Cook's Roofing, Inc. v. Hartford Underwriters Insurance Company ( 2020 )

07/20/2020
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
Assigned on Briefs April 15, 2020
COOK’S ROOFING, INC. v. HARTFORD UNDERWRITERS INSURANCE
COMPANY
Appeal from the Chancery Court for Shelby County
No. CH-07-1140-3 JoeDae L. Jenkins, Chancellor
___________________________________
No. W2019-00271-COA-R3-CV
___________________________________
This appeal involves retrospective insurance premiums for an assigned risk workers’
compensation insurance policy. The insured employer is a roofing contractor. The
insurance company conducted a retrospective premium audit and determined that the
roofing contractor owed retrospective premiums based on the fact that its primary
subcontractor was uninsured during a portion of the policy period. The roofing contractor
refused to pay the increased premium, so the insurance company canceled the insurance
policy. The roofing contractor filed this lawsuit against the insurance company, alleging
negligence, promissory estoppel, and violation of the Tennessee Consumer Protection Act.
The insurance company filed a counterclaim for the unpaid balance owed for the premiums
under the policy. The insurance company filed a motion for summary judgment on all
claims asserted by the roofing contractor and on its own counterclaim. The trial court
granted the motion for summary judgment, dismissed the claims asserted by the roofing
company, and entered judgment in favor of the insurance company and against the roofing
contractor for $66,212 plus prejudgment interest. However, the trial court denied the
insurance company’s subsequent motion to enforce the judgment against the two
individuals who operated the roofing company and served as the sole officers and
shareholders of the corporation. Both parties raise issues on appeal. For the following
reasons, we affirm the decision of the chancery court in part, we reverse in part, and we
remand for further proceedings consistent with this opinion.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
in Part, Reversed in Part and Remanded
CARMA DENNIS MCGEE, J., delivered the opinion of the court, in which D. MICHAEL
SWINEY, C.J., and FRANK G. CLEMENT, JR., P.J., M.S., joined.
Everett B. Gibson, Memphis, Tennessee, for the appellant, Cook’s Roofing, Inc.
Ben M. Rose, Brentwood, Tennessee, for the appellee, Hartford Underwriters Insurance
Company.
OPINION
I. FACTS & PROCEDURAL HISTORY
Mike Cook was employed by a Memphis roofing company for three years before he
and his wife, Rebecca, decided to go into business for themselves in 2003. The Cooks
initially operated their roofing business as a sole proprietorship known as Cook’s Roofing.
Rebecca served as the company bookkeeper, while Mike worked as the “estimator,”
meeting with customers, collecting payments, and inspecting job sites. However, all of the
actual construction work was performed by subcontractors. The sole subcontractor for
their roof construction work was Mr. Augustine Chaidez. Mr. Chaidez had enough
employees that Cook’s Roofing could have crews working on two jobs simultaneously.
Pursuant to Tennessee’s Workers’ Compensation Law, the Cooks were required to
maintain workers’ compensation insurance. See Tenn. Code Ann. § 50-6-101, et seq. In
Tennessee, employers are permitted to purchase workers’ compensation insurance either
in the voluntary market or in the residual assigned risk market. See Am. Zurich Ins. Co. v.
MVT Servs., Inc., No. M2011-01266-COA-R3-CV, 2012 WL 3064650, at *2 n.6 (Tenn.
Ct. App. July 27, 2012). “An assigned risk plan is insurance approved by the
Commissioner of Commerce and Insurance as insurance ‘of last resort,’ available when an
employer is unable to obtain coverage in the voluntary market.” Id.
The Cooks purchased an assigned risk workers’ compensation insurance policy
through the Tennessee Workers’ Compensation Insurance Plan (“TWCIP”). See Tenn.
Code Ann. § 56-5-114(c)(1) (directing the commissioner to “implement a plan . . . for the
equitable apportionment among insurers of applicants for workers’ compensation
insurance who are in good faith entitled to such insurance, but who are unable to procure
it through ordinary methods”). The policy provided that the insurance premium would be
calculated by the use of retrospective rating. As we explained in American Zurich,
This method of insurance premium calculation bases the premium on the
total payroll of covered employees during the policy period. It is typically
used where the exact composition of the employer’s workforce is subject to
substantial variation, or where the insured’s risk is difficult to measure at the
beginning of the policy period. See Lee R. Russ & Thomas F. Segalla, 5
Couch on Ins.3d § 69:15 (2008). Under the retrospective rating method, the
employer deposits an estimated premium with the insurance company at the
beginning of the policy period. Shortly after the policy period expires, the
-2-
insurance company conducts a routine retrospective premium audit, looking
back at the workers who were actually on the insured’s payroll during the
policy period, utilizing records provided by the insured employer related to
employee payroll and classification. The actual insurance premium due for
the immediate past policy period is then determined based on the results of
the audit. Depending on the audit result, the insured employer may either
receive a refund on the premium paid or be required to pay additional
premiums to the insurance company.1
2012 WL 3064650, at *2.
Mike and Rebecca Cook admittedly knew from the outset that their company might
have to pay additional insurance premiums for their workers’ compensation insurance
coverage if their subcontractor had no coverage of his own for subcontractor employees.
The Cooks learned at the beginning of their contractor-subcontractor relationship with Mr.
Chaidez that he had no workers’ compensation insurance. Because of the possibility that
they would be charged additional insurance premiums related to the employees of Mr.
Chaidez, the Cooks deducted money from their payments to Mr. Chaidez and retained it
for potential insurance premiums. In April 2004, Mr. Chaidez asked the Cooks to
discontinue that practice. After consulting with an insurance agency, the Cooks drafted a
“letter agreement” that they believed would protect them from liability for their
subcontractor’s employees. At the same time, they stopped deducting money from their
payments to Mr. Chaidez related to the potential premium assessments. However, when
their insurance company conducted an audit, the Cooks were informed that the letter
agreement was not acceptable. Their insurer assessed an additional retrospective premium
of around $30,000. Going forward, the Cooks required Mr. Chaidez to have his own
workers’ compensation insurance on his employees.
Mr. Chaidez applied for an assigned risk workers’ compensation insurance policy
utilizing Chenault Insurance Agency. Through the TWCIP, the plan administrator assigned
policies to one of several member companies in the assigned risk pool for Tennessee. The
insurance company that was assigned to issue the Chaidez policy was Hartford
Underwriters Insurance Company.
The Cooks reluctantly paid the additional $30,000 premium assessed by their
insurer. However, when the time came to renew their policy, they sought out a different
insurance agency because of their dissatisfaction with the advice they were given. Around
this time, the Cooks also decided to incorporate their business as Cook’s Roofing, Inc.
1
A retrospective rating provision “is a standard provision in workers’ compensation
insurance policies.” Am. Zurich Ins. Co., 2012 WL 3064650, at *11. Such provisions reflect “the
reality that any number of employees may be hired or terminated while the policy is in effect, thus
increasing or decreasing the amount of risk to which the insurer is exposed.” Id.
-3-
Around June 2005, Cook’s Roofing submitted an application for an assigned risk policy
using a different insurance agency. They calculated and paid an estimated annual premium
of around $4,000.2 The Cooks were listed as the sole officers of the corporation.
Coincidentally, the plan administrator randomly assigned Hartford to issue the Cook’s
Roofing policy as well. Hartford issued the one-year policy effective from June 2, 2005,
to June 2, 2006. The policy contained a standard premium adjustment clause providing
that the initial premium paid by Cook’s Roofing upon submission of its application was
simply an estimate.
On September 9, 2005, Cook’s Roofing requested and obtained a certificate of
insurance from Chenault Insurance Agency, indicating that its subcontractor, Mr. Chaidez,
had been issued a worker’s compensation insurance policy of his own. In reliance on the
certificate, Cook’s Roofing continued to do business with Mr. Chaidez as its sole
subcontractor. The Cooks believed that they were “fully protected from assessment of
future audit premiums” once they obtained the certificate of insurance regarding the
Chaidez policy. However, the certificate stated:
THIS CERTIFICATE IS ISSUED AS MATTER OF INFORMATION
ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
....
INSURED
Chaidez, Augustine
....
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY
PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT,
TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT
WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR
MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES
DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. . . .
....
CERTIFICATE HOLDER
Cook’s Roofing . . . .
....
CANCELLATION
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE
2
“The estimate is determined by the insured, and the insured submits the estimate to the insurance
company for approval based on estimated payroll amounts and classification codes.” Am. Zurich, 2012 WL
3064650, at *2 n.8.
-4-
CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE
ISSUING INSURER WILL ENDEAVOR TO MAIL 10 DAYS WRITTEN
NOTICE TO THE CERTIFICATE HOLDER NAMED . . . BUT FAILURE
TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY
KIND UPON THE INSURED, ITS AGENTS, OR REPRESENTATIVES.
The policy binder provided that a copy of all certificates of insurance issued for the policy
must be automatically sent to Hartford.3 However, Chenault Insurance Agency did not
send Hartford a copy of the certificate of insurance it issued to Cook’s Roofing.
