                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                   July 7, 2010 Session

        ENGLISH MOUNTAIN RETREAT, LLC, ET AL. v. SUSANNE
                  CRUSENBERRY-GREGG, ET AL.

                    Appeal from the Circuit Court for Knox County
                     No. 2-471-07   Harold Wimberly, Jr., Judge


           No. E2009-02148-COA-R3-CV - FILED SEPTEMBER 21, 2010


Plaintiffs purchased property insurance from defendants. The insured building was destroyed
by a fire and plaintiffs received the full coverage limit. Nonetheless, plaintiffs sued
defendants claiming that the building was under-insured and that they relied on the
defendants’ negligent advice. A jury trial occurred and after the close of plaintiffs’ proof,
defendants moved for a directed verdict on all issues. The trial court granted defendants’
motion and dismissed plaintiffs’ complaint. Plaintiffs appeal. We find that a directed verdict
is inappropriate because plaintiffs presented sufficient facts for a jury to decide liability.
Therefore, we reverse the trial court’s order and remand for a full trial.

        Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
                            Reversed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which H ERSCHEL P. F RANKS,
P.J., and C HARLES D. S USANO, J R., J., joined.

Brian C. Quist, Joanna R. O’Hagan, and Ryan E. Jarrard, Knoxville, Tennessee, for the
appellants, English Mountain Retreat, LLC and G.E.R. Management, LLC.

Brad A. Fraser and Ryan C. Dreke, Knoxville, Tennessee, for the appellees, Susanne
Crusenberry-Gregg and the Assurance Center.

                                         OPINION

                             I. FACTUAL BACKGROUND

      G.E.R. Management, LLC (“G.E.R.”) owns real property and improvements located
on English Mountain, Sevier County, Tennessee. G.E.R.’s tenant, English Mountain Retreat,
LLC (“English Mountain”) operates an alcohol and drug treatment facility at that location.
Richard Kahn is the sole owner of G.E.R. and co-owner of English Mountain.1

        G.E.R. purchased English Mountain in November 2003 for $1.16 million. English
Mountain consists of 27 acres of land, tennis courts, a pool, a golf course, and various
buildings including, but not limited to: condominiums, a restaurant, and a main
administration building. Mr. Kahn and the seller agreed at the time of purchase that the seller
would carry the mortgage payments and Mr. Kahn would pay the existing insurance
premiums; this arrangement lasted for about two years. After making improvements to the
property and hiring a full-time employee on site, Mr. Kahn decided to update the insurance
for the property. He then contacted Susanne Crusenberry-Gregg (“Ms. Gregg”), an insurance
agent for the Assurance Center (collectively “Defendants”) about purchasing insurance. Ms.
Gregg is licenced in the State of Tennessee as a property and casualty insurance sales
producer and is an accredited advisor in insurance.

        Ms. Gregg made two visits to English Mountain. On her initial visit, she spent hours
touring the facility, taking photographs, and keeping notes. Ms. Gregg’s purpose for the
initial visit was to identify the property’s exposures to liability and gather information for
insurance recommendations. During her second visit, she presented a proposal with her
recommendations of the insurance needs for the property. Those recommendations included
different coverage limits for the various buildings located on the facility. The total premium
for the recommended coverage was $33,305. After the presentation, Mr. Kahn tendered a
check for the down payment, made some changes to the coverage, and eventually executed
an insurance policy. The insurance policy contained commercial property coverage,
commercial general liability coverage, and commercial inland coverage. The insurance
policy’s premium totaled $24,196.2

        In April 2007, the main administration building was completely destroyed by a fire.
The building was insured for replacement cost coverage with a limit of $450,000 plus
inflation guard. Because the building was a total loss, Plaintiffs were issued a check for
$457,200 – the total of the policy limit with the increase for inflation.

      Thereafter, Plaintiffs filed suit against Defendants alleging negligent
misrepresentation and vicarious liability. In their Amended Complaint, Plaintiffs claimed


        1
            We will refer to G.E.R. and English Mountain as “Plaintiffs” collectively.
        2
        The policy was initially provided through Auto-Owners Mutual Insurance Company. However,
when English Mountain became a drug and alcohol treatment facility, Auto-Owners did not renew the policy,
and Lloyd’s of London issued a new policy for English Mountain.

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that Ms. Gregg failed to “properly measure and or value the building,” and as a result, the
building was grossly under-insured. Plaintiffs further claimed that the cost to replace the
destroyed administration building would be at least $1,250,000 and that they are damaged
in excess of $750,000.

        A jury trial began on September 14, 2009. At the close of Plaintiffs’ proof,
Defendants moved for a directed verdict. The trial court granted the motion. Plaintiffs filed
a timely appeal.

