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Posted by: Tanja Trezise on Mar 26, 2012

Head Comment: With dissenting opinion

Court: TN Supreme Court

Attorneys 1:

David Lyle Franklin, Chattanooga, Tennessee, for the appellant, Allstate Insurance Company.

Attorneys 2:

Charles S. Sexton, Sevierville, Tennessee, for the appellees, John Tarrant, Diana Lynn Tarrant, and Blue Ribbon Cleaning, Inc.

Billy J. Stokes, Jon M. Cope, and Hudson T. Ellis, Knoxville, Tennessee, for the appellee, Charles E. Leatherwood.

Judge(s): LEE

After an automobile accident between the insured’s van and a motorcycle, the insurer filed a declaratory judgment action to determine whether the van was covered under a commercial policy with a liability limit of $500,000 or a personal policy with liability limits of $100,000 per person and $300,000 per accident. The insurer alleged that before the accident the insured had instructed his insurance agent to transfer the van from the commercial policy to the personal policy. The insured denied this and alleged that he had instructed the agent to retain the van on the commercial policy. The trial court ruled that because the insurer had sent the insured a letter and premium bills showing the change in coverage and the insured had paid the bills without objection, he had ratified the transfer and the van was covered under the personal policy. The Court of Appeals reversed. We hold that the action of the insurance agent in transferring the van to the personal policy was not subject to ratification by the insured because the insurance agent was not acting in the insured’s stead or for his benefit when it made the transfer. We further hold that the insurer is estopped from denying coverage under the commercial policy. We affirm the judgment of the Court of Appeals, although on different grounds.