                  IN THE COURT OF APPEALS OF TENNESSEE
                               AT JACKSON
                                  JANUARY 18, 2005 Session

              JUSTIN L. THURMAN v. JUSTIN E. HARKINS, ET AL.

                   Direct Appeal from the Circuit Court for Fayette County
                           No. 4294 Jon Kerry Blackwood, Judge



                      No. W2004-01023-COA-R3-CV - Filed May 23, 2005


This case involves a question of whether an insurance policy covers the injuries sustained by the
plaintiff under the facts of this case. The original suit filed by plaintiff against Justin Harkins,
Andrew Keon, and James Keon was settled out of court, leaving Great River Insurance Company,
an unnamed defendant. After granting the plaintiff’s motion for declaratory and partial summary
judgment on whether the plaintiff was a covered insured under the policy, the parties agreed to send
the matter to arbitration. The arbitrator returned an award in favor of the plaintiff, and the trial court
confirmed the award but reduced the amount, accounting for the insurance policy’s limit. The trial
court also awarded the plaintiff pre-judgment interest but stated that the total award to the plaintiff
could not exceed the limit in the insurance policy. Great River Insurance Company appealed to this
Court, and the plaintiff filed a cross-appeal. For the following reasons, we affirm.


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

ALAN E. HIGHERS, J., delivered the opinion of the court, in which DAVID R. FARMER , J., and HOLLY
M. KIRBY , J., joined.

Paul Campbell, III, Chattanooga, TN, for Appellant Great River Insurance Company

Jason G. Whitworth, Lyle Reid, Covington, TN, for Appellee Justin Thurman

                                               OPINION

                                   Facts and Procedural History

        On or about August 5, 2000, Justin Thurman (“Thurman” or “Appellee”) was a passenger
in a 1997 Oldsmobile, traveling on Harrell Road in Fayette County, Tennessee. Justin E. Harkins
was operating the Oldsmobile, and it was owned by James R. Keon, who permitted Andrew Keon
to use the vehicle. Andrew Keon, who was an additional passenger at the time, in turn, permitted
Justin Harkins to operate the Oldsmobile. While driving, Justin Harkins lost control of the vehicle,
running off the road resulting in a single-car accident. Justin Harkins, James Keon, and Andrew
Keon were uninsured/underinsured motorists at the time of the accident.

       At the time of the accident,1 Lorrie and Leslie Corban, Thurman’s mother and stepfather, held
a commercial insurance policy (the “policy”) with Great River Insurance Company (“Great River”
or “Appellant”) under their business name, L & L Roofing & Construction Company and their own
names. The insurance policy provided coverage for uninsured/underinsured motorists with a limit
of $500,000.00, designating the covered automobiles under a “code 2.” In its Business Auto
Coverage Form, “code 2” is defined as

        owned “autos” only. Only those “autos” you own (and for Liability Coverage any
        “trailers” you don’t own while attached to power units you own). This includes those
        “autos” you acquire ownership of after the policy begins.

In an additional form entitled Tennessee Uninsured Motorists Coverage (“UM Coverage Form”),
it states that the provisions of the Coverage Form apply unless modified by the UM Coverage Form.

        The UM Coverage Form provides the following coverage:
        [Great River] will pay all sums the “insured” is legally entitled to recover as
        compensatory damages from the owner or driver of an “uninsured motor vehicle”.
        The damages must result from “bodily injury” sustained by the “insured”, or
        “property damage” caused by an “accident”. The owner’s or driver’s liability for
        these damages must result from the ownership, maintenance or use of the “uninsured
        motor vehicle”.

The UM Coverage Form next defines the persons included as an “insured”:
      B. Who Is Insured
            1. You.2
            2. If you are an individual, any “family member”.
            3. Anyone else occupying a covered “auto” or a temporary substitute
            for a covered “auto”. The covered “auto” must be out of service
            because of its breakdown, repair, servicing, loss or destruction.
            4. Anyone for damages he is entitled to recover because of “bodily
            injury” sustained by another “insured”.

“Family member” is defined in the policy as a “person related to you by blood, marriage or adoption,
who is a resident of your household, including a ward or foster child.” Great River admitted that
Thurman was a “family member” of his mother, Lorrie Corban, as defined in the policy.


        1
                 The policy had an effective period of May 31, 2000, to May 31, 2001.

        2
                  In the Business Auto Coverage Form, it states that the words “you” and “your” refer to the named
insureds on the declarations page, and “we,” “us,” and “our” refer to Great River.

