Gray v. NORTH CAROLINA INS. UNDERWRITING

• Decision Date: 19 January 1999
• Docket Number: No. COA97-1321.,COA97-1321.
• Citation: 132 NC App. 63,510 S.E.2d 396
• Court: North Carolina Court of Appeals
• Parties: Jack S. GRAY and Mary B. Gray t/a Tower Circle Motel, Plaintiffs, v. NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION, Defendant.

510 S.E.2d 396

132 NC App. 63

Jack S. GRAY and Mary B. Gray t/a Tower Circle Motel, Plaintiffs, v. NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION, Defendant.

No. COA97-1321.

Court of Appeals of North Carolina.

January 19, 1999.

Vandeventer, Black, Meredith & Martin, L.L.P., by Norman W. Shearin, Jr., Kitty Hawk, for plaintiffs-appellants.

Cranfill, Sumner & Hartzog, L.L.P., by William W. Pollock, Raleigh, for defendant-appellant.

HORTON, Judge.

On 31 August 1993, plaintiffs Jack S. Gray and Mary B. Gray (the Grays) traded as the Tower Circle Motel (the Motel). On that day, Hurricane Emily struck the Outer Banks and the Motel suffered wind damage. Insurance coverage for the Motel property was provided by an insurance policy issued by defendant North Carolina Underwriting Insurance Association to "Jack S. & Mary L. Gray T/A Tower Circle Motel." The policy provided coverage to the real property against wind and hail damage only. On 1 September 1993, the Grays filed a claim with defendant for "extensive wind damage."

During the adjustment process, defendant received a copy of a deed of trust from an attorney for Georgia B. Gray. Georgia Gray's late husband was the brother of plaintiff Jack S. Gray. The attorney advised defendant that Georgia B. Gray held a note and deed of trust on the Motel property and that plaintiffs were required, by the terms of that deed of trust, to obtain insurance on the Motel property for the benefit of Georgia B. Gray.

Plaintiffs requested a cash advance during the adjustment process. In accordance with its long-standing policy and on advice of counsel, defendant issued a joint check on 21 October 1993 in the amount of $25,000.00 to plaintiffs and Georgia B. Gray as an advance. Plaintiffs returned the check to defendant.

Defendant hired an adjuster to investigate plaintiffs' wind loss. The adjuster concluded that wind damage to the Motel property exceeded the policy limits. After a review of the adjuster's report and photographic evidence, defendant felt much of the damage to the motel property was due to flooding rather than wind. Defendant hired a second adjuster to investigate the loss. After consultation with a contractor, the second adjuster determined that the amount of damage to the motel property caused by wind was $60,821.51.

Plaintiffs' attorney informed defendant that they were dissatisfied with defendant's determination of damages, had retained their own engineer and contractor to inspect the property, and requested that they be allowed to submit their own reports to defendant for its consideration. Defendant agreed to consider any additional information submitted by plaintiffs. On several occasions, defendant requested the additional information from plaintiffs, but defendant received no additional information until the commencement of this action on 13 July 1994 in Dare County Superior Court.

Plaintiffs alleged that defendant's actions during the adjustment of the claim breached the insurance policy and also constituted unfair and deceptive trade practices. Plaintiffs also sought a declaratory judgment that they were entitled to receive any proceeds under the policy free of any interest the mortgage holder might have.

On 19 December 1996, a jury found that defendant had breached the policy of insurance; that plaintiffs had been injured by the breach in the amount of $256,256.91; that defendant had done one of five enumerated acts with regards to the claim under the policy, and had done so with such frequency as to indicate a general business practice; that plaintiffs were injured as a result of the business practice in the amount of $117,000.00; and plaintiffs were entitled to the proceeds of the policy free of the claim of any other person. In its amended judgment, the trial court trebled the award of $117,000.00 to $351,000.00, awarded prejudgment interest on all sums awarded, and taxed costs to defendant, including attorneys' fees in the sum of $117,000.00. Defendant appealed. Plaintiffs cross-appealed, contending the trial court should have trebled all damages awarded to plaintiffs and should have awarded attorneys' fees based on the total of all damages awarded by the jury.

The primary questions presented for decision by this Court are: (I) whether the trial court correctly charged the jury on the measure of damages for the loss of personal property; (II) whether plaintiffs introduced sufficient evidence of frequent willful acts by defendant which would support plaintiffs' claim for unfair and deceptive trade practices under Chapters 75 and 58 of the North Carolina General Statutes; and (III) whether the declaratory judgment claim was properly submitted to the jury.

