September 24, 2021

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Is a Statutory Good Faith Breach Available for Tennessee Policyholders – Part III

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This blog follows a previous blog post, Tennessee Bad Faith Claims: Is a Statutory Good Faith Breach Available for Tennessee Policyholders – Part II. This post is to conclude the series dated May 25, 2021, and June 8th, 2021.

In this series so far, we learn that T.C.A. § 56-8-101(c) restricts policyholders from bringing claims of breach of good faith and fair dealing when adjusters fail to be responsive and when the insurer fails to affirm or deny coverage in a reasonable time. We further learn that, although the above is restrictive, a policyholder can still sue an insurance carrier for bad faith failure to pay under Tenn. Code Ann. §56-7-105(a).

A recent case in the 6th Circuit Court of Appeals addressed the availability of extra-contractual damages to policyholders and whether the statutory remedies were the sole remedies for bad faith suits.1 This case involved a dispute over a life insurance policy, the plaintiff was awarded punitive damages by the jury. The insurer appealed and argued the district court erred in not dismissing the claim for punitive damages as the statutory remedy for bad faith was the exclusive extra-contractual remedy in Tennessee.

The 6th Circuit held that the statutory remedy for bad faith was not the exclusive remedy for an insurer’s bad faith and that a policyholder may freely pursue common law claims and remedies alongside a statutory bad faith claim.2 The court further noted:

[T]he new statute expressly disclaims any effect on the availability of common law remedies like punitive damages: ‘Nothing in this section shall be construed to eliminate or otherwise affect any … [r]emedy, cause of action, right to relief or sanction available under common law[.]’3

While this case may mean for the time being that in Tennessee federal courts policyholders are able to seek punitive damages and other extra-contractual damages outside of those provided by statute, the durability of this opinion is in question, a decision by the Tennessee Supreme Court or a Tennessee Court of Appeals can, and likely will, resolve these questions.
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1 Lindenberg v. Jackson Nat’l Life Ins. Co., 912 F.3d 348 (6th Cir. 2018).
2 Id. at 359.
3 Id. at 359-60, citing T.C.A. §56-8-113.

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