                                                       -2-
         Thurman filed a complaint3 against Justin Harkins, Andrew Keon, James Keon, and Great
River.4 Thurman reached a settlement agreement with Justin Harkins, Andrew Keon, and James
Keon, wherein State Farm Insurance Company agreed to pay its policy limit of $50,000.00 for the
release of these defendants. Thurman filed a motion for declaratory and partial summary judgment
requesting the trial court to find Thurman was an “insured” under the policy with Great River. The
trial court granted Thurman’s motion, finding that Thurman was an insured under the policy and that
the limit of liability insurance coverage was $500,000.00. The matter was sent to arbitration, and
the arbitrator determined that Thurman suffered damages in the amount of $3,153,684.15. In its final
order, the trial court adopted the arbitration award, applied the maximum limit of liability stated in
the insurance policy, gave Great River a credit for the $50,000.00 paid by State Farm Insurance
Company, and ordered Great River to pay Thurman $445,000.005 plus pre-judgment interest
provided the total award did not exceed $450,000.00.6 Great River now appeals and presents the
following issue for our review:

         I.       Whether the insurance policy provided uninsured/underinsured motorist coverage for
                  the plaintiff under the circumstances of this case.

Additionally, on a cross-appeal, Thurman presents the following issue:

         II.      Whether the trial court erred when it limited the award of pre-judgment interest such
                  that the total award could not exceed the policy limit minus the amount of the prior
                  settlement received.

For the following reasons, we affirm.




                                               Standard of Review

       Contract interpretation presents an issue of law. Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95
(Tenn. 1999) (citing Hamblen County v. City of Morristown, 656 S.W.2d 331, 335-36 (Tenn. 1983)).

         3
                  Thurman later amended his complaint to include a request for pre-judgment interest.

         4
                 Great River is an unnamed, but served, defendant in Thurman’s lawsuit designated the
uninsured/underinsured motorist carrier.

         5
                As best this Court can determine from the record, the trial court applied the $50,000.00 credit to the
amount of $495,000.00 because Thurman drafted an “offer of judgment” to Great River in March 2002 for the amount
of $495,000.00.

         6
                    Though the policy contained a limit of $500,000.00 for uninsured/underinsured motorist coverage, the
trial court did not permit the award to exceed $450,000.00 because of the $50,000.00 settlement already received by
Thurman.

                                                          -3-
As such, our review on appeal of this issue is de novo. Id. (citing Hamblen County, 656 S.W.2d at
335-36). All other questions of law are reviewed de novo affording no presumption of correctness
to the trial court’s conclusions of law. Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91
(Tenn. 1993) (citing Estate of Adkins v. White Consol. Indus., Inc., 788 S.W.2d 815, 817 (Tenn. Ct.
App. 1989)). “[R]eview of findings of fact by the trial court in civil actions shall be de novo upon
the record of the trial court, accompanied by a presumption of the correctness of the finding, unless
the preponderance of the evidence is otherwise.” Tenn. R. App. P. 13(d) (2004).

                                Coverage of the Insurance Policy

        Great River argues that the trial court erred when it determined that the insurance policy
provided Thurman uninsured/underinsured motorist coverage. Specifically, Great River argues that,
because the policy involved is a business policy, as opposed to a personal policy, the coverage should
be tied to the vehicles for which the policy lists coverage.

        We begin by noting that an insurance policy is subject to the same rules of enforcement and
construction applied to contracts in general. Osborne v. Mountain Life Ins. Co., 130 S.W.3d 769,
773 (Tenn. 2004) (citing Am. Justice Ins. Reciprocal v. Hutchison, 15 S.W.3d 811, 814 (Tenn.
2000)); Quintana v. Tenn. Farmers Mut. Ins. Co., 774 S.W.2d 630, 632 (Tenn. Ct. App. 1989)
(citing Great Am. Life Ins. Co. v. Armstrong, 185 S.W.2d 505, 507 (Tenn. 1945)). When presented
with an issue of contract interpretation, we must review the contract and make our own independent
determination of the contract’s meaning. Hyde v. Ishikawa Gasket Am., Inc., No. M2002-02653-
COA-R3-CV, 2003 Tenn. App. LEXIS 896, at *7 (Tenn. Ct. App. Dec. 22, 2003) (citing Cagle v.
Cagle, No. 02A01-9710-CH-00265, 1998 Tenn. App. LEXIS 776, at *7 (Tenn. Ct. App. Nov. 18,
1998)).

