Elite filed a timely notice of appeal.

                                              II.

       Elite raises the following issues for our review:

              Whether the filing of the Motion to Designate Receipts as
              Exempt Funds was filed untimely and the issue waived.

              Whether the trial court erred in exempting estate assets from
              payment to creditors pursuant to Tenn. Code Ann. § 26-2-110
              when the statute does not pertain to estate administration but to
              post-judgment execution and garnishment.




                                              -3-
              Whether the trial court erred in interpreting the statute to include
              health insurance benefits when the language has limiting
              construction.

                                              III.

        In cases decided by a trial court, sitting without a jury, our review is de novo upon the
record of the proceedings below. The record comes to us with a presumption of correctness
as to the trial court’s factual determinations – one that we must honor unless the evidence
preponderates otherwise. Tenn. R. App. P. 13(d); Nave v. Nave, 173 S.W.3d 766, 770 (Tenn.
Ct. App. 2005); Wright v. City of Knoxville, 898 S.W.2d 177, 181 (Tenn.1995). The trial
court’s conclusions of law, such as the interpretation of a statute, are reviewed de novo, with
no presumption of correctness. Whaley v. Perkins, 197 S.W.3d 665, 670 (Tenn. 2006);
Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000).

                                              IV.

        Elite essentially argues that the Estate’s motion to designate the funds received from
BCBS as “exempt funds” pursuant to Tenn. Code Ann. 26-2-110 comes too late. Generally
stated, the statute provides an exemption from the claims of creditors for specified insurance
benefits. Elite asserts that, because no exception to its claim was timely filed, its claim
became a valid judgment against the Estate. Elite concludes that the Estate thereby implicitly
waived its right to argue that the health insurance payments are exempt from the claims of
creditors. We conclude that Elite is only partially correct.

        The time for potential creditors to file claims against the decedent’s Estate ran from
September 9, 2010, until January 9, 2011. Elite timely submitted its claim in October 2010.
The Estate did not file an exception to Elite’s claim. Considering the relevant facts in light
of Elite’s argument, two things are readily apparent. First, as Elite correctly contends, its
claim is a valid, binding obligation of the Estate. “Failure to except to a claim amounts to
an admission of its justness; and the claim becomes, in effect, a judgment against the estate.
. . .” Needham v. Moore, 292 S.W.2d 720, 723 (Tenn. 1956)(quoting Pritchard, Wills and
Estates, Phillips, Vol. 2, p. 268). The trial court correctly so held and the Estate concedes
this point.

        The problem lies with the second part of Elite’s argument. Elite concludes that by
failing to file an exception to its claim, the Estate waived its right to assert that the health
insurance benefits the Estate had received are exempt from the cumulative claim of Elite.
The Estate responds that by filing the motion to designate the health insurance receipts as
exempt funds, the Personal Representative “was seeking relief from the Court in order to

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define the pool of assets from which [Elite’s] judgment could be satisfied.” The Estate
characterizes the motion as a form of post-judgment relief that recognizes the distinction
“between the process for obtaining a final judgment and the process for enforcing or
collecting on [a] final judgment. . . .” (Emphasis added.) We find the Estate’s argument to
be persuasive.

        In short, we agree with the Estate’s conclusion that the “failure to file an exception
to [Elite’s] [c]laim does not preclude the Personal Representative from seeking post-
judgment determinations pertaining to the [c]laim.” As the Supreme Court has observed,
“claims unexcepted to become the equivalent of judgments against the estate, excepting of
course that the right to an execution thereon does not follow.” Warfield v. Thomas’ Estate,
206 S.W.2d 372, 375 (Tenn. 1947)(quoting Higgins’ Administration of Estates in Tennessee,
Section 126(a), p. 97). By not filing an exception to Elite’s claim, the Estate has simply
acknowledged the validity of the debt. The issue of whether certain funds of the Estate are
exempt from claims of creditors is a totally separate issue from that of the validity of the debt.
The acknowledgment of the validity of the debt does not carry with it an implication that
Elite is entitled to share in all of the monies in the Estate to satisfy its claim. This issue is
found adverse to the position of Elite.

