                    IN THE COURT OF APPEALS
                         AT KNOXVILLE                                        FILED
                                                                            November 23, 1998

                                                                            Cecil Crowson, Jr.
                                                                             Appellate Court
                                                                                   Clerk


JAMES M. BEAM and JOYCE A. BEAM,                 ) Knox Chancery
Individually and as Next                         ) C.A. No. 03A01-9802-CH-00055
of Kin of      KAREN H. BEAM, Deceased,          )
and Next Friend of LANCE B. BEAM,                )
A Minor,                                         )
                                                 )
                                                 )
              Plaintiffs-Appellees               )
                                                 )
                                                 ) HON. FREDERICK D. MCDONALD
vs.                                              ) CHANCELLOR
                                                 )
                                                 )
UNITED SERVICES AUTOMOBILE                       )
ASSOCIATION, and/or USAA CASUALTY                )
INSURANCE COMPANY, and/or USAA                   )
GENERAL INDEMNITY COMPANY,                       )
                                                 )
                                                 ) AFFIRMED IN PART,
              Defendants-Appellants              ) REVERSED IN PART AND
                                                 ) REMANDED



FRANCIS A. CAIN and BEVERLY DEAN NELMS, Frantz, McConnell, & Seymour, LLP,
Knoxville, for Appellants.


MARK E. FLOYD, Pryor, Flynn, Priest & Harber, Knoxville, for Appellees.



                                       OPINION


                                                                                McMurray, J.


       This appeal involves the determination of whether there is insurance coverage on three

separate insurance policies — two automobile policies and a personal umbrella policy. The

plaintiffs, James and Joyce Beam, had purchased insurance coverage from the defendant, United

Services Automobile Association (USAA). The plaintiffs, whose daughter was killed in an
automobile accident, filed a declaratory action against USAA seeking a judgment as to whether

uninsured motorist (UM) coverage was included under their personal umbrella policy and whether

USAA had acted in "bad faith" by denying coverage. In its answer, USAA denied that the plaintiffs

could recover under both automobile policies and under their personal umbrella policy. With court

approval, the plaintiffs amended their complaint to allege that the two automobile policies could be

"stacked," thereby allowing them a greater recovery.



       Each party filed a motion for partial summary judgment on the issue of "stacking" the UM

coverage. The trial court granted partial summary judgment in favor of the Beams on the issue of

stacking. One month later, the second issue, regarding umbrella UM coverage, was heard by the trial

court without a jury. Again, the trial court ruled in favor of the Beams, holding that they did have

UM coverage under their personal umbrella policy at the time of the accident. USAA now appeals.

We affirm the judgment of the trial court as to the automobile policies and reverse the judgment of

the trial court as to the umbrella policy.



        USAA presents two issues for our consideration:



        1.      Whether the trial court erred in failing to grant summary judgment to it on the
                issue of "stacked" uninsured/underinsured motorist coverage; and

        2.      Whether the trial court erred in finding UM coverage under the Beams'
                personal umbrella policy even though James Beam signed a form rejecting
                UM coverage.



        The Beams had three insurance policies with USAA at the time of the accident. First, the

Tennessee automobile policy, number 00122 83 80U 7105 0, provided for UM coverage bodily

limits of $300,000 per person and $500,000 per accident. This policy insured three vehicles: a 1989

Volvo, a 1989 Pontiac, and a 1996 Chevrolet Camaro. Second, the Pennsylvania automobile policy,

                                                  2
number 00122 83 80U 7104 0, provided for UM and underinsured motorist bodily injury limits of

$300,000 per person and $500,000 per accident, as well as providing for "stacked" coverage. The

Pennsylvania automobile policy insured one vehicle, a 1979 Volvo, that was garaged in Pennsylva-

nia. Mr. Beam, an airline pilot, used that vehicle in Pennsylvania whenever he flew there. Third,

the Tennessee umbrella policy, number 00122 83 80 70U, provided for up to $5 million in coverage.



       In 1993, the Beams moved from Pittsburgh, Pennsylvania, to Knoxville, Tennessee. In early

March 1994, after the Beams' move to Knoxville, USAA sent the Beams a UM rejection form for

their personal umbrella policy. This rejection form was sent approximately two months before the

time for the renewal of the policy. On March 21, 1994, a USAA service representative spoke by

telephone to Mrs. Beam and told her that the Tennessee umbrella UM rejection form had been

mailed. Mrs. Beam indicated that she would discuss the matter with her husband.



