Consumer Protection Laws Help Tennesseans Recover

Americans pursuing dreams and goals through education, work, or the growth of small and large businesses want to compete on a level playing field.  They want to be treated honestly and fairly by competitors, insurers, state and local governments, vendors, and customers.  Of course history informs us that not all individuals or companies play by the rules.  Eventually every business faces the breach of an important contract, a bad debt, a denied insurance claim or some other legal matter.

Due to challenging economic times, many individuals and businesses are facing a more insidious threat than broken contracts.  They are increasingly being damaged by unfair, deceptive and outright fraudulent practices by those with whom they do business.  Fortunately, Tennessee law provides the legal weapons needed to combat reprehensible behavior by those who knowingly take advantage of consumers in the marketplace. 

These weapons include the Tennessee Consumer Protection Act (TCPA) and bad faith insurance laws.  The TCPA is often misunderstood because it is entitled a “consumer” act.  It is important to understand that the TCPA considers both individuals and businesses to be consumers.  In fact, a large portion of all TCPA claims involve businesses suing businesses for unfair or deceptive practices.  The Act is important because when a consumer has been damaged by the unfair, deceptive or fraudulent actions of another, a court may invoke it to award actual damages, punitive damages and attorneys fees.  In the hands of a skilled attorney, the TCPA can be used to fully compensate a consumer and deter a bad actor from engaging in further deceptive behavior. 

A recent case handled by my firm is an excellent example of how the TCPA might apply to you or your business.  Our client was a young, aspiring country music singer.  She paid a Nashville record producer for song production and further promotion of her career.  He represented himself as an accomplished producer with good connections at the major records labels.  The producer breached the contract by failing to produce the promised songs and results.  However, we argued that the producer’s repeated and threatening requests for funds and his early and utter refusal to perform the contract suggested an intention to defraud our client from the outset.  The court agreed and rendered a six figure verdict including punitive damages and attorney fees under the TCPA.  A simple claim for breach would not have made the young woman whole or deterred the producer from such future conduct.

While aspiring artists cannot buy insurance against unscrupulous producers, many consumers buy insurance to protect themselves from life-altering events such as natural disasters, theft and fraud.  The premiums are expensive, but consumers are willing to pay them for the promise of being covered for unexpected and potentially catastrophic losses. 

Unfortunately, insurers sometimes place their economic interests ahead of their policyholders’ interests and wrongfully refuse to pay valid claims.  When an insurer unjustifiably refuses to pay a valid claim it may be found to have breached the insurance policy or to have acted in bad faith

Another recent case handled by my firm is a good example of how you or your company could be affected by an insurer’s breach or bad faith.  Our clients, the Fagans, were wrongfully accused by Allstate of burning down their own home. 

In July 2005, Peter and Tracy Fagan awoke to smoke and flames in their Sevierville, Tennessee home.  They lost everything they owned including their children's pets; clothing and toys; family photos; personal and business records; and an uninsured Corvette Stingray which was parked in the basement.  The Fagans always contended that the fire was caused when Mrs. Fagan fell asleep while smoking on the first floor of the home.

After the fire, Mrs. Fagan, who was not just a policyholder but an Allstate insurance agent, filed a claim under her Allstate homeowner's policy for the insured contents of the home.  Instead of paying the claim, Allstate immediately hired a fire origin expert and a private investigator.  Allstate denied the claim alleging that the Fagans intentionally set the fire for financial gain due alleged financial and marital problems.

In reality, at the time of the fire, the Fagans owned approximately $1 million worth of real property and had near perfect credit.  All their mortgages were current and they had recently been approved for purchase of another rental property.

When the Fagans sued Allstate for payment of their claim, Allstate counter-sued them for bringing the claim and requested that the Fagans be ordered to reimburse Allstate for the company's $40,000 in expert and litigation costs plus its attorney's fees.

After a 3 day trial in U.S. District Court for the Eastern District of Tennessee, a jury returned a verdict in favor of the Fagans.  The jury found that the Fagans did not set fire to their home and awarded them the full amount due under their homeowner's policy.  The jury denied Allstate's counter suit against the Fagans. 

The facts of Fagan v. Allstate are informative as to just how far an insurer may go in trying to avoid a valid claim.  Hopefully you will never fall victim to such unscrupulous behavior.  But always remember that Tennessee’s civil justice system exists to help you prosecute those who would harm you and your business.  If the case is pursued competently and aggressively, you may be able to recover not only your actual losses, but you may recover your litigation costs and have penalties imposed which deter a defendant from harming others.