Grady Eugene Dutton v. Tennessee Farmers Mutual Insurance Company

Court of Appeals of Tennessee, Eastern Section, at Knoxville, No. E2017-01322-COA-R9-CV, heard March 13, 2018, filed June 25, 2018 (D. Michael Swiney, C.J., delivering the opinion of the court, joined by Frank G. Clement, P.J.M.S., and Thomas R. Frierson, II, J.); the Tennessee Supreme Court denied permission to appeal on November 15, 2018. The complete opinion appears below, transcribed from the official reporter through the Caselaw Access Project, Harvard Law School’s open archive of published U.S. case law at case.law. The reporter printed no syllabus and no headnotes; its head matter is the caption, the docket number, the session and filing dates, the notation of the denied appeal, counsel of record, and the panel, and all of that appears above the opinion. Here is everything we touched, in full. We removed the archive’s structural marker naming the opinion’s author. We removed page headers, footers, and star-page markers. We labeled the footnote the scan strands at the end without its marker. We bolded the judge’s name line, set the reporter’s own Background, Discussion, and Conclusion headings in bold, and formatted as block quotations the passages the reporter set off as block quotations. And we closed the spacing artifacts the reporter database carries, which are all of them and nothing else: a space after the dollar sign in three dollar figures; twenty-four spaces before commas inside case citations; three spaces before colons; two spaces before closing parentheses and one after an opening parenthesis; two spaces after opening brackets and three before closing brackets; two spaces before semicolons; and a stray period in “585 S.W.2d. 620.” Two things we deliberately left alone: the opinion spells the Georgia case it relies on “Lively” in one sentence and “Liveley” in the next, and both appear as printed; and the ellipses inside quoted material are the Court’s, not ours. No word of the Court’s has been changed, condensed, reordered, or paraphrased.

The full opinion

Grady Eugene DUTTON v. TENNESSEE FARMERS MUTUAL INSURANCE COMPANY

No. E2017-01322-COA-R9-CV. Court of Appeals of Tennessee, Eastern Section, AT KNOXVILLE. March 13, 2018 Session. FILED June 25, 2018. Application for Permission to Appeal Denied by Supreme Court November 15, 2018.

Thomas L. Kilday, Greeneville, Tennessee, for the appellant, Tennessee Farmers Mutual Insurance Company.

Floyd W. Rhea, Sneedville, Tennessee, for the appellee, Grady Eugene Dutton.

D. Michael Swiney, C.J., delivered the opinion of the court, in which Frank G. Clement, P.J.M.S. and Thomas R. Frierson, II, J., joined.

D. Michael Swiney, C.J.

We granted the Rule 9 application for an interlocutory appeal filed by Tennessee Farmers Mutual Insurance Company (“TN Farmers”) to consider whether material misrepresentations made on an application for a policy of insurance may become not material by virtue of later changes made to the policy. We find and hold that the misrepresentations made on the policy application increased the risk of loss and voided the policy or prevented its attaching pursuant to Tenn. Code Ann. § 56-7-103 and that subsequent changes to a void policy did not render the misrepresentations not material. We, therefore, reverse the June 22, 2017 order of the Circuit Court for Hawkins County (“the Trial Court”) denying TN Farmers’ motion for summary judgment and remand this case to the Trial Court for entry of an order granting summary judgment to TN Farmers.

Background

Grady Eugene Dutton (“Plaintiff”) sued TN Farmers with regard to a property insurance policy (“the Insurance Policy”) insuring a house (“the House”) located at 187 Little Pumpkin Valley Road in Edison, Tennessee (“the Property”). The House was destroyed by fire on May 28, 2016, and TN Farmers refused to pay the claim after it discovered that Plaintiff and his ex-wife Sheila Brock (“Brock”) had made misrepresentations when answering questions on the application for the Insurance Policy.