       On April 4, 1994, approximately one month after the umbrella UM rejection form was mailed

to James Beam, USAA had not received a response from the Beams. Therefore, under Tennessee

law, the umbrella policy was renewed to include UM coverage. On April 5, 1994, James Beam

called USAA to inquire about the UM coverage under his umbrella policy and about the premium

for the coverage. According to the computer documentation prepared by the USAA service

representative at the time of the conversation, Mr. Beam indicated that he would probably return the

umbrella UM rejection form: "He said he will probably return form — I said I will hold transaction

until renewal — If form recd — no action — If not, will add UM 5 million to umb renewal."



       Mr. Beam signed the rejection form for UM coverage under his personal umbrella policy on

April 1, 1994. Although the umbrella policy, including the UM coverage, had already been renewed,

the policy was amended to exclude the umbrella UM coverage once USAA received the UM


                                                 3
rejection form, and the Beams received a credit of $144.90 to their account for the umbrella UM

coverage.



          In January 1996, Mr. Beam purchased a 1996 Camaro for his daughter Karen who turned

sixteen the following month and added this car to his existing Tennessee automobile insurance

policy through USAA. In February 1996, Karen Beam turned sixteen, and she too was added to the

Beams' Tennessee automobile policy. On September 9, 1996, Karen Beam was driving the Camaro

when it was struck by a vehicle driven by Karen Pappas. Karen Beam was killed, and Lance Beam,

a passenger in the Camaro, was injured.



          The Beams filed a negligence action against Karen Pappas. Ms. Pappas had bodily injury

limits of $25,000 per person and $50,000 per accident under her liability insurance policy with

Horace Mann Insurance Company. Although Horace Mann indicated to the Beams that it would pay

its full policy limits of $50,000 to them, they contend that the coverages under Pappas' insurance and

the UM coverages on their two automobile policies will not compensate them for all the damages

as a result of the accident. Therefore, they seek to collect under the UM provision of their umbrella

policy.



          We address first the issue of whether the UM coverage provided by the Pennsylvania

automobile policy can be "stacked" onto the UM coverage provided by the Tennessee automobile

policy, thereby allowing the Beams a greater recovery. USAA contends that the legislative intent

of the UM statute in Tennessee is that stacking of coverages is not permitted.



                 Minimum policy limits not increased. — Nothing contained in this part shall
          be construed as requiring the forms of coverage provided pursuant to this part,
          whether alone or in combination with similar coverage afforded under other
          automobile liability policies, to afford limits in excess of those that would be

                                                  4
       afforded had the insured thereunder been involved in an accident with a motorist who
       was insured under a policy of liability insurance with the minimum limits described
       in § 55-12-107, or the uninsured motorist liability limits of the insured's policy if
       such limits are higher than the limits described in § 55-12-107. Such forms of
       coverage may include such terms, exclusions, limitations, conditions, and offsets,
       which are designed to avoid duplication of insurance, and other benefits.

Tenn. Code Ann. § 56-7-1205 (1994).



       Moreover, USAA argues that our Supreme Court and this Court

have interpreted this statute to mean that the stacking or duplication of automobile insurance

coverages is not permitted in Tennessee, citing State Automobile Mutual Ins. Co. v. Cummings, 519

S.W.2d 773 (Tenn. 1975) and Jones v. Mulkey, 620 S.W.2d 498 (Tenn. App. 1981).



       The Beams argue that the Pennsylvania automobile policy provides "stacked" UM coverage

on its face, and thus, they are entitled to recover under the UM provisions of the Tennessee policy

as well as the Pennsylvania policy. The plaintiffs assert that Tennessee Code Annotated § 56-7-1205

"does not prohibit an insurance company from expressly providing broader coverage than may be

required." Specifically, they point to the Pennsylvania automobile policy which provides for stacked

coverages. The Beams argue that following the accident USAA notified them in writing that the

coverage under the Pennsylvania automobile policy could be "stacked" onto the UM coverage under

the Tennessee automobile policy.



