                IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                                October 23, 2012 Session

    STONEBRIDGE LIFE INSURANCE COMPANY, GWENDOLYN R.
              WILLIAMS v. ONZIE O. HORNE, III

              Direct Appeal from the Chancery Court for Shelby County
                   No. CH111026      Arnold B. Goldin, Chancellor


              No. W2012-00515-COA-R3-CV - Filed November 21, 2012


This is an interpleader action resulting from competing claims to the proceeds of a life
insurance policy. The trial court granted summary judgment to the Insured’s mother, finding
that, because she was the only named beneficiary of the policy, she was entitled to the
proceeds. Insured’s husband appeals, arguing that, because Insured’s mother was only named
as a contingent beneficiary, the default provisions of the policy remained in effect, resulting
in him being the primary beneficiary of the policy. Husband also appeals the trial court’s
dismissal of his bad faith claim against the insurer. We affirm the dismissal of the bad faith
claim, but conclude that the contract at issue is ambiguous and the issue in this case is not
properly decided on summary judgment. Affirmed in part, reversed in part, and remanded.


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

J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J.,
and H OLLY M. K IRBY, J., joined.

Edricke L. Peyton, Memphis, Tennessee, for the appellant, Onzie O. Horne, III.

M. Andrew Pippinger and Dennis P. Hawkins, Memphis, Tennessee, for the appellee,
Stonebridge Life Insurance Company.

David F. Kustoff, Memphis, Tennessee, for the appellee, Gwendolyn R. Williams.

                                         OPINION

                                       I. Background
       The material facts of this case are not in dispute. Plaintiff/Appellee Stonebridge Life
Insurance Company (“Stonebridge”) issued a policy insuring the life of Anita M. Williams-
Horne (“Insured”). The policy was effective as of November 17, 1999. The default
provisions in the policy prioritized the beneficiaries as follows, unless otherwise specified:
(1) lawful spouse, if living; (2) equally to then living and lawful children; (3) equally to then
living parents or parent; (4) the insured’s estate. The policy indicated that this default
beneficiary provision may be changed by signed request. The policy provided that
$75,000.00 would be paid upon the Insured’s death.

       Insured married Defendant/Appellant Onzie Horne on January 28, 2000. Prior to the
marriage, no specific beneficiary had been named to the policy and it is undisputed that the
default provisions applied. On March 14, 2000, however, Insured executed a Beneficiary
Change Request form (“beneficiary change form”). The form contained the following
language:

              I, the undersigned policy owner, do hereby request the Company
              to revoke all prior beneficiary designations and optional
              methods of settlement, if any, and change the beneficiary of said
              policy as follows: Primary Beneficiary (or Beneficiaries) if
              living:

              Name       Relationship          Street Address, City, State, Zip
              __________ __________            _________________________
              __________ __________            _________________________

              Otherwise to Contingent Beneficiary (or Beneficiaries)
              __________ __________ _________________________
              __________ __________ _________________________

              The provisions in this Beneficiary Change takes precedence
              over any printed provisions in this policy which establish a
              beneficiary.

In the copy of the form returned to Stonebridge, Insured left the section entitled “Primary
Beneficiary (or Beneficiaries), if living” blank. Instead, Insured filled in only the section
entitled “Otherwise to Contingent Beneficiary (or Beneficiaries)” with the name of her
mother, Defendant/Appellee Gwendolyn Williams.

      Insured died on April 3, 2011. Mr. Horne was Insured’s lawful husband at her death.
Mr. Horne submitted a claim to Stonebridge on April 28, 2011. Stonebridge advised Mr.

                                               -2-
Horne’s counsel that Stonebridge sent a check to Mr. Horne and that his claim was
considered “paid” on May 6, 2011. However, after Ms. Williams made a claim under the
policy, Stonebridge issued a stop payment on the check to Mr. Horne. It is unclear whether
Mr. Horne ever received the check, but it is undisputed that Mr. Horne never received the
proceeds of the policy.

        There was some confusion as to whether Stonebridge would pay Mr. Horne’s claim
despite Ms. Williams’ objection, but ultimately Stonebridge filed an action for interpleader
on June 16, 2011 with the Chancery Court of Shelby County pursuant to Rule 22.01 of the
Tennessee Rules of Civil Procedure, discussed in detail below. Stonebridge simultaneously
paid the amount owed on the claim into the Shelby County Chancery Court Clerk’s office.
Stonebridge amended its complaint on June 21, 2011 to correctly reflect the amount of the
claim. Mr. Horne filed an answer and a counter-claim against Stonebridge for bad faith
refusal to pay the proceeds of the insurance policy and a violation of the Tennessee
Consumer Protection Act (“TCPA”) on July 1, 2011. The counter-claim further asked that
Ms. Williams be enjoined from “further slanderous or libelous statements regarding Mr.
Horne, and any issues that surround the unfortunate death of the [Insured].” 1 Stonebridge
filed a motion to dismiss the counterclaims for failure to state a claim upon which relief can
be granted on July 15, 2011. Ms. Williams filed a motion for summary judgment on August
2, 2011, claiming that she was entitled to the policy proceeds as a matter of law. Mr. Horne
responded with a motion for summary judgment of his own, asserting that he was entitled to
the proceeds.