Three months after the certificate of insurance was issued by Chenault Insurance
Agency, Hartford cancelled the Chaidez workers’ compensation insurance policy on
January 3, 2006, due to nonpayment of premium. Hartford issued notice of the cancellation
to Mr. Chaidez, but it did not send a copy to the certificate holder, Cook’s Roofing, because
it had never received a copy of the certificate of insurance informing it that Cook’s Roofing
was a certificate holder. For purposes of summary judgment in this case, it was undisputed
that Hartford did not notify Chenault Insurance Agency about the cancellation of the
Chaidez policy either.4
In April 2006, Hartford requested that Cook’s Roofing provide it with information
regarding its subcontractors. In response, Mrs. Cook contacted Chenault Insurance Agency
and requested another certificate of insurance for the Chaidez policy. Chenault’s employee
checked its internal filing system and did not see any notices of cancellation, so she issued
the certificate of insurance to Cook’s Roofing despite the fact that the Chaidez policy had
been cancelled in January 2006. Mrs. Cook then faxed the April 12, 2006 certificate of
insurance to Hartford as requested. Again, however, Chenault Insurance Agency did not
send a copy of the certificate of insurance it issued for the Chaidez policy to Hartford.
3
According to Hartford’s corporate designee, the TWCIP and related manuals required that
insurance agents or producers send copies of certificates of insurance to the insurance carrier due to the fact
that there is no relationship between the insurance companies and the insurance agents or producers in this
context. The TWCIP expressly provides that insurance agents are not considered to be appointed agents of
the insurer carriers. The corporate designee explained that when the insurance carrier receives a copy of a
certificate of insurance, it will then list the certificate holder in an automated system so that the certificate
holder will receive any subsequent notices of cancellation. Chenault Insurance Agency admittedly does
not send copies of certificates of insurance to any carriers but claims that most agencies “just don’t do that”
in practice. Instead, Chenault Insurance Agency takes responsibility for notifying certificate holders about
cancellations if it receives a copy of a notice of cancellation from a carrier.
4
Hartford’s corporate designee testified that it is Hartford’s standard practice to send a copy of
notices of cancellation to the producing agent, and she had no reason to believe that such notice would not
have been sent to Chenault Insurance Agency in this case. However, she said the process is “all mechanical”
and completed by a distribution center in another state, so she did not have a separate copy of the producer’s
copy in the underwriting file. Chenault Insurance Agency claimed that it never received a copy of the
notice of cancellation. For purposes of summary judgment, Hartford admitted that it did not send a copy
of the notice of cancellation of the Chaidez policy to Chenault Insurance Agency.
-5-
According to Mrs. Cook, Hartford did not inform her at this time that the Chaidez policy
had been cancelled.5 As such, Cook’s Roofing continued to do business with Mr. Chaidez
unaware of the fact that he was uninsured.
The Cook’s Roofing policy expired on June 2, 2006, and Hartford proceeded with
its retrospective premium audit to determine the actual premium owed by Cook’s Roofing
for the 2005-2006 policy period. Hartford initially determined that Cook’s Roofing owed
no additional premium and in fact was entitled to a small refund. However, on August 22,
2006, Hartford issued a “premium adjustment notice” based on a revised audit, indicating
that Cook’s Roofing owed $33,583 in retrospective premium for the 2005-2006 policy
period due to the additional risk from the fact that Mr. Chaidez was an uninsured
subcontractor for the latter half of the policy period. Specifically, Cook’s Roofing had
continued to use Mr. Chaidez to perform its roofing work after the cancellation of his own
policy on January 3, 2006, and through the date of expiration of the Cook’s Roofing policy
on June 2, 2006.6
Because the Cook’s Roofing policy had been renewed for an additional one-year
period, which was still in effect, Hartford calculated additional premium owed for the
existing policy period as well based on the currently uninsured status of the primary
subcontractor for Cook’s Roofing. Hartford utilized the payroll figures from its 2005-2006
policy period audit to calculate that an additional premium of $35,674 was owed for the
existing 2006-2007 policy. As such, on August 30, 2006, Hartford sent Cook’s Roofing a
premium bill for $66,212 owed toward the two policy periods (after applying some small
credits toward the balance for 2005-2006).
Cook’s Roofing disputed that it owed any additional premium and refused to pay it.
Because they had obtained the certificates of insurance regarding the Chaidez policy, the
Cooks believed that they were “fully protected from assessment of future audit premiums.”
The 2006-2007 Cook’s Roofing policy was cancelled by Hartford for nonpayment of
premium, effective November 10, 2006. The TWCIP expressly provided that an employer
5
Internal documentation maintained by Hartford states that its representative called Mrs. Cook on
April 12, 2006, and spoke with her to request information about the subcontractors currently used by Cook’s
Roofing. According to the documentation, Mrs. Cook stated that they were only using Mr. Chaidez, and
the representative informed her that Mr. Chaidez’s policy had been cancelled. In response, according to
the handwritten note, Mrs. Cook insisted that they had a current certificate of insurance for Mr. Chaidez
and would fax it to Hartford. However, Mrs. Cook submitted an affidavit denying that she ever spoke with
the representative by phone. She claimed that Hartford simply requested an updated certificate of insurance
for their subcontractor and that she provided it by fax, and she was never told, at that time, that the Chaidez
policy had been cancelled. Because this case was resolved via motion for summary judgment, we will view
the facts in the light most favorable to Cook’s Roofing with respect to this issue.
6
According to the testimony of Hartford’s corporate designee, when the Chaidez policy was
cancelled, the Cook’s Roofing policy became “liable” for injuries that occurred after the cancellation date
because there was no insurance for any of the employees of the uninsured subcontractor. As a result,
Hartford assessed additional premium to Cook’s Roofing.
-6-
with an outstanding unpaid insurance premium on a previous policy issued under the plan
was ineligible for future coverage under the plan. Hartford notified the plan administrator
of the unpaid invoice, and Cook’s Roofing could not obtain replacement coverage from a
different insurance company in the pool thereafter.
On June 12, 2007, Cook’s Roofing filed this lawsuit against Mr. Chaidez, Chenault
Insurance Agency, Inc., and St. Paul Travelers ob/o The Hartford Insurance a/k/a Hartford
Underwriters Insurance Company (“Hartford”).7 Cook’s Roofing asserted claims for
breach of contract, negligence, promissory estoppel, and violation of the Tennessee
Consumer Protection Act (“TCPA”). Cook’s Roofing sought compensatory and punitive
damages in addition to a declaration that it did not owe anything to Hartford.
In 2008, Hartford filed an answer and a counterclaim seeking to recover the unpaid
balance owed for the two policy periods in addition to pre- and post-judgment interest. The
case languished in the trial court for years. Counsel for Cook’s Roofing withdrew in 2008,
and its claims against Chenault Insurance Agency were dismissed for lack of prosecution
in 2010. Hartford filed a motion for default judgment on its counterclaim against Cook’s
Roofing, which led Cook’s Roofing to finally file an answer to the counterclaim in June
2010. Cook’s Roofing retained new counsel and filed a motion to set aside the dismissal
of its claims against Chenault, which the trial court granted. However, Cook’s Roofing
would eventually voluntarily dismiss its claims against Chenault Insurance Agency and
Mr. Chaidez.
Five years into the litigation, in 2012, Cook’s Roofing was permitted to file an
amended complaint. The amended complaint omitted the claim for the breach of contract
but continued to assert claims for negligence, promissory estoppel, and violation of the
TCPA. The amended complaint alleged that Hartford was negligent in failing to give
notice of its cancellation of the Chaidez policy in January 2006 and in failing to inform
Cook’s Roofing about the cancellation of the Chaidez policy when Hartford received the
invalid certificate of insurance from Mrs. Cook in April 2006. Cook’s Roofing argued that
Hartford’s actions essentially forced it out of business. It sought compensatory damages
including lost profits, in addition to punitive damages, treble damages, and attorney’s fees.
Hartford filed an amended answer. Hartford asserted that Cook’s Roofing, Inc., had
been administratively dissolved by the Secretary of State and that it may be necessary to
add its individual owners or shareholders as parties to the litigation. In response, Cook’s
Roofing represented that its corporate status had been reinstated.
7
According to Hartford, the “real party in interest” among the referenced entities is Hartford
Underwriters Insurance Company. Travelers Insurance served as a third-party administrator for Hartford
and had some involvement with this case as the servicing insurer with respect to this assigned risk policy.
However, for clarity, we will simply refer to “Hartford” throughout this opinion.
-7-
A scheduling order provided that the deadline for depositions of fact witnesses was
June 30, 2014. On July 31, 2014, Cook’s Roofing filed a motion for leave to file a second
amended complaint and to modify the scheduling order. Cook’s Roofing sought to add an
additional count to its complaint for intentional interference with prospective business
relationships. The motion to amend was not set for a hearing for another two years. In
2016, Hartford filed a response in opposition to the motion to amend, citing undue delay
and unfair prejudice. Hartford noted that the case had been pending for nearly a decade.
It also asserted that the proposed amendment was futile because Hartford had not acted
with improper motive or means, and the statute of limitations had run in any event. After
a hearing, the trial court entered an order on May 24, 2016, denying the motion to amend
without elaboration.8
On October 5, 2018, Hartford filed a motion for summary judgment seeking
dismissal of the claims asserted by Cook’s Roofing and also seeking a judgment for
$66,212 on its own counterclaim for breach of contract. Hartford asserted that Cook’s
Roofing was solely responsible for confirming the insured status of its subcontractor before
continuing to do business with him. Hartford argued that it acted in accordance with the
requirements of the TWCIP and had no duty to notify Cook’s Roofing about the
cancellation of the policy held by Mr. Chaidez. Thus, Hartford asserted that Cook’s
Roofing could not prove the elements of its claims for negligence or violation of the TCPA.