                                        II. ISSUES

       Plaintiffs raise the following issues on appeal, which we restate:

       1. Whether the trial court erred in granting Defendants’ motion for directed
       verdict.

       2. Whether Plaintiffs presented sufficient facts to constitute a prima facie case
       regarding Defendants’ liability.

       3. Whether insurance agents are liable for providing misleading information
       upon which an insured relies and is subsequently damaged.


                             III. STANDARD OF REVIEW

      A trial court’s decision to grant a motion for directed verdict is a question of law.
Underwood v. HCA Health Servs. of Tennessee, Inc., 892 S.W.2d 423, 425 (Tenn. Ct. App.
1994). We review a question of law de novo with no presumption of correctness. Bowden
v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000).


                                     IV. DISCUSSION

      The standard for reviewing a motion for directed verdict was articulated by the
Tennessee Supreme Court in Johnson v. Tennessee Farmers Mut. Ins. Co.,

       In reviewing the trial court’s decision to deny a motion for a directed verdict,
       an appellate court must take the strongest legitimate view of the evidence in
       favor of the non-moving party, construing all evidence in that party’s favor and
       disregarding all countervailing evidence. A motion for a directed verdict

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       should not be granted unless reasonable minds could reach only one
       conclusion from the evidence. The standard of review applicable to a motion
       for a directed verdict does not permit an appellate court to weigh the evidence.
       Moreover, in reviewing the trial court’s denial of a motion for a directed
       verdict, an appellate court must not evaluate the credibility of witnesses.
       Accordingly if, material evidence is in dispute or doubt exists as to the
       conclusions drawn from that evidence, the motion must be denied.

205 S.W.3d 365, 370 (Tenn. 2006) (internal citations omitted).

        A motion for directed verdict is a question of law that requires this court to answer
one question: whether the non-moving party presented enough evidence to create an issue
of fact for a jury to resolve. Burton v. Warren Farmers Co-op., 129 S.W.3d 513, 520 (Tenn.
Ct. App. 2002) (citations omitted). A motion for a directed verdict should not be granted “if
the party with the burden of proof has presented sufficient evidence to create an issue of fact
for a jury to decide.” Id. (citing White v. Vanderbilt Univ., 21 S.W.3d 215, 231 (Tenn. Ct.
App. 1999). A party has created a jury issue when there is doubt about the conclusions
drawn from the evidence. Id. There is no jury issue when reasonable minds can only reach
one conclusion from the evidence. Id; see also Alexander v. Armentrout, 24 S.W.3d 267, 271
(Tenn. 2000). “A case should go to the jury, even if the facts are undisputed, when
reasonable persons could draw conflicting conclusions from the facts.” Keylon v. Hill, No.
E2003-01054-COA-R3-CV, 2003 WL 22927143, at *3 (Tenn. Ct. App. E.S., Dec. 11, 2003)
(quoting Richardson v. Miller, 44 S.W.3d 1, 30 (Tenn. Ct. App. 2000)).

        In this case, the trial court granted Defendants’ motion for a directed verdict for two
reasons. First, the court found that Mr. Kahn’s reliance on Ms. Gregg’s insurance
recommendation was not justified because Mr. Kahn should have had independent
knowledge of the value of the building. Second, the court found that there was no proof of
financial loss, stating “there is no proof really about what the value of the building is from
anybody other than the insured amount that the building had. That’s the only proof we have
about anything about the value of the building.” Defendants argue that a directed verdict was
appropriate in this case because Plaintiffs failed to prove damages or establish that Mr. Kahn
justifiably relied on the advice of Ms. Gregg.

       A claim for negligent representation requires a showing of the following:

       One who, in the course of his business, profession or employment, or in any
       other transaction in which he has a pecuniary interest, supplies false
       information for the guidance of others in their business transactions, is subject
       to liability for pecuniary loss caused to them by their justifiable reliance upon

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       the information if he fails to exercise reasonable care or competence in
       obtaining or communicating the information.

Restatement (Second) of Torts § 552(1) (1977). The Tennessee Supreme Court has called
section 552 of the Restatement (Second) of Torts “the guiding principle in negligent
misrepresentation actions against other professional and business persons.” Bennett v.
Trevecca Nazarene Univ., 216 S.W.3d 293, 301 (Tenn. 2007); Robinson v. Omer, 952
S.W.2d 423, 427 (Tenn. 1997).

        An essential requirement for a claim of negligent misrepresentation is “detrimental
reliance on a false premise.” McNeil v. Nofal, 185 S.W.3d 402, 408 (Tenn. Ct. App. 2005)
(supporting citations omitted). To succeed on a claim of negligent misrepresentation, the
plaintiff must prove that he or she relied justifiably on the defendant’s statements. See
Lambdin v. Garland, 723 S.W.2d 953, 956 (Tenn. Ct. App. 1986). It is the plaintiff’s burden
to establish that his or her reliance on the defendant’s statements was reasonable. Nofal, 185
S.W.3d at 409; see also Metropolitan Gov’t of Nashville and Davidson County v. McKinney,
852 S.W.2d 233, 238 (Tenn. Ct. App. 1992).

