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Child May Stack UIM In Parents' Auto Policy

The underinsured motorist coverage available to a policy owner’s child is identical to the coverage available to the policy owner, according to an opinion handed down by the North Carolina Court of Appeals last week.

This is so, said the court, because the Motor Vehicle Safety and Financial Responsibility Act allows underinsured motorist coverage stacking benefits to flow to an injured party covered by a policy, not just to the policy’s owner.

The case is Harris v. Nationwide Mutual Insurance Co. (North Carolina Lawyers Weekly No. NA0787 – 14 pages).

In the opinion, Judge Hugh A. Wells extended the holding in Sutton v. Aetna Casualty & Surety Co. (North Carolina Lawyers Weekly No. NS1525 – 13 pages; see September 11, 1989 Lawyers Weekly, page 1 story). Sutton did not address the issue of whether an insured non-owner is entitled to stack underinsured motorist (UIM) coverage to determine the insurer’s limits of liability.

The decision affirms the trial court, but an appeal is expected. In a lengthy dissent, Judge Edward Greene argued that the controlling statute, G.S. § 20-279.21(b)(4), allows only the owner to stack UIM policies.


Michelle K. Harris, a minor daughter of David and Ellen Harris, was injured in an auto accident while a passenger in a car owned by her friend’s parents. That car was insured under a policy with liability limited to $100,000. Her medical expenses alone were in excess of that amount.

The injured child’s parents owned three vehicles insured under a single policy by defendant Nationwide Mutual Insurance Company. The policy provided uninsured (UM) and underinsured motorist coverage of $100,000 per person and $300,000 per accident for each insured vehicle. The parents paid separate premiums of $10 per vehicle for the UM and UIM coverage.

The child filed an action for declaratory judgment to determine if she was entitled to stack coverage of the three separate vehicles under the single policy issued by Nationwide.

The trial court granted the injured child’s motion for summary judgment, finding that the UIM coverage for the three vehicles could be stacked in the amount of $300,000 and that the UIM coverage available to the injured child was identical to the coverage available to her parents, the owners of the policy.

The child settled with the tortfeasor for $270,000. The tortfeasor’s insurance policy, State Farm, paid $100,000. At issue was whether the defendant, Nationwide, was liable for the remaining $170,000.


Nationwide contended that the child is not entitled to stack coverage because (1) the tortfeasor’s vehicle did not qualify as an underinsured vehicle under Nationwide’s policy nor under G.S. § 20-279.21(b)(4), and (2) the injured child was not the policy owner and thus was not entitled to stack.

However, the Court of Appeals majority rejected Nationwide’s argument on both counts.

Focusing only on the second issue, the court said that a distinction between a policy owner and a non-owner family member covered by the policy was not valid. Applying the rule of Sutton, which allows interpolicy and intrapolicy stacking of UIM coverage, the majority said that an insured injured party is included as a person insured.

‘Although the plaintiff in Sutton was the owner of the insured vehicles, the Court’s holding in Sutton is that the benefits contemplated under the applicable statutory provisions in N.C. Gen. Stat. § 20-279.21(b)(4) flow to the insured injured party. (Emphasis supplied).’

Because the injured girl was a household and family member at the time of the accident, she was included under the policy as a person insured, the court ruled.


While Judge Greene agreed that the tortfeasor’s vehicle did qualify as an underinsured vehicle for the purposes of stacking coverage, he disagreed with the holding that the non-owner family member is entitled to such stacking coverage.

Judge Greene cited Smith v. Nationwide Mutual Insurance Co. (North Carolina Lawyers Weekly No. NS228 – 31 pages; see February 18, 1991 Lawyers Weekly, page 1 story) for his analysis. The Smith court allowed stacking of UIM coverages for a family member where the family member was covered by more than one policy issued to the named insured. Greene pointed out that the injured party here was covered by only a single policy.

Greene further argued that the controlling statute, G.S. § 20.279.21(b)(4), allows only an owner to stack UIM coverage.

Threshold Issue Rejected

Defense attorney Paul D. Coates was disappointed that the court apparently rejected what he termed as the threshold issue, which had been raised in Polk v. North Carolina Farm Bureau Mutual Insurance Co. (North Carolina Lawyers Weekly No. NS0600 – 1 Page; see May 20, 1991 Lawyers Weekly, page 1 story).

Coates said that in Polk the Supreme Court left open the question as to when a vehicle is underinsured for the purposes of stacking UIM coverages.

‘When you have a policy of UIM coverage and a policy of liability coverage equal to the UIM coverage, do you find no UIM coverage to stack because the policy coverages are equal, or do you stack first and then reduce the liability coverage?’ he asked. ‘We were arguing that in this case liability coverage was equal to UIM coverage, and that there was no UIM coverage to stack.’

Plaintiff’s attorney Clayton M. Custer agreed that the court had not really addressed the issue raised in Polk.

‘There’s some question as to where the law stands because of Polk,’ he commented.

Custer noted that Nationwide does not have an automatic right of appeal on this issue of whether the vehicle was an underinsured vehicle for the purposes of stacking because the court was in agreement on the point.

‘But the Supreme Court can address that issue on its own if it wants to,’ he said.

Final Word?

Coates also took issue with the court’s ruling on the main issue ‘ the question of who is entitled to stack ‘ and thus expects to file an appeal.

‘The statute specifically defines who an owner is,’ he said. ‘The statute only allows an owner to stack. The daughter was not an owner under the definition contained in the statute.’

Custer, who was pleased with the decision, nevertheless agreed that the Supreme Court needs to address the issue of who is entitled to stack coverages.

‘The issue particularly needs to be addressed in a situation such as this where you have a minor who can’t purchase insurance for herself,’ he said. ‘If Judge Greene’s dissent is adopted, a minor never will be entitled to full underinsured motorist coverage. The minor can’t be an owner of a vehicle or the insurance policy. She’ll never be an owner and thus never entitled to stack coverage. She’ll never be able to have full protection.’

Custer said some resolution from the Supreme Court is necessary as well because of the issue’s importance to the insurance industry. He pointed out that insurance companies are raising rates because courts are allowing coverages to be stacked.

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