                   IN THE SUPREME COURT OF TENNESSEE
                              AT KNOXVILLE
                                  September 3, 2003 Session

                   PEGGY GASTON v. TENNESSEE FARMERS
                      MUTUAL INSURANCE COMPANY

                        Appeal by Permission from the Court of Appeals
                              Circuit Court for McMinn County
                          No. 21,673    Lawrence H. Puckett, Judge



                    No. E2001-01487-SC-R11-CV - Filed November 7, 2003


We granted review to decide whether there was sufficient evidence to require a jury to determine
whether the insurer waived compliance with insurance policy provisions requiring the insurer’s
consent to a third-party settlement by its insured. After the insurance company denied her claim, the
insured filed a complaint alleging breach of contract, violation of the Tennessee Consumer
Protection Act, and bad faith. The trial court directed a verdict for the insurance company, finding
that the insured failed to comply with the subrogation provisions of her policy and that the insurance
company did not waive these provisions. The Court of Appeals reversed. After reviewing the record
and applicable authority, we agree with the Court of Appeals that there was evidence from which
a reasonable jury could find that the insurance company waived the subrogation provisions. We also
conclude that the insured was not required to demonstrate that the insurance company had not been
prejudiced and that the trial court improperly directed verdicts on the insured’s claims under the
Tennessee Consumer Protection Act and the bad faith statute. We therefore affirm the Court of
Appeals’ judgment and remand to the trial court for a new trial.

       Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals
                      Affirmed; Case Remanded to the Trial Court

E. RILEY ANDERSON , J., delivered the opinion of the court, in which FRANK F. DROWOTA , III, C.J.,
and ADOLPHO A. BIRCH , JR., JANICE M. HOLDER , and WILLIAM M. BARKER, JJ., joined.

H. Chris Trew, Athens, Tennessee, for the Appellant, Tennessee Farmers Mutual Insurance
Company.

Larry B. Nolen, Athens, Tennessee, for the Appellee, Peggy Gaston.
                                           OPINION

                                       BACKGROUND

        On June 10, 1996, the plaintiff, Peggy Gaston, then age 59, was driving her 1996 Honda
Civic automobile in a southerly direction on Highway 411 in Englewood, Tennessee, when she was
struck head-on by a 1987 Ford Mustang driven by sixteen-year-old Stephanie Wise and owned by
her father, Tim Wise. The undisputed evidence at trial was that Stephanie Wise was driving on the
wrong side of the road at the time she collided with Gaston’s vehicle. As a result of the accident,
Peggy Gaston suffered serious bodily injuries and incurred medical bills exceeding $30,000. Her
automobile, valued at $15,401.25, was a total loss.

        Gaston and her husband, Dane Gaston, were insured by the defendant, Tennessee Farmers
Mutual Insurance Company (“Tennessee Farmers”). Their policy had the following limits: $50,000
bodily injury liability per person; $50,000 property damage per accident; $50,000 uninsured/under-
insured for property damage; $5,000 medical payments; and $50,000 uninsured/under-insured for
bodily injury each person, up to $100,000 per accident. The policy stated:

                                  WHAT IS NOT COVERED

               We do not provide uninsured coverage for property damage or
               bodily injury sustained by any person or entity:

                                             * * *

               If that person or entity or the legal representative of that person
               settles the bodily injury or property damage claim without our
               written consent.


       Tim Wise, the owner of the 1987 Ford Mustang that struck the Gastons’ vehicle, had an
automobile liability policy with CNL Insurance America Company (“CNL”), which provided
coverage of $25,000 per person for bodily injury and $10,000 for property damage.

       The day after the accident, June 11, 1996, Peggy Gaston’s daughter, Dana Gaston Watson,
reported the accident to David Brown, Tennessee Farmers’ senior claims adjuster. Gaston’s
husband, Dane Gaston, also discussed the insurance coverage with Brown and the fact that there
was no “stacking” of the CNL limits with Tennessee Farmers so that only $25,000 of under-insured
coverage was available, plus $5,000 medical payments coverage. On June 25, 1996, Tennessee
Farmers paid $15,201.25 to the Gastons for the total loss of their vehicle.

     On August 19, 1996, the Gastons sent a demand letter to Betty Kinnas, a claims adjuster at
CNL. The letter enclosed medical bills incurred by Peggy Gaston and requested payment of the


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 $25,000 coverage as soon as possible. A copy of the letter was sent to David Brown, the senior
 claims adjuster at Tennessee Farmers with whom they had been discussing the claim.

