                 IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                  December 5, 2001 Session

  TRAVELERS INDEMNITY COMPANY v. KENTON FREEMAN, ET AL.

                    Appeal from the Chancery Court for Davidson County
                      No. 00-497-III   Ellen Hobbs Lyle, Chancellor



                  No. M2001-00657-COA-R3-CV - Filed February 28, 2002


Travelers Indemnity Company [Travelers] filed a complaint for a declaratory judgment respecting
its liability to pay UM coverage for the minor child of its policyholder who was divorced from the
child’s mother, with joint custody having been awarded. Mother was killed in a traffic accident in
Alabama; her passenger child was injured. Mother owned and was driving her automobile, and she
also had UM coverage. The adverse driver had split liability coverage all of which was paid, in
equal parts, to the Administrator of the mother’s estate, and to the minor child. Mother’s UM carrier
paid its entire policy proceeds to her administrator. Travelers objected, inter alia, to the lack of
allocation of the proceeds of mother’s UM coverage. Travelers’ insured, on behalf of his minor
child, filed a counter-claim against Travelers for the entire UM coverage, notwithstanding an amount
certain had never been determined. The court found that Travelers had never disputed that the value
of the minor child’s claim exceeded the UM coverage and rendered a summary judgment against
Travelers for an amount certain. We vacate and remand.

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

HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which HERSCHEL P. FRANKS and
D. MICHAEL SWINEY , JJ. , joined.

John D. Schwalb, Nashville, Tennessee, for the appellant, Travelers Indemnity Company.

Steven A. Riley, Gregory S. Reynolds and Chris L. Vlahos, for the appellee Kenton Freeman,
individually, and as next friend of Will Freeman.

                                            OPINION

       This litigation began as a complaint for a declaratory judgment. The plaintiff [Travelers]
alleged that on May 12, 1999, it issued a policy of liability insurance to Kenton Freeman in
Davidson County, which provided UM coverage of $500,000.00 to him and any family member,
who is described as a blood relative residing in Freeman’s household.
       Travelers further alleged that on August 4, 1999, in Alabama, Alice Freeman, the former wife
of Kenton Freeman, was killed when another vehicle struck her automobile, and that Will Freeman,
age 11, the son of Kenton and Alice Freeman, was severely injured in the accident.

        Travelers further alleged that the vehicle owned and driven by Alice Freeman was insured
by Progressive Insurance Company [Progressive] which provided UM coverage of $500,000.00.
The vehicle which struck the Freeman automobile was insured by Nationwide Insurance Company,
with limits of $100,000.00 per claimant, which was paid.

       Travelers further alleged that the Estate of Alice Freeman has demanded the entire amount
of UM coverage from Progressive, and that a claim has been made on behalf of Will Freeman under
Kenton Freeman’s policy with Travelers. It is alleged that the Progressive policy is primary to that
of Travelers as to any claim of Will or Kenton Freeman, and that Travelers has no liability to them
under its policy, or alternatively, that Travelers is entitled to offset any payments made by
Progressive.

        Travelers sought a judgment that it did not provide coverage to Will Freeman, or in the
alternative, that the Progressive policy is primary to the policy of Travelers, and that Progressive be
directed to make no payments to the Estate of Alice Freeman until the right of the parties has been
determined.

        Kenton Freeman filed a response for himself and as next friend of Will Freeman. He alleged
that Will Freeman, his son, resided with him in Franklin, Tennessee, and at the time of the accident,
Will resided with both of his parents. The allegations respecting liability insurance were admitted.

        By way of counter-claim against Travelers, Freeman alleged that Alice Freeman was driving
her automobile northbound on I-65 in Chilton County, Alabama, when she was struck head on by
an automobile driven by John Watson who was traveling southbound on I-65, and crossed the
median. Watson was killed instantly, and Alice Freeman died within three hours. It is alleged that
Will Freeman sustained fractures of both legs, skull, ribs, and other injuries.

