IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE FILED January 22, 1999 HELEN BELL, ) Cecil W. Crowson ) Appellate Court Clerk Plaintiff/Appellant, ) ) Appeal No. ) 01-A-01-9802-CV-00079 VS. ) ) Warren Circuit ) No. 8868 TENNESSEE FARMERS MUTUAL ) INSURANCE COMPANY, ) ) Defendant/Appellee. )
APPEALED FROM THE CIRCUIT COURT OF WARREN COUNTY AT MCMINNVILLE, TENNESSEE
THE HONORABLE CHARLES D. HASTON, JUDGE
PETER J. STRIANSE 2100 First American Center Nashville, TN 37238
AUBREY HARPER 114 N. College Street McMinnville, TN 37110 Attorneys for Plaintiff/Appellant
STEVEN A. DIX 201 West Main Street, Ste. 201 Murfreesboro, TN 37130 Attorney for Defendant/Appellee
REVERSED AND REMANDED
BEN H. CANTRELL PRESIDING JUDGE, M.S.
CONCUR: KOCH, J. CAIN, J. OPINION
The owner of a homeowner’s insurance policy sued the defendant
insurance company to recover benefits allegedly due under the policy. The defendant
moved for summary judgment, which the trial court granted, based on the plaintiff’s
alleged failure to comply with the notice provisions in the policy, and on her best
interest plea of facilitation to commit arson. We reverse the trial court.
I.
Helen Bell’s McMinnville home was insured under a homeowners policy,
issued by Tennessee Farmers Mutual Insurance Company. On November 27, 1995,
the home was destroyed by fire. Within forty-eight hours, Ms. Bell’s fiancé Robert
Hennessee verbally notified insurance agent Jeff Flatt about the loss. Mr. Flatt
allegedly told Mr. Hennessee that the insurance company was already aware of the
fire, that company investigators were working with the fire marshall and local law
enforcement on an arson investigation, and that there was no time limit on the filing
of a claim. Ms. Bell submitted actual written notice of the fire to the insuror on
December 28, 1995.
Ms. Bell was indicted for arson on March 8, 1996. The insuror
subsequently refused to honor her claim under the homeowner’s policy, asserting that
she had caused the fire loss to her home. On November 26, 1996 she filed a
complaint in the Circuit Court of Warren County, asking that a jury of twelve be
allowed to determine whether the insurance company should be compelled to honor
its policy, to reimburse her for her loss, and to pay a 25% penalty for its alleged bad
faith.
As the civil case proceeded, so did negotiations in the criminal case.
Pursuant to those negotiations, Ms. Bell entered a best interest plea of guilty to the
-2- offense of facilitation to commit arson on January 29, 1997, and the criminal court
granted her judicial diversion. She was given three years probation, after which her
plea would be expunged from the record if she complied with the conditions of
probation.
The insurance company filed a Motion for Summary Judgment on the
ground that the plaintiff’s plea in the criminal case voided her policy. A memorandum
in support of the motion also recited that the insured had waited over thirty days
before notifying the company of the loss, and that she cleaned up the evidence in the
interim, thus hampering the defendant’s investigation.
On August 19, 1997, the trial court granted summary judgment to the
defendant, citing “. . . the failure of the insured to comply with the notice conditions
precedent to coverage, and for the Plaintiff’s admission of her role in the facilitation
of arson.” Ms. Bell subsequently filed a Motion to Alter or Amend the Judgment,
accompanied by the affidavit of Robert Hennessee, and the addendum to her best
interest plea of guilty.1 The addendum had been prepared contemporaneously with
the written plea, and had been signed by the defendant, her counsel, and the
prosecuting attorney. In it, Ms. Bell acknowledged that she was voluntarily entering
a plea of guilty because her best interests required it, but stated that she was unwilling
to admit participation in the acts constituting the crime. The Motion to Alter or Amend
was denied. This appeal followed.