As for the promissory estoppel claim, Hartford argued that it made no promise to Cook’s
Roofing regarding the Chaidez policy, as the incorrect certificate of insurance was issued
by Chenault Insurance Agency, not Hartford. Hartford argued that in the context of
assigned risk policies, an insurance agent or producer is an agent of the insured who is
applying for insurance and not an agent of the insurance company that is ultimately
assigned to issue the assigned risk policy. In any event, Hartford argued that it was
unreasonable for Cook’s Roofing to rely on the certificates of insurance. Alternatively,
Hartford contended that dismissal of the claims asserted by Cook’s Roofing was
appropriate because Cook’s Roofing failed to exhaust its administrative remedies before
the Tennessee Department of Commerce and Insurance.
On its counterclaim for breach of the insurance policy, Hartford sought a judgment
for $66,212 in unpaid premium. Hartford attached numerous documents to its motion,
including the Tennessee Workers’ Compensation Insurance Plan, relevant policy
applications, binders, policy terms, certificates of insurance, audit documents, premium
bills, and the Chaidez policy cancellation notice. Hartford also submitted deposition
testimony from its corporate designee, Mike Cook, Rebecca Cook, David Chenault of
Chenault Insurance Agency, and the employee of Chenault Insurance Agency who issued
the second certificate of insurance on the cancelled policy.
8
Initially, Chancellor Kenny W. Armstrong had presided over the proceedings. The order denying
the motion to amend was entered by Chancellor James R. Newsom, III.
-8-
Cook’s Roofing filed a response. Regarding exhaustion of administrative remedies,
Cook’s Roofing argued that no statute mandated an administrative appeal under the
circumstances, and therefore the common law rule would apply and give the court
discretion as to whether the case should be dismissed. As for its negligence claim, Cook’s
Roofing insisted that its claim was “unrelated to contractual duties” and that Hartford was
“especially careless” in failing to notify Chenault Insurance Agency of the cancellation of
the Chaidez policy. Regarding the subsequently issued certificate of insurance, Cook’s
Roofing asserted that Chenault Insurance Agency was the agent of Hartford for the purpose
of issuing certificates of insurance. It also argued that Hartford had an obligation to “alert”
certificate holders such as Cook’s Roofing that the April 2006 certificate of insurance was
invalid. Cook’s Roofing argued that Hartford caused it “to be misled into believing that
there was no insurance premium financial risk attaching to its doing business with Mr.
Chaidez.” According to Cook’s Roofing, Hartford’s actions “were the sole cause of
[Cook’s Roofing] falling into the trap” of the $30,000 retrospective audit premium. As
such, Cook’s Roofing asserted that Hartford’s counterclaim should be denied on unjust
enrichment grounds. Cook’s Roofing also disputed the amount that it would owe for the
cancelled 2006-2007 policy. It pointed out that there was no post-cancellation audit for
the partial policy term and suggested that the amount claimed by Hartford was based on
the original estimate for a twelve-month policy. Cook’s Roofing claimed that the actual
amount owed was therefore unknown. In support of its response, Cook’s Roofing
submitted numerous documents, including policy terms, premium bills, letters, the
certificate of insurance, affidavits of Mike and Rebecca Cook, and deposition testimony
from Mr. Chenault and representatives of Hartford.
After a hearing, the trial court entered a thirteen-page order granting summary
judgment to Hartford, entering judgment on its counterclaim and dismissing all claims
asserted by Cook’s Roofing.9 The court made lengthy findings of fact and conclusions of
law. It summarized the case as a dispute over premiums owed to Hartford for a workers’
compensation insurance policy issued to Cook’s Roofing under the TWCIP. It described
the policy at issue and its premium adjustment clause, which provided that the initial
premium was only an estimate and not necessarily the amount that would be owed after an
audit was conducted at the end of the term. The court found that Cook’s Roofing agreed
to pay the premium based on all employees or other persons engaged in work that could
make Hartford liable under the policy, including Mr. Chaidez.
The trial court found that Mr. Chaidez had also obtained his policy through the
TWCIP, with the assistance of Chenault Insurance Agency, an insurance producer assisting
Tennessee businesses in securing workers’ compensation insurance under the plan. The
trial court found that Chenault Insurance Agency was acting as the legal agent of Mr.
Chaidez, not as the agent of Hartford. The trial court noted that the Chaidez policy and the
Cook’s Roofing policy were both coincidentally randomly assigned to Hartford but that
9
By this time, Chancellor JoeDae L. Jenkins was presiding over the case.
-9-
they were completely separate contracts, and there was no relationship between Hartford
and Cook’s Roofing with respect to the Chaidez policy. The trial court found that Hartford
cancelled the Chaidez policy effective January 3, 2006, for nonpayment of premium. The
trial court acknowledged that evidence was presented suggesting that Chenault Insurance
Agency may not have received a copy of the cancellation notice from Hartford on the
Chaidez policy; however, there was no dispute that Mr. Chaidez received a cancellation
notice. As such, the trial court found that the Chaidez policy was effectively cancelled
pursuant to Tennessee law and the TWCIP.
The trial court found that Mrs. Cook provided a certificate of insurance to Hartford
that incorrectly stated that the Chaidez policy was still in effect. However, the court found
that the certificate of insurance was faulty and not indicative of actual insurance coverage.
The court found that Mrs. Cook could have verified the policy with Hartford, but instead
she merely relied on the certificate of insurance issued by Chenault Insurance Agency. The
court noted that Chenault Insurance Agency did not contact Hartford either. The trial court
found that the faulty certificate of insurance could not relieve Cook’s Roofing of its
obligation to confirm the insured status of its subcontractor and prevent Hartford from
being exposed to risk under the policy when the subcontractor was uninsured. The faulty
certificate of insurance could not alter Hartford’s rights and obligations under the policy.
Thus, the trial court found that Mr. Chaidez’s failure to maintain workers’ compensation
insurance while working for Cook’s Roofing resulted in additional risk exposure to
Hartford under the Cook’s Roofing workers’ compensation policy.
The trial court found that Hartford conducted a standard retrospective premium
audit on the 2005-2006 policy, and because Mr. Chaidez had worked for Cook’s Roofing
from January to June 2006 without insurance coverage, additional premium accrued on the
Cook’s Roofing policy to account for the additional risk occasioned by his employment.
The trial court found that the audit indicated that Cook’s Roofing owed $30,583 for the
2005-2006 premium, which Cook’s Roofing refused to pay, leading to cancellation of the
2006-2007 policy. It found that Cook’s Roofing also owed $35,674 in premium for the
2006-2007 policy period at the time of cancellation. The court found that Cook’s Roofing
owed a total of $66,212.10
The trial court found that the damages allegedly suffered by Cook’s Roofing
originated with its failure to satisfy its own obligation to verify Mr. Chaidez’s insurance
status while he worked as its subcontractor. It found that Cook’s Roofing presented
inadequate argument in response to the motion for summary judgment regarding the
elements of its claims for negligence, violation of the TCPA, and promissory estoppel, and
10
The trial court’s written order states that a total of $66,212 was owed, with the two policy
premiums equaling $30,583 and $35,674. The trial court apparently interposed the last two numbers of the
premium for 2005-2006, stating that it was $30,583 rather than $30,538 as reflected on Hartford’s bill. The
numbers utilized by the trial court would not add up to $66,212.
- 10 -
therefore, it had waived or conceded those issues. More specifically, the trial court found
that Cook’s Roofing failed to clearly articulate and establish any legal duty in tort owed by
Hartford, the breach of which caused an injury. It found no unfair or deceptive practice,
for purposes of the TCPA claim, where the plain language of the certificate of insurance
alerted the certificate holder that the certificate was issued as a matter of information only
and conferred no rights on the certificate holder. The court found that reliance on the
certificate, in the face of those warnings, was not reasonable. According to the trial court,
Cook’s Roofing simply failed to raise any disputed material facts as to its claims.
Consequently, the trial court dismissed the claims asserted by Cook’s Roofing and entered
summary judgment in favor of Hartford on its counterclaim for $66,212.11
Cook’s Roofing prematurely filed a notice of appeal even though Hartford’s request
for prejudgment interest had not yet been resolved. Hartford filed a motion to dismiss the
appeal for lack of a final order. This Court entered an order directing the appellant to obtain
entry of a final judgment in the trial court.
Before the trial court, in addition to filing a motion for prejudgment interest,
Hartford also filed a motion to enforce the judgment against the Cooks individually.
According to the motion, Hartford had sought to execute on the judgment and learned
through post-judgment discovery that Cook’s Roofing had no assets. Hartford asserted
that the Cooks were the alter egos of the corporation and that they used the corporate form
as a sham to perpetuate a fraud. Hartford claimed that the Cooks had ignored corporate
formalities, operated the corporation from their home, and taken the only company assets
for personal use after they closed the business. Thus, Hartford asked the trial court to pierce
the corporate veil and allow it to execute the judgment against Mr. and Mrs. Cook.
Hartford attached to its motion the post-judgment deposition testimony of Mrs. Cook in
addition to a memorandum of law.
Cook’s Roofing opposed any award of prejudgment interest. It also filed a brief in
opposition to Hartford’s motion to enforce the judgment against the Cooks individually.
Cook’s Roofing argued that the individual defendants must be afforded “full due process
rights” in an action to pierce the corporate veil and could not be “added to a judgment” in
the absence of a jury trial, if demanded. In response, Hartford maintained that it was
appropriate to pierce the corporate veil in post-judgment proceedings because the
corporation and the individuals are treated as a single entity.
The trial court entered an order awarding prejudgment interest to Hartford, although
for a shorter period than Hartford requested, and at a rate of only one percent. The trial
11
The trial court’s order states, “Cook’s Roofing did not dispute the premium owed through
administrative proceedings with the Tennessee Department of Commerce and Insurance, as a contested
case under the Tennessee Uniform Administrative Procedures Act.” It did not otherwise address the parties’
arguments regarding exhaustion of administrative remedies.
