Johnson & Associates, LLC v. The Hanover Insurance Group, Inc.
572 S.W.3d 636
Tenn. Ct. App.2018Background
- Johnson & Associates/Johnson Industrial ("Johnson") owned a commercial building at 212 Industrial Dr., Bristol; the building became vacant in Nov. 2011.
- Hanover issued a commercial property policy covering many locations; the Industrial Drive property was listed separately with an occupancy classification of "Vacant Buildings," higher premiums, and a higher theft deductible, and the cause-of-loss form was "Special" (which includes theft).
- The policy contained a standard vacancy clause excluding coverage for losses (including theft) if a building had been "vacant for more than 60 consecutive days," with "vacant" defined in the policy as less than 31% of square footage used for customary operations.
- Johnson (through agents H&O and BB&T) repeatedly confirmed with Hanover’s producer that theft coverage would apply to the two vacant properties; Hanover’s agent prepared a renewal showing theft coverage and a theft deductible for the Industrial Drive property.
- A theft occurred in Sept. 2013 causing ~ $847,557 in damage; Hanover denied coverage in May 2014, invoking the vacancy exclusion because the building had been vacant more than 60 days.
- Trial court granted Johnson’s summary judgment: held vacancy exclusion did not apply (and/or was waived), the policy was at least ambiguous (construed for insured), and Hanover was estopped from denying coverage based on agent representations; appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether vacancy exclusion bars theft loss | Policy declarations and endorsements show Industrial Dr. was insured for theft despite physical vacancy; vacancy clause was not meant to apply to properties listed/classified as "Vacant Buildings." | Vacancy clause unambiguously excludes theft if building was vacant >60 days before loss; building was vacant. | Vacancy clause did not apply to this property as insured; theft covered. |
| Whether policy language is ambiguous | Even if exclusion arguably applies, the policy is reasonably susceptible to Johnson’s reading; ambiguities must be construed for insured. | Policy meaning is clear; exclusion applies. | Policy at least ambiguous; construed against Hanover in favor of coverage. |
| Whether Hanover is estopped by its agent's representations | Producer/agent (BB&T and its agent) repeatedly represented theft coverage would be provided for the vacant property; Hanover is bound and estopped. | Agent statements cannot overcome clear policy language. | Hanover is estopped from denying coverage based on agent representations; producer was agent of insurer. |
Key Cases Cited
- McCaleb v. American Ins. Co., 325 S.W.2d 274 (Tenn. 1959) (vacancy clause waived where insurer issued policy with knowledge property was vacant and expected to remain so)
- Allstate Ins. Co. v. Tarrant, 363 S.W.3d 508 (Tenn. 2012) (insurer estopped from denying coverage due to mistake or representations of its agent)
- Travelers Ins. Co. v. Aetna Cas. & Sur. Co., 491 S.W.2d 363 (Tenn. 1973) (provision limiting coverage construed strongly against insurer)
- Warfield v. Lowe, 75 S.W.3d 923 (Tenn. Ct. App. 2002) (exclusions and limitations to be construed against insurer)