Drivers who’ve been hurt in a car accident may now hit a roadblock to “stacking” the full value of their underinsured motorist policies on top of any recovery they receive from the at-fault driver, after the North Carolina Supreme Court declined to follow a rule laid down by the state’s Court of Appeals more than 20 years ago.
Pamela and William Dana were hit by a drunk driver in Winston-Salem in 2016. Pamela’s injuries were fatal, and William’s serious. The vehicle that hit them was covered by an insurance policy issued by Integon National Insurance Company which provided bodily injury liability coverage with limits of up to $50,000 per person and $100,000 per accident. Integon tendered the full $100,000 to the Danas.
Pamela had carried UIM coverage with limits of $100,000 per person and $300,000 per accident. Her insurer, Farm Bureau, offered to pay the full per-person limit, but minus the $100,000 received from Integon. The Danas countered that they were entitled to the full $200,000 policy limits, on top of Integon’s contribution.
Farm Bureau sought a declaratory judgment, and in 2018 Forsyth County Superior Court Judge Eric C. Morgan entered summary judgment in favor of the Danas. In 2019, the state’s Court of Appeals affirmed, citing its 2000 decision in N.C. Farm Bureau Mut. Ins. Co., Inc. v. Gurley, which held that when an at-fault driver’s liability policy is exhausted due to a per-accident cap, the UIM policy limit will be the UIM policy’s per-accident cap.
But writing for the Supreme Court’s majority in a Dec. 17 opinion, Justice Samuel Ervin IV reversed, saying that the Danas’ recovery was limited by the per-person limits of the UIM policy. Although the relevant state law is intended to provide protection for innocent victims of motor vehicle negligence, that didn’t require interpreting the statute “to produce the maximum possible recovery for persons injured as a result of motor vehicle negligence regardless of any other consideration.”
“We are unable to conclude that the General Assembly intended N.C.G.S. § 20-279.21(b)(4) to be applied in a manner that fails to take into account the existence of multiple limits of liability and places an injured party in a more favorable position than he or she would have occupied had the tortfeasor been fully insured,” Ervin wrote.
Looking to the statute
The parties agreed that the at-fault driver’s vehicle qualified as an “underinsured highway vehicle” under the statute, given that the sum of his limits of liability was less than the limits of the UIM coverage applicable to the Dana’s vehicle and his liability was exhausted by Integon’s distribution.
Ervin turned to the statute for guidance, finding “a considerable amount of language that seems to bear upon the proper resolution of the issue that is before us in this case”: the calculation of the amount of coverage that was available to the Danas under the Farm Bureau policy.
Ervin paid particular attention to the “repeated references” to the issue of the limitation of liability, which made it “difficult for us to conclude that these expressions have no meaning, a result that, if
adopted by the Court, would allow insurers to have a significant degree of flexibility in drafting policies as they see fit.”
Attempting to parse the statutory language, Ervin noted the absence of the direct incorporation of per-person and per-accident limits and the use of both singular and plural language with regard to limits. Despite these challenges, he determined the statute incorporated, at least by implication, the traditional use of both per-person and per-accident liability limits rather than a “one size fits all” rule focusing upon a single limit that is applicable in all situations.
“We are unable to discern any reason why the General Assembly would have intended to preclude the use of both per-person and per-accident liability limitations in determining the maximum amount of underinsured motorist coverage that is available for payment to any individual claimant and believe that the most reasonable reading of the relevant statutory language provides for a common sense resolution of the dispute that is before us in this case, which is that, in cases involving multiple claimants, the total amount of underinsured motorist coverage available to those claimants (considering both the available liability coverage and the available underinsured motorist coverage) is limited by the per-accident limit and that the total amount of coverage available to any individual claimant is constrained by the per-person limit,” Ervin wrote.
Gurley in effect overruled
Ervin refused to be limited to making one formula – the per-person limit, the per-accident limit or the Gurley rule – controlling for all purposes. And while Gurley had been on the books for roughly two decades without having been disturbed by the General Assembly, he rejected the canon of legislative acquiescence.
“In view of the fact that applying the rule adopted in Gurley to the facts in this case would have exactly the effect that the rule in question was explicitly intended to avoid, it is difficult for us to afford any weight in the interpretive process to the General Assembly’s failure to modify the relevant provisions of N.C.G.S. § 20-279.21(b)(4) to account for the likelihood that Gurley would be applied in a mechanical manner to produce a result that Gurley itself appears to have been intended to avoid,” he wrote.
The facts of the case demonstrated that Gurley’s application can, in some instances, result in the payment of an amount that exceeds the per-person limit in cases involving multiple claimants.
“The relevant statutory language most readily supports the use of an approach that determines the amount to be paid to any particular claimant by treating the per-accident amount of underinsured motorist coverage as the total sum that is available to all of the claimants entitled to a share of the available underinsured motorist coverage, subject to the caveat that the amount of underinsured motorist coverage that is available to any individual claimant is limited to the per-person amount,” Ervin held.
Justice Anita Earls wrote a concurrence to provide further explanation as to why she was willing to overrule a settled precedent like Gurley, which she found inconsistent with the applicable statutes.
In a separate concurrence, Justice Philip Berger Jr., joined by Chief Justice Paul Newby and Justice Tamara Barringer, argued that the outcome was dictated by the terms of the insurance policy at issue, which stated that the per accident limit was subject to the per person limit.
Douglas Maynard of Maynard Law in Winston-Salem, who represented the Danas, said he wasn’t surprised by the outcome.
“Since we won at the trial court and the Court of Appeals, 3-0, when the Supreme Court decided to take the case it did cause me some pause,” Maynard said. “It’s interesting that there are two divergent opinions as to why my client officially lost.”
William F. Lipscomb of the Lipscomb Law Firm in Wilkesboro represented Farm Bureau and was “extremely pleased” with the decision.
“The takeaway for lawyers is that both the per-person and per-accident limits found in almost all motor vehicle insurance policies must be enforced,” Lipscomb said. “Neither limit can be exceeded. That allows multiple claimant UIM claims to be handled consistently with both insurance policy provisions and the North Carolina statutes.”
The decision essentially “fixed” the problem of the Gurley decision, Lipscomb said, which allowed the per-person UIM limit to be exceeded in certain claim situations, which was contrary to the insurance policy provisions.
“Now all insurance companies can handle these claims consistently with the insurance statutes.”
The 35-page decision is North Carolina Farm Bureau Mutual Insurance Co. v. Dana (Lawyers Weekly No. 010-156-21). The full text of the opinion is available online at nclawyersweekly.com.