                                               V.

                                               A.

       By its remaining two issues, Elite focuses on the application and construction of the
insurance benefits exemption set forth in Tenn. Code Ann. § 26-2-110. Elite’s argument is
essentially two-fold: (1) The statute is not applicable in the context of estate administration
cases, and (2) limiting language within the statute makes it clear that the stated exemption
does not apply to benefits paid under a “typical” health insurance policy. In this section, we
address both issues.

      As pertinent to our review, Tenn Code Ann. § 26-2-110 provides, in relevant part, as
follows:

               (a) There shall be exempt from the claims of all creditors, and
               from execution, attachment, or garnishment, any sum or sums of
               money which may hereafter become due and payable to any
               person, who is a resident and citizen of this state, from any
               insurance company or other insurer, under the terms and
               provisions of any contracts of accident, health, or disability
               insurance insuring the assured against loss by reason of

                                               -5-
               accidental personal injuries, or insuring the assured against loss
               by reason of physical disability resulting from disease.

               (b) In the event of the death of any such person so insured as set
               out in subsection (a), any sum or sums of money so due and
               payable at the time of the death of the insured shall likewise be
               exempt from the claims of all creditors and from execution,
               attachment or garnishment, in the same manner as provided in
               §§ 56-7-201, 56-7-203.

The issues before us require an examination of section 26-2-110. The Supreme Court has
set forth principles guiding our review:

               Our role in construing a statute is to “ascertain and give effect
               to the legislative intent without unduly restricting or expanding
               a statute’s coverage beyond its intended scope.” To do so, we
               focus initially on the statute’s words, giving these words their
               natural and ordinary meaning in light of their statutory context.
               We must avoid any “forced or subtle construction that would
               limit or extend the meaning of the language.” Every word in a
               statute is presumed to have meaning and purpose, and the statute
               must be construed in its entirety.

Shore v. Maple Lane Farms, LLC, E2011-00158-SC-R11-CV, 2013 WL4428904 at *11
(Tenn. 2013)(internal citations omitted).

                                               B.

        First, Elite asserts that the trial court erred when it found section 26-2-110 applicable
to the present case. Elite notes that the present case involves a matter of estate administration
– “not a situation where a creditor is attempting to garnish wages of a judgment debtor.”
Elite further submits that the statute “does not discuss what happens to estates when money
is paid to the decedent prior to his death . . . for the benefit of medical providers of treatment
and services of [the] decedent prior to his death.” (Emphasis in original.)

        A plain reading of subsection (a), above, reflects that the statute provides to residents
of this state an exemption for insurance benefits from “the claims of all creditors, and from
execution, attachment, or garnishment. . . .” (Emphasis added.) The quoted language directly
contradicts Elite’s position that the statute addresses only “post-judgment remedies by
judgment debtors.” Elite offers no authority for its position that, where insurance benefits are

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concerned, cases involving claims against the assets of an estate, such as the situation
presented here, are not properly considered within the “claims of all creditors” language. In
our view, subsection (b) does address the exemption relative to insurance benefits that are
paid out after the insured’s death and received into his estate. The statute expressly provides
that “any sum or sums of money so due and payable at the time of the death of the insured
shall likewise be exempt from the claims of all creditors.”

        In In re Jennings Estate, 212 Tenn. 107, 368 S.W.2d 289 (1963), the Supreme Court
applied the predecessor statutes to Section 26-2-110 in the context of an estate matter.1 In
Jennings, the insured, Barthol, held an insurance policy that provided separate coverage for
liability and medical services. Id., 368 S.W.2d at 289. Coverage for medical services was
limited to $500. The insured was responsible for a car accident that seriously injured
Jennings and led to his death. Id. Jennings’ personal representative recovered $500 in
medical expenses paid under the policy. Methodist Hospital claimed it was entitled to the
$500 as payment for medical services it rendered to Jennings before his death. Id. The
Court held that the proceeds recovered by Jennings’ personal representative under the
medical services provision of the automobile liability policy were exempt from claims of
creditors – including the hospital’s claim for medical services it rendered to Jennings as a
result of the car accident.