       The trial court heard arguments on all outstanding motions on January 24, 2012. On
February 9, 2012, the trial court entered an order with detailed findings of fact and
conclusions of law. In the order, the trial court granted Stonebridge’s motion to dismiss the
counter-claims2 and Ms. Williams’ motion for summary judgment and denied Mr. Horne’s
motion for summary judgment. The order provided that the insurance contract at issue was
plain and unambiguous and that, because Ms. Williams was the only specifically named
beneficiary, she was entitled to the proceeds. On the same day, the trial court entered an order
directing the Chancery Court clerk to pay the interpleaded funds to Ms. Williams, dismissing




        1
          Although it is unclear from the record, it appears that Mr. Horne is referring to what he calls an
“insinuation” by Ms. Williams that Mr. Horne was somehow implicated in the Insured’s death. Mr. Horne
asserts that these allegations are false because the Shelby County Sheriff concluded that the Insured’s cause
of death was suicide.
        2
          Specifically, the trial court dismissed Mr. Horne’s claims against Stonebridge for bad faith failure
to pay and violation of the TCPA. Mr. Horne does not challenge the dismissal of his TCPA claim on appeal.

                                                     -3-
all other pending claims not specifically addressed,3 and assessing costs against Mr. Horne.
Mr. Horne filed a timely notice of appeal.

                                       II. Issues Presented

Mr. Horne raises the following issues, which are taken from his brief:

               1.      Whether the trial court improperly enforced the insurance
                       policy at issue, in a manner other than as written, to
                       result in the payment of the insurance proceeds to a
                       contingent beneficiary when the primary beneficiary was
                       legally available to receive said payments?
               2.      Whether Mr. Horne’s motion for summary judgment was
                       improperly denied?
               3.      Whether Ms. Williams’ motion for summary judgment
                       was improperly granted?
               4.      Whether Stonebridge acted in bad faith by filing an
                       action for interpleader of the insurance proceeds when its
                       unambiguous policy provided for payment of proceeds to
                       the decedent’s spouse?
               5.      Whether Mr. Horne’s counter-claims against Stonebridge
                       for bad faith refusal to pay were improperly dismissed?

        However, from our review, there are two dispositive issues in this case, which we
state as follows:

               1.      Whether the trial court erred in granting summary
                       judgment to Ms. Williams’ and denying summary
                       judgment to Mr. Horne, by finding that the insurance
                       contract unambiguously provided that the proceeds
                       should be paid to Ms. Williams?
               2.      Whether the trial court erred in dismissing Mr. Horne’s
                       counter-claim against Stonebridge for bad faith refusal to
                       pay the insurance proceeds?

In the posture of Appellee, Stonebridge raises the following issue:


       3
          One claim that was not specifically addressed in the prior order was Mr. Horne’s request for
injunctive relief prohibiting Ms. Williams from further defamation of his character. Mr. Horne does not
challenge the dismissal of this claim on appeal.

                                                 -4-
              1.     Whether Mr. Horne’s appeal is frivolous such that
                     pursuant to Tennessee Code Annotated Section 27-1-122,
                     Stonebridge should be awarded its costs and expenses
                     for having to defend this appeal?

                                       III. Analysis
                              Interpretation of the Contract

       Mr. Horne’s first issues concern the trial court’s decision to grant Ms. Williams’
motion for summary judgment and deny his motion for summary judgment, resulting in the
proceeds of the life insurance policy being awarded to Ms. Williams. The trial court’s
decision to grant a motion for summary judgment presents a question of law. Our review is
therefore de novo with no presumption of correctness afforded to the trial court’s
determination. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997). This Court must make a
fresh determination that the requirements of Tenn. R. Civ. P. 56 have been satisfied.
Abshure v. Methodist Healthcare–Memphis Hosps., 325 S.W.3d 98, 103 (Tenn. 2010).

       The specific issues in this case concern interpretation of a contract. The question of
interpretation of a contract is a question of law. Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95
(Tenn. 1999). Therefore, the trial court's interpretation of a contract is not entitled to a
presumption of correctness on appeal. Allstate Insurance Company v. Watson, 195 S.W.3d
609, 611 (Tenn. 2006); Angus v. Western Heritage Ins. Co., 48 S.W.3d 728, 730 (Tenn. Ct.
App. 2000). “This Court must review the document ourselves and make our own
determination regarding its meaning and legal import.” Hillsboro Plaza Enters. v. Moon,
860 S.W.2d 45, 47 (Tenn. Ct. App. 1993).