       As USAA notes in its brief, the trial court in making its decision regarding the stacking of

coverages relies on a stipulation between the parties that an additional amount in the Beams'

premium was charged for stacked coverage under the Pennsylvania automobile policy. However,

at trial it was discovered that because the Beams had only one vehicle covered under the

Pennsylvania automobile policy, they had not been charged an additional amount in their premium



                                                 5
for stacked coverage. USAA asserts that whether there was a premium differential is irrelevant

because under Tennessee law, the stacking of insurance coverages is not permissible.



              In our analysis of this issue, we will first look to the Tennessee UM statute and the case law

that interprets that statute. First, Tennessee Code Annotated § 56-7-1205 indicates on its face an

intent to guarantee coverage only within certain limits. In interpreting this statute, our Supreme

Court in Cummings noted that the UM statute "evinces a legislative purpose to provide recovery only

up to the minimum statutory limit." Cummings, 519 S.W.2d at 775. Like the Supreme Court in

Cummings, this Court in Jones v. Mulkey, 620 S.W.2d 498 (Tenn. App. 1981), felt bound by the

statute in its ruling that stacking of coverages is not permissible. We too are bound by the statute

in this cases involving policies issued in Tennessee and subject to interpretation under Tennessee

Law.1 We are not required to apply Tennessee Law, however, to a policy issued in Pennsylvania and

subject to interpretation under the laws of Pennsylvania. We are at liberty to apply Pennsylvania law

unless it is in conflict with the public policy of this state. In Pennsylvania, "stacking" is permitted

and it is expressly provided in the Pennsylvania policy that the coverage may be stacked. As we

have previously noted, the public policy in this state as established by the legislature "evinces a

legislative purpose to provide recovery only up to the minimum statutory limit." This is not to say,

however, that public policy prohibits parties from contracting for insurance in excess of the

minimum statutory limit. It appears that our public policy is directed toward a duplication of

benefits or a "double recovery." See T.C.A. § 56-7-1205. Hence, since there is quite obviously no

room for a "double recovery" under the facts and circumstances of this case, it is not in conflict with

out public policy to enforce the provisions of the Pennsylvania insurance policy which allow

stacking. "All through the legal history of our State the courts have had not only the power but are



              1
                  T . C . A . § 5 6 - 7 - 1 2 0 1 , b y i t s     o w n t e r m s , a p p l i e s   o n l y   t o   p o l i c i e s   d e l i v e r e d ,
i s s u e d        f o r d e l i v e r y o r r e n e w e d i n   t h i s s t a t e . . . .

                                                                           6
constantly enforcing rights of actions arising under the laws of another state which require the

ascertainment and application of the law of the foreign state, and this we have done even when the

law of the foreign state be different from our own. The only exception being where the law of the

foreign state be against the public policy of our State. See Whitlow v. N.C. & St. L. Ry. Co., 114

Tenn. 344, 357, 84 S.W. 618, 68 L.R.A. 503 (1904)." Zurick v. Inman, 221 Tenn. 393, 426 S.W.2d

767 (Tenn. 1968).



       Under Pennsylvania law, stacking is expressly permitted. Pennsylvania's Motor Vehicle

Financial Responsibility law provides as follows:



       §1738. Stacking of Uninsured and Underinsured Benefits and Option to Waive.

               (a)      Limit For Each Vehicle — When more than one (1) vehicle is insured
       under one or more policies providing uninsured or underinsured motorist coverage,
       the stated limit for uninsured or underinsured coverage shall apply separately to each
       vehicle so insured. The limits of coverages available under this subchapter for an
       insured shall be the sum of the limits for each motor vehicle as to which the injured
       person is an insured. (Emphasis added).



       Further, the courts of Pennsylvania have expressly approved stacking of coverage to the

limits of coverage or to the extent of the insured's damages, whichever is less. See Harleysville Mut.

Cas. Co. v. Blumling, 241 A.2d 112 (Pa. 1968).



       We, therefore, find no error in the trial court's judgment allowing stacking of the

Pennsylvania policy and the Tennessee automobile policy.