       On September 1, 1996, Tennessee Farmers received $10,000 from CNL for the subrogation
 payment it had made to Peggy Gaston for the loss of her vehicle.1

         On September 30, 1996, Peggy Gaston and CNL reached an agreement under which CNL
 paid its liability policy limits of $25,000 by payment of $13,000 directly to the University of
 Tennessee Medical Center and paying the balance of Tim Wise’s liability coverage, $12,000,
 directly to Peggy Gaston. As part of the settlement, the Gastons executed a release with CNL and
 Tim Wise for Peggy Gaston’s bodily injuries.

         On November 7, 1996, the Gastons met with David Brown to discuss payment by Tennessee
 Farmers of the $25,000 under-insured motorist coverage available under their policy. As a result
 of the discussion, Brown learned that Peggy Gaston had settled her claim made on August 19, 1996,
 and had signed a release with CNL and Tim Wise. Brown then told the Gastons that Tennessee
 Farmers would not pay the under-insured motorist coverage afforded under the policy because the
 Gastons had breached the policy terms by settling with CNL without Tennessee Farmers’ written
 permission.2

        Peggy Gaston then filed suit alleging that Tennessee Farmers had breached the insurance
 contract by failing to pay her claim, had violated the Tennessee Consumer Protection Act, Tenn.
 Code Ann. § 47-18-101 et seq. (2001 & Supp. 2003) (“TCPA”), and had acted in bad faith, see
 Tenn. Code Ann. § 56-7-105 (2000).

          At a jury trial, Brown testified that he had received a copy of the August 19, 1996 demand
 letter to CNL, but that he did not contact the Gastons because he believed it would be more
 advisable to “wait until [he] heard back from Mr. or Mrs. Gaston.” Brown also admitted that he
 knew the University of Tennessee Medical Center had a $13,000 lien against the Gastons for the
 medical services that had been rendered, that Peggy Gaston had suffered serious injuries from the
 accident in which liability was uncontested, that Peggy Gaston’s medical bills were at least $25,000,
 that the Gastons would likely file a claim for the under-insured motorist coverage, and that
 Tennessee Farmers had exposure for the coverage. Neither Brown nor anyone else at Tennessee
 Farmers, however, contacted the Gastons. Instead, Brown testified that his duty as the Gastons’
 insurance adjuster was to “answer [insured’s] questions when asked” and not “to explain every
 possibility of a policy or everything that may or may not go right or wrong with a case.”



        1
          The figure of $15,201.25 reflects the $200 deductible for property claims included in the Gastons’ policy.
This $200 was paid to Peggy Gaston upon Tennessee Farmers’ receipt of the $10,000 subrogation payment from CNL.
The $10,000 paid by CNL reflects the maximum of Tim W ise’s policy for property damage.

        2
          The record does not indicate that Tennessee Farmers attempted to recover the payment already made to Mrs.
Gaston for her property damage claim.

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        After hearing the plaintiff’s proof, the trial court directed a verdict for the defendant,
Tennessee Farmers, finding that the plaintiff failed to produce material evidence that Tennessee
Farmers had waived the terms of the policy. The trial court also directed verdicts and dismissed the
plaintiff’s claims under the TCPA and the bad faith statutory provisions.

         The Court of Appeals reversed the judgment after concluding that the jury should have been
allowed to consider whether Tennessee Farmers waived the subrogation provisions of the policy,
and whether Tennessee Farmers violated the Tennessee Consumer Protection Act and the bad faith
statute.

        We granted Tennessee Farmers’ application for permission to appeal.


                                    STANDARD OF REVIEW

        In ruling on a motion for directed verdict, trial courts must take the strongest legitimate view
of the evidence in favor of the non-moving party, construing all evidence in that party’s favor and
disregarding all countervailing evidence. Eaton v. McLain, 891 S.W.2d 587, 590 (Tenn. 1994).
A court may grant the motion only if reasonable minds could reach only one conclusion from the
evidence. Id. Appellate courts apply the same standard in reviewing the trial court’s decision on
a directed verdict. Sauls v. Evans, 635 S.W.2d 377, 379 (Tenn. 1982).