       The counter claimants alleged that Nationwide, on behalf of Watson, paid its policy limits
of $100,000.00, each, to the Estate of Alice Freeman, and to the Circuit Court Clerk of Alabama for
the benefit of Will Freeman.

       Counter claimants further alleged that Kenton Freeman, as Administrator of the Estate of
Alice Freeman, demanded of Progressive its policy limits of $500,000.00 for the wrongful death of
Alice Freeman, offset by the $100,000.00 paid by Nationwide and that the Administrator has agreed
to accept the policy limits subject to the court’s approval.

        Counter claimants further alleged that Travelers provided Kenton Freeman with UM
coverage of $500,000.00 for any family member, to which Will Freeman, or a family member, is
entitled, but which Travelers has refused to pay, thereby breaching its contract with Kenton Freeman,
and is guilty of bad faith under Tenn. Code Ann. §56-7-105.

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        In its response to the counter-claims, the Progressive Casualty Insurance Company relied
upon its policy provisions, and affirmatively pleaded the defense of release, alleging that Kenton and
Will Freeman entered into a compromise and settlement with the under insured motorist, and
released the tort-feasor from any liability for the accident.

        In its response to the counter-claim Travelers denied that Will Freeman is an insured under
the policy, denied the right of Kenton Freeman to recover under the policy, and denied the right of
Will Freeman to recover under the policy. Travelers further denied that Kenton Freeman “had a
claim for bad faith.”

       Progressive moved the court that it be allowed to deposit $400,000.00 with the treasury of
the court and thereupon be dismissed from the case and adjudged to be without further liability. The
motion was granted and Progressive thereupon deposited $400,000.00 with the court, such action
being without prejudice to the rights of Travelers, but not constituting a grant for denial of Will
Freeman’s entitlement to coverage under the policy Travelers issued to Kenton Freeman.

        Thereupon, Kenton Freeman, as guardian of Will Freeman, moved for summary judgment
“on all claims in the amended complaint and counter-claim on the grounds that there are no disputed
issues of fact . . . ”

        Travelers then moved for summary judgment on “plaintiffs negligence claims,” alleging that
there are no genuine issues of material fact.

       The motion of Kenton Freeman, as guardian of his son, Will, was granted and he was
“awarded a judgment in the amount of $400,000.00, plus pre-judgment interest at the rate of 10
percent per annum from January 4, 2000.” Travelers appeals. Appellate review is de novo on the
record. We presume the judgment is correct, Tenn.R.App.P. Rule 13(d), but not as to questions of
law.

     The appellate standard of review of a grant of summary judgment is set out in Staples v.
CBL & Associates 15 S.W.3d 83, 89 (Tenn. 2000), as follows:

                The standards governing the assessment of evidence in the summary
         judgment context are also well established. Courts must view the evidence in the
         light most favorable to the nonmoving party and must also draw all reasonable
         inferences in the nonmoving party’s favor. See Robinson v. Omer, 952 S.W.2d
         at 426; Byrd v. Hall, 847 S.W.2d at 210-11. Courts should grant a summary
         judgment only when both the facts and the inferences to be drawn from the facts
         permit a reasonable person to reach only one conclusion. See McCall v. Wilder,
         913 S.W.2d 150, 153 (Tenn.1995); Carvell v. Bottoms, 900 S.W.2d 23, 26
         (Tenn.1995).

Travelers propounds the following issues for review:


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        1.          Did the court below commit error in granting summary judgment to the
                    defendants in the amount of $400,000.00 thereby, in effect, allocating all of
                    the primary uninsured motorist coverage to cover punitive damage in
                    violation of the uninsured motorist statute?

        2.          Did the court below commit error when it failed to dismiss the defendants’
                    bad faith claim?

        3.          Did the court below commit error in denying Travelers and granting
                    defendants summary judgment when the primary policy of uninsured
                    motorist coverage had not been exhausted?