       1
         See 1937 Tenn. Acts ch. 287, §1, §2; Tenn. Code Ann. §§ 26-213 and 26-214 (repealed). Former
section 26-213 provided as follows:

               There shall be exempt from the claims of all creditors, and from execution,
               attachment, or garnishment, any sum or sums of money which may
               hereafter become due and payable to any person, who is a resident and
               citizen of this state, from any insurance company or other insurer, under the
               terms and provisions of any contracts of accident, health, or disability
               insurance insuring the assured against loss by reason of accidental personal
               injuries, or insuring said assured against loss by reason of physical
               disability resulting from disease.

Former section 26-214 provided as follows:

               In the event of the death of any such person so insured as set out in 26-213,
               any sum or sums of money so due and payable at the time of the death of
               the insured shall likewise be exempt from the claims of all creditors and
               from execution, attachment, or garnishment, in the same manner as
               provided.



                                                   -7-
        In short, we find nothing to support Elite’s position that Tenn. Code Ann. § 26-2-110
“is not meant to be used in estate administration. . . .” The trial court did not err in applying
the statute to the case at bar.

                                               C.

       Lastly, Elite asserts that standard policies of health insurance, like the one the
decedent had, are not properly included among the insurance policies set out in Tenn. Code
Ann. § 26-2-110. Instead, Elite argues, health insurance policies are intended to protect the
insured against the risk of incurring medical expenses. As such, Elite concludes, payments
under a health insurance policy do not fall within the “limiting” language of Tenn. Code Ann.
§ 26-2-110, i.e., the following language:

               insuring the assured against loss by reason of accidental
               personal injuries, or insuring the assured against loss by reason
               of physical disability resulting from disease.

       Again, in our view, a reading of the statute is dispositive. Tenn. Code Ann. §
26-2-110 exempts specified insurance benefits from the claims of creditors – again, this
includes “any . . . money . . . due and payable to any person, . . . from any . . . insurer, under
the terms and provisions of any contracts of accident, health, or disability insurance insuring
the assured against loss by reason of accidental personal injuries, or insuring the assured
against loss by reason of physical disability resulting from disease.” Tenn. Code Ann. § 26-
2-110 (a). In order to give meaning to each of the referenced types of insurance policies set
out in the statute – “accident, health and disability” – they must be read as addressing
different subjects or risks. We agree with Elite’s contention that health insurance policies
are designed to protect against – or lessen – the risk of loss resulting from medical expenses
an insured may incur. The Code defines health insurance coverage as “benefits consisting
of medical care, provided directly, through insurance or reimbursement, or otherwise and
including items and services paid for as medical care, under any policy, certificate or
agreement offered by a health care entity. . . .” Tenn. Code Ann. § 56-7-109(a)(3). In the
case of the decedent, all of the funds at issue were paid to him for medical care received
under the terms of his health insurance policy. As we read the “limiting” language, it was
designed to apply to, and further define, accident insurance and disability insurance. The
limiting language has nothing to do with health insurance as referred to in the statute.
Payments under a health insurance policy are exempt from the claims of creditors. As such,
we think the payments from BCBS to the decedent clearly fall within the insurance benefits
exemption provided in section 26-2-110.




                                               -8-
        In a nutshell, Tenn. Code Ann. § 26-2-110 exempts from any and all creditors’ claims
money due to an insured under a policy of health insurance. The trial court correctly held
that the exemption applies to the health insurance payments deposited into the decedent’s
Estate.

                                             VI.

       The judgment of the trial court is affirmed. Costs on appeal are taxed to the appellant,
Elite Oncology Medical Group. This case is remanded, pursuant to applicable law, for
collection of costs assessed by the trial court.




                                    __________________________________________
                                    CHARLES D. SUSANO, JR., PRESIDING JUDGE




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