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Goot v. Metropolitan Government of Nashville and Davidson County11/9/2005
ife an opportunity to qualify for the waiver of premium benefit. This claim fails on three grounds. First, the Metropolitan Government does not have either the statutory or contractual obligation to inform its employees of its negotiations and discussions with insurance companies regarding changes in group insurance benefits. Second, while the Metropolitan Government has an obligation to act reasonably when it is procuring group health insurance benefits for its employees, it was not acting unreasonably when it declined to incur an additional $10,000,000 expense in order to offer employees a "one time exception" to the requirements to qualify for the waiver of premium benefit. Third, the Metropolitan Government had no obligation under Metro. Code § 3.08.040(A)(3) to inform disabled employees of the "one time exception" because it never became part of the employee benefit plan. Accordingly, the trial court properly determined that the Metropolitan Government was entitled to a dismissal of Mr. Reese's breach of contract claim as a matter of law.
VI. The Breach of Contract Claims of Mmes. Goot, Taylor, and Duke
We now turn to the breach of contract claims of Mmes. Goot, Taylor, and Duke. The trial court granted a directed verdict for the Metropolitan Government at the close of their proof on the ground that they had failed to prove "the terms of the life insurance contract." Mmes. Goot, Taylor, and Duke assert that the trial court erred because the terms of the waiver of premium provision in the life insurance contract were not in dispute. For its part, the Metropolitan Government insists that the trial court erred by failing to direct a verdict on the ground that Mmes. Goot, Taylor, and Duke were not third-party beneficiaries of their deceased spouses' group insurance policies. We have determined that the trial court properly declined to direct a verdict on the Metropolitan Government's third-party beneficiary claim but that the trial court erred by directing a verdict because of the surviving spouses' failure to prove the terms of the waiver of premium provision.
A. The Surviving Spouses as Intended Third-Party Beneficiaries of Their Spouses' Group Life Insurance Benefits
The Tennessee Supreme Court has adopted the "intent to benefit" test as set forth in the Restatement (Second) of Contracts § 302 (1981). The only third parties who may claim a legally enforceable interest in a contract are persons who the contracting parties intended to benefit. The court's test for determining whether a third party is an intended beneficiary provides:
A third party is an intended third-party beneficiary of a contract, and thus is entitled to enforce the contract's terms, if
(1) The parties to the contract have not otherwise agreed;
(2) Recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties; and
(3) The terms of the contract or the circumstances surrounding performance indicate that either:
(a) the performance of the promise will satisfy an obligation or discharge a duty owed by the promisee to the beneficiary; or
(b) the promisee intends to give the beneficiary the benefit of the promised performance.
Owner-Operator Indep. Drivers Ass'n v. Concord EFS, Inc., 59 S.W.3d 63, 70 (Tenn. 2001). An intended beneficiary's rights are measured by the contract itself, United States Fid. & Guar. Co. v. Elam, 198 Tenn. 194, 213-14, 278 S.W.2d 693, 702 (1955), thus courts must analyze third-party contract claims by construing the contract as a whole rather than in a piecemeal fashion. Benton v. Vanderbilt Univ., 137 S.W.3d 614, 619-20
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