II. The Notice Requirement
1 Ms. Bell does not contest the admissibility of the best intere st ple a. A g uilty plea is ordin arily adm issib le in a civil trial as a judic ial adm ission. Te nn. Cod e Ann. § 40-35-313(b)(1). A plea of nolo contendere , however, is not. See Rule 410(2), Tenn. R. Evid. We do not express an opinion on whether the best interest “Alford” plea would be admissible if a timely objection were made. (For a discus sion of the “Alford” ple a see P art III below.)
-3- The terms of the insurance policy included the following instruction to
policyholders:
1. What to Do in Case of Loss
If a covered loss occurs, the insured person must:
(a) give us immediate written notice... ... (e) exhibit the damaged property to us or our representative as often as may be reasonably required;
As the appellee points out, policies requiring “immediate” or “prompt”
notice have generally been interpreted to mean that the notice must be given within
a reasonable time under the circumstances of the case. Allstate Insurance Co. v.
Wilson, 856 S.W.2d 706, 709 (Tenn. App. 1992). See also Melton v. Republic
Vanguard Insurance Co., 548 S.W.2d 313 (Tenn. App. 1976).
While under our prior cases failure to give the notice was an absolute
defense to an action on the policy, the Tennessee Supreme Court has now said that
we must consider whether the delay in giving notice resulted in prejudice to the
insurance company. Alcazar v. Hayes, ____ S.W.2d ____ (Tenn. 1998)(filed
December 21, 1998). The Court said that in all cases pending on appeal or tried in
the future the failure to give adequate notice put the burden on insureds to prove that
they acted in good faith and that the insuror was not prejudiced by the delay.
Thus, even if the thirty-one day delay in giving written notice in this case
were to be considered unreasonable, Ms. Bell could still avoid the failure-to-give-
notice defense by showing that the delay did not prejudice the insurance company.
We, therefore, reverse the summary judgment granted to the insurance
company on the notice question. On remand the trial court should consider the
reasonableness of the notice, the good faith of Ms. Bell, and the prejudice to the
insurance company.
-4- III. The Best Interest Plea
In North Carolina v. Alford, 400 U.S. 25 (1970) the Supreme Court
affirmed the constitutionality of the so-called best interest plea. The Court noted that
an ordinary plea of guilty in a criminal case consists of both a waiver of trial and an
express admission of guilt. However in a best interest plea (now often called an Alford
plea) the defendant consents to submit to criminal penalties without trial, and without
admitting guilt. The State of Tennessee permits a trial judge to accept a best interest
plea, when the defendant enters such a plea voluntarily, with an understanding of its
nature and consequences, and when the court is satisfied that there is a factual basis
for the plea. See Dortch v. State, 705 S.W.2d 687 (Tenn. Crim. App. 1985). The
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IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE FILED January 22, 1999 HELEN BELL, ) Cecil W. Crowson ) Appellate Court Clerk Plaintiff/Appellant, ) ) Appeal No. ) 01-A-01-9802-CV-00079 VS. ) ) Warren Circuit ) No. 8868 TENNESSEE FARMERS MUTUAL ) INSURANCE COMPANY, ) ) Defendant/Appellee. )
APPEALED FROM THE CIRCUIT COURT OF WARREN COUNTY AT MCMINNVILLE, TENNESSEE
THE HONORABLE CHARLES D. HASTON, JUDGE
PETER J. STRIANSE 2100 First American Center Nashville, TN 37238
AUBREY HARPER 114 N. College Street McMinnville, TN 37110 Attorneys for Plaintiff/Appellant
STEVEN A. DIX 201 West Main Street, Ste. 201 Murfreesboro, TN 37130 Attorney for Defendant/Appellee
REVERSED AND REMANDED
BEN H. CANTRELL PRESIDING JUDGE, M.S.