       We turn now to the issue of whether the Beams had UM coverage under their personal

umbrella policy. USAA contends that James Beam rejected UM coverage on his umbrella policy

on April 1, 1994. It further asserts that once UM coverage has been rejected by an insured, such

                                                  7
coverage cannot be added until the insurer is notified in writing of the desire to add the coverage.

USAA argues that Mr. Beam never requested that UM coverage be added to his personal umbrella

policy after having rejected the coverage. Therefore, USAA maintains that when the Beams'

daughter was killed on September 9, 1996, the Beams did not have UM coverage under their

personal umbrella policy because Mr. Beam had rejected such coverage in April 1994.



           In support of its argument, USAA relies on the following provision of the Tennessee UM

statute:



           However, any named insured may reject in writing such uninsured motorist coverage
           completely or select lower limits of such coverage but not less than the minimum
           coverage limits in § 55-12-107. Any document signed by the named insured or legal
           representative which initially rejects such coverage or selects lower limits shall be
           binding upon every insured to whom such policy applies, and shall be conclusively
           presumed to become a part of the policy or contract when issued or delivered,
           irrespective of whether physically attached thereto. Unless the named insured
           subsequently requests such coverage in writing, the rejected coverage need not be
           included in or supplemental to any continuation, renewal,
           reinstatement, or replacement of such policy, or the transfer of vehicles insured
           thereunder, where the          named insured had rejected the coverage in connection
           with a policy previously issued by the same insurer; provided, that whenever a new
           application is submitted in connection with any renewal, reinstatement or
           replacement transaction, the provisions of this section shall apply in the same manner
           as when a new policy is being issued.

Tenn. Code Ann. § 56-7-1201(a)(2) (Supp. 1997).



           USAA contends that "[t]he umbrella policy was maintained from 1986 through the time of

the accident under policy number 00122 83 80 70U and was simply renewed year after year." It

further argues that after Mr. Beam signed the UM rejection form in 1994, no new application for

umbrella insurance was ever submitted. Also, it notes that the Beams received an adjustment of

$144.90 on their billing statement when Mr. Beam rejected UM coverage.




                                                    8
        The Beams argue that the addition of the 1996 Camaro in January 1996 and the addition of

Karen Beam in February 1996 to their existing insurance coverage with USAA were "applications"

for coverage. Their argument rests on the last sentence in Tennessee Code Annotated § 56-7-

1201(a)(2): "whenever a new application is submitted in connection with any renewal, reinstatement

or replacement transaction, the provisions of this section shall apply in the same manner as when a

new policy is being issued." Therefore, they contend that because they had not specifically rejected

UM coverage on their personal umbrella policy regarding these two "applications," UM coverage

would have been automatic under Tennessee law, and consequently, UM coverage would have been

in effect at the time of the accident.



        In addition, the Beams assert that they never received any notification from USAA that UM

coverage had been removed from their umbrella policy. The Beams note that the umbrella policy

that became effective on May 3, 1994, a month after Mr. Beam had rejected UM coverage, stated

on the declaration page that UM coverage was included. They maintain that in the two years after

Mr. Beam rejected umbrella UM coverage, he never received any indication that he no longer had

UM coverage.



        In its ruling, the trial court commented on two provisions of the umbrella UM rejection form.

The court noted the statement "[p]lease complete the rejection order form on the reverse and return

it within the next ten days." The court observed that "on the reverse there's various choices to be

checked off and the final statement again stating that if you do not sign and return this rejection form

within ten days, uninsured motorist will be added to your policy and you'll be charged accordingly."

The trial court concluded that in "[r]eading all the documents, there is no indication in the renewal

that we can see that would alert an ordinary person that something needed to be done to include

uninsured motorist coverage."


                                                   9
        USAA argues that the trial court failed to construe the policy as a whole. Specifically, USAA

notes that the form also states "[i]f this is a new policy, please return this form with your application.

If it is a renewal, return this only if you desire a change, or have not previously signed a rejection

form, within the next ten days." USAA maintains that the rejection form "specifically addresses a

renewal and without ambiguity clearly instructs the insured to return the form if a change is desired

with respect to previously rejected coverage."



        Insurance contracts are subject to the same rules of construction and enforcement as contracts

generally. See Hurley v. Tennessee Framers Mut. Ins. Co., 922 S.W.2d 887 (Tenn. App. 1995).