        4.          Even assuming the primary uninsured motorist limits were exhausted, did the
                    court below commit error when it failed to allocate or prorate the benefits of
                    the primary uninsured motorist coverage on the basis of the value of the
                    claims?

        5.          Did the court below commit error in granting summary judgment for an
                    amount certain when the value of the underlying claims had never [been]
                    determined?

        Will was severely injured in the traffic accident in Alabama. The insurer of the adverse
driver paid him $100,000.00; his mother’s UM carrier paid him nothing, because it paid the policy
limits [$500,000.00 less $100,000.00] to the estate of his mother.1

      Because the issues are intertwined, we elect to discuss them collectively. At the outset, it
may be helpful to a clearer understanding if the relevant insurance policies are further identified:

                 Watson was insured by Nationwide, who paid its split-policy limits equally
        to the Administrator of the Estate of Alice Freeman and to the Alabama Circuit Court
        Clerk on behalf of Will Freeman, a minor. The Nationwide policy is not implicated
        in this litigation.

               Alice Freeman was insured by Progressive, which paid its entire UM
        coverage2 to the administrator of her estate. Will Freeman was paid nothing. He and
        the Administrator of his mother’s estate were represented by the same attorney.

               Kenton Freeman’s policy with Travelers was implicated owing to its UM
        coverage provision. Initially, Travelers alleged that Will Freeman was not a member

        1
            Presumably, Will would inherit the funds received by the Administrator of his mother’s estate, assuming
that she died intestate and unmarried. He was apparently an only child.

        2
             $500 ,000.00 less $10 0,000 .00 paid by N ationw ide in acco rd with p olicy pro visions.

                                                             -4-
       of Kenton Freeman’s household, which would negate the UM coverage afforded by
       Travelers’ policy, but this position has been abandoned and Travelers now concedes
       that its UM coverage is exposed, as will hereafter appear.

         With two exceptions, the issues involved the allocation of the proceeds of the Progressive
policy. The excepted issues are those concerned with (1) alleged bad faith of Travelers in not
promptly paying the UM coverage to Will Freeman, and (2) the summary judgment for an amount
certain.

        Before we reach the issues, a parenthetical discussion of post-summary judgment
proceedings is necessary. Travelers filed a Rule 59 motion to alter or amend “all orders entered
within 30 days of the filing of this motion,” including (1) the denial of Travelers’ motion for
summary judgment, (2) the granting of the defendants’ [Freeman’s] motion for summary judgment,
(3) the granting of judgment against Travelers for $400,000.00, and (4) the award of prejudgment
interest.

        Counsel for Travelers argued “that for liability to exist under any UM policy there has to be
some tort-feasor to a judgment or some type of agreement or settlement . . . because the policy
provides that we will pay all sums an insured is entitled to recover from the owner or operator of an
uninsured motor vehicle. There has been no determination as to what the damages for the death of
this lady were, nor has there been a determination as to the damages for this young man.”

       Counsel then pointed out the differences between it [the amount of damages] not being
argued and it being conceded, to which the trial judge agreed. We also agree.

       Travelers next pointed out that, as to Will Freeman, two claims existed on account of his
minority: one by his father for medical expenses, and Will’s claim for personal injuries, and that
there was “nothing in the record that would support a determination by the court that that is
$400,000.00.” We agree.

        Counsel for Travelers next argues “that the Travelers’ policy is the secondary uninsured
policy as it relates to Will Freeman, but that it is a primary UM policy as it may relate to his father’s
claims which could still be asserted because Alabama has a two-year statute of limitation . . . If the
secondary UM carrier is to be liable there has to be an exhaustion of the primary UM policy . . . That
policy was not exhausted.”

        The argument continued that [Progressive] “paying $400,000.00 into the court did not
exhaust the limits of its policy because each claim must be examined separately . . . Progressive got
out of this case for $100,000.00 less than they should have.”