                                             ANALYSIS

                           Breach of Insurance Contract and Waiver

         The defendant, Tennessee Farmers, argues that it was not required to pay its policy benefits
because the plaintiff, Peggy Gaston, breached the policy terms, which stated that there was no
coverage “[i]f that person or entity or the legal representative of that person settles the bodily injury
or property damage claim without our written consent.” Gaston, however, contends that Tennessee
Farmers’ claims adjuster, David Brown, had discussed Tennessee Farmers’ under-insured motorist
coverage with them and knew that she had requested payment from CNL, i.e., Tim Wise’s insurance
carrier, but that he did not contact her or warn her of the consequences of such a settlement. She
argues that Tennessee Farmers therefore waived the policy’s terms and that she was entitled to her
Tennessee Farmers’ policy benefits.

        We begin our review by examining the basic principles of waiver, including “the
long-standing rule in Tennessee that any contractual provision of a policy of insurance, whether part
of an insuring, exclusionary, or forfeiture clause, may be waived by the acts, representations, or
knowledge of the insurer’s agent.” Bill Brown Constr. Co. v. Glens Falls Ins. Co., 818 S.W.2d 1,
13 (Tenn. 1991) (emphasis in original); see also Rutherford v. Tennessee Farmers Mut. Ins. Co.,
608 S.W.2d 843, 846 (Tenn. 1980). Indeed, this Court has specifically stated that


                                                  -4-
               [a] waiver is a voluntary relinquishment by a party of a known right.
               . . . “[I]t may be proved by express declaration; or by acts and
               declarations manifesting an intent and purpose not to claim the
               supposed advantage; or by a course of acts and conduct . . . .”

Chattem, Inc. v. Provident Life & Accident Ins. Co., 676 S.W.2d 953, 955 (Tenn. 1984) (quoting
Baird v. Fidelity-Phoenix Fire Ins. Co., 162 S.W.2d 384, 389 (Tenn. 1942)). The burden of proof
to establish waiver rests with the insured, Bill Brown Constr. Co., 818 S.W.2d at 13, and is a
question of fact for the jury, see Carolyn B. Beasley Cotton Co. v. Ralph, 59 S.W.3d 110, 113
(Tenn. Ct. App. 2000), perm. app. denied, (Tenn. 2001) (quoting Koontz v. Fleming, 65 S.W.2d
821, 824 (Tenn. Ct. App. 1933)).

         These familiar waiver principles were applied by this Court in Rutherford to facts very
similar to the present case. The defendant, Tennessee Farmers, knew that its insured in Rutherford
was negotiating a settlement with an under-insured motorist’s insurance company, yet it did not
intervene or warn the insured, who was represented by counsel, that her settlement would result in
losing under-insured motorist coverage if she did not obtain Tennessee Farmers’ written consent
to settle the claim. Rutherford, 608 S.W.2d at 844-45. After the insured settled the claim with the
other party’s insurance company, the defendant denied coverage of the claim on the basis of a
provision that prohibited the insured from settling without the written permission of the insurer.
Id. at 845. We concluded that an insurer with knowledge that an insured is seeking a settlement
with another insurance carrier may not fail to act and then seek to enforce exclusionary terms of a
policy. Id. at 846. We also emphasized that an insurer could not decline to pay a claim based upon
a policy exclusion in a case where the insurer’s reliance on that policy provision appeared to be an
afterthought. Id.

        In our view, these principles are fully applicable in this case. The plaintiff, Peggy Gaston,
established that a copy of the letter written to CNL on August 19, 1996, was sent to David Brown,
an agent of Tennessee Farmers. The letter expressly asked a CNL claims adjuster, “Please let us
know, as soon as possible . . . when we might expect payment of your clients [sic] $25,000.00
insurance coverage.” David Brown acknowledged that he received the letter and that he understood
the consequences of Peggy Gaston settling the claim directly with CNL. After having earlier
discussed the under-insured coverage with the Gastons, and knowing that Peggy Gaston had
substantial medical bills and serious injuries for which Tennessee Farmers had exposure on its
coverage, Brown simply decided to wait to see what developed rather than inform Mrs. Gaston that
she risked losing the coverage she had been paying for if she carried out her course of action.
Neither Brown nor anyone else at Tennessee Farmers ever contacted the Gastons.