- 11 -
court denied Hartford’s motion to enforce the judgment against the Cooks individually.
The trial court noted that the Cooks, individually, had not been given an opportunity to
defend against the alter ego theory, as there were no pleadings giving notice of the same,
no discovery, and no hearing on the matter. Hartford filed a motion to alter or amend and
suggested that the trial court could hold an evidentiary hearing as to whether to pierce the
corporate veil. However, the trial court denied the motion.
II. ISSUES PRESENTED
Cook’s Roofing presents the following issues, which we have slightly reworded, for
review on appeal:
1. Whether the trial court erred in denying the motion for leave to amend the complaint
filed by Cook’s Roofing;
2. Whether the trial court erred in granting summary judgment in favor of Hartford on
the claims asserted in the amended complaint filed by Cook’s Roofing; and
3. Whether the trial court erred in granting summary judgment in favor of Hartford on
its counterclaim for $66,212.
In its posture as appellee, Hartford raises the following additional issues for review:
1. Whether the trial court erred in only partially granting the motion for prejudgment
interest; and
2. Whether the trial court erred in denying Hartford’s motion to enforce the judgment
against the individual shareholders of Cook’s Roofing, Inc.
For the following reasons, we affirm the judgment of the chancery court in part, we reverse
in part, and we remand for further proceedings consistent with this opinion.
III. DISCUSSION
A. Exhaustion of Administrative Remedies
Although neither party designated it as an issue on appeal, Hartford suggests in a
footnote in its brief that the case alternatively should have been dismissed for failure to
exhaust administrative remedies. We will address the issue to the extent that its resolution
could impact subject matter jurisdiction.
In Tennessee, “when exhaustion of administrative remedies is required by statute,
the failure to do so will deprive the court of subject matter jurisdiction.” Chattanooga-
Hamilton Cty. Hosp. Auth. v. UnitedHealthcare Plan of the River Valley, Inc., 475 S.W.3d
746, 758 (Tenn. 2015) (citing Pickard v. Tenn. Water Quality Control Bd., 424 S.W.3d
511, 523 (Tenn. 2013)). However, “unless the statute providing for an administrative
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remedy requires exhaustion ‘by its plain words,’ an administrative appeal is not
mandatory.” Ready Mix, USA, LLC v. Jefferson Cty., 380 S.W.3d 52, 63 (Tenn. 2012)
(quoting Thomas v. State Bd. of Equalization, 940 S.W.2d 563, 566 (Tenn. 1997)). “‘[A]
statute does not require exhaustion when the language providing for an appeal to an
administrative agency is worded permissively.’” Chattanooga-Hamilton Cty. Hosp. Auth.,
475 S.W.3d at 758 (quoting Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 839 (Tenn.
2008)). In the absence of a statutory mandate, the exhaustion of administrative remedies
doctrine “is a matter of judicial discretion.” Ready Mix, 380 S.W.3d at 64.
“The Tennessee legislature has provided detailed rules for contesting workers’
compensation insurance premiums.” Riverport Ins. Co. v. Countrywide Payroll & HR
Sols., Inc., No. 3:15-CV-00297, 2017 WL 4274707, at *2 (E.D. Tenn. Sept. 26, 2017).
Tennessee Code Annotated section 56-5-114(c)(1) directed the Commissioner of
Commerce and Insurance to implement a residual market plan and “provide a method
whereby applicants for insurance, insured, and insurers may have a hearing on grievances
and the right of appeal to the commissioner.” Accordingly, Tennessee Code Annotated
section 56-5-109 (formerly designated -309) provides a method whereby aggrieved persons
“may” submit written requests for review to insurers and then “may” appeal to the
Commissioner. It provides:
AGGRIEVED PERSONS. Every insurer and rate service organization shall
provide within this state reasonable means whereby any person aggrieved by
the application of its rating system may be heard on written request to review
the manner in which the rating system has been applied in connection with
the insurance afforded.12 If the insurer fails to grant or reject the request
within thirty (30) days, the applicant may proceed in the same manner as if
the application had been rejected. Any party affected by the action of the
insurer on the request may, within thirty (30) days after written notice of the
action, appeal to the commissioner who, after a hearing held upon not less
than ten (10) days’ written notice to the appellant and to the insurer, may
affirm, modify, or reverse the action.
Tenn. Code Ann. § 56-5-109(b). The Department of Commerce and Insurance
promulgated administrative rules to implement this law. See Tenn. Comp. R. & Regs.
0780-01-82-.01, et seq. (“The purpose of this Chapter is to: (1) Set forth requirements for
12
Because of the limited issue before us on appeal, we will assume for the sake of argument that
Cook’s Roofing was a person “aggrieved by the application of [the] rating system” within the meaning of
the statute but express no opinion as to that issue. See Tenn. Code Ann. § 56-5-109(b). “Rating System”
is defined as “the systematic process of determining workers’ compensation premium based upon rules
published in the applicable manuals, workers’ compensation statutes, and the insurer’s rate pages.” Tenn.
Comp. R. & Regs. 0780-01-82-.04(11). But see Nat’l Council on Comp. Ins. v. Gaddis, 786 S.W.2d 240,
242 (Tenn. Ct. App. 1989) (considering an argument that an appeal did not involve a rate dispute within
the meaning of the statute).
- 13 -
insurers and rate service organizations in providing a process whereby insureds of workers’
compensation policies may request a review of the application of the insurer’s or rate
service organization’s rating system to the insured’s coverage in this state[.]”) Finally, the
TWCIP provided, “Persons aggrieved by the action of a TWCIP Servicing Carrier or Direct
Assignment Carrier shall have the same right to appeal under TCA 56-5-309(b). A person
so aggrieved may request the Plan Administrator to review the decision or actions of the
insurer by filing a formal dispute.”
Federal courts have concluded that the administrative remedy provided in this
context is not mandatory. In Valley Mechanical, Inc. v. BB & T Insurance Services, Inc.,
No. 1:13-CV-378, 2014 WL 2871475, at *7 (E.D. Tenn. June 24, 2014), the district court
reasoned:
Ultimately, the Court cannot conclude § 56-5-309 [now -109]
contains a hard-and-fast requirement that parties exhaust administrative
remedies before filing suit. Although Defendants are correct that the statute
and related regulations set up a system for the administrative resolution of
workers’ compensation premium disputes, Defendants point to no case
holding that § 56-5-309 requires a party exhaust administrative remedies
before filing suit. Furthermore, the statute does not by its plain words make
exhaustion mandatory. See Ready Mix, 380 S.W.3d at 63-64. Rather, the
statute provides that a party “may” avail itself of that process and “may”
appeal to the Commissioner. These words do not indicate that exhausting
such procedures is a condition precedent to filing suit. That the statute
requires insurers to set up a dispute resolution process does not render it the
sole avenue for relief. Accordingly, because § 56-5-309 does not require
exhaustion by its plain words, the Court cannot conclude Valley was required
to exhaust its administrative remedies in Tennessee before suing in relation
to its Tennessee workers.
See also Riverport, 2017 WL 4274707, at *3-4 (noting that when exhaustion of
administrative remedies is not mandatory it is a matter of judicial discretion but deciding
to require the parties to exhaust administrative remedies in disputes regarding assigned risk
policies and the TWCIP); Virginia Sur. Co., Inc. v. McMurry Constr. Co., Inc., No. 07-
2802, 2008 WL 11322113, at *6 (W.D. Tenn. Sept. 23, 2008) (concluding that exhaustion
was left to the court’s discretion because Tennessee Code Annotated section 56-5-309
“nowhere mandates administrative exhaustion and uses permissive language in its
description of the steps to be taken in the process of administrative review”).
Here, Hartford argued in its motion for summary judgment that dismissal was
appropriate for failure to exhaust administrative remedies. In its summary judgment order,
the trial court simply noted that “Cook’s Roofing did not dispute the premium owed
through administrative proceedings with the Tennessee Department of Commerce and
- 14 -
Insurance[.]” The trial court apparently concluded that such an appeal was not mandatory.
Given the permissive language utilized in the relevant statutes, we agree. Therefore, the
trial court did not lack subject matter jurisdiction to consider this dispute.
B. Motion to Amend
The first issue raised by Cook’s Roofing is whether the trial court abused its
discretion in denying its motion to file a second amended complaint. To briefly review the
timeline, the original complaint was filed in 2007, and Cook’s Roofing was permitted to
file its first amended complaint in 2012, to which Hartford filed an amended answer. In
2014, Cook’s Roofing moved for leave to file a second amended complaint to add a claim
for intentional interference with prospective business relationships. This proposed claim
would be based not only on Hartford’s failures to provide notice of cancellation of the
Chaidez policy but also on Hartford’s subsequent decision to notify the TWCIP plan
administrator, after cancellation of the Cook’s Roofing policy, that Cook’s Roofing refused
to pay its outstanding premium balance, rendering it ineligible for future coverage. Cook’s
Roofing alleged that this action improperly caused the TWCIP administrator to “refuse to
do business” with Cook’s Roofing and resulted in substantial lost profits. Cook’s Roofing
sought modification of the existing scheduling order due to the new issues raised by the
proposed amendment, noting that the case was not yet set for trial. The motion to amend
was not heard until 2016. Hartford opposed the motion on the basis of undue delay and
undue prejudice and also asserted that the proposed amendment was futile. After a hearing,
the trial court denied the motion to amend, simply stating that it was not well taken.