Insurance contracts are to be construed in such a way "as to give effect to the intention and express

language of the parties." Blaylock & Brown Constr., Inc. v. AIU Ins. Co.,796 S.W.2d 146, 149

(Tenn. App. 1990). To determine whether there was a renewal of an existing policy or whether a

new policy was issued, one should look to the intent of the contracting parties as evidenced by the

policy itself. Lewis v. Western Assur. Co., 175 Tenn. 37, 130 S.W.2d 982 (1939). The intention of

the parties should be determined from the construction of the insurance contract as a whole. Burns

v. Temperature Control Co., 52 Tenn. App. 51, 371 S.W.2d 804 (1962). The words expressing the

parties' intentions should be given their usual, natural and ordinary meaning. Taylor v. White Stores,

Inc., 707 S.W.2d 514 (Tenn. App. 1985).



        In our discussion of the personal umbrella policy in this case, we note that it is undisputed

that on April 1, 1994 Mr. Beam signed a form rejecting umbrella UM coverage. The Beams, who

had had a personal umbrella policy with USAA since 1986, had never had UM coverage under their

umbrella policy.     However, the Beams argue that their addition of the 1996 Camaro and their

daughter to their existing insurance coverage with USAA constituted "applications" for insurance




                                                   10
under Tennessee Code Annotated § 56-7-1201(a)(2), and as such, provided UM coverage

automatically under Tennessee law.



       To determine whether there was a new policy or a renewal, we must look at the language in

the policy as evidence of the parties' intentions. The statement "RENEWAL OF Policy Number

USAA 00122 83 80 7OU" appears at the top of the personal umbrella policy declarations page.

Also, on the lower part of the page is the following statement: "Form and Endorsement(s) made part

of this policy at time of issue: REMAIN IN EFFECT (REFER TO PREVIOUS POLICY):" At the

bottom of the same page is the statement, "ATTACH THIS DECLARATION TO PREVIOUS

POLICY" in capital letters and bold type. Clearly, the policy language indicates a renewal and not

an application for coverage.



       In addition, Tennessee's UM statute clearly provides the procedure for adding UM coverage

once it has been rejected:



                Any document signed by the named insured or legal representative which
       initially rejects such coverage or selects lower limits shall be binding upon every
       insured to whom such policy applies, and shall be conclusively presumed to become
       a part of the policy    or contract when issued or delivered, irrespective of whether
       physically attached thereto. Unless the        named insured subsequently requests
       such coverage in writing, the rejected coverage need not be included in or
       supplemental to any continuation, renewal, reinstatement, or replacement of such
       policy, or the transfer of vehicles insured thereunder, where the named insured had
       rejected the coverage in connection with a policy previously issued by the same
       insurer.

Tenn. Code Ann. § 56-7-1201(a)(2).


       The record reveals that the Beams were well aware of the situation regarding UM coverage

under their umbrella policy. First, USAA sent Mr. Beam a letter dated March 2, 1994 in which

USAA explained the procedure for rejecting UM coverage in Tennessee. Second, Mr. Beam and


                                                11
Mrs. Beam both discussed umbrella UM coverage with a USAA service representative. A

representative spoke with Mrs. Beam on March 21, 1994 regarding the rejection form that was

mailed to the Beams. Mrs. Beam indicated to the representative that she would discuss the matter

with her husband. On April 4, 1994, USAA had not received a response from the Beams regarding

the umbrella UM rejection form, so UM coverage was included, as explained in the letter sent to Mr.

Beam. On April 5, 1994, Mr. Beam called USAA to discuss the rejection form and the premium for

UM coverage on the umbrella policy. According to the computer documentation entered by the

USAA service representative at the time of the conversation, Mr. Beam indicated that he would

probably return the rejection form, thereby rejecting UM coverage on the umbrella policy. Lastly,

Mr. Beam signed the UM rejection form on April 1, 1994 and sent the form to USAA. USAA

posted a credit of $144.90 for the umbrella UM coverage on May 3, 1994.



       Mr. Beam argues that USAA did not tell him that UM coverage was not included under his

personal umbrella policy and that he was uninformed regarding his insurance coverages. We find

this argument unpersuasive in light of the fact that Mr. Beam signed the UM rejection form himself

and in light of all the communication between USAA and the Beams concerning this matter. Mr.

