An auto insurer that had to pay on an underinsured motorist policy after a policyholder was hit by a drunken driver cannot seek contribution from the party hosts that allegedly served the drinks that rendered the driver intoxicated, the North Carolina Court of Appeals has ruled.
George Olsen was walking along the side of the road in Surf City in late 2013 when he was struck by a car driven by Skylar Wellington, who was charged with DWI. Wellington’s auto liability carrier offered the full limit of its liability coverage, and Olsen then negotiated a settlement with Nationwide, his UIM carrier, for $850,000.
Nationwide alleged that the party hosts, Timothy W. Smith and Timothy R. Smith, had negligently served Wellington alcohol and allowed her to drive, and the insurer sought contribution from the Smiths for a portion of their alleged common liability for Olsen’s injuries. A Duplin County Superior Court judge granted the Smiths’ motion to dismiss based on failure to state a claim, and Nationwide appealed.
On Nov. 21, the Court of Appeals unanimously affirmed, finding that a claim for contribution is only available among joint tortfeasors, and a plaintiff’s insurer is not a tortfeasor.
Judge Chris Dillon, writing for the court, said that state law allows a UIM insurer to fully participate in an action by its insured against an underinsured motorist, but the right to bring claims does not extend to a right to seek contribution against tortfeasors who may have contributed to causing the accident because neither the insurer nor its policyholders are themselves tortfeasors.
“Here, Nationwide, as the underinsured insurance carrier, has no right to assert a claim against the Smiths for contribution because its insured–the Plaintiffs–never had any right to assert such a claim,” Dillon wrote.
The court noted that its ruling did not restrict Nationwide’s ability to assert any properly preserved direct claim which could have been asserted by the Olsens.
Bob Cherry of Marshall, Williams & Gorham in Wilmington represented Nationwide. Cherry said that he believed that a ruling in his client’s favor was dictated by the North Carolina Supreme Court’s 2014 ruling in Lunsford v. Mills, in which the court held that a policyholder injured in an accident in which there is more than one at-fault driver may recover under his or her UIM policy before exhausting the liability insurance policies of all the at-fault drivers.
Cherry expressed surprise that the Court of Appeals did not mention Lunsford in its decision. He said that he and his clients had discussed the possibility of filing a petition for discretionary review.
“I think that’s what really confused me with their reasoning. Lunsford changed the whole landscape in terms of UIM coverage,” Cherry said. “We argued to the trial court that Lunsford not only permitted this, but also this was the best practice in North Carolina for an insurance company to take … I left like under Lunsford we had the right to do what we were doing, but the Court of Appeals said no.”
Don Clark of Goldsboro represented the Smiths. Clark declined to comment on the court’s ruling.
The six-page decision is Nationwide Property & Casualty Insurance Co. v. Smith (Lawyers Weekly No. 011-358-17). The full text of the opinion is available online at nclawyersweekly.com.
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