“Under the Tennessee Rules of Civil Procedure, a party may amend its pleadings
once as a matter of course before a responsive pleading is served.” Abdur’Rahman v.
Parker, 558 S.W.3d 606, 620 (Tenn. 2018) (citing Tenn. R. Civ. P. 15.01). When a
responsive pleading has already been filed by the opposing party, “the party seeking to
amend must obtain written consent of the adverse party or leave of court, ‘and leave shall
be freely given when justice so requires.’” Id. (quoting Tenn. R. Civ. P. 15.01). “‘Trial
courts have broad authority to decide motions to amend pleadings and will not be reversed
absent an abuse of discretion.’” Id. (quoting Pratcher v. Methodist Healthcare Memphis
Hosps., 407 S.W.3d 727, 741 (Tenn. 2013)). Thus, appellate courts “will uphold the trial
court’s denial of a motion to amend ‘so long as reasonable minds can disagree as to the
propriety of the decision made.’” Brown v. Mapco Exp., Inc., 393 S.W.3d 696, 701 (Tenn.
Ct. App. 2012) (quoting Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001)).
Numerous factors should be considered to guide a trial court’s discretionary
decision regarding whether to allow an amendment of the pleadings, including “‘undue
delay in filing the amendment, lack of notice to the opposing party, bad faith by the moving
party, repeated failure to cure deficiencies by previous amendments, undue prejudice to the
opposing party, and the futility of the amendment.’” Blackwell v. Sky High Sports
Nashville Operations, LLC, 523 S.W.3d 624, 656 (Tenn. Ct. App. 2017) (quoting Gardiner
- 15 -
v. Word, 731 S.W.2d 889, 891-92 (Tenn. 1987)). “‘When a motion to amend is denied, the
trial court should give a reasoned explanation for its action.’” Bowman v. Benouttas, 519
S.W.3d 586, 602 (Tenn. Ct. App. 2016) (quoting Kincaid v. SouthTrust Bank, 221 S.W.3d
32, 42 (Tenn. Ct. App. 2006)). Without such information, this Court cannot discern the
reason behind the trial court’s denial in order to determine whether the decision constituted
an abuse of discretion. Ferrell v. Miller, No. M2013-00856-COA-R3-CV, 2013 WL
6228153, at *7 (Tenn. Ct. App. Nov. 27, 2013) (citing Quinn-Glover v. Regional Med. Ctr.
at Memphis, No. W2011-00100-COA-R3-CV, 2012 WL 120209, at *11 (Tenn. Ct. App.
Jan. 17, 2012)).
In the absence of any explanation for the denial, this Court will “remand for
consideration of the request . . . and for express findings.” Ferrell, 2013 WL 6228153, at
*7; see, e.g., Bellanti v. City of Memphis, No. W2011-01917-COA-R3-CV, 2012 WL
1974220, at *1 (Tenn. Ct. App. June 4, 2012) (“Because the trial court’s order denying the
City’s motion to amend fails to explain the basis for its denial, we are constrained to remand
the case to the trial court for entry of a reasoned explanation of its actions[.]”)
Given that the trial court failed to offer any reason for its denial of the motion to
amend, we are likewise constrained to reverse and remand for the trial court to reconsider
the motion to amend. In the event that it is denied, the trial court must give a reasoned
explanation for its decision. See id.
C. Dismissal of the Claims Asserted by Cook’s Roofing
The next issue raised by Cook’s Roofing is whether the trial court erred in granting
summary judgment to Hartford on the claims asserted by Cook’s Roofing in its amended
complaint. Appellate courts review a trial court’s decision on a motion for summary
judgment de novo with no presumption of correctness. Kershaw v. Levy, 583 S.W.3d 544,
547 (Tenn. 2019) (citing Beard v. Branson, 528 S.W.3d 487, 494-95 (Tenn. 2017)).
Summary judgment is appropriate “if 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. On appeal, “we make a fresh determination
about whether the requirements of Rule 56 have been met.” TWB Architects, Inc. v.
Braxton, LLC, 578 S.W.3d 879, 887 (Tenn. 2019) (citing Rye v. Women’s Care Ctr. of
Memphis, 477 S.W.3d 235, 250 (Tenn. 2015)).
The claims set forth in the amended complaint included negligence, promissory
estoppel, and violation of the TCPA. As previously noted, the trial court found that Cook’s
Roofing waived or conceded these claims due to its failure to present sufficient argument
regarding the elements of the claims in response to the motion for summary judgment.
However, the trial court went on to make some conclusions regarding the three claims and
explain why the elements were not shown to exist in this case.
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On appeal, the argument presented by Cook’s Roofing is again lacking. In the
section of its brief addressing this issue, the single citation to legal authority provided by
Cook’s Roofing is a one-sentence standard of review for a motion for summary judgment.
It does not cite any authority regarding negligence, promissory estoppel, or violation of the
TCPA, or for that matter, even mention the latter two claims. Instead, Cook’s Roofing
simply argues that the trial court “ignored important material evidence in the record.” It
quotes excerpts from the evidence it presented but fails to establish how this evidence
would establish or even relate to any of the claims it asserted in its amended complaint.
From what we can discern from the argument, Cook’s Roofing is attempting to demonstrate
that some facts are in dispute. However, for purposes of summary judgment, a disputed
fact is only deemed material “if its resolution is necessary to determine the substantive
claim.” Himmelfarb v. Allain, 380 S.W.3d 35, 38 (Tenn. 2012) (citing Mills v. CSX
Transp., Inc., 300 S.W.3d 627, 632 (Tenn. 2009)). Cook’s Roofing makes no attempt to
demonstrate how the facts it claims are disputed would relate to any of the various claims
alleged in the amended complaint, such as negligence, promissory estoppel, or violation of
the TCPA.
Aside from its discussion of various facts, the only isolated reference to
“negligence” is in the following final paragraph of the section:
Hartford had a duty to avoid issuing the certificate of insurance needed by its
insured carelessly in a maneuver that would mislead members of the public
including Cook’s Roofing. Cook’s Roofing requested the Chaidez
certificates as a member of the public, not as a Hartford policy holder.
Hartford’s negligence resulted in Cook’s Roofing being led into the trap of
large audit premiums by reasonable reliance upon the certificates authorized
by Hartford.
(emphasis added). Hartford did not issue the certificate of insurance; Chenault Insurance
Agency did. Yet Cook’s Roofing includes no argument or citation to authority regarding
any agency relationship or negligence claim. As Hartford noted in its brief on appeal,
Cook’s Roofing failed to provide “any legal analysis” with respect to this second issue. On
that basis, Hartford asked this Court to deem this issue waived.
“It is not the role of the courts, trial or appellate, to research or construct a litigant’s
case or arguments for him or her, and where a party fails to develop an argument in support
of his or her contention or merely constructs a skeletal argument, the issue is waived.”
Sneed v. Bd. of Prof’l Responsibility of Supreme Court, 301 S.W.3d 603, 615 (Tenn. 2010).
Because Cook’s Roofing did not construct any argument or cite any authority in its
principal brief to show that the trial court erred in granting summary judgment on its claims
for negligence, promissory estoppel, or violation of the TCPA, the second issue it raised
- 17 -
on appeal is waived.13
D. Hartford’s Counterclaim
The final issue raised by Cook’s Roofing is whether the trial court erred in awarding
a judgment for $66,212 to Hartford on its counterclaim for breach of contract. Again,
Cook’s Roofing cites no authority in support of this issue. However, it does not appear to
dispute the substantive merits of the breach of contract claim that served as the basis for
the counterclaim. Instead, Cook’s Roofing disputes the amount of the judgment awarded.14
It argues that “the trial court committed large error by accepting for summary judgment
purposes Hartford’s claim to an entitlement to a $66,21[2] recovery for unpaid
premiums[.]” Cook’s Roofing basically challenges the amount of the award on two
grounds. First, it argues that the sum of $35,674 sought by Hartford for the 2006-2007
policy period was impermissibly based on the policy premium estimate for that period
rather than a post-cancellation audit. Second, Cook’s Roofing argues that even if the
premium estimate figure is used for the 2006-2007 policy, that amount should be prorated
based on a shortened policy period of only five months prior to cancellation.
On August 30, 2006, Hartford sent a “premium bill” to Cook’s Roofing for a total
of $66,212. The bill reflects that Cook’s Roofing owed $30,538 toward the “revised audit”
for the 2005-2006 policy and $35,674 toward the existing 2006-2007 policy, which was to
be effective from June 2, 2006, to June 2, 2007. Cook’s Roofing was paying its premium
for the 2006-2007 renewed policy by installments or a “pay plan.” The bill showed a
breakdown of the charges owed for the 2006-2007 policy premium:
INSTALLMENT DUE DATE 09/02/06 $569.00
ENDORSEMENT EFFECTIVE DATE 06/02/06 $16,478.00
ENDORSEMENT EFFECTIVE DATE 07/02/06 $4,799.00
ENDORSEMENT EFFECTIVE DATE 08/02/06 $4,799.00
ENDORSEMENT EFFECTIVE DATE 09/02/06 $4,230.00
ENDORSEMENT EFFECTIVE DATE 10/02/06 $4,799.00
------------
13
Cook’s Roofing attempted to develop some arguments regarding its claims in its reply brief.
“Reply briefs, however, are generally not a vehicle to correct deficiencies in initial briefs.” Augustin v.