Plaintiff, who was 73 years old at the time of the fire, has been married multiple times. He met Brock in 1994, and they were married in December of 1995 and divorced in 2002. Brock had drug problems, and on one occasion in 1998 Plaintiff placed Brock in drug rehabilitation for 30 days. After they divorced, Plaintiff and Brock reconciled and began living together again for a time. They later had another falling out, and Plaintiff moved to Missouri where he remarried, and then later divorced, his first wife. After that divorce, Plaintiff returned to Tennessee and reconciled with Brock.

On April 29, 2008, Brock was arrested on multiple drug charges, some of which were felony charges. Specifically, Brock was arrested on charges of felony possession of drug paraphernalia, possession of Schedule II drugs (cocaine) for resale, and possession of Schedule III and Schedule IV drugs. Plaintiff was living in Missouri at that time, but Brock told him about her arrests when they spoke on the telephone. Plaintiff returned to Tennessee around Christmas of 2008, and he and Brock began living together again.

The Property was acquired by deed dated March 10, 2009 with Brock listed as the sole grantee. Plaintiff testified that he does not know why the deed does not list him as a grantee as he and Brock purchased the Property together. A deed of trust dated approximately one month after the purchase of the Property listed both Brock’s name and Plaintiff’s name. Plaintiff testified that he and Brock purchased the Property for 130,000 and that the mortgage was for 55,000. He testified that he and Brock both contributed their own monies toward the remainder of the purchase price, and that he and Brock moved on to the Property as soon as they purchased it. On April 21, 2009, Plaintiff and Brock met with a TN Farmers’ agent and executed an application to insure the Property.

On the application, Plaintiff and Brock answered ‘no’ to questions about whether they had ever been charged with, convicted of, or pled guilty to a felony and whether they had ever been charged with, convicted of, or pled guilty to arson, fraud, theft, or drug related crime. On the page containing these questions and answers and Plaintiff’s and Brock’s signatures, the application also states: “I(We) understand that any misrepresentations or failure to answer questions truthfully, correctly and completely will void this insurance.” Furthermore, the application for the Insurance Policy states that the applicants had a previous total fire loss of 10,000 in December of 2006. When questioned during deposition, Plaintiff could not remember this fire loss, but could remember being insured by TN Farmers and living with Brock in Sneedville, Tennessee at that time.

Additionally, the Insurance Policy contains the following language:

ACTS WHICH AUTOMATICALLY VOID THE POLICY

Concealment or Fraud

The policy shall be automatically void as to all insureds if any insured, whether before or after a loss or occurrence:

1. conceals or misrepresents any material fact or circumstance relating to this policy or loss;

Brock negotiated a plea and was convicted in August of 2009 of charges including felony drug charges. Plaintiff testified that he could not recall if he and Brock were living together at the time that she was convicted. He stated: “she’s had quite a history, and it’s so hard for me to remember everything that she — she was involved in shoplifting and stuff like that as well.”

A Quit Claim Deed dated June 23, 2010 states that Brock was incarcerated in the Tennessee Department of Corrections and that Plaintiff held her Power of Attorney. Plaintiff executed this deed on Brock’s behalf using a Power of Attorney. The deed conveyed to Plaintiff a life estate in the Property with a remainder interest to Catherine Dawn Sexton (“Sexton”), Brock’s daughter. Plaintiff is not Sexton’s father, but he claims to have a “[v]ery good… Very close” relationship with Sexton. Plaintiff testified that this deed was prepared and executed because Brock was in jail and a credit card company had a judgment lien against her. Plaintiff testified that he settled the debt with the credit card company and had the judgment lien released. Plaintiff recorded the deed, but never recorded the Power of Attorney. He produced a copy of the Power of Attorney as an exhibit to his deposition. The Power of Attorney is signed by Brock and witnessed and notarized, but a space for Plaintiff’s signature on this document is blank.