                                                  -5-
         Counsel then referenced Alabama’s wrongful death statute which allows the recovery of
punitive damages only in a wrongful death case. Compensatory damages are not recoverable.3
Consequently, Travelers argues that Progressive paid $400,000.00 as compensatory damages, thus
entitling Travelers to a credit for this amount. Travelers further asserts that even if this argument
is rejected the $400,000.00 paid by Progressive must be pro-rated between the wrongful death claim
and Will’s claim for personal injuries.

        We cannot consider the provocative issue of the Alabama Wrongful Death Statute because
the issue was raised, for the first time, after summary judgment was granted. See, Bradley v.
McLeod, 984 S.W.2d 929 (Tenn. Ct. App. 1998) [a Rule 59 motion is not available to raise new
legal theories, or to introduce new evidence that was always available].

        Contrary to the insistence of the appellees, however, we may consider the remaining issues
raised by Travelers respecting the non-allocation of the Progressive policy proceeds and the award
of a sum certain to Will Freeman. Tennessee law controls the interpretation of the issuance policy.
Tenn. Code Ann. § 56-7-102.

        Because we cannot consider Travelers argument that the Progressive payment must be
allocated to punitive damages only, as the Alabama Statute directs, we turn to the relevant Tennessee
Statute, Tenn. Code Ann. §56-7-1201. In doing so, we must assume that Progressive’s policy
payment to the Administrator of her estate was in settlement of his claim for compensatory damages.
The statutory scheme provides:

       (3)       With respect to bodily injury to an insured while occupying an automobile
                 not owned by the insured, the following priorities of recovery under
                 uninsured motorist coverage apply:
                 (A)    The uninsured motorist coverage on the vehicle in which the insured
                        was an occupant shall be the primary uninsured motorist coverage:
                 (B)    If uninsured motorist coverage on the vehicle in which the insured
                        was an occupant is exhausted due to the extent of compensatory
                        damages, then the uninsured motorist coverage provided by a policy
                        under which the insured is a named insured shall be applicable as
                        excess coverage to the policy described in subdivision (b)(1);
                        provided, that if the insured is covered as a named insured under
                        more than one (1) policy, then only such policy with the highest
                        limits of uninsured motorist coverage shall apply;
                 (C)    If the uninsured motorist coverage provided under the policies
                        described in subdivisions (b)(3)(A) and (B), if applicable, is
                        exhausted due to the extent of compensatory damages, then the
                        uninsured motorist coverage provided by a policy under which the
                        insured is covered other than as a named insured shall be applicable


       3
           Campbell v. Williams, 638 So.2d 804 (Ala. 1994) and a host of other cases. The issue is well settled.

                                                        -6-
                           as excess coverage to the policies listed in subdivisions (b)(3)(A) and
                           (B); provided, that if the insured is covered by more than one (1) such
                           policy, then only such policy with the highest limits of uninsured
                           motorist coverage shall apply; and
                  (D)      In no instance shall the insured be entitled to receive total benefits
                           from all policies listed in subdivision (b)(3)(A)-(C) in an amount
                           greater than the limits of the policy providing the highest limits of
                           uninsured motorist coverage.

        The operative language is “if the UM coverage on [the Alice Freeman vehicle] is exhausted
due to the extent of compensatory damages, then the UM coverage provided by a policy under which
the insured is a named insured [the Kenton Freeman vehicle] shall be applicable as excess coverage
...”

        The appellees argue that the UM coverage on the Alice Freeman policy was exhausted,
thereby activating the excess coverage. It is admitted that Progressive paid the Administrator the
entire policy proceeds, upon his demand, and paid Will Freeman nothing. Since the same attorney
represented4 both the Administrator and Will Freeman, he chose - we know of no other way to
express the fact - to apportion 100 percent of the proceeds to the Administrator’s claims as a matter
of representative strategy, since any apportionment might inure to the benefit of Travelers. The
troubling aspect of this strategy is that the value of the claims of the Administrator and Will Freeman
has never been determined. We infer that the trial court apparently assumed that the value of the
claims to be in excess of the policy limits. We do not hesitate to hold that such an assumption
cannot be indulged; to do so would arrogate, first to counsel, and secondly, to the trial court, the
authority to determine that the pecuniary or excessive value of Alice Freeman’s life was, at a
minimum, the policy limits.

