by Christopher J. Culp
CHARLOTTE, NC – The North Carolina Supreme Court recently clarified what the term “limit of liability” means in UIM cases where there are multiple claimants. In N.C. Farm Bureau Mutual Insurance Co. v. Dana, 2021-NCSC-161, 866 S.E.2d 710 (2021), the Court reversed the North Carolina Court of Appeals and held 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. This decision expressly overrules the reasoning contained in the prior North Carolina Court of Appeals decision in N.C. Farm Bureau Mutual Insurance Co. v. Gurley, 139 N.C. App. 178, 532 S.E.2d 846 (2000) a case that has been relied upon for 20 years by UIM insurers.
Facts of Case
The facts of the case were that on February 3, 2016, Mr. Bronson, who was intoxicated, was driving in a southbound direction on Old Salisbury Road in Winston-Salem when the vehicle that he was operating entered the northbound lane and collided with a vehicle owned by Ms. Dana, resulting in serious injuries to Ms. Dana and Mr. Dana, who was a passenger in Ms. Dana’s vehicle. The injuries that Ms. Dana sustained ultimately proved fatal. Jessica Jones, a passenger in Mr. Bronson’s vehicle, was also killed in the accident. A vehicle owned and operated by Joshua Ryan Jeffries was damaged in the accident as well.
Lower Court Decision
Farm Bureau filed a declaratory judgment action to determine the UIM coverage available. At the time of the accident, Mr. Bronson’s vehicle was covered by a policy of automobile insurance that had been 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. In the trial court, Integon proposed to apportion the full amount of the available per-accident coverage as follows:
- William Dana $32,000
- Estate of Pamela Dana $43,750
- Estate of Jessica Jones $23,500
- Joshua Jeffries $750
- Total $100,000
At the time of the accident, Ms. Dana was insured under a policy of automobile liability insurance issued by Farm Bureau that included underinsured motorist coverage with limits of $100,000 per-person and $300,000 per-accident. Farm Bureau offered to pay the full per-person limit to both Mr. Dana and the Estate, less the amount that had been received from Integon’s liability coverage, resulting in the following distribution:
- $100,000 per-person underinsured limit
- -$32,000 Integon coverage
- $68,000 total underinsured payment
Estate of Pamela Dana
- $100,000 per-person underinsured limit
- -$43,750 Integon coverage
- $56,250 total underinsured payment
Mr. Dana argued that he and the Estate were entitled to the full amount of per-accident underinsured motorist coverage set out in the policy, less the amount of liability coverage that had been provided by Integon and the amount that had already been offered by Farm Bureau. As a result, Farm Bureau would be obligated to pay a total of $124,250 to the Danas under its own proposal, while it would be obligated to provide a total of $200,000 in underinsured motorist coverage to the Danas under the proposal that they submitted, which consisted of the $300,000 per-accident limit provided under the Farm Bureau policy less the $100,000 in liability coverage provided by Integon. As a result, the Danas claimed to be entitled to an additional $75,750 in underinsured motorist coverage over and above the amount that Farm Bureau had already tendered to them.
The trial court agreed with Dana and his interpretation of the coverage available pursuant to Gurley. The trial court entered summary judgment in favor of Dana, and Farm Bureau appealed the decision to the N.C. Court of Appeals.
Court of Appeals Decision
The Court of Appeals noted that, per Gurley, the Court should consider (1) the number of claimants seeking coverage under the UIM policy; and (2) whether the negligent driver’s liability policy was exhausted pursuant to a per-person or per-accident cap. 267 N.C. App. 42, 832 S.E.2d 501 (2019).
Gurley held that when more than one claimant is seeking UIM coverage, how the liability policy was exhausted will determine the UIM limit. Where the negligent driver’s liability policy is exhausted pursuant to the per-person cap, the UIM policy’s per-person cap will be the applicable limit. However, when the liability policy is exhausted pursuant to the per-accident cap, the applicable UIM limit will be the UIM policy’s per-accident cap. Gurley, 139 N.C. App. at 181).
The parties had stipulated that the Danas were entitled to collect some amount of underinsured motorist coverage. Since Bronson’s liability coverage was exhausted pursuant to the per-accident cap, the Court of Appeals held that “Gurley mandates [that] the [Danas] are collectively entitled to receive coverage pursuant to the per-accident cap of $300,000.” This resulted in the claimants receiving $75,750 additionally to the UIM benefits N.C. Farm Bureau tendered.
North Carolina Supreme Court Decision
The N.C. Supreme Court granted discretionary review of the case. After analyzing the statutory language, the Supreme Court reversed the Court of Appeals.
The underinsured motorist coverage that is made available pursuant to N.C.G.S. § 20-279.21(b)(4) applies “when, by reason of payment of judgment or settlement, all liability bonds or insurance policies providing coverage for bodily injury caused by the ownership, maintenance, or use of the underinsured vehicle have been exhausted.” N.C.G.S. § 20-279.21(b)(4);
The Supreme Court stated that “[w]e 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…” The Supreme Court concluded that where there are 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. In the case of the Danas, the total amount of underinsured coverage available to them collectively was set at the per-accident limit of $300,000, with neither claimant to receive more than the per-person limit of $100,000.
It should be noted that Gurley has been the law in North Carolina since 2000. The decision in Dana expressly overrules Gurley and any case relying on it. A person may not receive more than the per-person limit, and all claimants may not recover beyond the per-accident limit. When the number of claimants reflects these limits (e.g., two claimants to a 100/200 policy) then the analysis starts and ends with the per-person limit. When there are more than two claimants (e.g., three claimants to the same 100/200 policy) the per-occurrence cap becomes the limiting factor. Adjustors handling UIM claims need to be aware that the determination of UIM limits in cases involving multiple claimants is now governed by the Dana decision.
If you have questions concerning liability litigation claims and UIM coverage, feel free to contact me directly at (704)816-7656 or [email protected].