Bradley Cty. Sheriff's Office, 598 S.W.3d 220, 227 (Tenn. Ct. App. 2019). “A reply brief is a response to
the arguments of the appellee.” Owens v. Owens, 241 S.W.3d 478, 499 (Tenn. Ct. App. 2007). “Because
an appellee may not respond to a reply brief, it would be fundamentally unfair to allow the appellant to
assert additional arguments in the reply brief.” Meersman v. Regions Morgan Keegan Tr., No. M2017-
02043-COA-R3-CV, 2018 WL 4896660, at *3 n.7 (Tenn. Ct. App. Oct. 9, 2018) perm. app. denied (Tenn.
Feb. 20, 2019).
14
Cook’s Roofing does suggest that the counterclaim should have been denied “on unjust
enrichment grounds,” but it does not cite any authority in support of this issue. Therefore, we deem the
argument waived. See Sneed, 301 S.W.3d at 615.
- 18 -
SUB-TOTAL $35,674.00
When Cook’s Roofing failed to pay the bill, the 2006-2007 policy was cancelled effective
November 10, 2006.
The corporate designee for Hartford explained the premium calculation during her
deposition. She testified that after the revised audit premium was added to the 2005-2006
policy, the payroll amounts determined from that audit were applied to the existing
renewed policy for 2006-2007 as well. She said it is typical after a worker’s compensation
policy audit to add any additional payroll from the prior period to the renewed existing
policy. She pointed out that Cook’s Roofing was on an installment plan and that the
premium bill listed the amounts due. She clarified that the amount listed was not past due
but the amount currently owed. The bill listed a due date of “9/26/06.” When asked if the
sum of $35,674 was the amount owed for the entire period, she said it appeared to be the
amount “for the installments up through 10/2/06.” She noted that the policy was cancelled
effective November 10, 2006. When asked again about the calculation of the sum of
$35,674 shown as due toward the 2006-2007 policy period, she said,
[W]hat I believe happened was, the payroll that was picked up from Chaidez
on the 2005 to 2006 policy was then applied to the 2006 to 2007. That’s
done in a lump sum, and then it’s the total -- that would be the total estimated
premium at that time until that policy runs out -- until the policy expires. So
whatever is due and owing for those installments is just divided by how many
installments there are.
(emphasis added).
Hartford’s counterclaim described “a premium audit” conducted after expiration of
the policy period, which revealed that Cook’s Roofing owed $30,538 toward the 2005-
2006 policy premium. It alleged that the same audit revealed that Cook’s Roofing owed
over $30,000 for the renewed 2006-2007 policy. The counterclaim alleges, “To date, these
outstanding premium amounts are due and owing.” Hartford sought summary judgment
on its breach of contract claim for $66,212. In its statement of undisputed facts, Hartford
included the following statement: “At the time [of] its cancellation, Cook’s Roofing also
owed $35,674.00, on the 2006-2007 Cook’s Policy, which Cook’s Roofing has not paid.”
(emphasis added) Thus, it is apparent that Hartford was seeking to recover the precise
amount it billed Cook’s Roofing before it cancelled the renewed policy for 2006-2007.
The trial court awarded a judgment on the counterclaim for $66,212, the exact amount
listed on the premium bill. There is simply nothing in the record to suggest that Hartford
ever conducted a post-cancellation audit to determine the actual payroll and other
information for the policy period and calculate whether the actual liability of Cook’s
Roofing was more or less than the estimated premium.
- 19 -
The insurance policy included the following terms regarding calculation of the
premium:
E. Final Premium
The premium shown on the Information Page, schedules, and endorsements
is an estimate. The final premium will be determined after this policy ends
by using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work covered
by this policy. If the final premium is more than the premium you paid to us,
you must pay us the balance. If it is less, we will refund the balance to you.
The final premium will not be less than the highest minimum premium for
the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the following
way unless our manuals provide otherwise:
1. If we cancel, final premium will be calculated pro rata based on the time
this policy was in force. Final premium will not be less than the pro rata
share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be based on
the time this policy was in force, and increased by our short-rate cancellation
table and procedure. Final premium will not be less than the minimum
premium.
F. Records
You will keep records of information needed to compute premium. You will
provide us with copies of those records when we ask for them.
G. Audit
You will let us examine and audit all your records that relate to this policy.
These records include ledgers, journals, registers, vouchers, contracts, tax
reports, payroll and disbursement records, and programs for storing and
retrieving data. We may conduct the audits during regular business hours
during the policy period and within three years after the policy period ends.
Information developed by audit will be used to determine final premium.
In response to the motion for summary judgment, Cook’s Roofing disputed the amount
owed for the 2006-2007 policy term as uncertain because there was no post-cancellation
audit for the shortened policy term. According to Cook’s Roofing, the amount sought by
Hartford was based on the estimate for the twelve-month policy, which was to be adjusted
by an audit at the end of the policy period. Thereafter, Hartford submitted an affidavit of
its corporate representative stating:
[D]espite my deposition testimony regarding the amount of premiums
- 20 -
Cook’s Roofing owes to Hartford under the relevant policies, it appears from
reviewing the Plaintiff’s response that it is confused regarding this issue. It
should not be. To be clear, Cook’s Roofing currently owes $66,212.00 in
premium, Hartford having credited any and all amounts that Cook’s Roofing
may have paid towards its premium obligation.
However, the affidavit did not state whether a post-cancellation audit was completed or
attempted.15 Before the trial court, Hartford’s counsel simply suggested that the argument
by Cook’s Roofing about the lack of a final audit “reflects its profound ignorance with how
these assigned risk plans are administered.”
The trial court made lengthy findings in its order but did not mention anything about
the lack of a post-cancellation audit for the 2006-2007 policy. It simply stated:
43. Travelers proceeded to conduct its standard retrospective premium audit
on the Cook’s Policy for the 2005-2006 Cook’s Policy Period. Because the
Chaidez Policy had been effectively cancelled on January 3, 2006, Mr.
Chaidez continued to work for Cook’s Roofing without his own workers
compensation insurance.
44. However, because the Chaidez Policy had been effectively cancelled on
January 3, 2006, and Mr. Chaidez continued to work for Cook’s Roofing
without his own workers compensation insurance, this caused additional
premium to accrue on the Cook’s Policy to account for the additional risk
occasioned by Mr. Chaidez employment during the 2005-2006 Cook’s
Policy Period.
45. During the physical audit, Cook’s Roofing failed to produce sufficient
documents supporting its position with regard to Mr. Chaidez. As a result,
the auditor made a reasonable premium calculation based on the documents
produced. Having failed to comply with its obligations during the audit
process, Cook’s Roofing cannot raise this issue again in this proceeding.
46. The final results of the audit indicated that — at that time — Cook’s
15
We note that “[b]oth the insurance company and the insured employer have responsibilities in
the required retrospective premium audit.” Am. Zurich Ins. Co., 2012 WL 3064650, at *11. If a dispute
arises, “the burden is on the insured employer to establish that its workers should be excluded from premium
consideration.” Id.
Notably, the corporate representative for Hartford testified that after the Chaidez policy was
cancelled on January 3, 2006, Hartford conducted a post-cancellation audit of the Chaidez policy in
February 2006, which included the initial policy period and also a shortened policy period for the second
term up to the date of cancellation. We note that other cases involving similar policies have also discussed
post-cancellation audits. See, e.g., Cont’l Cas. Co. v. Theraco, Inc., 437 S.W.3d 841, 845 (Tenn. Ct. App.
2014); Am. Zurich Ins. Co., 2012 WL 3064650, at *6; Liberty Mut. Ins. Co. v. Friendship Home Health
Agency, LLC, No. M2007-02787-COA-R3-CV, 2009 WL 736659, at *1 (Tenn. Ct. App. Mar. 19, 2009);
CNA (Cont'l Cas.) v. King, No. M2004-02911-COA-R3-CV, 2006 WL 2792159, at *2 (Tenn. Ct. App.
Sept. 28, 2006).
- 21 -
Roofing owed additional premium in the amount of $30,5[38].00 for the
2005-2006 Cook’s Policy Period.
47. Cook’s Roofing refused to pay the additional premium assessed, and the
Cook’s Policy was therefore cancelled during the 2006-2007 Cook’s Policy
Period in accordance with the terms of the Cook’s Policy, Tennessee law,
and the TWCIP.
48. At the time of the Cook’s Policy’s cancellation, Cook’s Roofing also
owed $35,674.00 in premium for the 2006-2007 Cook’s Policy Period for a
total premium owed in the amount of $66,212.00 on the Cook’s Policy.
Viewing the evidence in the light most favorable to Cook’s Roofing, we conclude that
genuine issues of material fact remain as to whether Hartford should have conducted a
post-cancellation audit of the 2006-2007 policy and whether its alleged failure to do so
now impacts its claim for recovery of the unpaid estimated premium that was owed at the
time of cancellation.
We note, however, that in response to the motion for summary judgment, Cook’s
Roofing limited its dispute to the amount owed for the 2006-2007 policy period. Cook’s
Roofing did not demonstrate that any genuine issue of material fact existed with respect to
the amount it owed for the 2005-2006 policy period. As such, we affirm the trial court’s
judgment in favor of Hartford on its counterclaim for the sum of $30,538 for the 2005-
2006 policy period. We reverse the judgment for $35,674 allegedly owed for the 2006-
2007 policy period and remand for further proceedings regarding that issue.
E. Prejudgment Interest
We now consider the issues raised on appeal by Hartford. First, Hartford argues
that the trial court erred in limiting its award of prejudgment interest to a shorter period
than Hartford requested and at a rate of only one percent.
Because we have reversed the portion of the award attributable to the 2006-2007
policy period premium, we also reverse the award of prejudgment interest for that portion
of the original award. However, we will consider Hartford’s arguments as they relate to
interest on the 2005-2006 premium.