Another Quit Claim Deed dated September 9, 2014 deeded the Property from Sexton to Plaintiff. Plaintiff testified that this deed was executed because he gave Brock property on Marie’s Lane in exchange for her interest in the Property. He further stated that he actually gave the property on Marie’s Lane to Sexton, but it was for Brock. He then further explained that the transaction was even more complicated because Plaintiff traded property he owned at Big Springs Road to another man for the property at Marie’s Lane by Plaintiff giving the Big Springs Road property to the man’s son and having the man give the Marie’s Lane property to Sexton. Plaintiff testified all of this was to “release [Brock] from any and all ownerships of [the Property], her and Catherine [Sexton] both.”

On January 7, 2014, Plaintiff requested that TN Farmers take Brock off of the Insurance Policy because he “was breaking relationships with her, and we were doing this deed swap thing and everything at the time.” Plaintiff requested that Sexton be added as an insured at that time. Plaintiff testified that Sexton’s interest in the Insurance Policy was deleted in September of 2014.

Another Quit Claim Deed dated May 14, 2015 deeded the Property from Plaintiff to Jeanette Mikel Johnson (“Johnson”), Plaintiff’s daughter. Plaintiff testified he executed this deed for tax purposes. He stated: “It was nothing special. It was just that she has my Power of Attorney and everything. Whenever I die, she has my soul, and I thought it would be simpler to transfer the properties over to her for tax purposes, but then after a little consideration, I thought it might be best to bring it back to my name.”

Plaintiff testified that Johnson lives in Missouri and has not been back to this area since he deeded the Property to her. So Plaintiff mailed Johnson a deed, which is dated November 15, 2015 and purports to deed the Property back to Plaintiff. Johnson signed the deed and mailed it back to Plaintiff. Johnson’s signature on the deed, however, was not notarized, and Plaintiff never recorded this deed. Plaintiff seemed to think the deed had to be notarized before it was recorded, and he testified that he was waiting for Johnson to come to Tennessee so they could have the deed notarized. Plaintiff gave a copy of the November 15, 2015 deed to the investigators when they were conducting the fire investigation on the Property.

The House was destroyed by fire on May 28, 2016. Plaintiff was asked who he believed had an interest in the Property at the time of the fire, and he stated: “I owned the house and property. According to this being registered, Janette [sic] Mikel would have been the owner of the property… Sheila Brock is not a party to this.”

At the time of the fire, Plaintiff and his 38 year old girlfriend were living in the House, but were on vacation in Missouri for Plaintiff’s daughter’s wedding. Plaintiff testified that he has lived in the House continuously from the time Brock purchased the Property in April of 2009 through the time of the fire. Plaintiff’s current girlfriend moved in a few months before the fire. Brock had last lived in the House in 2014. Plaintiff stated that Brock moved out because “the drug situation, it was unbearable, and I couldn’t take it anymore.”

Plaintiff testified that while he and his girlfriend were in Missouri, Brock was driving Plaintiff’s truck, which he had loaned to her. On the weekend of the fire, Brock, who knew the combination to the gate lock on the Property, returned Plaintiff’s truck to the Property with Plaintiff’s permission. Plaintiff testified that he and Brock spoke on the telephone, and she requested permission to go into the House to take a shower. Plaintiff denied Brock permission to enter the House. Brock then entered the House through an unlocked window and got some water jugs from the House. Plaintiff testified that Brock later told him she had done this.

Plaintiff denied having anything to do with the fire. When asked if it had occurred to him that Brock had something to do with the fire, he stated: “Oh, absolutely… I don’t know that she would, but like you said, it’s possible that she could have, but I don’t know, and we don’t have no reason why she would. So I don’t know.” He was asked if he thought Brock started the fire, and he stated: “I don’t know. I honestly don’t know. I can’t point a finger at something I don’t know, and I don’t think you could either.” Plaintiff testified that a baseboard heater in the bathroom may have started the fire because he thought the thermostat “might have been defective or something…”

Plaintiff currently is living on the Property in his RV. He also has a single-wide trailer on the Property, but is not staying there. The last person to use the single-wide trailer was Plaintiff’s cousin, who recently got out of jail. The cousin was in jail for trying to shoot Brock. Plaintiff testified that no one is staying in the single-wide trailer at this time.

