                     IN THE COURT OF APPEALS OF TENNESSEE
                                 AT NASHVILLE
                                           October 4, 2004 Session

 MARGIE MARIE LYNN, ET AL. v. EXPEDITERS EXPRESS, INC., ET AL.

                          Appeal from the Circuit Court for Davidson County
                               No. 98C-2258     Carol Soloman, Judge



                       No. M2003-01777-COA-R3-CV - Filed February 25, 2005


Plaintiff sued her employer for misrepresentation relating to health insurance coverage and sought
to recover amounts incurred by her husband for medical bills. The trial court found for plaintiff
awarding her treble and punitive damages. We reverse the trial court’s finding of treble and punitive
damages and affirm the trial court’s award of a refund to plaintiff for amounts contributed as
premiums.

               Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
                              Affirmed in Part and Reversed in Part

PATRICIA J. COTTRELL, J., delivered the opinion of the court, in which WILLIAM C. KOCH , JR., P.J.,
M.S., and WILLIAM B. CAIN , J., joined.

Mathew R. Zenner, Nashville, Tennessee, for the appellants, Expediters Express, Inc., et al.

Paul T. Housch, Nashville, Tennessee, for the appellees, Margie Marie Lynn, et al.

                                           MEMORANDUM OPINION1


       In November of 1997, Margie and Johnny Lynn were working for Expediters Express, Inc.
(“Expediters”) as a husband/wife truck driving team. During that time, John Tulles, president and
owner of Expediters, notified his employees of the possibility that health insurance might be offered
to employees of Expediters on a group basis. Margie Lynn completed an application for insurance

       1
           Tenn. R. Ct. App . 10 states:

       This Court, with the concurrence of all judges participating in the case, may affirm, reverse o r modify
       the actions of the trial court by memorandum opinion when a formal opinion would have no
       precedential value. When a case is decided by memorandum opinion it shall be designated
       “MEMORANDUM OPIN ION,” shall not be published, and shall not be cited or relied on for any
       reason in any unrelated case.
naming her husband as a dependent. It was anticipated that the employees would pay a part of the
premium. While the purpose of the deductions are disputed, Expediters withheld a premium
deduction from three of Ms. Lynn’s weekly paychecks. For the weeks ending November 28 and
December 5, 1997, a premium deduction of Forty-Five Dollars and five cents ($45.05) each week
was withheld from Ms. Lynn’s checks. In her weekly payroll check for December 19, 1997, a
premium deduction of One Hundred thirty-Five Dollars and fifteen cents ($135.15) was made for
three weeks of insurance premiums. The total withheld for insurance purposes from Ms. Lynn’s
paychecks was Two Hundred Twenty-Five Dollars and twenty-five cents ($225.25).

        According to Ms. Lynn, she had been told by Mr. Tulles that the insurance coverage would
go into effect on December 10, 1997. While the Lynns were aware of a problem with Johnny Lynn’s
health, according to Ms. Lynn, they did not seek medical help until the insurance went into effect.
In late December, Johnny Lynn began to seek medical help and was diagnosed with throat cancer.
Mr. Lynn incurred medical bills beginning in December of 1997.

        There is no dispute that the insurance company declined to provide group coverage for
Expediters’ employees. Ms. Lynn acknowledged that she was told that in order to be covered, she
needed to receive either an insurance card or notice of acceptance from the insurer. She admits that
she received no indication from any insurance carrier that her application had been accepted. Mr.
Tulles testified that he never told his employees that insurance coverage had been secured, only that
Expediters was applying for it. According to Mr. Tulles, the insurance premium deductions were
made from employees payrolls because the carrier required advance premiums to accompany the
applications. Ms. Lynn, on the other hand, testified that she was told by Mr. Tulles that the policy
would be in effect on December 10, 1997. In reliance on this representation, Ms. Lynn testified that
her husband incurred medical bills believing they had insurance. The bulk of the medical bills
introduced were incurred in March of 1998, while a few appear to have been incurred in December
of 1997. A judgment was obtained by Perry Community Hospital against Ms. Lynn for Four
Thousand, One Hundred Eight Dollars ($4,108) for medical bills allegedly incurred by her husband.

        Ms. Lynn apparently left Expediters’ employ in early 1998, and the record does not clearly
show that Ms. Lynn was employed with Expediters when many of the bills were incurred. Ms. Lynn
did not testify on this issue, but the 1998 W-2 for Ms. Lynn, made an exhibit below, showed a total
salary for 1998 of Two Hundred Six Dollars ($206). Mr. Tulles’s testimony on this subject was
sketchy and uncertain. It appears from the record that Ms. Lynn was not employed by Expediters
except for perhaps one to two weeks in 1998.

        This lawsuit was initiated by Margie and Johnny Lynn against Expediters and Mr. Tulles
alleging conversion of the premiums withheld from paychecks, fraud and negligent
misrepresentation, promissory fraud, breach of contract and a violation of the Tennessee Consumer
Protection Act, Tenn. Code Ann. § 47-18-101 et seq.




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        Prior to the trial, the marriage of Margie and Johnny Lynn was annulled since Johnny Lynn
was still married to another woman. At the non-jury trial, plaintiff’s counsel non-suited Mr. Lynn’s
claims, leaving Ms. Lynn as the sole plaintiff.

