The trial court dismissed the direct action against Allstate for failure to state a claim upon which relief could be granted, pursuant to Tenn. R. Civ. P. 12.02(6), because Tennessee law does not permit a direct action against an insured's insurance carrier "without first establishing that the insured ... has become ‘legally obligated’ to pay damages." Ferguson v. Nationwide Prop. & Cas. Ins. Co. , 218 S.W.3d 42, 52 (Tenn. Ct. App. 2006) (quoting Seymour v. Sierra , 98 S.W.3d 164, 165 (Tenn. Ct. App. 2002) ). Following the dismissal of Plaintiff's claims against Allstate, the trial court summarily dismissed Plaintiff's claims against Defendant upon the finding that Plaintiff failed to present any evidence that the fair market value was more than Allstate paid on behalf of Defendant. The court also summarily dismissed Plaintiff's claim for the loss of use of her car, because it could not be repaired and she never sought to rent a replacement vehicle.
There is no privity of contract between the Plaintiffs and the Defendant, CENTRAL, and as such, no direct action can be maintained. Tennessee is not a `direct action' state wherein a Plaintiff can sue the liability insurance carrier of the Defendant who allegedly caused the harm. Seymour v. Sierra, 98 S.W.3d 164 (Tenn.Ct.App. 2002). Plaintiffs allege that Defendant, CENTRAL, negotiated in bad faith and as such constitutes a violation of the Tennessee Consumer Protection Act, T.C.A. 46-18-104(b)(22); however, no privity of contract existed between the Plaintiffs and the Defendant, CENTRAL.
Moreover, CIC is correct that "Tennessee is not a 'direct action' state where a plaintiff can sue the liability insurance carrier of the defendant who allegedly caused the harm" without first establishing that the insured defendant "has become 'legally obligated' to pay the damages resulting from" the plaintiff's claimed injury. Ferguson v. Nationwide Prop. & Cas. Ins. Co., 218 S.W.3d 42, 52 (Tenn. Ct. App. 2006) (quoting Seymour v Sierra, 98 S.W.3d 164, 165 (Tenn. Ct. App. 2002)).
Because "Tennessee is not a 'direct action' state," a plaintiff cannot "sue the liability insurance carrier of the defendant who allegedly caused harm." Seymour v. Sierra, 98 S.W.3d 164, 165 (Tenn. Ct. App. 2002). Additionally, "[t]he rights of any third-party to the insurance contract are derivative rights and can rise to no greater dignity than the rights of the insured under the contract."
The phrase "uninsured motor vehicle" is deemed, under Tennessee law, to include underinsured motor vehicles such as at issue in the instant case. Seymour v. Sierra, 98 S.W.3d 164, 166 (Tenn. Ct. App. 2002). TFMIC, in response, states that it is in agreement that Tennessee law governs on the issue of the rights and liabilities of the parties to the subject underinsured motorist policy, and that it is merely a nominal party under Tennessee law.
While it is true, as U.S. Fire and North River assert, that Tennessee, Missouri, Connecticut, and Massachusetts are not "direct action" states, that, however, misses the point because the plaintiffs have not brought a direct action suit. All cases cited by the defendants in support of their assertion that this is a direct action suit are suits where the insured sued its uninsured motorist carrier to determine liability under a contract of insurance for injuries suffered in an automobile accident, see Seymour v. Sierra, 98 S.W.3d 164 (Tenn.Ct.App. 2002), an injured party sued her employer, the alleged tortfeasor, and the employer's insurer for reimbursement for property damage after a fire, see Ferguson v. Nationwide Prop. Cas. Ins. Co., 218 S.W.3d 42 (Tenn.Ct.App. 2006), or an injured party sued an insurer directly to establish liability of the insured, see John Beaudette, Inc. v. Sentry Ins. Mut. Co., 94 F.Supp.2d 77 (D. Mass. 1999); Szafarowicz v. Gotterup, 68 F.Supp.2d 38 (D. Mass. 1999); Desmond v. American Ins. Co., 786 S.W.2d 144 (Mo.Ct.App. 1990). The cases cited were not declaratory judgment actions. Furthermore, there are numerous cases which have been filed in this district where an alleged injured party in an underlying personal injury suit or the insurer of the insured alleged to have caused the injury have filed suit seeking declaratory judgment as to the coverage of the insurance policy, the duty to indemnify, or the duty to defend.
Uninsured motorist coverage in Tennessee encompasses both uninsured and underinsured motor vehicles. See Seymour v. Sierra, 98 S.W.3d 164, 166 (Tenn.App.2002). Accordingly, the court will simply refer to the coverage as uninsured motorist.
We note that, if Defendant Hyler's assignment was valid, Defendant Hyler purported to assign the proceeds of a potential claim to the Plaintiff and not the claim itself. Although the assignment of personal injury claims is not permitted in Tennessee, seeSeymour v. Sierra, 98 S.W.3d 164, 165 (Tenn.Ct.App.2002) (“Tennessee is not a ‘direct action’ state where a plaintiff can sue the liability insurance carrier of the defendant who allegedly caused the harm.”), it is undecided in Tennessee whether a party may assign the proceeds of a potential claim.
Mr. Arnold states that the trial court improperly dismissed his suit against Progressive by utilizing an incorrect interpretation of Ferguson v. Nationwide Prop. &Cas. Ins. Co., 218 S.W.3d 42 (Tenn. Ct. App. 2006). Ferguson states the widely accepted proposition that "Tennessee is not a 'direct action' state where a plaintiff can sue the liability insurance carrier of the defendant who allegedly caused the harm." Id. at 52 (quoting Seymour v. Sierra, 98 S.W.3d 164, 165 (Tenn. Ct. App. 2002)). Mr. Arnold's claims against Progressive were based on the fact that Progressive was Ms. Malchow's insurer.
Tennessee is not a "direct action" state where plaintiffs can sue the liability carrier of the defendant who allegedly caused the harm. Seymour v. Sierra, 98 S.W.3d 164, 165 (Tenn. Ct. App. 2002). On April 12, 2016, Appellants timely served and proceeded with an action against their uninsured/underinsured motorist carrier, Progressive Hawaii Insurance Corporation ("Progressive"), in accordance with Tennessee Code Annotated section 56-7-1206(d).