TN Farmers filed a motion for summary judgment alleging that the material misrepresentations made by Plaintiff and Brock on the Insurance Policy application increased the risk of loss causing the policy to be void. In response to the motion for summary judgment, Plaintiff filed his own affidavit, but failed to respond to TN Farmers’ statement of undisputed material facts. After a hearing, the Trial Court entered its order denying TN Farmers’ motion for summary judgment after finding and holding, inter alia:

The misrepresentations made on their application by Grady Dutton and Sheila Brock regarding Sheila Brock’s criminal record are not material misrepresentations pursuant to the requirements of T.C.A. 56-7-103 because the defendant insurer, for purposes of its present Motion, has not asserted that the misrepresentations were made with the intent to deceive and the misrepresented facts did not increase the risk of loss to the defendant insurer because the insurance contract was renewed several times during the seven-year period from the date of application until the fire, during which time Sheila Brock was deleted from coverage and Sheila Brock’s daughter, Catherine Sexton, was first added, then deleted from the coverage, thereby changing the contract.

The Trial Court then granted TN Farmers permission to file for interlocutory appeal. We granted the Rule 9 application by order entered September 5, 2017.

Discussion

We granted this Rule 9 application to consider the sole issue, as stated by the Trial Court:

[W]hether an insurance application misrepresentation may become not material, i.e., not increase the risk of loss to the insurer pursuant to the provisions of T.C.A. 56-7-103, after the passage of time from the application misrepresentation until the date of loss by reason of successive renewals of the policy and other intervening changes in the policy coverage by reason of persons being deleted and added as insureds.

As pertinent to this appeal, Tenn. Code Ann. § 56-7-103 provides:

56-7-103. Misrepresentation or warranty will not void policy - Exceptions.

No written or oral misrepresentation or warranty made in the negotiations of a contract or policy of insurance, or in the application for contract or policy of insurance, by the insured or in the insured’s behalf, shall be deemed material or defeat or void the policy or prevent its attaching, unless the misrepresentation or warranty is made with actual intent to deceive, or unless the matter represented increases the risk of loss.

Tenn. Code Ann. § 56-7-103 (2016).

In Freeze v. Tennessee Farmers Mut. Ins. Co. this Court discussed the material misrepresentations made on insurance policy applications and explained how pursuant to Tenn. Code Ann. § 56-7-103 such misrepresentations may render the policy void. Freeze v. Tennessee Farmers Mutual Ins. Co., 527 S.W.3d 227 (Tenn. Ct. App. 2017). As we noted in Freeze: “[D]etermining whether a particular misrepresentation increases an insurance company’s risk of loss is a question of law for the court.” Freeze, 527 S.W.3d at 232 (quoting Smith v. Tennessee Farmers Life Reassurance Co., 210 S.W.3d 584, 589 (Tenn. Ct. App. 2006)).

It is well settled in Tennessee that regardless of what caused the loss, “[i]f the policy is obtained through fraud or misrepresentation which materially ‘increases the risk of loss,’ it is voidable from its inception.” Day v. Mut. of Omaha Ins. Co., 534 S.W.2d 859, 864 (Tenn. Ct. App. 1975); see also, e.g., Volunteer State Life Ins. Co. v. Richardson, 146 Tenn. 589, 244 S.W. 44, 49 (1922) (holding that insurance company was entitled to have policy canceled due to misrepresentations and stating: “Of course, the matter represented in the Dibrell Case did not enter into the death of the insured as a contributing cause, either directly or indirectly but it was, nevertheless, material and increased the risk of loss within the meaning of our statute, for the reason that it was information which would naturally and reasonably have influenced the judgment of the insurer with respect to the application. The principle is just as applicable to the situation presented here as in that case…”); Montgomery v. Reserve Life Ins., 585 S.W.2d 620, 622 (Tenn. Ct. App. 1979) (stating: “No recovery will be allowed on a policy issued in reliance on a misrepresentation in the application which increased the risk of loss… It matters not what caused the death of the insured.”).