       The Tennessee Supreme Court recently discussed the court’s role in interpreting
contracts in Maggart v. Almany Realtors, Inc., 259 S.W.3d 700 (Tenn. 2008), stating:

              “The cardinal rule for interpretation of contracts is to ascertain
              the intention of the parties and to give effect to that intention,
              consistent with legal principles.” Bob Pearsall Motors, Inc. v.
              Regal Chrysler–Plymouth, Inc., 521 S.W.2d 578, 580
              (Tenn.1975); see also Christenberry [ v. Tipton], 160 S.W.3d
              [487,] 494 [(Tenn. 2005)]. If the language of the contract is
              clear and unambiguous, the literal meaning controls the outcome
              of the dispute. Planters Gin Co. v. Fed. Compress &
              Warehouse Co., 78 S.W.3d 885, 890 (Tenn. 2002). In such a
              case, the contract is interpreted according to its plain terms as
              written, and the language used is taken in its “plain, ordinary,

                                             -5-
              and popular sense.” Bob Pearsall Motors, Inc., 521 S.W.2d at
              580; Planters Gin Co., 78 S.W.3d at 890. The interpretation
              should be one that gives reasonable meaning to all of the
              provisions of the agreement, without rendering portions of it
              neutralized or without effect. See Davidson v. Davidson, 916
              S.W.2d 918 922–23 (Tenn. Ct. App. 1995). The entire written
              agreement must be considered. D. & E. Const. Co. v. Robert J.
              Denley Co., 38 S.W.3d 513, 518–19 (Tenn. 2001).

                     In construing a contract, the entire contract should
                     be considered in determining the meaning of any
                     or all of its parts. It is the universal rule that a
                     contract must be viewed from beginning to end
                     and all its terms must pass in review, for one
                     clause may modify, limit or illuminate another.

              Cocke County Bd. of Highway Comm'rs v. Newport Utils. Bd.,
              690 S.W.2d 231, 237 (Tenn. 1985) (internal citations omitted).

                      However, on occasion, a contractual provision may be
              susceptible to more than one reasonable interpretation, rendering
              the terms of the contract ambiguous. Planters Gin. Co., 78
              S.W.3d at 890. “Ambiguity, however, does not arise in a
              contract merely because the parties may differ as to
              interpretations of certain of its provisions. A contract is
              ambiguous only when it is of uncertain meaning and may fairly
              be understood in more ways than one.” Johnson v. Johnson, 37
              S.W.3d 892, 896 (Tenn. 2001) (internal quotation marks and
              citations omitted). The court will not use a strained construction
              of the language to find an ambiguity where none exists.
              Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805
              (Tenn. 1975).

Id. at 703–704.

        In this case, the specific question that must be decided is who is the proper
beneficiary of the insurance proceeds. “In construing the policy provision designating the
beneficiary, courts have generally applied principles of law analogous to those used in
construing bequests by will, with the intention of the insured deemed the controlling element,
and extrinsic evidence admissible to clarify that intent when the designation is sufficiently

                                             -6-
ambiguous.” 4 Couch on Insurance § 59:9. Thus, this Court must first determine whether the
policy at issue is sufficiently ambiguous that the issue must be resolved with the use of
extrinsic evidence. If the contract is ambiguous even after this Court applies the pertinent
rules of construction, then the interpretation of the contract “become[s] a question of fact
such that summary judgment is not proper.” Planters Gin Co., 78 S.W.3d at 890 (citing
Smith v. Seaboard Coast Line R.R. Co., 639 F.2d 1235, 1239 (5th Cir. 1981)).

       The question of what constitutes an ambiguous insurance contract is well-settled in
Tennessee: “Where language in an insurance policy is susceptible of more than one
reasonable interpretation, [] it is ambiguous.” Tata v. Nichols, 848 S.W.2d 649, 650
(Tenn.1993) (citing Moss v. Golden Rule Life Ins. Co., 724 S.W.2d 367, 368 (Tenn. Ct.
App. 1986)). In other words, “‘[a]mbiguity’ in a contract is doubt or uncertainty arising from
the possibility of the same language being fairly understood in more ways than one.” NSA
DBA Benefit Plan, Inc. v. Connecticut Gen. Life Ins. Co., 968 S.W.2d 791, 795 (Tenn. Ct.
App. 1997) (citing Hillis v. Powers, 875 S.W.2d 273, 276 (Tenn. Ct. App. 1993)). However,
according to Williston on Contracts, courts must remember that:

              [n]ot every dispute with respect to the proper interpretation of
              insurance policy language constitutes an ambiguity. An
              insurance policy is not ambiguous simply because the parties
              disagree about its meaning. Both the insured and the insurer are
              likely to take conflicting views of coverage, but neither
              conflicting expectations nor disputation is sufficient to create an
              ambiguity. Rather, an objective test is applied to determine
              whether an ambiguity exists in an insurance policy. Generally,
              an ambiguity in insurance policy language exists only if the
              language is fairly or reasonably susceptible to two or more
              different, but reasonable, interpretations or meanings. A genuine
              uncertainty or honest difference must exist as to which of two or
              more meanings is proper; a policy is not ambiguous simply
              because “creative possibilities” as to its meaning can be
              suggested by the parties.

                      A policy term will not be found to be ambiguous simply
              because it is not defined within the policy, or because it has
              more than one meaning, or a broad meaning. Additionally, the
              fact that an insurance policy is a complex instrument requiring
              analysis or the need to interrelate multiple and various policy
              provisions, will not alone create an ambiguity . . . .



                                              -7-
                        Generally, whether insurance policy language is
                 ambiguous, and therefore requires interpretation or construction,
                 is a question of law to be decided by the court, and is thus fully
                 reviewable on appeal.

