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Arbitration – Motion to Compel – Insurance – Auto – UIM – Exhaustion of Liability Coverage

Editor’s Note: The following is a corrected version of a digest that appeared in our August 27, 2012 issue.

Creed v. Smith (Lawyers Weekly No. 12-07-0867, 11 pp.) (Linda McGee, J.) Appealed from Catawba County Superior Court. (Timothy S. Kindcaid, J.) N.C. App.

Holding:  The plaintiff’s motion to compel arbitration should have been granted because his insurance company’s liability limits had been “exhausted” for the purposes of G.S. § 20-279.21 and the underinsured motorist policies of the plaintiff and his employer.

The plaintiff was driving a vehicle owned by his employer in February 2008 when he was involved in a collision with another motorist. Because the plaintiff was driving in “the course and scope of his employment,” his employer’s underinsured motorist policy applied, as did a UIM policy the plaintiff held in addition to his regular car insurance.

The UIM carrier advanced the liability limits of $50,000, and the plaintiff returned the liability limits to the defendant.

The UIM carrier argued successfully to the trial court that the advance of the limits meant that the liability policy was not exhausted. The carrier’s argument concluded that without exhaustion, the UIM statute did not apply and the plaintiff had no right to arbitration. The trial court denied the motion to compel arbitration.

The parties had no dispute about the timing of the payment, notice of tender or demand for arbitration.  The only issue was whether the liability policy had been exhausted.

We reverse. The driver’s main car insurance coverage was exhausted when the full amount of the policy was tendered, not paid. The motion to compel arbitration with the UIM holders, then, was timely and should have been granted.


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