Tennessee Court Interpretation of Insurance Contracts

Insurance policies represent an interesting subset of contract law that relies on common law and specific statutes, namely those contained in Title 56 of the Tennessee Code Annotated. Lawsuits asking a question concerning the extent of insurance coverage under a specific policy is a question of law requiring the interpretation of contractual language.¹ In fact, Tennessee courts have long agreed that “insurance policies are, at their core, contracts.”²

This concept of utilizing the traditional doctrines of contract law stems from the notion that insurance policies are merely contracts that represent the intention of the parties, i.e., the insurance company and the insured. And in the interpretation of these contracts, Tennessee courts seek “to ascertain and give effect to the intent of the parties.”³ Doctrines that aid in the interpretation of contracts and Tennessee insurance policies include the notion that the terms of an insurance policy should be given their “plain and ordinary meaning.”⁴ However, this plain and ordinary meaning is taken under the context of the entire agreement.⁵

Insurance policies are also contracts of adhesion drafted by insurance companies on standardized forms that the insureds had no role in drafting, whatsoever.⁶ An ‘adhesion contract’ is a special term which signifies the court’s understanding that contracts, such as insurance policies, are not the result of negotiation and concessions between the parties, like insurance companies and their policyholders. Instead, these adhesion contracts contain terms determined by the insurance company to which the insured has no choice but to adhere if they desire insurance coverage; it’s a “take-it-or-leave-it” contractual relationship.⁷ The effect of such a public benefit position is that Tennessee courts, like most other courts, find that “contracts of insurance are strictly construed in favor of the insured [as to provide coverage], and if the disputed provision is susceptible to more than one plausible meaning, the meaning favorable to the insured controls.”⁸ Therefore, coverage, where ambiguous, is interpreted broadly while any exclusions may be taken narrowly.

For more information on general knowledge on contracts of adhesion, please see my colleague’s recent post on the subject, When Words Collide: Insurance Policies as Contracts of Adhesion.⁹

Though at their core insurance policies are merely contracts, additional implications are applied in their interpretation. The traditional doctrines of contract law alone may not determine whether a particular claim is covered under a particular insurance policy. And, regardless of the beneficial implications of insurance policies as adhesion contracts, insureds seeking coverage under their policy should be prepared to provide details of the specific facts supporting their right to coverage in order to potentially overcome any ambiguities.
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¹ Garrison v. Bickford, 377 S.W.3d 659, 663 (Tenn.2012) (citing Clark v. Sputniks, LLC, 368 S.W.3d 431, 436 (Tenn. 2012); Maggart v. Almany Realtors, Inc., 259 S.W.3d 700, 703 (Tenn. 2008)).
² Allstate Ins. Co. v. Tarrant, 363 S.W.3d 508, 527 (Tenn.2012) (Koch, J., dissenting).
³ Id.
⁴ U.S. Bank, N.A. v. Tennessee Farmers Mut. Ins. Co., 277 S.W.3d 381, 386-87 (Tenn. 2009).
⁵ Cocke Cnty. Bd. of Highway Comm’rs v. Newport Utils. Bd., 690 S.W.2d 231, 237 (Tenn. 1985).
⁶ See, e.g., Alcazar v. Hayes, 982 S.W.2d 845, 851 (Tenn. 1998) (citing Bill Brown Const. v. Glens Falls Ins., 818 S.W.2d 1, 12 (Tenn. 1991)); Bill Wilson, When Words Collide: Resolving Insurance Coverage And Claims Disputes, 85 (2018).
⁷ Alcazar, 982 S.W.2d at 851–52 (citing Brandt v. Mutual Ben. Health & Acc. Ass’n, 202 S.W.2d 827 (Tenn. Ct. App. 1947)); Wilson at 102.
⁸ Southern Trust Ins. Co. v. Phillips, 474 S.W.3d 660, 664-65 (Tenn. Ct. App. 2015), quoting Garrison v. Bickford, 377 S.W.3d 659, 663-64 (Tenn. 2012) (internal citations omitted).
⁹ Anthony Orlando, When Words Collide: Insurance Policies as Contracts of Adhesion, Property Ins. Coverage Law Blog (December 23, 2020), https://www.propertyinsurancecoveragelaw.com/2020/12/articles/insurance/when-words-collide-insurance-policies-as-contracts-of-adhesion/