In Brooks v. Tenn. Farmers Mut. Ins. Co., 2014 Tenn. App. LEXIS 776 (Tenn. Ct. App. Nov. 26, 2014), an insured’s home was damaged by a tornado and an independent adjuster hired by the insurance company offered the homeowner $56,788 to resolve the claim. The homeowner disagreed with the estimate and refused to settle the claim for that amount. Rather than paying what it admitted it owed, the insurance company gave the insured a check (which apparently contained release language above the space for the endorsement) for the amount of its estimate and suggested that the insured “take it or leave it.” After considering the proof, the Court of Appeals held that the insurance company’s behavior was unfair and deceptive, justifying double damages under the Tennessee Consumer Protection Act (note that this was a case that arose prior to the change in the law that protects insurance companies from lawsuits for violations of the TCPA). Specifically, the court held that the “take it or leave it” statement was coercive and intended to mislead, that the disclaimer language on the check was a false statement, that it was coercive to make a smaller estimate on the house without a full examination of the damage, and that the insurance company had notice other issues not included within the estimate.
This case strikes close to home because it is a fairly common practice for insurance carriers to place release language on their checks, and many times insureds are duped into accepting the checks. Sometimes the insureds are just desperate to get some money to start repairs and other times they just don’t bother reading the fine print. Either way, I’ve always cringed when I see such a tactic because it flies in the face of an insured’s right to file a supplemental claim and an insurance company’s obligation to always pay what they owe without any requirement of a release. The Brooks case should stop the practice in Tennessee, and those carriers that continue to engage in such unfair practices could subject themselves to extra-contractual damages for bad faith and/or punitive damages.
By the way, reading this case reminded me of Tennessee citizens’ loss of their rights under the Tennessee Consumer Protection Act in insurance disputes. Next time you talk to your state senator or representative, ask them how it makes sense that all businesses except insurance companies are prohibited from engaging in unfair or deceptive practices? What is it about insurance companies that makes them immune from a law that was designed to stop the type of claims activity that was demonstrated in the Brooks case? For the life of me, I can’t thing of a single reason how the 2011 legislation that removed the TCPA from policyholder’s available remedies in any way benefits the citizens of this State. Perhaps someone out there will enlighten me.