In Day, this Court further elucidated:

It is not material to the validity of coverage whether the disability suffered by the insured was related to the misrepresentations. Regardless of what may cause the death or disability of the insured after the issuance of a voidable policy, it has no bearing on whether or not the policy is enforceable. If the policy is obtained through fraud or misrepresentation which materially “increases the risk of loss,” it is voidable from its inception.

In the case of Brotherhood of Railroad Trainmen v. Daniels, 18 Tenn. App. 264, 75 S.W.2d 1019 [(1934)], the insured died from an illness other than the one he failed to disclose in his application for insurance. In passing upon the issue, the court said:

“The fact that the applicant did not die of the ailment he had had, and suppressed, is not controlling, as the defendant in error insists is the case. For, if the attacks ‘evidenced a material impairment of the applicant’s constitution’ (Harris v. [Security Mut. Life] Insurance Co., supra [130 Tenn. 325, 170 S.W. 474 (1914)]) then the warranties were material warranties, and the contract was avoided at its inception.”

Also, in the case of Mutual Life Ins. Co. v. Dibrell, 137 Tenn. 528, 536, 194 S.W. 581, 583 [(1926)], the court, in addressing itself to this question, said:

“It cannot be that the matter misrepresented should necessarily relate to the hazard of loss by the death of the insured. Such a construction might prevent the company’s rescinding the contract because of a misrepresentation that actually induced the contract, in an action begun promptly after the making of the application and the issuance of the policy. What will not avail to ‘void the policy,’ under the statute, it seems equally will not ‘prevent its attaching,’ as a contract. We cannot adopt the harsh and radical construction that the Legislature meant to deprive the insurer of the right to rescind the policy contract for inducing fraud.”

Day, 534 S.W.2d at 864.

In the case now before us the Trial Court found that Plaintiff and Brock made misrepresentations on the application for the Insurance Policy. There is no question that these misrepresentations were material when made. See Freeze, 527 S.W.3d 227 (holding that similar misrepresentations were material and rendered the policy at issue void). In his brief on appeal, Plaintiff concedes that he “does not rebut the trial court’s finding that a misrepresentation was made, and that drug use would affect the insurer’s decision to extend coverage.”

Plaintiff argues, however, that the later changes made to the Insurance Policy by successive renewals and the deletions and additions of insured persons render the misrepresentations made by Plaintiff and Brock not material as they no longer would increase the risk of loss. Specifically, Plaintiff asserts that Brock has been removed from the Policy and no longer has an ownership interest in the Property and that TN Farmers recorded these changes and accepted them through multiple renewals of the Insurance Policy. Plaintiff asserts that the “deletions, transfers” and the fact that Brock no longer lives on the Property create a “distance” between Brock and the Property, and therefore, the misrepresentations no longer have a bearing on risk.

We find Plaintiff’s arguments unavailing. There is no question that Plaintiff and Brock made misrepresentations on the Insurance Policy application and that those misrepresentations were material and would increase the risk of loss. As such, the Insurance Policy was defeated, voided, or prevented from attaching at its inception pursuant both to the plain, clear, and unambiguous language of Tenn. Code Ann. § 56-7-103 and the Insurance Policy itself. Given the fact that the Insurance Policy was void from its inception, the attempted changes to the Insurance Policy by virtue of renewals and changes to the named insureds that Plaintiff relies upon in this case were of no effect.