When Hartford filed its motion for prejudgment interest in 2019, it pointed out that
it had been without the benefit of the premium since it sent the bill in 2006. However,
Hartford limited its request for prejudgment interest to the period since it had completed
its discovery on June 15, 2012. Hartford claimed that after that date, it was waiting on
Cook’s Roofing to take depositions. Thus, Hartford sought a total interest award of
$43,119 on the judgment of $66,212. In opposition, Cook’s Roofing argued that
prejudgment interest was inappropriate due to the uncertainty regarding the lack of a post-
cancellation audit for the 2006-2007 policy period.
- 22 -
The trial court granted Hartford’s motion for prejudgment interest in part. The trial
court found that an award of prejudgment interest would compensate Hartford for the loss
of premium funds to which it was entitled. It found that the amount owed was certain and
that Hartford sent the premium bill to Cook’s Roofing demanding payment in 2006. It
found that Hartford was without the use of the funds until judgment was entered in 2018.
The trial court acknowledged Hartford’s argument regarding “the lengthy time in which
the case has been pending.” However, the trial court found that “a number of factors”
contributed to the length of the litigation, and the court noted that it did not attribute the
lack of prosecution “wholly” to the inaction of Cook’s Roofing. The trial court stated that
it had considered “the entirety of the circumstances” and found it equitable to award
prejudgment interest for a period spanning from September 16, 2016, to the date of
judgment on December 18, 2018. The trial court set the rate of prejudgment interest at one
percent. Hartford did not offer any argument or evidence to support a specific rate of
interest on its claim, but it argues on appeal that the trial court should have awarded interest
at the “market rate” of six percent and for the full period requested by Hartford.
Pursuant to Tennessee Code Annotated section 47-14-123, unless otherwise
provided, prejudgment interest “may be awarded by courts or juries in accordance with the
principles of equity at any rate not in excess of a maximum effective rate of ten percent
(10%) per annum.” Trial courts are vested with considerable discretion when determining
whether prejudgment interest is warranted, but the decision “is not immunized from
challenge on appeal.” E Sols. for Buildings, LLC v. Knestrick Contractor, Inc., No.
M2018-02028-COA-R3-CV, 2019 WL 5607473, at *12 (Tenn. Ct. App. Oct. 30, 2019)
perm. app. denied (Tenn. Mar. 26, 2020). “‘[A]ppellate deference is not synonymous with
rubber stamping a trial court’s decision.’” Id. (quoting Scholz v. S.B. Int'l, Inc., 40 S.W.3d
78, 82 (Tenn. Ct. App. 2000)). We must review “whether the trial court has based its
decision on applicable legal principles and whether the decision is consistent with the
evidence.” Scholz, 40 S.W.3d at 82-83 (citing Myint v. Allstate Ins. Co., 970 S.W.2d 920,
927 (Tenn. 1998); Overstreet v. Shoney’s, Inc., 4 S.W.3d 694, 709 (Tenn. Ct. App. 1999)).
“The trial court’s discretion ‘extends not only to awarding of prejudgment interest but also
to the amount of interest allowed and the time over which it shall be calculated.’” Mabey
v. Maggas, No. M2006-02689-COA-R3-CV, 2007 WL 2713726, at *10 (Tenn. Ct. App.
Sept. 18, 2007) (quoting AHCI, Inc. v. Lamar Adver. of Tenn., Inc., No. 03A01-9301-CH-
00010, 1994 WL 25848, at *4 (Tenn. Ct. App. E.S. Jan. 26, 1994), aff'd, 898 S.W.2d 191
(Tenn. 1995)); see also Premier Imaging/Med. Sys., Inc. v. Coffey Family Med. Clinic,
P.C., No. E2017-02186-COA-R3-CV, 2018 WL 3361067, at *8 (Tenn. Ct. App. July 10,
2018) (explaining that the trial court’s choice of a particular rate, subject to the statutory
limit, was a discretionary matter for the trial court).
According to the Tennessee Supreme Court,
Several principles guide trial courts in exercising their discretion to
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award or deny prejudgment interest. Foremost are the principles of equity.
Tenn. Code Ann. § 47-14-123. Simply stated, the court must decide whether
the award of prejudgment interest is fair, given the particular circumstances
of the case. In reaching an equitable decision, a court must keep in mind that
the purpose of awarding the interest is to fully compensate a plaintiff for the
loss of the use of funds to which he or she was legally entitled, not to penalize
a defendant for wrongdoing. Mitchell v. Mitchell, 876 S.W.2d 830, 832
(Tenn. 1994); Otis [v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 446
(Tenn. 1992))].
Myint, 970 S.W.2d at 927.
Over the years, “the Tennessee Supreme Court has shifted the balance to favor
awarding prejudgment interest whenever doing so will more fully compensate plaintiffs
for the loss of use of their funds.” Scholz, 40 S.W.3d at 83. In almost all cases, fairness
will “require that a successful plaintiff be fully compensated by the defendant for all losses
caused by the defendant, including the loss of use of money the plaintiff should have
received.” Id. “That is not to say that trial courts must grant prejudgment interest in
absolutely every case.” Id. Some equitable factors for the court’s consideration include:
“(1) promptness in the commencement of a claim, (2) unreasonable delay of the
proceedings by either party, (3) abusive litigation practices by either party, (4) the certainty
of the existence of an underlying obligation, (4) the certainty of the amount in dispute, and
(5) prior compensation for the lost time value of the plaintiff’s money.” Poole v. Union
Planters Bank, N.A., 337 S.W.3d 771, 791 (Tenn. Ct. App. 2010).
Here, the trial court’s stated reason for awarding but limiting the amount of
prejudgment interest was that “a number of factors” contributed to the lengthy delay in this
case and that it was not wholly attributable to Cook’s Roofing. The trial court did not
explain the significance of the starting date of September 16, 2016, and from our review of
the record, we cannot discern why the trial court chose that particular date. The order
simply states, “The date of September 16, 2016 is selected as the beginning date to
commence the calculation of interest as being equitable to the Plaintiff [Cook’s Roofing]
considering the entirety of the circumstances.” On appeal, Cook’s Roofing references
“successive vacancies in the office of Chancellor” that lasted until mid-2016. Chancellor
JoeDae Jenkins, who ultimately granted summary judgment and awarded prejudgment
interest, was elected in August 2016. Thus, when he began presiding over the case, it had
been pending since 2007. Hartford had admittedly completed its discovery in 2012, and
yet Hartford did not file its motion for summary judgment until October 2018, eleven years
after the case was filed. Once the motion was finally filed, the trial court entered an order
granting the motion only two months later.
The trial court is entitled to weigh the equities in determining the appropriate
amount of prejudgment interest. Varner Const. Co. v. Marrs, No. W2000-01029-COA-
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R3-CV, 2002 WL 818234, at *14 (Tenn. Ct. App. Apr. 18, 2002) (concluding that the trial
court did not abuse its discretion in declining to award interest for the entire duration of the
litigation when its “extraordinary” length supported limiting the award). “Our courts have
recognized that the trial courts can consider the unusual duration of litigation as a factor in
reducing prejudgment interest.” Harrison v. Laursen, 128 S.W.3d 204, 210 (Tenn. Ct.
App. 2003). The court “can deny prejudgment interest when both parties are responsible
for delays.” Id.
“Others cases have awarded prejudgment interest even in the face of delays,
especially where the delay was not wholly attributable to the plaintiff’s conduct.” Foster-
Henderson v. Memphis Health Ctr., Inc., 479 S.W.3d 214, 228 (Tenn. Ct. App. 2015). See,
e.g., Gen. Const. Contractors Ass’n, Inc. v. Greater St. Thomas Baptist Church, 107
S.W.3d 513, 526 (Tenn. Ct. App. 2002) (affirming an award during a two-year delay
attributable to the trial court, noting that “it may seem unjust to Appellant that the meter
continued to run on the accrual of interest during the time that the trial court held the case
under advisement, [but] it could be viewed as equally unjust to the Appellee to discount
this time in computing the total amount of damages due”).
Considering the long duration of this litigation and the fact that both parties and the
trial court were to some degree responsible for the delay, we cannot say that the trial court
abused its discretion in deciding to award prejudgment interest but limit the award to a
period of two years and at a rate of only one percent. See MSK Constr., Inc. v. Mayse
Constr. Co., No. E2014-00139-COA-R3-CV, 2014 WL 4826655, at *7 (Tenn. Ct. App.
Sept. 30, 2014) (“[T]he court’s decision to award prejudgment interest at a statutory rate
of 1 percent was wholly within the court’s discretion.”) “If a discretionary decision is
within a range of acceptable alternatives, we will not substitute our judgment for that of
the trial court simply because we may have chosen a different alternative.” 3L Commc’ns
L.L.C. v. Merola, No. M2012-02163-COA-R3-CV, 2013 WL 4803532, at *9 (Tenn. Ct.
App. Sept. 6, 2013) (citing White v. Vanderbilt Univ., 21 S.W.3d 215, 223 (Tenn. Ct. App.
1999)). We therefore affirm the award of prejudgment interest on the portion of the
judgment attributable to the 2005-2006 policy premium.