CONCUR: KOCH, J. CAIN, J. OPINION
The owner of a homeowner’s insurance policy sued the defendant
insurance company to recover benefits allegedly due under the policy. The defendant
moved for summary judgment, which the trial court granted, based on the plaintiff’s
alleged failure to comply with the notice provisions in the policy, and on her best
interest plea of facilitation to commit arson. We reverse the trial court.
I.
Helen Bell’s McMinnville home was insured under a homeowners policy,
issued by Tennessee Farmers Mutual Insurance Company. On November 27, 1995,
the home was destroyed by fire. Within forty-eight hours, Ms. Bell’s fiancé Robert
Hennessee verbally notified insurance agent Jeff Flatt about the loss. Mr. Flatt
allegedly told Mr. Hennessee that the insurance company was already aware of the
fire, that company investigators were working with the fire marshall and local law
enforcement on an arson investigation, and that there was no time limit on the filing
of a claim. Ms. Bell submitted actual written notice of the fire to the insuror on
December 28, 1995.
Ms. Bell was indicted for arson on March 8, 1996. The insuror
subsequently refused to honor her claim under the homeowner’s policy, asserting that
she had caused the fire loss to her home. On November 26, 1996 she filed a
complaint in the Circuit Court of Warren County, asking that a jury of twelve be
allowed to determine whether the insurance company should be compelled to honor
its policy, to reimburse her for her loss, and to pay a 25% penalty for its alleged bad
faith.
As the civil case proceeded, so did negotiations in the criminal case.
Pursuant to those negotiations, Ms. Bell entered a best interest plea of guilty to the
-2- offense of facilitation to commit arson on January 29, 1997, and the criminal court
granted her judicial diversion. She was given three years probation, after which her
plea would be expunged from the record if she complied with the conditions of
probation.
The insurance company filed a Motion for Summary Judgment on the
ground that the plaintiff’s plea in the criminal case voided her policy. A memorandum
in support of the motion also recited that the insured had waited over thirty days
before notifying the company of the loss, and that she cleaned up the evidence in the
interim, thus hampering the defendant’s investigation.
On August 19, 1997, the trial court granted summary judgment to the
defendant, citing “. . . the failure of the insured to comply with the notice conditions
precedent to coverage, and for the Plaintiff’s admission of her role in the facilitation
of arson.” Ms. Bell subsequently filed a Motion to Alter or Amend the Judgment,
accompanied by the affidavit of Robert Hennessee, and the addendum to her best
interest plea of guilty.1 The addendum had been prepared contemporaneously with
the written plea, and had been signed by the defendant, her counsel, and the
prosecuting attorney. In it, Ms. Bell acknowledged that she was voluntarily entering
a plea of guilty because her best interests required it, but stated that she was unwilling
to admit participation in the acts constituting the crime. The Motion to Alter or Amend
was denied. This appeal followed.
II. The Notice Requirement
1 Ms. Bell does not contest the admissibility of the best intere st ple a. A g uilty plea is ordin arily adm issib le in a civil trial as a judic ial adm ission. Te nn. Cod e Ann. § 40-35-313(b)(1). A plea of nolo contendere , however, is not. See Rule 410(2), Tenn. R. Evid. We do not express an opinion on whether the best interest “Alford” plea would be admissible if a timely objection were made. (For a discus sion of the “Alford” ple a see P art III below.)
-3- The terms of the insurance policy included the following instruction to
policyholders:
1. What to Do in Case of Loss
If a covered loss occurs, the insured person must:
(a) give us immediate written notice... ... (e) exhibit the damaged property to us or our representative as often as may be reasonably required;
As the appellee points out, policies requiring “immediate” or “prompt”
notice have generally been interpreted to mean that the notice must be given within
a reasonable time under the circumstances of the case. Allstate Insurance Co. v.
Wilson, 856 S.W.2d 706, 709 (Tenn. App. 1992). See also Melton v. Republic
Vanguard Insurance Co., 548 S.W.2d 313 (Tenn. App. 1976).