16 Williston on Contracts § 49:17 (4th ed.) (footnotes omitted). We conclude that the
contract at issue in this case indeed contains an ambiguity.

        As discussed above, the policy itself provides default provisions that pay the proceeds
of the insurance policy to closest living relatives “unless [the insured] specif[ies] otherwise.”
Therefore, prior to the change in beneficiary form executed by the Insured, the policy
provisions clearly and unambiguously would have required payment to Mr. Horne after his
marriage to the Insured. However, the Insured executed a change of beneficiary form, which
must be considered as part of the contract in this case. See D. & E. Const. Co., 38 S.W.3d
at 518–19. In construing contracts, this Court is required to consider not only the printed
provisions of the contract, but also the handwritten provisions:

                 [I]is the imperative duty of courts to give effect to all the terms
                 and language of the agreement. The construction is to be made
                 on a consideration of the whole instrument, and this principle
                 applies as well to instruments partly printed and partly written
                 or typed as to those wholly printed or wholly written or typed.

17A Am. Jur. 2d Contracts § 386 (footnotes omitted). Thus, we must give effect to both the
printed provisions in the contract and the handwritten beneficiary designation provided by
the Insured. The change of beneficiary form clearly states that the Insured “request[s] the
Company [i.e. Stonebridge] to revoke all prior beneficiary designations and option methods
of settlement, if any.”4 (emphasis added). This language suggests that, by signing the
beneficiary change form, all prior designations, including the default designations, were
revoked. Despite this language, the Insured chose only to complete the portion of the form
that changed the Contingent Beneficiary, arguably choosing to keep the prior designation
regarding the primary beneficiary.

        To determine the intent of the parties in this case, we first look to the plain language
of the policy. Neither Primary Beneficiary nor Contingent Beneficiary are defined within the
four corners of the contract. Both parties cite to Stonebridge’s online glossary, which defines
a Primary Beneficiary as: “The person who, upon the insured's death, has the first right to
receive insurance proceeds.” In contrast, Stonebridge defines a Contingent Beneficiary as:

       4
           There is no dispute regarding any optional methods of settlement in this case.

                                                     -8-
“A secondary beneficiary designated by the insured to receive the benefits of the policy if the
named primary beneficiary is deceased when the proceeds become payable.” (emphasis
added). Thus, the language suggests the Insured may only designate a Contingent Beneficiary
if he or she also names a Primary Beneficiary. However, the Insured in this case clearly
named a Contingent Beneficiary despite failing to specifically name a Primary Beneficiary.
Because this Court’s goal is to ascertain the intent of the parties, including the Insured, we
must conclude that the dictionary definitions in this case conflict with the Insured’s action
in failing to name a Primary Beneficiary. The dictionary definitions are, therefore, not
dispositive of this case.

        Both Ms. Williams and Mr. Horne next argue that the specific provisions of the policy
are unambiguous and in their respective favor. We respectfully disagree. According to Mr.
Horne, the Insured’s decision to clearly and unambiguously leave the space for the Primary
Beneficiary blank illustrates her intent to maintain the default provisions, which would
require the proceeds be given to him. However, if this Court were to credit this interpretation,
it would be required to disregard the language providing that, by signing the beneficiary
change form, the Insured was revoking all prior designations. In addition, despite the clear
action of the Insured in leaving the Primary Beneficiary space blank, we note that the
practical effect of adopting Mr. Horne’s interpretation would have been exactly the same as
had the default provisions applied in their entirety. While we do not conclude that this is an
unreasonable interpretation of the policy, we are unwilling to adopt this interpretation in light
of the clear language that all prior designations were revoked. In contrast, Ms. Williams
points to the language providing that all prior designations have been revoked and argues that
default provisions were also revoked by that language. Thus, she argues that she is the only
proper beneficiary of the policy because she is the only named beneficiary. However, in order
to credit Ms. Williams’ interpretation of the contract, this Court would be required to ignore
the fact that the Insured clearly chose to name Ms. Williams as only the Contingent
Beneficiary of the policy. Taking the contract as a whole, the policy is clearly subject to more
than one reasonable interpretation. In order to hold otherwise, this Court would be required
to disregard portions of the contract. However, courts are cautioned that:

              As is true with contracts generally, a court seeking to divine the
              intent of the parties will construe an insurance policy as a whole,
              rather than focusing on individual terms, phrases, sentences, or
              sections. Each provision must be read in context with every
              other provision, and all of the provisions must be considered in
              their entirety. The court will seek to give effect to every policy
              provision, and will avoid a construction that will give effect to
              one provision while rendering another provision superfluous or
              without meaning.

                                               -9-
16 Williston on Contracts § 49:14 (4th ed.) (footnotes omitted). Taking the contract as a
whole, we must conclude that there “is doubt or uncertainty arising from the possibility of
the same language being fairly understood in more ways than one.” NSA DBA Benefit Plan,
968 S.W.2d at 795 (citing Hillis, 875 S.W.2d at 276). Therefore, we conclude that the
insurance contract at issue is ambiguous.