I. Breach of Contract Claim

Plaintiffs alleged that the Motel real property and some personal property suffered wind-related damage from Hurricane Emily, and that defendant breached the policy of insurance by refusing to pay for such damages. The jury answered the breach of contract issue in the affirmative, and answered the damages issue resulting from that breach in the sum of $256,256.91. According to plaintiffs, that amount of damages is made up by adding "$247,973.76, representing the Crittenden assessment of covered loss to the structures damaged by the winds of Hurricane Emily and $8,283.15 in covered loss to personal property ($8,783.35 less $500.00 deductible)."

Defendant contends the claim for loss of personal property should not have been submitted to the jury since plaintiffs did not introduce evidence of the value of the personal property immediately prior to, and immediately after, the wind damage caused by the hurricane. Defendant's assignment of error states that the trial court erred in instructing the jury on the correct measure of damages. Although defendant now complains about the trial court's jury instructions on this issue, no objection or exception was taken to the trial court's instructions in this area following the charge to the jury when the trial court gave counsel an opportunity to do so. "By failing to call the trial court's attention to alleged errors in the jury charge, plaintiff has waived his right to appellate review." Donavant v. Hudspeth, 318 N.C. 1, 29, 347 S.E.2d 797, 814 (1986).

Further, we note that defendant did not move at the conclusion of the evidence for a directed verdict on this issue, nor did he make the argument as a part of his motion for judgment notwithstanding the verdict. Consequently, this assignment of error is overruled.

II. Unfair or Deceptive Trade Practices Claim

N.C. Gen.Stat. § 75-1.1 (1994) provides in part:

(a) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.

(b) For purposes of this section, "commerce" includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession.

N.C. Gen.Stat. § 75-16 (1994) provides:

If any person shall be injured or the business of any person, firm or corporation shall be broken up, destroyed or injured by reason of any act or thing done by any other person, firm or corporation in violation of the provisions of this Chapter, such person, firm or corporation so injured shall have a right of action on account of such injury done, and if damages are assessed in such case judgment shall be rendered in favor of the plaintiff and against the defendant for treble the amount fixed by the verdict.

Thus, N.C. Gen.Stat. § 75-16 allows a private cause of action for violation of N.C. Gen.Stat. § 75-1.1, and mandates the imposition of treble damages. Marshall v. Miller, 302 N.C. 539, 543, 276 S.E.2d 397, 400 (1981).

Unfair trade practices in the insurance business are regulated by the provisions of N.C. Gen.Stat. § 58-63 (1994 and Cum.Supp. 1997) (Unfair Trade Practices Act). The Unfair Trade Practices Act prohibits anyone from engaging "in any trade practice which is defined in this Article as or determined pursuant to this Article to be ... an unfair or deceptive act or practice in the business of insurance." N.C. Gen.Stat. § 58-63-10 (1994). The Act then sets out a listing of actions which are "defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance[.]" N.C. Gen.Stat. § 58-63-15 (1994).

N.C. Gen.Stat. § 58-63-15(11), which is entitled "Unfair Claim Settlement Practices," sets out, in fourteen subsections, various acts which constitute unfair trade practices when committed with "such frequency as to indicate a general business practice...." Id. "The relationship between the insurance statute and the more general unfair or deceptive trade practices statutes is that the latter provide a remedy in the nature of a private action for the former." Kron Medical Corp. v. Collier Cobb & Associates, 107 N.C.App. 331, 335, 420 S.E.2d 192, 194, disc. review denied, 333 N.C. 168, 424 S.E.2d 910 (1992). As a matter of law, a violation of N.C. Gen.Stat. § 58-63-15 is an unfair or deceptive trade practice in violation of N.C. Gen.Stat. § 75-1.1. Pearce v. American Defender Life Ins. Co., 316 N.C. 461, 470, 343 S.E.2d 174, 179 (1986) (construing N.C. Gen.Stat. § 58-54.4, the predecessor to N.C. Gen.Stat. § 58-63-15).

In the case sub judice, plaintiffs contend defendant violated the following sections of N.C. Gen.Stat. § 58-63-15(11):

b. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;

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f. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;

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h. Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled;

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1. Delaying the investigation or payment of claims by requiring an insured claimant... to submit a preliminary claim report and then requiring the

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