With regard to renewals of insurance policies, this Court has stated:

When an insurance policy renewal is made, unless otherwise provided and called to the attention of the insured, the terms of the original policy become a part of the renewal contract of insurance. See 13A Appleman, Insurance Law and Practice, § 7648; 17 Couch on Insurance 2nd, §§ 64:40, 68:61. When renewing an insurance policy, the insurer must call attention to any changes in the terms and, if it fails to do so, such change is no part of the contract. Where the parties to a contract of insurance agree to a renewal, it is presumed that the same terms, conditions, premiums and subject matter obtain in the new contract as in the old. 13A Appleman, supra, § 7648. “An accurate definition of renewal cannot be made until it is first determined whether the renewal takes effect as an extension or continuation of the original policy or whether it represents the formation of a new although identical contract of insurance.” 17 Couch on Insurance 2nd, § 68:2 at 659. Whether a renewal insurance policy is a new and independent contract or whether it is an extension or continuation of the original contract depends primarily upon the intention of the parties as ascertained from the instrument itself. Lewis v. Western Assur. Co., 175 Tenn. 37, 130 S.W.2d 982 (1939); 17 Couch, supra, § 68:39.

Brewer v. Vanguard Ins. Co., 614 S.W.2d 360, 363 (Tenn. Ct. App. 1980).

The record on appeal reveals that the renewals of the Insurance Policy were intended to extend or continue the term of the Insurance Policy, not to form a whole new and independent contractual agreement. Given this, the renewals in the case now before us were dependent upon the original Insurance Policy, which, as discussed above, was void from its inception due to the material misrepresentations which increased the risk of loss made by Plaintiff and Brock on the application for the Insurance Policy.

Additionally, in its brief on appeal, TN Farmers points us to cases from Georgia and Illinois wherein appellate courts in those states rejected arguments similar to the ones made by Plaintiff in this case and found that renewals to insurance policies made prior to the insurer’s discovery of misrepresentations did not cure the misrepresentations or destroy the insurer’s right to defeat or avoid the policy. Lively v. Southern Heritage Ins. Co., 256 Ga.App. 195, 568 S.E.2d 98, 102 (2002) (stating: “The Livelys also assert that Southern Heritage’s renewal of the insurance policy corrected the misrepresentations contained in the application. We find no merit in this argument.” [In part, because] “[t]he parties apparently continued to rely upon the application submitted [initially] for the renewal.”); American Country Ins. Co. v. Mahoney, 203 Ill.App.3d 453, 148 Ill.Dec. 438, 560 N.E.2d 1035, 1043 (1990) (stating: “Finally, we reject Mahoney’s argument that American’s decision to renew her insurance policy, well before it learned of her misrepresentations, eliminated any right to defeat or avoid the policy. Mahoney has not cited authority, and our own research had disclosed no authority, that supports this novel claim. And the text of [the Illinois statute] imposes no time limitation on the right, which it grants the insurer, to defeat or avoid a policy; that is, [the Illinois statute] does not prohibit an insurer from seeking to defeat or avoid a policy … after it decides to renew a policy, in ignorance of the insured’s material misrepresentations. Mahoney’s application itself clearly provided that American would rely upon the misrepresentations therein when considering whether to renew her policy.”).

We find the reasoning employed in Liveley and Mahoney to be persuasive. We note that as was the case with the Illinois statute in Mahoney, our statute, Tenn. Code Ann. § 56-7-103, also contains no time limitation within which an insurer who is ignorant of an insured’s misrepresentations must take steps to avoid or defeat the policy. The decision whether to include such a time limitation in the statute was a policy decision made by our General Assembly.

Given all of the above, we hold that the material misrepresentations made by Plaintiff and Brock on the Insurance Policy application rendered the Insurance Policy void or prevented its attaching from its inception and that the subsequent renewals and attempted additions and deletions of named insureds did not operate to render the misrepresentations not material. We, therefore, reverse the Trial Court’s June 22, 2017 order denying TN Farmer’s motion for summary judgment and remand this case to the Trial Court for entry of an order granting summary judgment to TN Farmers.

