Vanquish Worldwide, LLC v. Sentinel Ins. Co., Ltd.

1

VANQUISH WORLDWIDE, LLC v. SENTINEL INSURANCE COMPANY, LTD ET AL.

No. E2020-01650-COA-R3-CV

Court of Appeals of Tennessee, Knoxville

January 21, 2022

October 13, 2021 Session

Appeal from the Circuit Court for Blount County No. L-19518 David Reed Duggan, Judge

Vanquish Worldwide, LLC, a Tennessee company that services contracts with the United States government, procured business insurance from Sentinel Insurance Company, Ltd., d/b/a The Hartford ("Sentinel") and American National Property and Casualty Company ("ANPAC") through insurance agent Steve Hardin. Vanquish later sought coverage for its payment of an arbitrated settlement with a subcontractor. Despite Mr. Hardin's assurance that Vanquish would have coverage for the dispute, Vanquish's claim was denied because it was outside the stated coverage of its insurance policies. Vanquish brought negligent misrepresentation and negligence claims against Mr. Hardin and against Sentinel and ANPAC on the basis of vicarious liability. The trial court granted summary judgment to Mr Hardin, Sentinel, and ANPAC. Vanquish appeals. Because the unrebutted statutory presumptions of Tennessee Code Annotated § 56-7-135 effectively negate elements of each cause of action, we affirm the trial court's judgment.

Tenn R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed and Remanded

D Scott Hurley and Ryan N. Shamblin, Knoxville, Tennessee, for the appellant, Vanquish Worldwide, LLC.

Seth M. Friedman, Atlanta, Georgia, and Joshua J. Bond, Knoxville, Tennessee, for the appellee, Sentinel Insurance Company, Ltd.

William A. Simms, Knoxville, Tennessee, for the appellee, American National Property & Casualty Companies.

Russell E. Reviere and N. Mark Kinsman, Jackson, Tennessee, for the appellees, Steven Douglas Hardin and Hardin Insurance Services.

Kenny Armstrong, J., delivered the opinion of the court, in which John W. McClarty and Kristi M. Davis, JJ., joined.

OPINION

KENNY ARMSTRONG, JUDGE.

I. Factual and Procedural History

Vanquish provides vehicle maintenance, logistics, and base support services to United States and foreign government agencies and international aid organizations. In August of 2011, the U.S. government awarded Vanquish a contract to transport cargo, equipment, and other materials to military operation areas in Afghanistan ("the trucking contract"). The trucking contract required that the in-country trucking services be performed predominantly by Afghan nationals, so Vanquish entered into a subcontract with United Sadat Transportation and Logistics Co., Ltd. ("USC"). Under its agreement with USC, Vanquish would receive orders from the U.S. Government and then assign the tasks pertinent to the orders to USC. When the tasks were complete, Vanquish would invoice the U.S. Government and would pay USC after receiving payment from the government.

Vanquish purchased insurance through Steve Hardin/Hardin Insurance Services, and over a period of years, some of those insurance policies were issued through Sentinel and American National Property and Casualty ("ANPAC"). Before coverage was obtained through Sentinel or ANPAC, Mr. Hardin met with representatives of Vanquish, including Vanquish's principal, Eric Barton, over several months to discuss Vanquish's business activities. Steve Hardin was informed that Vanquish sought business liability coverage for the contract administration and claims bookkeeping that Vanquish performed under the trucking contract.

In April of 2013, a dispute arose between Vanquish and USC. USC asserted claims of unjust enrichment, breach of the implied covenant of good faith and fair dealing, fraud, conversion, and punitive damages, all of which were based on Vanquish's alleged refusal to pay USC for services under the trucking contract. In December of the same year, USC initiated arbitration proceedings against Vanquish. In its March 4, 2014 response to USC's request for arbitration, Vanquish admitted that it had not paid USC for invoices since May 2013, but stated that it was exercising its right under its contract with USC to withhold payment for its perceived losses.

In early 2014, Mr. Barton informed Mr. Hardin that a dispute regarding a "bookkeeping error" had been submitted to arbitration. Based on his conversation with Mr. Hardin, Mr. Barton alleged that Mr. Harding told him he "would handle it," and so Mr. Barton "assumed [there] would be either legal defense today or reimbursement later."