        The cardinal rule for interpreting a contract is to determine the intention of the parties and
give effect to that intention. Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521
S.W.2d 578, 580 (Tenn. 1975) (citing Petty v. Sloan, 277 S.W.2d 355 (Tenn. 1955)). We must
construe an insurance policy fairly and reasonably, giving the language its usual and ordinary
meaning. Tata v. Nichols, 848 S.W.2d 649, 650 (Tenn. 1993); Quintana, 774 S.W.2d at 632 (citing
Parker v. Provident Life & Accident Ins. Co., 582 S.W.2d 380, 383 (Tenn. 1979); Metro. Life Ins.
Co. v. Smith, 554 S.W.2d 123, 128 n.4 (Tenn. 1977); Dixon v. Gunter, 636 S.W.2d 437, 441 (Tenn.
Ct. App. 1982)). Our duty is to enforce a contract according to its plain terms. Bob Pearsall Motors,
Inc., 521 S.W.2d at 580 (citing Eleogrammenos v. Standard Life Ins. Co., 149 S.W.2d 69 (Tenn.
1941)). But when there is doubt or ambiguity as to meaning, an insurance contract must be
construed favorably to the insured; however, courts will not create a new contract for the parties.
Berry v. Prudential Ins. Co. of Am., 134 S.W.2d 886, 889-90 (Tenn. Ct. App. 1939) (citing U.S.
Stove Corp. v. Aetna Life Ins. Co., 84 S.W.2d 582 (Tenn. 1935); Moore v. Life & Cas. Ins. Co., 40
S.W.2d 403 (Tenn. 1931); Green v. Fid. & Guar. Co., 185 S.W. 726 (Tenn. 1915); Seay v. Ga. Life
Ins. Co., 179 S.W. 312 (Tenn. 1915); Knox v. Fraternal Aid Union, 1 Tenn. App. 317 (Tenn. Ct.
App. 1925)); Bob Pearsall Motors, Inc., 521 S.W.2d at 580 (citing Dubois v. Gentry, 184 S.W.2d
369 (Tenn. 1945)).


                                                 -4-
        Great River argues that the insurance policy held by L & L Roofing & Construction Company
and Leslie and Lorrie Corban does not provide uninsured/underinsured motorist coverage to
Thurman because no “covered auto” was involved in the accident. We disagree. We begin by
examining the declarations portion of the policy. After naming the insureds, the declarations page
states the following:

         This policy provides only those coverages where a charge is shown in the premium
         column below. Each of these coverages will apply only to those “autos”7 shown as
         covered “autos”. “Autos” are shown as covered “autos” for a particular coverage by
         the entry of one or more of the symbols from the COVERED AUTO section of the
         Business Auto Coverage Form next to the name of the coverage.

Under the coverage section for uninsured and underinsured motorists, it states that the “covered
auto” for such coverage is a “code 2.” “Code 2” is defined as

         owned “autos” only. Only those “autos” you own (and for Liability Coverage any
         “trailers” you don’t own while attached to power units you own). This includes those
         “autos” you acquire ownership of after the policy begins.

The two listed “owned autos” for the insured are a 1995 Chevrolet Diesel and a 1990 Dump
Trailer. Great River also directs our attention to a provision in the Business Auto Coverage
Form discussing liability coverage which states as follows:

         We will pay all sums an “insured” legally must pay as damages because of “bodily
         injury”8 or “property damage”9 to which this insurance applies, caused by an
         “accident”10 and resulting from the ownership, maintenance or use of a covered
         “auto”.

Further, Great River brings to this Court’s attention the provision in the UM Coverage Form which
states that the endorsement modifies insurance provided under the Business Auto Coverage Form
“[f]or a covered ‘auto’ licensed or principally garaged in, or ‘garage operations’ conducted in,
Tennessee. . . .” (emphasis added). Great River argues that, when taken together, these provisions
demonstrate the intent of the parties to tie uninsured/underinsured motorist coverage to “owned


         7
                  “Auto” is defined in the policy as “a land motor vehicle, ‘trailer’ or semitrailer designed for travel on
public roads but does not include ‘mobile equipment’.”

         8
                  “Bodily injury” is defined in the policy as “bodily injury, sickness or disease sustained by a person
including death resulting from any of these.”

         9
                  “Property damage” is defined in the policy as “damage to or loss of use of tangible property.”

         10
                   “Accident,” for purposes of the policy, “includes continuous or repeated exposure to the same
conditions resulting in ‘bodily injury’ or ‘property damage’.”

                                                           -5-
autos” which are listed as the “covered autos” on the declarations page. Therefore, Great River
contends that, because neither of the “covered autos” were involved in the accident, Thurman should
be denied coverage.