       Accordingly, we believe that the evidence was sufficient for a reasonable jury to find that
Tennessee Farmers waived its policy provision requiring written consent before its policyholder
could settle with a third party. Although the Court of Appeals addressed the issue of prejudice
along with waiver, its discussion of prejudice was based upon American Justice Insurance
Reciprocal v. Hutchison, 15 S.W.3d 811 (Tenn. 2000). In that case, the question was the adequacy


                                                -5-
of an insured’s notice of a claim to the insurer. Id. at 815. Since notice is not at issue in the case
at bar, we do not find American Justice or the analysis of prejudice relevant. In any event, we agree
with the Court of Appeals’ conclusion that the trial court erred in granting a directed verdict.


                                 Direct Action Against the Insurer

        Tennessee Farmers, relying on Tennessee Code Annotated section 56-7-1206 (2000), argues
that the plaintiff was barred from bringing a direct action against it in these proceedings. This
provision, which is part of the Tennessee uninsured motorist statutory scheme, provides, in
pertinent part:

                (a) Any insured intending to rely on the coverage required by this
                part shall, if any action is instituted against the owner and operator
                of an uninsured motor vehicle, serve a copy of the process upon the
                insurance company issuing the policy in the manner prescribed by
                law, as though such insurance company were a party defendant.

Id. Similarly, in Glover v. Tennessee Farmers Mutual Ins. Co., 468 S.W.2d 727, 728-29 (1971),
former Tennessee Code Annotated section 56-1153 (which is virtually identical to present section
56-7-1206) was interpreted as a bar to direct action. Gaston argues, however, that the statute does
not prohibit a policyholder’s recovery under the contractual terms of the insurance policy.

        First, it is clear that plaintiff Gaston did not follow the procedure prescribed by this statute.
After settling with Tim Wise and his insurance company, CNL, for the limits under Wise’s policy,
Gaston sought payment from Tennessee Farmers under her under-insured motorist coverage; when
Tennessee Farmers refused to pay the claim, Gaston brought this action directly against it.

         This statute does not, however, end the analysis. Indeed, this Court has noted that there are
circumstances in which a direct action against an uninsured motorist carrier is appropriate. In Bolin
v. Tennessee Farmer’s Mutual Ins. Co., 614 S.W.2d 566 (Tenn. 1981), for instance, we stated that
“[i]t is obvious that under some circumstances an insurance carrier becomes subject to a claim
under [section 1206] at a fairly late stage, or even after the conclusion, of litigation against the tort-
feasor.” Id. at 568. In that case, the insured did not discover the uninsured status of the tortfeasor
until after the trial had already concluded; thus, the insured could not have included the insurer as
a party defendant as required by statute. Id. at 567-68.

        Similarly, in Rutherford, a direct action was brought against an uninsured motorist carrier
under circumstances much like those in the present case. 608 S.W.2d at 843. In that case the
insured settled a claim with another party’s insurance company, and the insurer, which had known
of the pending settlement, denied coverage of the claim on the basis of a subrogation provision that
prohibited the insured from settling without obtaining the consent of the insurer. Id. at 845.



                                                   -6-
 Although the issue was not directly raised on appeal, it is clear that the insured was permitted to
 proceed in a direct action against the insurer in those circumstances. See id. at 846.

         We believe that similar principles are applicable in this case. The statute relied upon by
 Tennessee Farmers would require Peggy Gaston to bring an action against the tortfeasor to collect
 benefits under the terms of her Tennessee Farmers’ policy. Moreover, Tennessee Farmers was
 aware of Gaston’s effort to settle the claim with CNL, but took no action to notify or warn her about
 the effects of such a settlement and allowed her to act so that she could no longer seek a recovery
 against the tortfeasor. Given that the purpose of the uninsured motorist statutes is to protect drivers
 from uninsured and under-insured motorists, see Griffin v. Shelter Mut. Ins. Co., 18 S.W.3d 195,
 198 (Tenn. 2000), we believe that a direct action against Tennessee Farmers was proper under the
 unique circumstances of this case.3


                           Tennessee Consumer Protection Act and Bad Faith

          Tennessee Farmers next argues that the Court of Appeals erred in concluding that the TCPA
 may apply in this case. Tennessee Farmers contends that the provisions of the TCPA do not apply
 to insurance companies in the handling of claims and that the complaint filed by plaintiff Gaston
 failed to state a claim under this statutory scheme. Gaston argues that actions taken by insurance
 companies in the handling of claims fall within the purview of the TCPA.