       Having determined that the contract at issue is ambiguous, we next determine whether
summary judgment was appropriate. As previously discussed, the Tennessee Supreme Court
has held that if a contract is ambiguous, then the court applies established rules of
construction to determine the parties’ intent. Planters Gin Co., 78 S.W.3d at 890. “Only if
ambiguity remains after the court applies the pertinent rules of construction does [the legal
meaning of the contract] become a question of fact such that summary judgment is not
proper.” Id. “The central tenet of contract construction is that the intent of the contracting
parties at the time of executing the agreement should govern.” Empress Health & Beauty
Spa, Inc. v. Turner, 503 S.W.2d 188, 190 (Tenn. 1973). According to this Court, in Huber
v. Calloway, No. M2005–00897–COA–R3–CV, 2007 WL 208975, 3–4 (Tenn. Ct. App. July
12, 2007):

              Intent is revealed through an examination of the language
              chosen by the parties. City of Cookeville ex rel. Cookeville
              Reg'l Med. Ctr. v. Humphrey, 126 S.W.3d 897, 903 (Tenn.
              2004). This standard is an objective one, and the courts must
              determine intent by examining the meaning that a reasonable
              person would have derived from the words had such person
              been in the same situation as that of a party to the contract.
              Hardwick v. American Can Co., 113 Tenn. 657, 670, 88 S.W.
              797, 801 (1905); Moore v. Moore, 603 S.W.2d 736, 739 (Tenn.
              Ct. App. 1980).

In this case, we cannot discern the Insured’s intent from the plain language of the policy.
Instead, we conclude that the contract is subject to more than one reasonable interpretation
and extrinsic evidence is needed to discern the Insured’s intent. First, as argued by Ms.
Williams, the provisions in the policy suggest that a reasonable person in the Insured’s place
may have intended to name Ms. Williams as the Primary Beneficiary on the policy, but
mistakenly wrote her name in the space marked for Contingent Beneficiaries. Second, as
argued by Mr. Horne, a reading of the policy shows that the Insured only changed the
Contingent Beneficiary rather than the Primary Beneficiary. A reasonable interpretation of
this action would be that the Insured intended to maintain the prior beneficiary designation
under the default provision. Both these interpretations are reasonable and based on the “plain,

                                             -10-
ordinary, and popular sense” of the words in the contract. Bob Pearsall Motors, Inc., 521
S.W.2d at 580; Planters Gin Co., 78 S.W.3d at 890.

       According to Couch on Insurance, the question of who the intended beneficiary is can
often result in ambiguities that cannot be decided on the face of the contract:

                     The insured's designation of a particular beneficiary does
              not always make it clear whether that person is intended to be a
              primary or secondary beneficiary. . . .

                                          *    *     *

                     The dispute may result from such simple matters as the
              designation not being neatly confined to the form or application
              areas provided for primary and contingent beneficiaries, or
              result from changes of beneficiary that are in a slightly
              different—hence ambiguous—form.

                                          *    *     *

                     In determining these cases, the designation is generally
              subject to the rule that the court's goal is to determine and
              enforce the intent of the insured. In addition to any provisions
              contained on the relevant form on this issue, the court may
              ordinarily receive and consider extrinsic evidence for the
              purpose of determining the insured's intent, including the
              purpose for which the insurance was procured, provided that the
              court does, in fact, determine that the designation is ambiguous.

4 Couch on Insurance § 59:19 (footnotes omitted). Because of the ambiguity in the terms of
the policy after the execution of the beneficiary change, we are unable to discern the
Insured’s intent from the four corners of the contract. Accordingly extrinsic evidence is
admissible to determine the Insured’s intent:

              [I]f the language is ambiguous and the intention of the parties
              does not clearly appear therefrom, other matters may be taken
              into consideration in ascertaining such intention, such as the
              circumstances or conditions surrounding the execution of the
              contract, the situation of the parties, the subject matter of the
              contract, and the object or purpose of the contract.

                                              -11-
45 C.J.S. Insurance § 573 (footnotes omitted); see also Couch on Insurance § 59:9 (“In
construing the policy provision designating the beneficiary, courts have generally applied
principles of law analogous to those used in construing bequests by will, with the intention
of the insured deemed the controlling element, and extrinsic evidence admissible to clarify
that intent when the designation is sufficiently ambiguous.”). In addition, where the
intentions of the parties are in doubt, we conclude that summary judgment is inappropriate.
See Bourland, Heflin, Alvarez, Minor & Matthews, PLC v. Heaton, No. W2011–01693-
COA-R3-CV, 2012 WL 1187981, at *4 (Tenn. Ct. App. April 9, 2012) ( “[I]f the Contract
is, in fact, ambiguous, the case is not ripe for summary judgment.”). The central question in
this case is who the Insured intended to be the Primary Beneficiary of this policy. “Whether
or not a particular person has been named as beneficiary is a question of fact and is for the
trier of fact, where the evidence leaves the issue in doubt.” 4 Couch on Insurance § 59:13
(footnote omitted). Accordingly, we reverse the trial court’s grant of Ms. Williams’ motion
for summary judgment, affirm the denial of Mr. Horne’s motion for summary judgment, and
remand for a trial in which both parties are permitted to introduce extrinsic evidence
regarding the Insured’s intent.

