Michael Kelley To Argue Case Before Tennessee Supreme Court

6/7/2013

The Tennessee Supreme Court has recently granted permission to appeal in Hood v. Casey Jenkins et al., and Kennerly, Montgomery & Finley attorney Michael Kelley will argue the case this fall on behalf of the appellant insurance company.  On its surface, the case appears to involve a simple question of an alleged breach of an insurance contract.  In fact, however, the case raises significant legal issues regarding (a) the “good faith” payment defense heretofore available to insurance companies in Tennessee, (b) the right of third parties to rely upon facially valid court orders and judgment, (c) the right of “mature minors” to make financial decisions, and (d) direct and proximate causation relating to financial damages.  

In Hood, the insurance company paid a claim made by an individual who was the beneficiary under a policy which insured the life of his father.  At the time, the beneficiary was sixteen-years-old.  The company paid the claim only after receiving two court orders issued by a Tennessee juvenile court judge which made the beneficiary’s adult sister his guardian.  The company issued a check to the guardian, who endorsed the check, and deposited it into a joint bank account which they had opened the month before.  The check cleared, and the insurance company heard nothing further for more than a year.        

Then, approximately eighteen months later, the beneficiary filed a lawsuit claiming that the guardian had misappropriated a portion of the funds.  The plaintiff asserted a breach of fiduciary duty claim against the guardian and obtained a default judgment.  However, the plaintiff also asserted that the insurance company should be required to pay the claim again because it had breached the contract of insurance.  The primary allegation against the company was that, even though the company had paid the claim in reliance upon two facially valid court orders, it should be held liable because the guardian had not also obtained letters of guardianship under the applicable state statute.   The trial court granted judgment against the company, and the Court of Appeals affirmed.  Hood v. Jenkins, 2012 WL 4788636 (Tenn. Ct. App. 2012).

In the application for permission to appeal, Kelley raised three distinct questions:

  • Where a third-party makes a payment in reliance upon a facially valid court order, may the third-party be liable in an action for breach of contract if the underlying terms of the order are later determined to be deficient under a state statute?
  • In spite of the “mature minor” exception contained in Caldwell v. Bechtol, 724 S.W.2d 739 (Tenn. 1987) and the express provisions of Tenn. Code Ann. § 45-2-702, do the guardianship statutes contain a presumption that precludes a sixteen-year-old from having the capacity to consent to financial transactions?      
  • If funds from an insurance company are deposited into a joint bank account in which the beneficiary is an owner, are its actions the cause of the beneficiary’s damages if the joint owner subsequently misappropriates a portion of the funds?  

The case has been fully briefed, and oral argument is expected to occur in September.

If you would like to read the application for permission to appeal or the memoranda filed by the parties in the Supreme Court, call Michael Kelley at (865) 546-7311 or send an e-mail to mkelley@kmfpc.com.

Kennerly, Montgomery & Finley maintains an active appellate practice.   Five KMF  lawyers have argued cases in the Tennessee Supreme Court, and four have handled a dozen or more appeals in the state and federal court system.  

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