Conclusion

The judgment of the Trial Court denying summary judgment to TN Farmers is reversed, and this cause is remanded to the Trial Court for entry of an order granting summary judgment to TN Farmers and for collection of the costs below. The costs on appeal are assessed against the appellee, Grady Eugene Dutton.

[Footnote as the reporter printed it:] It is not the role of this Court “to make a different contract than that executed by the parties.” Posner v. Posner, No. 02A01-9710-CV-00249, 1997 WL 796216, at *2-3 (Tenn. Ct. App. Dec. 30, 1997), no appl. perm. appeal filed. See also, e.g., Central Drug Store v. Adams, 184 Tenn. 541, 201 S.W.2d 682 (1947). “In the absence of fraud or mistake, a contract must be interpreted and enforced as written even though it contains terms which may be thought to be harsh or unjust.” Tenpenny v. Tenpenny, No. 01A01-9406-CV-00296, 1995 WL 70571, at *6 (Tenn. Ct. App. Feb. 22, 1995), appl. perm. appeal denied July 3, 1995.

What it decided

This one is carrier-favorable, and a Tennessee homeowner needs to read it anyway.

Grady Dutton’s house burned to the ground on May 28, 2016. Tennessee Farmers refused to pay, not because of anything about the fire, but because of two answers on an insurance application signed seven years earlier. On April 21, 2009 Mr. Dutton and Sheila Brock applied to insure the property. They answered “no” to whether either had ever been charged with, convicted of, or pled guilty to a felony, and “no” to whether either had ever been charged with, convicted of, or pled guilty to arson, fraud, theft, or a drug-related crime. Brock had been arrested a year earlier, on April 29, 2008, on felony drug charges including possession of cocaine for resale. The application page they signed carried this sentence: “I(We) understand that any misrepresentations or failure to answer questions truthfully, correctly and completely will void this insurance.”

The trial court denied the insurer summary judgment, reasoning that the misrepresentations had stopped being material because the policy was renewed repeatedly over seven years, during which Brock was deleted as an insured, her daughter was added and then deleted, and the property changed hands several times. The Court of Appeals took the interlocutory appeal to answer that single question, and answered it for the insurer.

The statute does the work. Tenn. Code Ann. § 56-7-103 begins as a protection for policyholders: no misrepresentation in an application “shall be deemed material or defeat or void the policy or prevent its attaching.” Then come the two exceptions: “unless the misrepresentation or warranty is made with actual intent to deceive, or unless the matter represented increases the risk of loss.”

Read that “or” carefully, because it is the whole case. The insurer did not allege intent to deceive for purposes of its motion. It did not have to. The second exception is enough by itself, and whether a misrepresentation increases the risk of loss “is a question of law for the court,” not a question for a jury.

Three consequences followed.

1. The policy never attached. Because the answers were material and increased the risk of loss, the policy “was defeated, voided, or prevented from attaching at its inception.” Mr. Dutton conceded on appeal that a misrepresentation was made and that “drug use would affect the insurer’s decision to extend coverage.”
2. Renewals cannot repair a policy that never existed. Applying Brewer v. Vanguard, the Court found these renewals “were intended to extend or continue the term of the Insurance Policy, not to form a whole new and independent contractual agreement,” so they “were dependent upon the original Insurance Policy, which … was void from its inception.” Adding and deleting named insureds changed nothing.
3. There is no deadline on the insurer. Following Georgia’s Lively and Illinois’s Mahoney, the Court noted that “our statute, Tenn. Code Ann. § 56-7-103, also contains no time limitation within which an insurer who is ignorant of an insured’s misrepresentations must take steps to avoid or defeat the policy,” and that the absence of one “was a policy decision made by our General Assembly.”

Older Tennessee cases supply the harshest piece of this doctrine, and the Court quoted them: “regardless of what caused the loss,” a policy obtained through a misrepresentation that materially increases the risk of loss “is voidable from its inception,” and “[i]t matters not what caused the death of the insured.” What you got wrong on the application does not have to have anything to do with the fire.

