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Insurance – Auto – UIM – First Impression – Judgments – Setoff – Subrogation Waiver

Hairston v. Harward (Lawyers Weekly No. 011-331-17, 20 pp.) (Donna Stroud, J.) (Robert Hunter Jr., J., dissenting) Appealed from Davidson County Superior Court (Joseph Crosswhite, J.) N.C. App.

Holding: After a $263,000 jury verdict in plaintiff’s favor, plaintiff’s underinsured motorist carrier paid plaintiff $145,000 and abandoned its right to subrogation. Under these circumstances, defendant is entitled to a $145,000 setoff.

We affirm the trial court’s order allowing the setoff.

In addition to the $145,000 UIM payment, plaintiff received $97,000 from defendant’s liability carrier. After the trial court allowed defendant a setoff, defendant paid plaintiff $46,669.92.

Plaintiff argues that UIM benefits are a collateral source, so defendant cannot reduce his tort liability for those benefits received from plaintiff’s UIM carrier. But the collateral source rule is not relevant to the issue presented here, since there is no question regarding evidence presented at the trial. Rather, the issue is the proper sources of payment of the jury verdict and the allocation of the liability among defendant’s liability insurer, plaintiff’s UIM carrier, and defendant.

In Wood v. Nunnery, 222 N.C. App. 303, 730 S.E.2d 222 (2012), this court said the reason the defendant therein could not receive a credit for the UIM carrier’s payment was that the UIM carrier still had a statutory right of subrogation against the plaintiff.

Here, the UIM carrier waived its right to subrogation in its settlement agreement with plaintiff, so the same argument would not apply. Unlike the UIM carrier in Wood, the UIM carrier here no longer has a right to subrogation, so the amount is final and will not change in the future.

The issue of whether UIM coverage should be credited against payments made on a tort judgment when subrogation and the right of reimbursement have been waived is an issue this court has not explicitly addressed. But based on Wood and other prior decisions, we hold that the trial court did not err when it allowed defendant to credit the UIM carrier’s payment towards the tort judgment amount.

Affirmed.

Dissent

(Hunter Jr., J.) The jury’s verdict was based on defendant’s negligence and was a tort recovery. The liability of the UIM carrier is based in contract, not in tort. Defendant’s tort liability is a separate entity from the UIM carrier’s contractual obligation.

The UIM carrier waived its statutory right of recovery. This action affects only the UIM carrier. Its agreement to waive subrogation from plaintiff does not bar plaintiff’s right to seek satisfaction of the judgment against defendant.

Nothing in G.S. § 20-279.21(b)(4) provides plaintiff with a “double recovery” in this case just because the UIM carrier abandoned its right to recovery. The fact that the UIM carrier elected not to pursue its legal right to subrogation is immaterial to plaintiff’s right to have his judgment against defendant satisfied by defendant. To apply plaintiff’s UIM benefits as a credit against the judgment results in an improper windfall for defendant.


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