        However, the UM Coverage Form further provides that “[t]his endorsement provides bodily
injury and property damage uninsured motorists insurance unless and [sic] ‘X’ is entered below.”
No “X” was entered, and, therefore, the policy provides uninsured motorist insurance coverage for
both bodily injury and property damage.11 Further, the UM Coverage Form contains the following
pertinent provision with respect to coverage:

        We will pay all sums the “insured”12 is legally entitled to recover as compensatory
        damages from the owner or driver of an “uninsured motor vehicle”.13 The damages

        11
                 Though the policy does not appear to modify the definition of “bodily injury,” the UM Coverage Form
does modify the definition of “property damage” as follows:

                 1. “Property damage” means injury or destruction of:
                         a. A covered “auto”;
                         b. Property contained in the covered “auto” and owned by you or any
                         “family member”;
                         c. Property contained in the covered “auto” and owned by any else
                         “occupying” the covered “auto”.


        12
                 As noted above, “insured,” for purposes of the UM Coverage Form, is defined in the policy as follows:

                 B. W ho Is Insured
                 1. You.
                 2. If you are an individual, any “family member”.
                 3. Anyone else occupying a covered “auto” or a temporary substitute for a covered
                 “auto”. The covered “auto” must be out of service because of its breakdown, repair,
                 servicing, loss or destruction.
                 4. Anyone for damages he is entitled to recover because of “bodily injury”
                 sustained by another “insured”.

Further, Great River has previously stipulated that Thurman is a “family member” for purposes of the policy.

        13
                 The UM Coverage Form defines “uninsured motor vehicle” as follows:

                 “Uninsured motor vehicle” means a land motor vehicle or trailer:
                 (1) For which no liability bond or policy at the time of an “accident” provides at least the
                 amounts required by the applicable law where a covered “auto” is principally garaged;
                 (2) That is an underinsured motor vehicle. An underinsured motor vehicle is a motor vehicle
                 or trailer for which the sum of the limits of liability available for payment to an “insured”
                 under all policies, bonds and securities applicable at the time of the accident, is less than the
                 Limit of Insurance for this coverage;
                 (3) For which an insuring or bonding company denies coverage or is or becomes insolvent;
                 or
                                                                                                             (continued...)

                                                          -6-
       must result from “bodily injury” sustained by the “insured”, or “property damage”
       caused by an “accident”. The owner’s or driver’s liability for these damages must
       result from the ownership, maintenance or use of the “uninsured motor vehicle”.

Applying the definitions of the policy for “insured” and “uninsured motor vehicle,” the language of
the UM Coverage Form, on its face, provides coverage to Thurman for the “bodily injuries” he
sustained as an “insured.” Nothing in this language suggests, as Great River argues, that a “covered
auto” must be involved in the event in order for Thurman to be covered by the policy as an
“insured.” Further, under a section outlining the limits of the UM Coverage Form, it states as
follows:

       The most we will pay for all damages resulting from “bodily injury” to an “insured”
       when the “insured” is “occupying” an “auto” not owned by the insured, or is not
       “occupying” any “auto”, is the highest limit of uninsured motorists coverage on an
       “auto” owned by the “insured”.

(emphasis added). Thus, from the UM Coverage Form, which modifies the policy as a whole, not
only does Thurman’s accident at issue appear to fall within the plain language outlining the coverage
of the UM Coverage Form, but the section outlining the limits of the UM Coverage Form states that
the policy covers the exact fact situation of Thurman’s accident, that being that he sustained bodily
injury while occupying an automobile not owned by him or Leslie or Lorrie Corban. Therefore, we
cannot say that the trial court erred when it determined that Thurman’s injuries are covered by the
policy of insurance with Great River.

                                             Pre-Judgment Interest




       13
            (...continued)
                    (4) That is a hit-and-run vehicle and neither the driver nor owner can be identified. The
                    vehicle must either:
                              (a) Hit an “insured”, a covered “auto” or a vehicle an “insured” is
                              “occupying”; or
                              (b) Cause “bodily injury” or “property damage” without hitting an
                              “insured”, a covered “auto” or a vehicle an “insured” is “occupying”.
                    ....
                    However, “uninsured motor vehicle” does not include any vehicle:
                    (1) Owned by, or furnished or available for the regular use of you or any “family member”;
                    (2) Owned or operated by a self-insurer under any applicable motor vehicle law, except as
                    a self-insurer who is or becomes insolvent and cannot provide the amounts required by that
                    motor vehicle law;
                    (3) Owned by a governmental unit or agency;
                    (4) Designed for use mainly off public roads while not on public roads; or
                    (5) W hile located for use as a premises.