       At trial, Plaintiffs called three witnesses: Mr. Kahn, Ms. Gregg, and Robert Marlino,
Project Manager with Smee Busby Architects. Mr. Marlino holds a degree in architecture,
and in his capacity as a project manager, he is trained and familiar with determining the
square footage of a building. After the administration building was destroyed by the fire, Mr.
Marlino traveled to English Mountain and used a tape measure to determine the square
footage of the building. He testified that he calculated the square footage of the building to
be 9,187 square feet.

         Ms. Gregg testified that it is an accepted practice for insurance agents to recommend
the value of replacement cost by multiplying the square footage of the building by the cost
to replace one square foot. Regarding the policy at issue, Ms. Gregg’s testimony revealed
that the cost to replace a square foot was $90 and that she used the number of 5,000 square
feet in reaching her recommendation of $450,000 as the coverage limit for the administration
building’s replacement cost. To determine the square footage of a building, Ms. Gregg stated
that she typically requires the customer to provide the square footage, but in this case, she
testified:

       I don’t recall where the number [the square footage of 5,000] came from, but
       I do not believe it came from the customer.

She further testified that she believed that Mr. Kahn relied on the recommendations that she
offered regarding the coverage for the facility. Mr. Kahn corroborated this fact with his own

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testimony, stating that he was “very impressed” by Ms. Gregg’s presentation and that he
relied on her proposal for the coverage limits prior to executing the insurance policy. On
cross-examination, however, Mr. Kahn conceded that he took no steps to have the buildings
on English Mountain appraised or measured.

        Defendants urge this court to affirm the trial court’s grant of the directed verdict,
claiming there is no evidence that Mr. Kahn’s reliance on Ms. Gregg’s recommendations was
justified. We disagree. The trial testimony illustrates that Ms. Gregg was responsible for
preparing a proposal for the property’s insurance needs and that she visited English Mountain
for the purpose of determining potential liabilities. Mr. Kahn testified that he did not know
the value of the administration building because he paid one price for the entire property.
He also testified that he did not know the cost to replace one square foot for the
administration building. Because Mr. Kahn did not provide the square footage for any of the
buildings, he assumed that Ms. Gregg obtained and verified that information from her initial
visit on the property.

         In this case, it is undisputed that the type of coverage at issue is replacement cost
coverage. Insuring a building for the actual cash value differs from replacement coverage
in that the amount of coverage totals the replacement cost of the building less the depreciated
value of the building. This is a significant distinction because insuring a building for
replacement cost coverage, as Mr. Kahn did, means that the actual value of the building is
of little importance because the insurance agent will use a standard figure for the replacement
cost of one square foot and multiply it by the square footage of the building to be insured.
The trial court’s finding that Mr. Kahn’s reliance on Ms. Gregg’s recommendations was
unreasonable is one based on weighing the evidence. When presented with a motion for
directed verdict, the trial court should not weigh the evidence, but only answer the question
of whether the plaintiff presented enough evidence to create an issue of fact. Here, Plaintiffs
presented such evidence.

        From the evidence, one conclusion cannot be clearly reached. Our review of the
record indicates that Plaintiffs provided sufficient proof to create an issue for a jury to
resolve. In taking the strongest legitimate view of the evidence in favor of the nonmoving
party, which in this case is Plaintiffs, we conclude that a directed verdict was not appropriate.
The administration building was grossly under-insured based on the proposal prepared by
Ms. Gregg. Her proposal included an estimate of the building’s square footage that was off
by approximately 4,000 square feet. Due to the inaccurate square footage, the amount for
the coverage limit did not come close to covering the building’s replacement cost after the
building was destroyed in a fire. It is unclear from the evidence the source of the figure for
5,000 square feet, but both Ms. Gregg and Mr. Kahn testified that it did not come from
Plaintiffs.

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        We find that reasonable minds may differ in the conclusions they reach from the
evidence presented at trial. Therefore, under the standard of review for a directed verdict,
Plaintiffs’ proof can lead to conflicting conclusions that warrants an issue for a jury.
Accordingly, we reverse.

       Having decided the dispositive issue of this appeal, we will not address the other
issues and arguments raised by the parties.


                                    IV. CONCLUSION

       The judgment of the trial court granting a directed verdict in favor of Defendants is
reversed and the case is remanded to the trial court for a new trial and for the collection of
costs. Costs of this appeal are assessed against appellees, Susanne Crusenberry-Gregg and
the Assurance Center.




                                                   _________________________________
                                                   JOHN W. McCLARTY, JUDGE




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