Beam testified that the signature on the UM rejection form appeared to be his, although he could not

remember signing the form. Moreover, the record reflects that Mr. Beam, an airline pilot, is not a

neophyte regarding insurance matters. The computer documentation of telephone conversations

between USAA and Mr. Beam indicates that he frequently inquired about insurance premiums,

deductible limits, and other aspects of his insurance coverage. The USAA computer documentation

also reveals that Mr. Beam inquired about insurance coverage regarding his daughter's boyfriend's

use of one of the family's vehicles, his daughter's move from a learner's permit to driver's license,

and other similar details regarding insurance coverage for his family. Consequently, we cannot

accept Mr. Beam's argument that he was uninformed or unsophisticated regarding matters of


                                                 12
insurance. Mr. Beam signed the rejection form, so he knew or should have known what he was

doing by that act. In the final analysis, we conclude that there was no UM coverage under the

umbrella policy.



           Assuming, however, for the purposes of discussion and for no other reason, that the umbrella

policy does provide UM coverage, unquestionably it is a policy issued under Tennessee law and is

a "policy delivered, issued for delivery or renewed in this state." Therefore, it is subject to

application of Tennessee law. As hereinbefore noted, Tennessee law prohibits the stacking of UM

coverage. See Cummings, supra., and T.C.A. § 56-7-1205.



               Accordingly, we reverse the judgment of the trial court and find that UM coverage was not

available to the Beams under their umbrella policy.2



           We do not believe that the record supports a finding that USAA acted in "bad faith" by

denying coverage.



           We affirm the judgment of the trial court allowing a stacking of the Pennsylvania policy with

the Tennessee Policy. We reverse the judgment of the trial court that there was UM coverage under

the umbrella policy and that the umbrella policy coverage could be stacked with the other policies.

This case is remanded to the trial court for such further action as may be necessary. Costs of the

appeal are assessed equally between the parties.



                                                                                    ______________________________
                                                                             Don T. McMurray, Judge

           2
              T . C . A . § 5 6 - 7 - 1 2 0 1 ( a ) ( 3 ) w a s a m e n d e d e f f e c t i v e J u l y 1 , 1 9 9 6 t o p r o v i d e d t h a t
u n i n s u r e d o r u n d e r i n s u r e d m o t o r i s t c o v e r a g e n e e d n o t b e p r o v i d e d i n t h i s s t a t e b y
a n e x c e s s o r u m b r e l l a p o l i c y o f i n s u r a n c e .

                                                                      13
CONCUR:


___________________________________
Houston M. Goddard, Presiding Judge

___________________________________
Herschel P. Franks, Judge




                                      14
                                 IN THE COURT OF APPEALS
                                      AT KNOXVILLE



JAMES M. BEAM and JOYCE A. BEAM, ) Knox Chancery
Individually and as Next                  ) C.A. No. 03A01-9802-CH-00055
of Kin of      KAREN H. BEAM, Deceased,          )
and Next Friend of LANCE B. BEAM,         )
A Minor,                                         )
                                                 )
               Plaintiffs-Appellees )
                                                 )
                                                 ) HON. FREDERICK D. MCDONALD
vs.                                              ) CHANCELLOR
                                                 )
                                                 )
UNITED SERVICES AUTOMOBILE                       )
ASSOCIATION, and/or USAA CASUALTY                )
INSURANCE COMPANY, and/or USAA )
GENERAL INDEMNITY COMPANY,                       )
                                                 ) AFFIRMED IN PART,
               Defendants-Appellants      ) REVERSED IN PART AND
                                      ) REMANDED

                                           JUDGMENT

        This appeal came on to be heard upon the record from the Chancery Court of Knox County,

briefs and argument of counsel. Upon consideration thereof, this Court is of opinion that there was

error in the trial court.

        We affirm the judgment of the trial court allowing a stacking of the Pennsylvania policy with

the Tennessee Policy. We reverse the judgment of the trial court that there was UM coverage under

the umbrella policy and that the umbrella policy coverage could be stacked with the other policies.

This case is remanded to the trial court for such further action as may be necessary. Costs of the

appeal are assessed equally between the parties.


                                                      PER CURIAM