        While this issue presents an issue of first impression in this state, courts in at least one
jurisdiction have likewise concluded that the issue presented in this case creates a disputed
issue of material fact that cannot be decided on summary judgment. In Holzberlein v. OM
Financial Life Insurance Company, No. 08-cv-02053m 2009 WL 706671, (D. Colo. March
12, 2009), the United States District Court for Colorado concluded that summary judgment
was inappropriate in a case wherein there was a question regarding how the decedent
intended the proceeds of an annuity to be paid after her death. The court noted that the
decedent’s intentions were subject to several reasonable interpretations and concluded that
these differing interpretations constituted “a disputed issue of material fact.” Id. at *2. The
issue in the case involved the decedent’s attempted addition of the plaintiff as a beneficiary
on an existing annuity. The annuities previously designated three other persons as equal
primary beneficiaries. The insurance company found the change of beneficiary form
improperly executed. The District Court disagreed and concluded that the decedent’s
unambiguous intent was to add the plaintiff as a beneficiary on the annuity. The District
Court, however, found an ambiguity as to whether by adding the plaintiff, the decedent
intended to change the status of the existing beneficiaries. Id. at *1. The Court explained that:

               Decedent’s intent when adding Plaintiff as a beneficiary is
               susceptible to three reasonable interpretations: (1) Decedent
               actually meant to add Plaintiff as a primary beneficiary without
               changing the status of the other primary beneficiaries, but
               mistakenly wrote the names of the four intended primary
               beneficiaries in the space marked for contingent beneficiaries;

                                               -12-
                 (2) Decedent actually meant to convert the original primary
                 beneficiaries to contingent beneficiaries and add Plaintiff as an
                 additional contingent beneficiary; or (3) Decedent actually
                 meant to add Plaintiff as a contingent beneficiary and did not
                 mean to convert the original primary beneficiaries into
                 contingent beneficiaries.

Id. at *2. Because there was more than one reasonable interpretation, the District Court
concluded that extrinsic evidence was admissible to determine the decedent’s intent. Finding
no extrinsic evidence in the record, the District court denied summary judgment. There is
likewise no extrinsic evidence in this case that shows the Insured’s intent among the two
competing interpretations offered by Mr. Horne and Ms. Williams.5 Thus, summary judgment
is likewise improper in this case.

       Ms. Williams argues, however, that the Insured’s action in naming only a Contingent
Beneficiary in the change of beneficiary form does not create an ambiguity because only one
person was actually named by the Insured as a beneficiary of the policy at all. To support this
argument, Ms. Williams cites the recent case of Neill v. Minnesota Life Insurance
Company, No. 10-144-S-REB, 2011 WL 2182573 (D. Idaho June 3, 2011). In Neill, the
United States District Court for Idaho affirmed summary judgment to the plaintiff daughters
of the deceased insured. Much the same as in this case, the insured named her daughters as
the Contingent Beneficiaries of the life insurance policy. The policy, however, contained
default provisions which, if applicable, provided that payment would be made to the
Insured’s husband. The court concluded that under the policy, the contract unambiguously
required that the proceeds of the policy would be paid to the daughters and granted summary
judgment in their favor. While the facts of Neill are highly analogous to the case at bar, the
contract in Neill is different. In Neill, the insurance contract provided that the default
provisions would apply only “[i]f there is no eligible beneficiary, or if the insured did not
name one.” Thus, the default provision did not distinguish between a Primary Beneficiary
and a Contingent Beneficiary. Because the insured in Neill named a beneficiary, her
daughters, the plain language of the contract provided that the default provisions did not


        5
          In his brief, Mr. Horne attempts to argue that there is extrinsic evidence in the record showing the
Insured’s intent; however, he simply points to the language of the contract and the events in this case, which
occurred well after the Insured’s death. This does not constitute evidence of the Insured’s intent. In addition,
in arguing that the contract is unambiguous, Mr. Horne argues that the Insured was an organized,
professional, intelligent woman who would not have made a mistake in placing her mother’s name in the
wrong place on the beneficiary change form. While we agree that evidence of this type would be admissible
extrinsic evidence to show the Insured’s intent, the record in this case contains nothing more that Mr.
Horne’s bare assertions regarding the Insured’s personality. Accordingly, there is no properly admitted
extrinsic evidence for this Court to consider.

                                                     -13-
apply.

       While the contract in Neill provides that the default provisions will only apply if the
beneficiary becomes ineligible or a beneficiary is not named, the contract in this case
provides that the default provisions apply “unless [the insured] specif[ies] otherwise.” Thus,
while the insured in Neill was merely required to name an eligible beneficiary, regardless of
whether the beneficiary was Primary or Contingent, to disable the default provisions, the
language regarding the applicability of the default provisions is much less specific. Here the
contract creates a distinction between a Primary Beneficiary and a Contingent Beneficiary
and it is this distinction that creates an ambiguity with regard to whether the default
provisions apply. Specifically, the Insured did otherwise specify a Contingent Beneficiary;
she did not, however, otherwise specify a Primary Beneficiary, despite language in the
contract that all prior designations were revoked. Accordingly, the language of the contract
creates an ambiguity as to whether a reasonable person in the Insured’s place would have
intended to remove the default provisions by otherwise specifying only a Contingent
Beneficiary of the policy proceeds. Because of this ambiguity, summary judgment in favor
of Ms. Williams was inappropriate.

