We are pleased to announce that the Tennessee Supreme Court issued a unanimous opinion today in Haddon v. Vanlier, et al., No. M2023-01151-SC-R11-CV, reversing the Court of Appeals and reinstating the trial court's judgment. Johnson Evans & Headrick, PC represented Auto-Owners Insurance Company throughout this litigation, including before the Tennessee Supreme Court.
The Decision
The central question before the Court was whether a plaintiff who obtains a judgment against an uninsured motorist carrier under Tennessee's Uninsured Motorist Act may recover prejudgment interest on that award. The trial court had denied prejudgment interest, finding that Ms. Haddon's claim was a personal injury action — a category of claim for which Tennessee law has historically barred prejudgment interest. The Court of Appeals reversed, characterizing the action as a contract claim.
The Supreme Court, in a unanimous opinion authored by Justice Mary L. Wagner and joined by the entire Court, reversed the Court of Appeals and reinstated the trial court's judgment denying prejudgment interest.
Why This Matters: The Gravamen Test
Tennessee law draws a critical distinction between personal injury and contract claims for purposes of prejudgment interest. Under Tennessee Code Annotated § 47-14-123 and governing common law, prejudgment interest is available in contract actions but not in personal injury actions. The Court applied its two-part "gravamen" test — examining (1) the legal basis of the claim and (2) the type of injuries for which damages are sought.
On both prongs, the Court found that Ms. Haddon's claim sounded in personal injury, not contract:
- Legal basis: Ms. Haddon's complaint alleged negligence and negligence per se against the tortfeasor. There was no allegation that Auto-Owners denied coverage or breached the insurance policy. The fact that Auto-Owners raised contract-based defenses as required under the UM Act did not transform the underlying action into a contract claim.
- Type of injury: The $320,000 jury verdict consisted entirely of personal injury damages — past and future pain and suffering, loss of enjoyment of life, permanent injury, and medical expenses. No contractual remedies were sought or awarded.
Distinguishing Schleif
The plaintiff argued that Schleif v. Hardware Dealer's Mutual Fire Insurance Co., 404 S.W.2d 490 (Tenn. 1966), required the Court to characterize any UM action as a contract claim. The Supreme Court disagreed, holding that Schleif was factually distinguishable: the Schleif plaintiffs sued their insurer because it denied coverage — a classic breach of contract claim. Ms. Haddon, by contrast, never alleged that Auto-Owners denied coverage or breached any contractual duty. Her claim arose solely from the tortfeasor's negligence. The Court also noted that Schleif predated the UM Act, which now plays a structural role in shaping how these cases proceed.
The UM Act's Policy Rationale
The Court grounded its holding in the purpose of Tennessee's Uninsured Motorist Act: to give injured plaintiffs the same protection they would have had if the tortfeasor carried liability insurance. Permitting prejudgment interest in UM cases — while it would be unavailable against an insured tortfeasor — would give UM plaintiffs a better outcome simply because the at-fault driver lacked insurance or could not be served with process. The Court found that result inconsistent with the statutory design.
What This Means for Insurers and Counsel
This decision provides important clarity for uninsured and underinsured motorist carriers operating in Tennessee:
- Prejudgment interest is not available in UM personal injury actions where the insured's claim is based on the tortfeasor's negligence rather than the insurer's denial of coverage.
- Raising policy defenses does not recharacterize the action. The UM Act requires insurers to assert contract defenses in the same proceeding or waive them — but that procedural requirement does not convert a tort action into a contract action.
- The gravamen test governs. Courts will look to what the plaintiff actually sought — the legal basis and the type of injury — not to how the parties label the case.
Our Role
Johnson Evans & Headrick represented Auto-Owners Insurance Company from the trial court through the Supreme Court. The result reflects our team's deep experience in Tennessee insurance litigation and appellate advocacy. We are proud to have achieved a favorable outcome on a question of first impression that will have lasting significance for the insurance industry in Tennessee.
This article is for informational purposes only and does not constitute legal advice. For guidance specific to your situation, please contact our office.
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This article is general information about the law as of its publication date, not legal advice, and reading it does not create an attorney-client relationship. The law changes; consult counsel about your specific situation.