F. Piercing the Corporate Veil
The final issue raised by Hartford on appeal is whether the trial court erred in
denying its motion to enforce the judgment against the Cooks individually. To briefly
review the relevant timeline, the trial court entered summary judgment against Cook’s
Roofing in 2018, and Cook’s Roofing prematurely filed a notice of appeal before the trial
court resolved the issue of prejudgment interest. This Court entered an order directing the
appellant to obtain a final judgment. Before the outstanding issue of prejudgment interest
was resolved, Hartford also filed a motion to enforce the judgment against the Cooks
individually. According to the motion, Hartford had sought to execute on the judgment
and learned through post-judgment discovery that Cook’s Roofing had no assets. Hartford
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asserted that Mike and Rebecca Cook were the alter egos of Cook’s Roofing and that they
used the corporate form as a sham to perpetuate a fraud. Hartford claimed that they simply
closed the business and took the only corporate asset, a company vehicle, for their own
personal use. Hartford also asserted that the Cooks ignored corporate formalities and
operated the business from their home. Thus, Hartford asked the trial court to consider the
factors relevant to piercing the corporate veil and enter an order allowing it to execute the
judgment against the Cooks individually. Hartford submitted post-judgment deposition
testimony in support of its motion.
Cook’s Roofing filed a responsive brief in which it referenced the due process rights
of the individual “target defendants.” Cook’s Roofing argued that individuals could not
simply be added to a judgment without giving them “their day in court to defend their
rights.” Hartford filed an additional reply, claiming that it was appropriate to consider
whether to pierce the corporate veil in a post-judgment proceeding.16
After a hearing, the trial court denied the motion. The trial court found that the
Cooks had not been given an opportunity to defend on the alter ego theory, as there were
no pleadings giving notice of the same, no discovery, and no hearing on those issues.
Hartford filed a motion to alter or amend and indicated that it was “certainly agreeable” to
having an evidentiary hearing on the alter ego issue. However, the trial court denied the
motion.
It is not uncommon to encounter uncertainty as to the appropriate procedure for
pursuing a claim to pierce the corporate veil. Larry E. Parrish, P.C. v. Strong, No. M2017-
02451-COA-R3-CV, 2018 WL 6843402, at *14 (Tenn. Ct. App. Dec. 28, 2018) perm. app.
denied (Tenn. July 25, 2019) (McBrayer, J., dissenting). “‘[N]either state nor federal
procedure is uniform in how veil-piercing cases are adjudicated.’” Id. (quoting Sam F.
Halabi, Veil-Piercing's Procedure, 67 Rutgers U. L. Rev. 1001, 1006 (2015)). In various
jurisdictions, “‘[v]eil-piercing claims run the gamut from free-standing causes of action . .
. to affirmative defenses to . . . equitable remedies enforced at the end of litigation.’” Id.
(quoting Halabi, 67 Rutgers U. L. Rev. at 1016).
In Tennessee, the claim has been pursued in various ways. For instance, in Boles v.
National Development Co., 175 S.W.3d 226, 231-32 (Tenn. Ct. App. 2005), the plaintiffs
filed suit against a corporation and later amended their complaint to add its alleged alter
ego, Clyde Engle. In that particular case, because of the complexity of the issues, the trial
was bifurcated into two hearings. Id. at 232. The first phase was limited to the plaintiffs’
claim for damages against the corporation. Id. After they were awarded a judgment for
compensatory damages against the corporation, the second phase of the trial was limited
to the plaintiffs’ claim that Clyde Engle was the alter ego of the corporation and thus
16
The reply filed by Hartford states that the Cooks also filed a separate response individually,
asserting their due process rights. However, it does not appear to be in the record on appeal.
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personally liable for the damages assessed against the corporation. Id. Following an
evidentiary hearing, the trial court pierced the corporate veil and held Engle personally
liable for the judgment. Id. at 236. As Boles illustrates, “it is common for a plaintiff to
bring suit against a closely held corporation and a sole shareholder individually in the same
action, and to obtain judgments against both defendants.” Oceanics Sch., Inc. v. Operation
Sea Cruise, Inc., No. 03A01-9904-CV-00153, 1999 WL 1059678, at *3 (Tenn. Ct. App.
Nov. 19, 1999).
In some cases, however, the veil-piercing issue has been pursued in a separate
action. For example, in Oceanics, 1999 WL 1059678, at *2, a foreign judgment was
domesticated in Tennessee, but upon execution, no assets of the corporation were found.
A year after the domestication, the plaintiff filed a motion to amend the complaint to add
an individual as an additional party-defendant. Id. According to plaintiff’s counsel,
plaintiff had no reason to suspect another defendant when suit was originally filed, and it
was not until post-judgment discovery that they learned facts about the individual’s
involvement that supported the alter ego theory. Id. at *3. Still, the trial court denied the
request to amend the complaint because the judgment in the domestication proceeding had
already become final. Id. at *4. This Court affirmed, emphasizing that the motion to amend
the complaint came “long after the judgment was final.” Id. We explained that “if [the
plaintiff] now wishes to proceed against [the individual] in an attempt to pierce the
corporate veil, a separate action must be commenced by filing a separate complaint against
[the individual] on that claim.” Id. at *2. The plaintiff did just that. The plaintiff filed a
separate action against the alleged alter ego of the corporation, seeking to pierce the
corporate veil and enforce the corporate judgment against the individual. See Oceanics
Sch., Inc. v. Barbour, 112 S.W.3d 135, 137 (Tenn. Ct. App. 2003) (“Oceanics II”). In that
separate case, the trial court found that the individual was in fact the alter ego of the
corporation and allowed the plaintiff to pierce the corporate veil. This Court affirmed. Id.
More recently, in Larry E. Parrish, P.C. v. Strong, No. M2017-02451-COA-R3-
CV, 2018 WL 6843402 (Tenn. Ct. App. Dec. 28, 2018) perm. app. denied (Tenn. July 25,
2019), this Court examined the actions taken in Boles and Oceanics. In the Parrish case,
the litigation was already bifurcated into two phases for the consideration of compensatory
and punitive damages. Id. at *2. After a jury awarded the plaintiff compensatory damages
during phase one, but before the second phase of trial was set, the plaintiff filed a motion
to hold an individual personally liable for the damages assessed against the corporate
defendant. Id. at *2-3. The trial court denied the motion, noting the procedural posture of
the case and that the compensatory damage phase had already been completed. Id. at *11.
The trial court noted that the plaintiff would still have available to her a post-judgment
remedy of suing the individual in a separate action to pierce the corporate veil. Id. at *12.
The trial court acknowledged that this course “might not be the most efficient judicial use
of resources” but reasoned that it was “the most responsible” given that there were no
pleadings alleging alter ego theories but only a motion to substitute the individual as a
party. Id. On appeal, this Court held that the trial court erred “in failing to hold a hearing
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on the issue of piercing the corporate veil.” Id. at *1. We considered the trial court’s due
process concerns to be “misplaced,” explaining that “it comports with due process for a
court to exercise jurisdiction over an individual who is an alter ego of a corporation subject
to the personal jurisdiction of the court.” Id. at *12. We also noted that only the
compensatory damage phase of the bifurcated proceeding had been completed when the
motion was filed. Id. at *13. Thus, we explained that the court could have employed a
procedure similar to that used in Boles, where the plaintiff had amended the complaint to
add the alleged alter ego and the court held a second hearing to determine whether to pierce
the corporate veil. Id. As such, we vacated the trial court’s decision and remanded for a
hearing and determination in accordance with the applicable factors for piercing the
corporate veil. Id.
Judge Neal McBrayer dissented from the majority opinion in Parrish, concluding
that the timing of the motion regarding piercing the corporate veil weighed in favor of its
denial. Id. at *14. He noted that when the motion was filed, the liability and compensatory
damages phase had concluded, and therefore, the introduction of the new question of
personal liability served to delay matters and created “a host of other issues.” Id. (By the
time the veil question was adjudicated, twelve months had expired since the jurors were
first summoned for jury service, and the trial court determined that it did not have
jurisdiction to re-empanel the same jury.) Id. at *3. Judge McBrayer believed that the trial
court “took the best course” by proceeding with the punitive damage phase and leaving the
plaintiff to file a separate suit against the individual. Id. at *14.
Considering all of these opinions, we return to the facts of the case before us. The
trial court was apparently bothered by the same type of due process concerns that motivated
the trial court to deny the motion without a hearing in Parrish. Indeed, in the case at bar,
when the trial court considered the post-judgment motion to enforce the judgment against
the Cooks individually, the only remaining issue was prejudgment interest. The trial court
had disposed of all claims by way of summary judgment. At that time, no motions or
pleadings had been filed seeking to add the Cooks as parties individually. However, our
consideration of the issues on appeal has led to a different procedural posture that requires
a remand for reconsideration of various issues. We have determined that it is necessary for
the trial court to reconsider the motion to amend the complaint in order to give a reasoned
explanation for its decision, and we have reversed the entry of summary judgment on
Hartford’s counterclaim as it relates to the 2006-2007 policy period. Both of those issues
will require further proceedings on remand. In light of this development, we conclude that
the trial court should also consider the issue of piercing the corporate veil on remand. As
we said in Parrish, because the proceedings are still ongoing, the trial court can employ a
procedure like that utilized in Boles, permitting amendment of the pleadings to add alleged
alter egos and holding a separate evidentiary hearing to determine whether to pierce the
corporate veil. Id. at *13. We therefore reverse the trial court’s denial of the motion to
enforce the judgment against the Cooks individually and remand for additional proceedings
on that issue.
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IV. CONCLUSION
For the aforementioned reasons, we affirm the decision of the chancery court in part,
we reverse in part, and we remand for further proceedings consistent with this opinion.
Costs of this appeal are taxed equally to the appellant, Cook’s Roofing Inc., and to the
appellee, Hartford Underwriters Insurance Company, for which execution may issue if
necessary.
_________________________________
CARMA DENNIS MCGEE, JUDGE
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