Shortly after learning about the arbitration, Mr. Hardin called Sentinel and ANPAC to notify them of the arbitration; at that time, Mr. Hardin was told that the claim might not be covered. Mr. Barton asserts that Mr. Hardin did not inform Vanquish until July 9, 2015, that there might not be insurance coverage for the claim. On November 19, 2015, Mr. Hardin informed Sentinel that Vanquish wanted to file a claim for indemnity coverage and the cost of its defense in the arbitration proceeding. Thereafter, Sentinel and ANPAC denied Vanquish's insurance claim on the ground that the claim did not involve an accident, property damage or bodily injury as required by the Sentinel and ANPAC policies.^[1] On April 13, 2016, Vanquish and USC settled the arbitrated claim for $7 million. Vanquish incurred $900, 000 in legal expenses for the arbitration.

On January 23, 2017, Vanquish filed a complaint in the Blount County Circuit Court, wherein it asserted claims against Mr. Hardin for negligence and negligent misrepresentation. Vanquish also asserted agency/respondeat superior claims against the insurance companies based on Mr. Hardin's actions.^[2]

In late February/early March of 2020, all defendants filed motions for summary judgment. On October 12, 2020, the trial court heard the motions and found that there were no disputes of material fact and that the insurance policies did not provide coverage for the arbitrated claim, as the policies "unambiguously provide on their faces that there is coverage only for an 'occurrence,' which is defined in the policy as an accident involving bodily injury, property damage or personal and advertising injury." The trial court also held that Mr. Hardin had negated a necessary element of the negligent misrepresentation claim. The court reasoned that because there is "no insurance policy in the market that would have provided coverage to [Vanquish] for the dispute it had with USC," Mr. Barton's and Vanquish's reliance on Mr. Hardin's advice-to the extent that it was contrary to the facts and negligent-was not reasonable.^[3] On November 10, 2020, the trial court entered an order granting summary judgment in favor of Sentinel and ANPAC; on November 16, 2020, the trial court entered an order granting Mr. Hardin's motion for summary judgment. Vanquish timely appealed.

II. Issues

Vanquish raises two issues for review:

1. Whether the trial court erred in determining that the Hardin defendants were entitled to summary judgment.

2. Whether the trial court erred in determining that the Defendants Sentinel and ANPAC were entitled to summary judgment.

Each appellee presents similar issues for appeal. We reframe those issues as follows:

1. Whether the trial court erred in finding that Vanquish's reliance on Mr. Hardin's statements conflicting with the terms of Vanquish's insurance policy was not reasonable.

2. Whether Sentinel and ANPAC are vicariously liable for the negligence of Mr. Hardin.

3. Whether Sentinel and ANPAC are estopped from denying coverage to Vanquish based on statements made by Mr. Hardin to Eric Barton.^[4]

III. Standard of Review

Our review of a trial court's grant or denial of a motion for summary judgment is de novo, with no presumption of correctness. Tatham v. Bridgestone Americas Holding, Inc., 473 S.W.3d 734, 748 (Tenn. 2015). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn. R. Civ. P. 56.04. "A disputed fact is material if it must be decided in order to resolve the substantive claim or defense at which the motion is directed." Byrd v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993). In reviewing the trial court's grant of summary judgment, "[w]e must determine whether the moving party satisfied its burden of production either (1) by affirmatively negating an essential element of the nonmoving party's claim or (2) by demonstrating that the nonmoving party's evidence at the summary judgment stage is insufficient to establish the nonmoving party's claim or defense." Grogan v. Uggla, 535 S.W.3d 864, 868 (Tenn. 2017) (quotation omitted). Because the party moving for summary judgment bears the burden of proof, we view the evidence in favor of the non-moving party by resolving all reasonable inferences in its favor and discarding all countervailing evidence. Parker v. Holiday Hosp. Franchising, Inc., 446 S.W.3d 341, 346-47 (Tenn. 2014).

IV. Analysis

A. Negligent misrepresentation claim against Steve Hardin

To make out a prima facie case for negligent misrepresentation, a plaintiff must prove the following by a preponderance of the evidence: (1) the defendant was acting in the course of his business, employment, or a transaction in which he has a pecuniary interest; (2) the defendant supplied information meant to guide others in their business decisions; (3) the information that the defendant supplied was false; (4) the defendant did not exercise reasonable care in obtaining or communicating the information; and (5) the plaintiff justifiably relied on the information. Homestead Grp LLC v. Bank of Tenn., 307 S.W.3d 746, 751 (Tenn. Ct....