        The trial court found Expediters and Mr. Tulles both liable and assessed damages under
several theories. First, the trial court found the premiums of $225 had been converted by defendants,
resulting in a treble damage award of $675.00 and prejudgment interest of $135.00. Second, based
on a finding of fraud and misrepresentation, the court trebled the amount of the judgment entered
against Ms. Lynn on behalf of Perry Community Hospital ($4,108.00) and awarded her $12,624.45.
Finally, the court awarded Ms. Lynn $4,108 as punitive damages based upon the fraud and
misrepresentation.

        Expediters and Mr. Tulles concede that it is appropriate to award Ms. Lynn the amount of
premiums withheld plus prejudgment interest. It is error, they contend, to treble that amount.
Expediters and Mr. Tulles argue that since there was no false statement by them and no reasonable
reliance by Ms. Lynn, the court erred in finding them liable for fraud and misrepresentation with
accompanying punitive damages. Lastly, Mr. Tulles argues that since he was acting in his capacity
of president of Expediters, he has no individual liability.

                                              ANALYSIS

        We begin with the issue of whether Ms. Lynn justifiably relied upon the alleged
misrepresentation because we believe this issue is dispositive of the fraud and misrepresentation
claims. It is well established that in order to prevail on a claim of negligent misrepresentation, the
plaintiff must establish that there was justifiable reliance on the false representation. Staggs v. Sells,
86 S.W.3d 219, 223 (Tenn. Ct. App. 2002). In order to prevail on a claim of fraudulent
misrepresentation, the plaintiff must likewise prove that he or she reasonably relied on the
misrepresentation. Allied Sound, Inc. v. Neely, 58 S.W.3d 119, 122 (Tenn. Ct. App. 2001). Based
upon the unique facts of this case, we find that Ms. Lynn is not able to prove that she incurred these
bills for her husband in reliance on any representation by Mr. Tulles or Expediters.

        First, the cause of the medical bills was not any representation by defendants, but rather it
was problems with Mr. Lynn’s health. In other words, the medical expenses arising from the cancer
treatment would have been incurred whether or not Ms. Lynn had insurance. Ms. Lynn does not
contend that medical treatment would not have been sought in the absence of insurance, but only that
it was delayed until the presumed effective date of the coverage. Therefore, the bills were not
incurred because of defendants’ representations. Second, although Mr. Tulles told her that the
insurance would become effective December 10, 1997, Ms. Lynn also testified that she was told that
she needed to receive some indication of acceptance from the insurance company that admittedly she
did not receive.

        Third, Ms. Lynn testified that she was told and believed that the insurance would remain in
effect only as long as the premiums were paid. It is not contested that Ms. Lynn’s premium


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contributions, at best, covered a period from December 10, 1997 (the date she says coverage was to
start) through the five (5) weeks she paid the premium, until January 14, 1998. No premiums were
deducted in 1998. The medical bills introduced at trial show that the majority of the medical
services were not provided during December and January. This further undermines Ms. Lynn’s
reliance contention. As for the Perry Community Hospital judgment, it is not possible to tell who
incurred the charges underlying that judgment or when the charges were incurred. There was no
testimony introduced regarding when the expenses underlying the Perry Community Hospital
judgment were incurred or what they were for. Based upon the testimony, we have been unable to
reconcile the amounts of the judgment with other evidence in the record. Fourth, it is doubtful that
Ms. Lynn even worked for Expediters during the 1998 period when many of the medical bills were
incurred.

        Since we find Ms. Lynn did not justifiably rely on Mr. Tulles’ alleged representations about
the existence of insurance, we reverse the trial court’s finding that defendants are liable for fraud and
misrepresentation and the award of damages related to those claims. Since the punitive damages are
based upon the trial court’s findings of fraud and misrepresentation, the award of punitive damages
is reversed as well.

        The remaining issue is Expediters’ liability for treble damages for conversion. We share the
trial court’s frustration with the company’s behavior. Although defendants do not dispute that Ms.
Lynn is owed the premiums, they have not refunded Ms. Lynn this amount. Expediters represented
to the court in its answer that “this defendant will tender the full amount of the funds arising from
the payroll deductions into the registry of this court for payment to the plaintiff Margie Lynn.” This
was not done. There is no dispute that the amount withheld from Ms. Lynn is due. While we agree
with the award of prejudgment interest, we are unable to find support for the trial court’s award of
treble damages. Furthermore, we find no basis for holding Mr. Tulles personally liable since he was
acting on behalf of Expediters. Therefore, we affirm the award of Two Hundred Twenty-Five
Dollars ($225) plus prejudgment interest against Expediters.2

        The judgment of the trial court as to the awards for fraud and misrepresentation and punitive
damages is reversed. The award for treble damages for conversion and the judgment against John
Tulles individually is reversed. The judgment awarding $225 plus pre-judgment interest is affirmed.
Costs of the appeal are taxed equally to the appellants, Expediters Express et al., and the appellee,
Margie Marie Lynn.



                                                                  ____________________________________
                                                                  PATRICIA J. COTTRELL, JUDGE


         2
            The record makes passing reference to a payment of One Thousand Dollars ($1,000) by defendants under some
sort of settlement agreement that apparently was repudiated. The appellants do not appeal the trial court’s failure to give
them any cred it for this amount.

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