While under our prior cases failure to give the notice was an absolute
defense to an action on the policy, the Tennessee Supreme Court has now said that
we must consider whether the delay in giving notice resulted in prejudice to the
insurance company. Alcazar v. Hayes, ____ S.W.2d ____ (Tenn. 1998)(filed
December 21, 1998). The Court said that in all cases pending on appeal or tried in
the future the failure to give adequate notice put the burden on insureds to prove that
they acted in good faith and that the insuror was not prejudiced by the delay.
Thus, even if the thirty-one day delay in giving written notice in this case
were to be considered unreasonable, Ms. Bell could still avoid the failure-to-give-
notice defense by showing that the delay did not prejudice the insurance company.
We, therefore, reverse the summary judgment granted to the insurance
company on the notice question. On remand the trial court should consider the
reasonableness of the notice, the good faith of Ms. Bell, and the prejudice to the
insurance company.
-4- III. The Best Interest Plea
In North Carolina v. Alford, 400 U.S. 25 (1970) the Supreme Court
affirmed the constitutionality of the so-called best interest plea. The Court noted that
an ordinary plea of guilty in a criminal case consists of both a waiver of trial and an
express admission of guilt. However in a best interest plea (now often called an Alford
plea) the defendant consents to submit to criminal penalties without trial, and without
admitting guilt. The State of Tennessee permits a trial judge to accept a best interest
plea, when the defendant enters such a plea voluntarily, with an understanding of its
nature and consequences, and when the court is satisfied that there is a factual basis
for the plea. See Dortch v. State, 705 S.W.2d 687 (Tenn. Crim. App. 1985). The
relevant portion of the addendum to Ms. Bell’s plea reads:
Although the Defendant does not contest the fact that a fire was intentionally set at her home located at 3705 Yager Road, McMinnville, Tennessee on November 27, 1995 and that said fire forms the basis of the arson charge contained in Count One of the indictment, the Defendant is unwilling to admit participation in the acts constituting the crime. Nevertheless, the Defendant hereby represents to the Court that the best interest plea of guilty herein is entered by the Defendant voluntarily, knowingly and understandingly and further represents to the Court that the Defendant’s interests require entry of such a plea.
The defendant relied upon the following exclusion in the insurance policy
for the proposition that Ms. Bell had rendered herself ineligible to collect any benefits:
We do not cover loss resulting directly or indirectly from: ... 8. An action by or at the direction of an insured person committed with the intent to cause a loss. This exclusion does not apply to loss sustained by an insured person who does not participate in such action nor have knowledge of such action.
The trial court ruled that Ms. Bell’s plea would bar her from any recovery under
the insurance contract as a matter of law. We believe that would be correct if the plea
had been of the type whereby the defendant admits guilt. However her best interest
-5- plea did not contain an admission of guilt, and it does not appear to us that Tenn.
Code Ann. § 40-35-313(b)(1) indicates a legislative intent to transform a best interest
plea into an admission of guilt for purposes of a civil action.
The insurance company argues that even if Ms. Bell did not admit
causing the fire, the addendum to her plea indicates guilty knowledge that would
likewise preclude recovery under the contract. We do not believe that the plea or its
addendum is sufficiently informative as to Ms. Bell’s role in the arson to support the
trial court’s conclusion. We therefore find that the trial court erred in granting
summary judgment to the defendant, or in the alternative, that it erred in refusing to
grant the appellant’s Motion to Alter or Amend the Judgment.
IV.
The judgment of the trial court is reversed. Remand this cause to the
Circuit Court of Warren County for further proceedings consistent with this opinion.
Tax the costs of appeal to the appellee.
________________________________ BEN H. CANTRELL, PRESIDING JUDGE, M.S.
CONCUR:
_____________________________ WILLIAM C. KOCH, JR., JUDGE
_____________________________ WILLIAM B. CAIN, JUDGE
-6- -7-