The proper calculation of underinsured motorist (UIM) coverage in a case involving both multiple underinsured tortfeasors and multiple UIM insurance policies is the difference between the total amount paid under all exhausted liability policies and the total limits of all applicable UIM policies, a unanimous panel of the North Carolina Court of Appeals has ruled in a matter of first impression.
In 2014, Vivian Tutterow was killed in a car accident. She was a passenger in a car driven by Pamela Crump. The accident involved a second vehicle, driven by Brian Hall.
Crump had an auto policy issued by Horace Mann with $100,000 per person liability limits and $100,000 per person UIM coverage. Hall had an auto policy issued by Nationwide with $100,000 per person liability limits.
Tutterow, as a passenger in Crump’s car, was covered under Crump’s $100,000 per person UIM coverage. Tutterow also had an auto policy issued by State Farm with $100,000 per person UIM coverage.
In 2015, Tutterow’s estate brought a wrongful death action against Crump, Hall and others. The parties stipulated that both Crump and Hall negligently caused the accident.
Horace Mann tendered the $100,000 limits of its liability policy on behalf of Crump; Nationwide tendered the same amount on behalf of Hall. No money was advanced under the UIM policies.
State Farm advanced $100,000 to Tutterow’s estate under its UIM policy while reserving its rights to recoup funds should the estate recover from Nationwide.
In 2019, the estate informed the UIM carriers that it reached a settlement with Hall that included a payment from Nationwide of the $100,000 limits of Hall’s liability policy. State Farm then requested that the estate reimburse the $100,000 it had advanced.
The funds were placed in escrow and the estate filed a declaratory judgment seeking a declaration of the UIM carriers’ coverage obligations and State Farm’s right to reimbursement. On cross motions for summary judgment, the trial court sided with the UIM carriers on the ground that the amount of UIM coverage was $0. The estate appealed.
A panel of the Court of Appeals affirmed in an opinion authored by Judge Richard Dietz.
“The trial court’s calculation follows the statute’s plain language and is consistent with the purpose of underinsured motorist coverage identified in our State’s case law,” he wrote. “We therefore affirm the trial court’s judgment.”
Unambiguous statutory language
Addressing the matter of first impression, Dietz began with the Motor Vehicle Safety and Financial Responsibility Act.
According to N.C. Gen. Stat. § 20-279.21(b)(4): “In any event, the limit of underinsured motorist coverage applicable to any claim is determined to be the difference between the amount paid to the claimant under the exhausted liability policy or policies and the limit of underinsured motorist coverage applicable to the motor vehicle involved in the accident. Furthermore, if a claimant is an insured under the underinsured motorist coverage on separate or additional policies, the limit of underinsured motorist coverage applicable to the claimant is the difference between the amount paid to the claimant under the exhausted liability policy or policies and the total limits of the claimant’s underinsured motorist coverages as determined by combining the highest limit available under each policy.”
The statutory language is unambiguous, Dietz found. While the first sentence was inapplicable to the case at hand (as it applied to scenarios in which the claimant is covered by only one UIM policy), the second sentence addressed a scenario in which the claimant is covered by more than one UIM policy.
“The use of the transitional word ‘furthermore’ indicates that this second sentence provides an additional factor or consideration that distinguishes it from the proceeding statement,” he wrote. “That additional consideration – meaning the thing that distinguishes the second sentence from the first – is the existence of multiple UIM policies that apply to the claimant. This is confirmed by the grammar of this second sentence, which refers to the ‘total limits of the claimant’s underinsured motorist coverages’ in the plural form, in contrast to the first sentence, which refers to the ‘limit of underinsured motorist coverage’ in the singular.”
In the scenario addressed by the second sentence of the statute, involving multiple applicable UIM policies, “the statute provides an unambiguous method to calculate the applicable limit of combined UIM coverage: it is the difference between the total amount paid under all exhausted liability policies and the total limits of all applicable UIM policies,” Dietz said.
Interpretation consistent with statutory purpose
The trial court properly applied the statutory provision, Dietz added.
“The court calculated the total amount paid under the exhausted liability policies as $200,000 and calculated the total limits of the claimant’s underinsured motorist coverages as $200,000,” he explained. “The court then determined that the total limits of UIM coverage is the difference between these two totals and, therefore, the ‘available UIM coverage is $0.’ This determination properly applied the statute’s plain language and is correct.”
Although the statute compelled this result, Dietz noted that this interpretation is also consistent with the purpose of the statute. UIM coverage serves as a safeguard, intended to put the insured in a position where total insurance coverage for injuries sustained in an automobile accident is no less than the amount of UIM coverage.
“Here, for example, the UIM carriers provided combined UIM coverage ensuring that, in the event of bodily injury or death in an auto accident, there would be at least $200,000 in available insurance coverage,” he wrote. “That is the amount of liability coverage provided in this case. Accordingly, we affirm the trial court’s entry of summary judgment in favor of the UIM carriers on this issue.”
The estate attempted to argue that the trial court’s order failed to acknowledge that State Farm waived its subrogation rights and was not entitled to reimbursement, but Dietz found that the statutory provision the estate relied upon was inapplicable.
“[W]hen the underlying liability insurers exhausted the limits of their two $100,000 policies by tendering the full limits, the UIM carriers had no duty to advance any payments because they owed nothing under their policies,” he said. “Because State Farm did not have any obligation to advance payment under its UIM policy, the statutory provision governing waiver of subrogation rights upon failure to timely advance payment does not apply.”
Judges Hunter Murphy and Darren Jackson joined the unanimous opinion.
Henry P. Van Hoy, II of Martin & Van Hoy in Mocksville represented the estate. While he was disappointed with the outcome, he appreciated the “clarity” from the appellate court on exactly how the statute should be interpreted.
“That way, we can bring it to the attention of our legislators to determine if the result reflects what the public policy of the state should be,” he said. “If the purpose of the statute is to compensate an injured party against UIM motorists and compensate them fully, then why give UIM carriers a benefit because there are more people at fault?”
Van Hoy noted that the decision of whether to appeal the case further “has not been fully resolved.”
Neither Charlotte attorney Jeffrey B. Kuykendal of McAngus, Goudelock & Courtie, who represented State Farm, nor Kara V. Bordman of Teague, Rotenstreich, Stanaland, Fox & Holt in Greensboro, who represented Horace Mann, responded to a request for comment.
The 11-page decision is Tutterow v. Hall (Lawyers Weekly No. 011-122-22). The full text of the opinion is available online at nclawyersweekly.com.