                                                          -7-
       Next, Thurman raises on a cross-appeal the issue of whether the trial court erred when it
determined that pre-judgment interest on the damage award was appropriate, provided it did not
increase the award over and above the limit stated in the insurance policy for uninsured/underinsured
motorist coverage minus the amount of the $50,000.00 settlement received in behalf of Justin
Harkins, Andrew Keon, and James Keon. The parties do not appear to argue whether the award of
pre-judgment interest is equitable, but rather, whether the insurance policy permits an award of pre-
judgment interest such that the total award exceeds the policy limit. As such, we are presented with
a question of law and our scope of review is de novo with no presumption of correctness
accompanying the trial court’s conclusions of law. Malone v. Maddox, No. E2002-01403-COA-R3-
CV, 2003 Tenn. App. LEXIS 147, at *11 (Tenn. Ct. App. Feb. 25, 2003) (citing Union Carbide
Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993)) (no app. filed).

        In this case, the insurance policy, as noted above, contains a provision limiting the amount
Great River owes the insured: “[t]he most we will pay for all damages resulting from ‘bodily injury’
to an ‘insured’ when the ‘insured’ is ‘occupying’ an ‘auto’ not owned by the insured, or is not
‘occupying’ any ‘auto’, is the highest limit of uninsured motorists coverage on an ‘auto’ owned by
the ‘insured’.” (emphasis added). The policy contains an additional provision limiting the amount
Great River is obligated to pay: “[r]egardless of the number of covered ‘autos’, ‘insureds’, premiums
paid, claims made or vehicles involved in the ‘accident’, the most we will pay for all damages is the
limit of UNINSURED MOTORISTS COVERAGE shown in the schedule.” (emphasis added).
These limits are very similar to those at issue in Malone v. Maddox wherein this Court addressed this
same issue. Malone, 2003 Tenn. App. LEXIS 147, at *8.

       As this Court previously noted, pre-judgment interest is “an element of, or in the nature of,
damages.” Tenn. Code Ann. § 47-14-123 (2001); Malone, 2003 Tenn. App. LEXIS 147, at *16.
Because the policy on its face limits the amount Great River is required to pay for “all damages” in
the event the uninsured/underinsured motorist coverage is triggered and pre-judgment interest is an
element of damages, pre-judgment interest is encompassed by the limiting language of the policy.
See Malone, 2003 Tenn. App. LEXIS 147, at *16. As stated by this Court in Malone, “‘all damages’
means just that, all damages, and, by statute, prejudgment interest is an element of the injured party’s
damages.” Id. at *17.

        Thurman additionally directs this Court’s attention to decisions of other jurisdictions wherein
the courts of those states contend that, if pre-judgment interest were prohibited from increasing the
amount of the judgment above the policy limit, such a position would discourage an insurance
company from settlement and encourage protracted litigation during which the insured is deprived
of the use of funds to which he or she is entitled. See Cox v. Peerless Ins. Co., 774 F. Supp. 83, 86-
87 (D. Conn. 1991); Peterman v. State Farm Mut. Auto. Ins. Co., 8 P.3d 549, 553 (Colo. Ct. App.
2000); Miller v. Gunckle, 775 N.E.2d 475, 481 (Ohio 2002); Potomac Ins. Co. v. Howard, 813
S.W.2d 557, 558 (Tex. App. 1991). However, this Court previously addressed this argument in
Malone, stating:




                                                  -8-
               In general terms, an insurance company has an incentive to settle [an
       uninsured motorist] claim with merit in order to eliminate the possibility of a damage
       award that includes prejudgment interest. When the value of [an uninsured motorist]
       claim arguably exceeds the [uninsured motorist] limit of coverage, the insurance
       company still has motivation to settle for a number of reasons, not the least of which
       is fear of the imposition of a bad faith penalty under Tenn. Code Ann. § 56-7-105
       (2000). In any event, we hold that the conclusion reached by the trial court with
       respect to prejudgment interest does not violate an established public policy of this
       state.

Malone, 2003 Tenn. App. LEXIS 147, at *17-18 (footnote omitted). For all these reasons, we hold
that the trial court did not err when it “capped” the amount of damages, including pre-judgment
interest, pursuant to the limit stated in the policy.

                                           Conclusion

       For the reasons stated above, we affirm. Costs of this appeal are taxed equally to the
Appellee, Justin Thurman, and Appellant, Great River Insurance Company, and its surety for which
execution may issue if necessary.




                                                      ___________________________________
                                                      ALAN E. HIGHERS, JUDGE




                                                -9-