Summary judgment for Tennessee Farmers. The Supreme Court declined to review.

What it did NOT decide

• It did not hold that every inaccurate answer voids a policy. The statute’s default runs the other way. A misrepresentation is not material and does not void the policy unless it was made with actual intent to deceive or it increases the risk of loss. An error that does neither is not a defense. Dutton is about answers that plainly did increase the risk, and the insured conceded as much on appeal.
• It did not decide who or what started the fire. The insured was asked in deposition whether Brock might have been involved, and answered that he did not know. He offered a possibly defective baseboard heater as an alternative. None of that mattered to the ruling. This was never an arson case.
• It did not decide the innocent-applicant question. Mr. Dutton signed the same application and answered the same questions, and the Court treated the misrepresentations throughout as made “by Plaintiff and Brock.” What happens when one applicant conceals something a co-applicant genuinely knew nothing about is a different case, and this opinion does not answer it.
• It did not decide what happens when the insurer knew. The reasoning it borrowed from Mahoney turns on an insurer renewing “in ignorance of the insured’s material misrepresentations.” Waiver and estoppel where the carrier had the true facts and issued or renewed anyway are not addressed here.
• It did not address the return of premiums. Seven years of premiums were paid on a policy the Court held never attached. The opinion says nothing about them.
• It did not reach any bad-faith question. Neither the § 56-7-105 penalty nor the unfair claims practices list at § 56-8-105 is discussed. This was decided as a contract-formation case.
• It did not enter a final judgment. The Court reversed the denial of summary judgment and remanded “for entry of an order granting summary judgment to TN Farmers.” That disposes of the coverage claim, but the opinion itself answers one certified question on interlocutory appeal.

Why it matters to policyholders

This is a rule that can cost you your claim if you ignore it, so here it is without softening. In Tennessee, an answer on your insurance application can void your policy from the day it was written, years later, after a total loss, even if the answer had nothing to do with the fire, and even if nobody accuses you of lying on purpose. A judge, not a jury, decides whether the answer increased the insurer’s risk of loss. And there is no time limit on the insurer’s right to raise it.

Get a copy of your application. Today, not after a loss. Ask your agent for the signed application and every change endorsement. Read what was actually written down. Applications are frequently filled in by an agent while the customer talks, and an answer can end up wrong without anyone intending it. Look hardest at criminal history for every named insured, prior losses and prior claims, occupancy, who else lives there, business use, vacancy, and who owns the property. The application in this file also recited a prior $10,000 fire loss in December 2006 that the insured could not remember when he was deposed.

If you find something wrong, correct it in writing and keep the proof. A written correction, dated and delivered, is the record of what the insurer knew and when. That record is what any later argument about waiver or estoppel gets built from.

Renewing does not launder anything. Seven years, repeated renewals, an insured removed, another added and removed, and a chain of deed transfers did not rehabilitate this policy. Do not assume time is on your side.

Ownership changes deserve their own phone call. The deeds in this record, some recorded, one never recorded, one never notarized, are a separate hazard in property insurance even where no misrepresentation is involved. When title moves, tell your insurer in writing and get the policy endorsed.

Know where our work stops and a lawyer’s starts. A public adjuster documents the loss, values the building and contents, prepares the sworn proof of loss, negotiates, and handles appraisal when the disagreement is about the amount of a loss the carrier concedes. On that limit, see Merrimack v. Batts, which holds that appraisal fixes the amount of the loss and leaves coverage and causation with the courts. An appraisal panel cannot rescue a policy the insurer says never attached. When a carrier raises misrepresentation or rescission, the fight is about whether a contract exists at all, and it belongs with an attorney; we refer it out and keep doing the documentation work the attorney will need. For what a Tennessee policyholder must prove to win a bad-faith penalty, see Palmer v. Nationwide. More Tennessee authority, in full text, is on the Tennessee claim-law page.

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