       As we have seen, the summary judgment determined both the issue of coverage and the
amount of damages to which Will Freeman was entitled under the contract of issuance. We hold that
such determination was beyond the reach of the Chancellor5 because the amount of damages was not
an issue for determination in an ex contractu action in the absence of an agreement, stipulation,
judgment or some other final mechanism. There was some evidence that Will Freeman had incurred
medical expenses - admitted over objection - and the affidavit of his father is clearly hearsay. It is
true that the affidavit was not countervailed, but the amount of damages was not a proper
adjudicative issue.




         4
          The motion of Travelers to disqualify counsel for the claimants because of the apparent con flict of interest
was denied. The issue is not before us except tangentially.
         5
           From the B ench, the Chan cellor comm ented that “the record indicates those [damages] are undisp uted,”
possibly owing to the importunations of counsel. The Chancellor relied on Spicer v. H illiard, 879 S.W.2d 858 (Tenn.
Ct. App. 199 4) which w e find is inapposite to the case at Bar.

                                                         -7-
        There is no evidence in the record that Will’s damages had been determined in any kind of
proceeding or had been agreed upon. Neither do we find in the record any admission by Travelers
that Will was entitled to receive any amount from Travelers; we note that counsel for Will repeatedly
stated to the Chancellor - and in the brief - that Travelers “has never disputed that the value of Will
Freeman’s claim exceeded its policy limits.” This argument overlooks the point that the value of
Will’s claim was never an issue; coverage was the issue. The determination of Will’s damages, or
a determination that his damages were in excess of the policy limits, was beyond the reach of the
Chancery Court.

         The appellee argues that “Travelers did not argue that the value of his [Will’s] claim
exceeded its policy limits but simply stood on it policy defense” and that it “cannot raise that issue
for the first time on appeal.” The novelty of this argument is notable, to say the least, and overlooks
the fact that counsel for Travelers objected to a description of Will’s injuries as hearsay and
irrelevant. We further note that the Chancellor commented that “the record indicated those
[damages] are undisputed.” It is worth repeating that the amount of damages had never been
determined; moreover, we find no evidence in the record that the amount of damages was
undisputed. It is easy to speculate - impermissibly - that Will’s injuries were so extensive as to
justify the assumption that the value of his claims exceeded the UM coverage.

       The issue of the alleged bad faith cannot be resolved on the record before us. The trial judge
held that this issue required a merit trial; Travelers did not include the issue in its motion for
summary judgment and thus we have no authority to adjudicate it.

        In sum, we hold that, given the posture of the case, the policy proceeds paid by Progressive
should be allocated between the Administrator of the Estate of Alice Freeman and Will Freeman
after the value of each claim has been determined. The allocation should be pro-rated in accordance
with the amount of damages each claimant is awarded. See, 7 Am. Jur. 2d, Automobile Insurance,
Sec. 430, and 70 A.L.R. 2d 416, Sec. 3.

        In light of the fact that Travelers belatedly conceded that Will Freeman was an additional
insured under its policy, we hold that in the event a proper determination is made of the value of his
claim, following the allocation of the Progressive policy, Travelers is liable therefor to the extent of
coverage.

        The issue of interest is pretermitted in light of our disposition of this case. The judgment of
the Chancery Court is vacated and the case is remanded for all appropriate proceedings pursuant to
this opinion. Costs of appeal and costs below are assessed to the appellees, Kenton Freeman,
individually and as next friend for his minor son, Will Freeman.



                                               _________________________________________
                                               HOUSTON M. GODDARD, PRESIDING JUDGE


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