Sutton v. Aetna Cas. & Sur. Co.

• Decision Date: 06 September 1989
• Docket Number: No. 539PA88,539PA88
• Parties: Sherry S. SUTTON v. The AETNA CASUALTY & SURETY COMPANY.
• Court: North Carolina Supreme Court

Page 759

382 S.E.2d 759

325 N.C. 259

Sherry S. SUTTON v. The AETNA CASUALTY & SURETY COMPANY.

No. 539PA88.

Supreme Court of North Carolina.

Sept. 6, 1989.

On discretionary review pursuant to N.C.G.S. § 7A-31 prior to a determination by the Court of Appeals of a declaratory judgment for defendant entered by Llewellyn, J., at the 6 August 1988 Session of Superior Court in New Hanover County. Heard in the Supreme Court on 14 March 1989.

Yow, Yow, Culbreth, Fox & Pennington by Stephen E. Culbreth and Ralph S. Pennington, Wilmington, for plaintiff-appellant.

Marshall, Williams, Gorham & Brawley by Ronald H. Woodruff, Wilmington, for defendant-appellee.

EXUM, Chief Justice.

The question presented is what is the effect, if any, of N.C.G.S. § 20-279.21(b)(4) on an insurer's obligation to aggregate, or stack, underinsured motorist (UIM) coverages for several vehicles all contained within a single automobile insurance policy.

Plaintiff seeks a declaratory judgment that defendant is obligated to stack the limits of liability of UIM coverages for each of four separate vehicles listed in two separate policies issued by defendant and upon which plaintiff has paid a separate premium for each coverage. The trial court awarded judgment for defendant. It ruled:

The Plaintiff is not entitled to aggregate or stack underinsured coverage provided in the policies of insurance issued by the Defendant to the Plaintiff based on the number of vehicles listed in each policy. The limit of liability for such underinsured coverage for any one person is established by the terms of the applicable policies without regard to the number of vehicles listed in said policies or the premiums paid on said policies.

On discretionary review in this Court, plaintiff contends the trial court erred in holding she was not entitled to stack, or aggregate, separate UIM coverages, for each of which she had paid a separate and distinct premium, on the ground the coverages were contained in a single policy. We agree and reverse the judgment of the trial court.

I.

The parties stipulated to these facts: Defendant issued two policies of insurance to plaintiff. The policies were numbered 225SX10699637PCA (Policy A) and 225SX17972951PCA (Policy B). In addition to basic bodily injury liability coverage of $50,000 per person for each of two vehicles, a Buick Regal and a Chevrolet Camaro, Policy A provided $50,000 per person UIM bodily injury coverage on each of these vehicles. The premium charged for this UIM coverage was $3.00 per vehicle. In addition to basic bodily injury liability coverage of $100,000 per person for each of two vehicles, a Chevrolet pickup truck and a Plymouth, Policy B provided $100,000 per person UIM bodily injury coverage on each of these vehicles. The premium charged for this UIM coverage was $6.00 for the Plymouth and $3.00 for the pickup truck.

As we understand the stipulations both Policy A and Policy B contained the following provision:

The limit of bodily injury liability shown in the Declarations for "each person", for Uninsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one auto accident. Subject to this limit for "each person" the limit of bodily injury liability shown in the Declarations for "each accident" for Uninsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury resulting from any one accident. The limit of property damage liability shown in the Declarations for "each accident" for Uninsured Motorists Coverage is our maximum limit of liability for all damages to all property resulting from any one accident. This is the most we will pay for bodily injury and property damage regardless of the number of:

1. Covered persons;

2. Claims made;

3. Vehicles or premiums shown in the Declarations; or

4. Vehicles involved in the accident.

On 31 May 1986 plaintiff was involved in an automobile accident when the vehicle she was operating was struck by a vehicle operated by Anthony V. Genesio, deceased. Plaintiff filed suit against the estate of Genesio seeking compensatory damages. The Genesio vehicle was insured by Nationwide Insurance Company (Nationwide) and had automobile personal injury liability limits of $50,000 per person. Nationwide petitioned the court for and received authority to pay its entire $50,000 coverage into court for the benefit of plaintiff. With plaintiff alleging in excess of $70,000 in medical expenses and the inability to return to her employment, she brought this declaratory judgment action which forms the basis of this appeal.