                                           Bad Faith

        Mr. Horne next argues that the trial court erred in dismissing his claim against
Stonebridge for bad faith refusal to pay. The trial court dismissed Mr. Horne’s claim for
failure to state a claim upon which relief can be granted pursuant to Rule 12.02(6) of the
Tennessee Rules of Civil Procedure. It is well settled that a motion to dismiss a complaint
for failure to state a claim upon which relief can be granted tests the legal sufficiency of the
complaint. It admits the truth of all relevant and material allegations, but asserts that such
allegations do not constitute a cause of action as a matter of law. See Riggs v. Burson, 941
S.W.2d 44 (Tenn.1997). When considering a motion to dismiss for failure to state a claim
upon which relief can be granted, courts are limited to an examination of the complaint alone.
See Wolcotts Fin. Serv., Inc. v. McReynolds, 807 S.W.2d 708 (Tenn. Ct. App. 1990). The
basis for the motion is that the allegations in the complaint, when considered alone and taken
as true, are insufficient to state a claim as a matter of law. See Cornpropst v. Sloan, 528
S.W.2d 188 (Tenn.1975). In considering such a motion, the court should construe the
complaint liberally in favor of the plaintiff, taking all the allegations of fact therein as true.
See Cook ex rel. Uithoven v. Spinnaker's of Rivergate, Inc., 878 S.W.2d 934 (Tenn.1994).

        Tennessee Code Annotated Section 56-7-105 provides a remedy for bad faith refusal
to pay an insurance claim to the rightful beneficiary. In order to succeed on a claim of bad
faith, the plaintiff must show that:
               (1) the policy of insurance must, by its terms, have become due

                                              -14-
              and payable, (2) a formal demand for payment must have been
              made, (3) the insured must have waited 60 days after making his
              demand before filing suit (unless there was a refusal to pay prior
              to the expiration of the 60 days), and (4) the refusal to pay must
              not have been in good faith.

Palmer v. Nationwide Mut. Fire Ins. Co., 723 S.W.2d 124, 126 (Tenn. Ct. App.1986). In
his complaint, Mr. Horne asserts that: (1) the policy became payable upon the death of the
Insured; (2) he made a formal demand for payment; (3) rather than paying the proceeds to
Mr. Horne, Stonebridge implead the funds to the court; and (4) Stonebridge’s action in
interpleading the funds was made in bad faith, evidenced by its action in first paying, then
stopping payment on the proceeds. Therefore, Mr. Horne argues that the trial court erred in
dismissing his claim and that the issue should have been allowed to go to the jury.

        In contrast, Stonebridge argues that even taking Mr. Horne’s allegations as true, it
never refused to pay the proceeds of the insurance to Mr. Horne. Instead, Stonebridge simply
requested that the trial court determine who was entitled to the proceeds and it was the trial
court who refused to pay Mr. Horne the proceeds. Thus, Stonebridge argues that it cannot be
liable for bad faith refusal to pay. Stonebridge points out that, by interpleading the funds to
the court is was simply availing itself of the established procedure of Rule 22.01 of the
Tennessee Rules of Civil Procedure in order to limit its liability. Rule 22.01 provides that:

              Persons having claims against the plaintiff may be joined as
              defendants and required to interplead when their claims are such
              that the plaintiff is or may be exposed to double or multiple
              liability. It is not ground for objection to the joinder that the
              claims of the several claimants or the titles on which their claims
              depend do not have a common origin or are not identical but are
              adverse to and independent of one another, or that the plaintiff
              avers that he or she is not liable in whole or in part to any or all
              of the claimants. . . .

Mr. Horne cites no Tennessee cases in which an insurance company has been found in bad
faith for complying with the procedure of Rule 22.01, nor has our research revealed any. In
his reply brief, Mr. Horne cites Michelman v. Lincoln Nat. Life Ins. Co., 685 F.3d 887 (9th
Cir. 2012), in which the United States Court of Appeals for the Ninth Circuit held that
insurers are subject to a duty of good faith when following the procedures of interpleader.
However, the Court held that “[t]he threshold to establish good faith is necessarily low so as
not to conflict with interpleader's pragmatic purpose, which is ‘for the stakeholder to ‘protect
itself against the problems posed by multiple claimants to a single fund.’” Id. at 894 (citing

                                              -15-
Mack v. Kuckenmeister, 619 F.3d 1010, 1024 (9th Cir. 2010)). As such, the Court concluded
that because the insured was faced with uncertainty about the ownership of the policy, it did
not act in bad faith in interpleading the funds. Id. at 898. Although not binding precedent,
“[f]ederal case law interpreting rules similar to our own are persuasive authority for
purposes of construing the Tennessee rule.” Jones v. Professional Motorcycle Escort
Service, L.L.C., 193 S.W.3d 564, 570 (Tenn. 2006) (citing Harris v. Chern, 33 S.W.3d 741,
745 n.2 (Tenn. 2000)).