             The Tennessee Consumer Protection Act provides as follows:

                    Any person who suffers an ascertainable loss of money or property,
                    real, personal, or mixed, or any other article, commodity, or thing of
                    value wherever situated, as a result of the use or employment by
                    another person of an unfair or deceptive act or practice declared to
                    be unlawful by this part, may bring an action individually to recover
                    actual damages.

 Tenn. Code Ann. § 47-18-109(a)(1) (2001).

         The main purpose of the Act is to protect consumers, and it must be liberally construed to
 affect that purpose. See Tenn. Code Ann. § 47-18-102 (2001); ATS Southeast, Inc. v. Carrier
 Corp., 18 S.W.3d 626, 627 (Tenn. 2000). In addition, causes of action arising from the TCPA may
 be cumulative with other statutory remedies. Tenn. Code Ann. § 47-18-112 (2000); Myint v.
 Allstate Ins. Co., 970 S.W.2d 920, 926 (Tenn. 1998).

         3
           W e also note the general rule that the party who is the beneficiary of a statute can waive that benefit if it is
not in violation of public policy or to the detriment of a third party. Black Diamond Coal Mining Co. v. Rankin, 98
S.W .2d 311, 312 (Tenn. 1936). W e find these elements present here, and we hold that just as the jury should determine
whether Tennessee Farmers waived the benefit of the policy provision, the jury should also determine whether it waived
the benefit of Tennessee Code Annotated section 56-7-1206.

                                                            -7-
        In Myint, an insured argued that his insurance company had engaged in an “unfair or
deceptive act or practice” in violation of the TCPA where the insurer had refused to pay a claim
under the terms of the policy. The insurer argued that the Act never applies to insurance companies
and that the insured’s only action was through the statutory bad faith provisions. Myint, 970
S.W.2d at 925. We concluded, however, that the TCPA may provide a cause of action for an
insurer’s “unfair or deceptive acts and practices,” and that the language of Tennessee Code
Annotated section 47-18-104(b)(27) (Supp. 2003), which prohibits “[e]ngaging in any other act or
practice which is deceptive to the consumer or to any other person[,]” includes insurance
companies. Myint, 970 S.W.2d at 926. Moreover, we emphasized that the insurance industry was
not explicitly excluded from coverage under the TCPA. Id.; see Tenn. Code Ann. § 47-18-111
(2001).

        Applying these principles, we conclude that Peggy Gaston may pursue a cause of action
under the TCPA. The evidence at trial revealed that the Gastons had several meetings with David
Brown, a Tennessee Farmers’ claims adjuster, regarding Peggy Gaston’s claim and that the Gastons
sent Brown a copy of the letter they wrote to CNL, i.e., the other motorist’s insurance carrier.
Neither Brown nor anyone else at Tennessee Farmers notified or informed Gaston, who was not
represented by counsel, that her effort to settle with CNL would prohibit her from collecting under
her own policy. In our view, a jury could reasonably conclude that Tennessee Farmers’ conduct was
unfair or deceptive under the TCPA. Accordingly, the trial court erred in granting a directed verdict
on this issue.

        Similarly, Peggy Gaston also sued for damages for “bad faith” under Tennessee Code
Annotated section 56-7-105 (2000), which provides for a 25 percent penalty against an insurance
company, in addition to the loss and interest, where the refusal to pay an insurance claim within 60
days is not in good faith. The language of this statute expressly applies to insurance companies and
provides that a jury decide whether the evidence demonstrates bad faith on the part of the insurer.
We believe that a reasonable jury could conclude that Tennessee Farmers’ conduct in this case
constituted bad faith in connection with its refusal to pay Gaston’s claim. The trial court therefore
erred in granting a directed verdict and refusing to allow the jury to decide this issue.

                                         CONCLUSION

        After reviewing the record and applicable authority, we agree with the Court of Appeals that
there was evidence from which a reasonable jury could find that the insurance company waived the
subrogation provisions. We also conclude that the insured was not required to demonstrate that the
insurance company had not been prejudiced and that the trial court improperly directed verdicts on
the insured’s claims under the Tennessee Consumer Protection Act and the bad faith statute. We
therefore affirm the Court of Appeals’ judgment and remand to the trial court for a new trial. Costs
on appeal are taxed to the appellant, Tennessee Farmers Mutual Insurance Company.

                                               ___________________________________
                                               E. RILEY ANDERSON, JUSTICE


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