N.C.G.S. § 20-279.21(b)(4) of the Motor Vehicle Safety and Financial Responsibility Act of 1953, as amended effective 1 October 1985, provides in relevant part:

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 pursuant to the exhausted liability policy and the total limits of the owner's underinsured motorist coverages provided in the owner's policies of insurance; it being the intent of this paragraph to provide to the owner, in instances where more than one policy may apply, the benefit of all limits of liability of underinsured motorist coverage under all such policies: Provided that this paragraph shall apply only to nonfleet private passenger motor vehicle insurance as defined in G.S. 58-131.36(9) and (10).

[Emphasis supplied.]

Plaintiff contends her policies provide a limit of UIM coverage totaling $300,000. Her argument is that N.C.G.S. § 20-279.21(b)(4) controls and that it requires that she be permitted to stack, or aggregate, the UIM coverages for each vehicle in both policies. The result under this position would be that she is entitled to $50,000 UIM coverage for each of the two vehicles for which this coverage is provided in Policy A and to $100,000 UIM coverage for each of the two vehicles for which this coverage is provided in Policy B. Thus Policy A would provide $100,000 UIM coverage and Policy B, $200,000 UIM coverage.

The questions before us are first, whether the statute prevails over the policy language and second, if it does, whether the statute should be interpreted as plaintiff contends.

II.

We are confident the statute prevails over the language of the policy.

This Court has established the principle that when a statute is applicable to the terms of a policy of insurance, the provisions of that statute become part of the terms of the policy to the same extent as if they were written in it, and if the terms of the policy conflict with the statute, the provisions of the statute will prevail. Insurance Co. v. Chantos, 293 N.C. 431, 441, 238 S.E.2d 597, 604 (1977); see e.g., Insurance Co. v. Casualty Co., 283 N.C. 87, 91, 194 S.E.2d 834, 837 (1973).

We conclude further that the statute, as plaintiff contends, requires that the UIM coverages for each vehicle in a single policy and all such coverages in both policies be aggregated.

UIM insurance in North Carolina is an outgrowth from and development of uninsured motorist insurance. J. Snyder, Jr., N.C. Automobile Insurance Law, § 30-1 (1988). Uninsured motorist insurance allows a recovery for an injured party where a tortfeasor has no liability insurance. Id. By comparison, UIM coverage allows the insured to recover when the tortfeasor has insurance, but his coverage is in an amount insufficient to compensate fully the injured party. Id. N.C.G.S. § 20-279.21(b)(4) requires that policies of automobile liability insurance which are written at limits that exceed minimum statutory limits and which afford uninsured motorist coverage must provide UIM coverage unless "any insured named in the policy rejects the" UIM coverage. ¹ This provision also requires that UIM coverage must be in an amount equal to the policy limits for automobile bodily injury liability as specified in the owner's policy. N.C.G.S. § 20-279.21(b)(4) (1983 & Cum. Supp. 1988).

Though this Court has never addressed the issue, there has been considerable litigation in other jurisdictions involving the question of whether an insured should be allowed intrapolicy stacking of uninsured motorist coverages. See J. Snyder, Jr., N.C. Automobile Insurance Law § 33-1 (1988); 2 A. Widiss, Uninsured and Underinsured Motorist Insurance § 40.1 (2d ed. 1987); Annot. "Combining or 'Stacking' Uninsured Motorist Coverages Provided in Single Policy Applicable to Different Vehicles of Individual Insured," 23 A.L.R. 4th 12 (1983). Given the close relationship between uninsured and underinsured coverages the principles applicable to uninsured motorist intrapolicy stacking should be equally applicable to factual situations giving rise to underinsured intrapolicy stacking questions. See J. Snyder, Jr., N.C. Automobile Insurance Law § 33-1 (1988); 2 A. Widiss, Uninsured and Underinsured Motorist Insurance § 40.1 (2d ed. 1987). The question of the validity of intrapolicy stacking of uninsured motorist coverages is "unsettled." Annot. "Combining or 'Stacking' Uninsured Motorist Coverages Provided in Single Policy Applicable to Different Vehicles of Individual Insured," 23 A.L.R. 4th 12 (1983). In determining whether intrapolicy stacking should be allowed courts have considered a variety of factors including: The requirements of state statutes; the policy language; and the payment of separate premiums. Annot. "Combining or 'Stacking' Uninsured Motorist Coverages Provided in Single Policy Applicable to Different Vehicles of Individual Insured," 23 A.L.R. 4th 12, 16 (1983). In general, the determination of this issue "requires a close examination of case law, statutory provisions, and applicable insurance clauses." J. Snyder, Jr., N.C. Automobile Insurance Law § 33-1 (1988).

Having concluded that in North Carolina N.C.G.S. § 20-279.21(b)(4) governs the question, we proceed to interpret that provision.

"The cardinal principle of...