        Stonebridge likewise argues that, even if it could have acted in bad faith by choosing
to follow the interpleader procedures, its decision to interplead the proceeds of the insurance
policy in this case was reasonable when faced with uncertainty as to the proper beneficiary
of the policy proceeds. We agree. In Sisk v. Valley Forge Ins. Co., 640 S.W.2d 844 (Tenn.
Ct. App. 1982), this Court explained that:

              The bad faith penalty is not recoverable in every refusal of an
              insurance company to pay a loss. An insurance company is
              entitled to rely upon available defenses and refuse payment if
              there is substantial legal grounds that the policy does not afford
              coverage for the alleged loss. If an insurance company
              unsuccessfully asserts a defense and the defense was made in
              good faith, the statute does not permit the imposing of the bad
              faith penalty.

Id. at 852 (quoting Nelms v. Tennessee Farmers Mutual Ins. Co., 613 S.W.2d 481, 484
(Tenn. Ct. App. 1978)); see also Ginn v. American Heritage Life Ins. Co., 173 S.W.3d 433,
443–44 (Tenn. Ct. App. 2004) (reversing a bad faith penalty imposed by the jury when the
insurer had reasonable grounds to refuse to pay). In this case, we have concluded that the
contract at issue contains an ambiguity, which makes resolution of this issue impossible at
the summary judgment stage. In doing so, we have concluded that both Mr. Horne’s and Ms.
Williams’s competing interpretations of the contract are reasonable. Thus, Stonebridge was
faced with two reasonable competing claims for the proceeds on this insurance policy when
it chose to interplead the funds with the Chancery Court. Given the competing reasonable
claims in this case, we cannot conclude that Stonebridge lacked “substantial legal grounds”
that the policy was not, in fact, payable to Mr. Horne. To adopt Mr. Horne’s argument and
find Stonebridge acted in bad faith for availing itself of the interpleader procedure when it
was faced with this uncertainty would essentially make Rule 22.01 a nullity. We decline to
do so. As such, taking all of Mr. Horne’s factual allegations as true, we affirm the trial
court’s dismissal of Mr. Horne’s statutory bad faith claim for failure to state a claim upon
which relief can be granted.



                                             -16-
       Finally, Stonebridge argues that it should be awarded costs and expenses incurred on
appeal pursuant to Tennessee Code Annotated Section 27-1-12, which provides:

              When it appears to any reviewing court that the appeal from any
              court of record was frivolous or taken solely for delay, the court
              may, either upon motion of a party or of its own motion, award
              just damages against the appellant, which may include but need
              not be limited to, costs, interest on the judgment, and expenses
              incurred by the appellee as a result of the appeal.


The decision to award damages based on the filing of a frivolous appeal rests solely in the
discretion of this Court. Whalum v. Marshall, 224 S.W.3d 169, 180 (Tenn. Ct. App. 2006).
“Imposing a penalty for a frivolous appeal is a remedy which is to be used only in obvious
cases of frivolity and should not be asserted lightly or granted unless clearly applicable,
which is rare.” Henderson v. SAIA, Inc ., 318 S.W.3d 328, 342 (Tenn. 2010). An appeal is
frivolous when it has “no reasonable chance of success,” Jackson v. Aldridge, 6 S.W.3d 501,
504 (Tenn. Ct. App.1999), or is “so utterly devoid of merit as to justify the imposition of a
penalty.” Combustion Eng'g, Inc. v. Kennedy, 562 S.W.3d 202, 205 (Tenn. 1978). After
reviewing the record in this case, we conclude that an award of costs and expenses to
Stonebridge is appropriate. Mr. Horne points to no evidence in the record that Stonebridge
acted with ill will or in an effort to intentionally deprive Mr. Horne of the proceeds of the
policy. Instead, the record shows that Stonebridge was faced with uncertainty regarding the
proper beneficiary of the policy and simply availed itself of the established procedures of
Rule 22.01 of the Tennessee Rules of Civil Procedure. Mr. Horne cited no Tennessee law in
which an insurer was found to have acted in bad faith for following the procedure of Rule
22.01. Indeed, the only law cited by Mr. Horne that recognizes that bad faith may occur in
interpleader actions supports a conclusion that Stonebridge did not act in bad faith in this
case. Accordingly, we conclude that Mr. Horne’s claims against Stonebridge had no
likelihood of success and Stonebridge should be awarded costs and expenses incurred on
appeal.

                                      IV. Conclusion

        The judgement of the Chancery Court of Shelby County is affirmed in part, reversed
in part, and remanded for further proceedings in accordance with this opinion. In addition,
Appellee Stonebridge Life Insurance Company is awarded its costs and expenses incurred
in defense of this appeal and this cause is remanded to the trial court for the assessment of
damages in accordance with Tennessee Code Annotated Section 27-1-122. Costs of this

                                             -17-
appeal are taxed one-half to Appellant Onzie Horne, and his surety, and one-half to Appellee
Gwendolyn Williams, for all of which execution may issue if necessary.




                                                   _________________________________
                                                   J. STEVEN STAFFORD, JUDGE




                                            -18-
