Baxley v. Nationwide Mut. Ins. Co.

• Decision Date: 02 July 1993
• Docket Number: Nos. 538PA91,226PA92,s. 538PA91
• Citation: 334 N.C. 1,430 S.E.2d 895
• Court: North Carolina Supreme Court
• Parties: , 23 A.L.R.5th 859 Della D. BAXLEY v. NATIONWIDE MUTUAL INSURANCE CO. (Two Cases).

Page 895

430 S.E.2d 895

334 N.C. 1, 23 A.L.R.5th 859

Della D. BAXLEY v. NATIONWIDE MUTUAL INSURANCE CO. (Two Cases).

Nos. 538PA91, 226PA92.

Supreme Court of North Carolina.

July 2, 1993.

Case Number 538PA91 on discretionary review of a decision of the Court of Appeals, 104 N.C.App. 419, 410 S.E.2d 12 (1991), reversing the judgment entered by Brewer, J., at the 8 June 1991 Session of Superior Court, Robeson County. Discretionary review allowed 4 March 1992. Heard in the Supreme Court 9 September 1992.

Case Number 226PA92 on discretionary review prior to determination by the Court of Appeals of the superseding judgment entered by Gore, J., on 11 May 1992, after a hearing at the 6 April 1992 Session of Superior Court, Robeson County. Discretionary review prior to determination was denied 16 July 1992, then allowed by supplemental order 24 November 1992 and consolidated for decision with case number 538PA91. Case number 226PA91 determined in the Supreme Court upon briefs filed with the Court of Appeals and without oral argument.

H. Mitchell Baker, III, P.A. by H. Mitchell Baker, and Brent D. Kiziah, Lumberton, for plaintiff-appellee.

LeBoeuf, Lamb, Leiby & MacRae by Peter M. Foley and Peter A. Kolbe, Raleigh, for defendant-appellant.

FRYE, Justice.

This case involves two issues. The first issue is whether the underinsured motorist On 17 January 1987, the automobile in which plaintiff, Ms. Della Baxley, was a passenger was struck by a vehicle driven by Ms. Anita Brown. Plaintiff suffered bodily injuries and incurred medical bills that have been stipulated to be in excess of $10,000. At the time of the accident, Allstate Insurance Company (Allstate) provided liability coverage for Ms. Brown in the amount of $25,000 per person. Defendant, Nationwide Insurance Company (Nationwide), provided plaintiff with UIM coverage in the amount of $100,000 per person and medical payments coverage up to $10,000.

(UIM) carrier in this case is obligated to pay prejudgment interest on the compensatory damages award of the jury in the underlying tort action by its insured against the tort-feasor. We conclude that the UIM carrier is obligated to pay prejudgment interest on the award up to its policy limits. The second issue is whether the UIM carrier is entitled to a credit under the UIM coverage section for a payment it made to its insured under the medical payments section of the insurance contract. We hold that under the terms of the policy the UIM carrier is not entitled to a credit for such payments.

On 22 August 1987, plaintiff filed a negligence action against the tort-feasor, Brown, seeking damages for the personal injuries plaintiff suffered in the automobile accident. On 11 September 1987, pursuant to the medical payments provision of plaintiff's policy issued by defendant Nationwide, plaintiff received from Nationwide the maximum medical payment of $10,000. Allstate paid $25,000, the policy limit under Brown's policy, to the clerk of court. In order to preserve its subrogation rights against Brown, Nationwide tendered $25,000, which was deposited with the clerk of court on 12 February 1988.

On 15 August 1988, Judge Robert H. Hobgood entered an order whereby Allstate, the liability carrier, and its attorney were released from any further obligation to defend Brown in the lawsuit between Baxley and Brown. Nationwide, plaintiff's UIM carrier, retained counsel for defendant Brown and assumed primary responsibility for her defense.

On 22 August 1988, the underlying negligence action between plaintiff and Brown proceeded to trial. The jury returned a compensatory damage verdict in favor of plaintiff in the amount of $100,000. On 14 September 1988, a judgment was entered against Brown for that amount plus costs and prejudgment interest from the date of the filing of the complaint, 20 August 1987, but excluding interest on the $25,000 that was tendered by Nationwide on 12 February 1988. On 13 December 1988, Nationwide, as plaintiff's UIM carrier, paid plaintiff an additional $65,000. Following the trial, the $25,000 that was paid by Allstate to the clerk of court was paid to Nationwide.

Plaintiff then filed a declaratory judgment action against Nationwide seeking a determination as to whether Nationwide was entitled to a credit against its UIM coverage limit for the $10,000 payment made under its medical payments coverage. Plaintiff also sought to have the court determine whether Nationwide, her UIM carrier, or Allstate, the tort-feasor's primary liability carrier, was liable to plaintiff for court costs, including prejudgment interest, in the original action.

On 8 June 1990, Superior Court Judge Coy E. Brewer entered the following judgment:

1. That there was a contract obligation between Plaintiff and Defendant Nationwide Mutual Insurance Company regarding medical payment coverage and that, since there was not [a] special jury verdict at the trial level regarding compensation for medical expenses incurred by the Plaintiff, Defendant Nationwide Mutual Insurance Company is not entitled to a credit for the medical payment made to Plaintiff under its underinsured motorist coverage. Therefore, Defendant Nationwide Mutual Insurance Company is obligated to pay an additional $10,000 to Plaintiff.

2. Defendant Nationwide Mutual Insurance Company as the underinsured motorist carrier, is not obligated to pay Plaintiff and defendant appealed to the Court of Appeals from the judgment.

any portion of the interest awarded to Plaintiff Della D. Baxley against Anita Brown ... because the obligation fails [sic] on the primary carrier, Allstate Insurance Company, and the original defendant, Anita Brown.

On the issue of prejudgment interest, the Court of Appeals held:

Here, as in Ensley [v. Nationwide Mut. Ins. Co., 80 N.C.App. 512, 342 S.E.2d 567, cert. denied, 318 N.C. 414, 349 S.E.2d 594 (1986) ], coverage is provided for damages which the plaintiff is legally entitled to recover from the owner or operator of the uninsured motor vehicle, and the plaintiff's claim is based in tort, despite the fact that recovery is derivative and conditional. The defendant assumed up to its policy limits the liability of the uninsured motorist for damages which the plaintiff is legally entitled to recover from the uninsured motorist. Ensley, 80 N.C.App. at 515, 342 S.E.2d at 569.

Baxley v. Nationwide Mut. Ins. Co., 104 N.C.App. at 424-25, 410 S.E.2d at 15. The Court of Appeals remanded the case to the superior court to apply the prejudgment interest provisions of N.C.G.S. § 24-5(b) to the $65,000 paid by Nationwide on 13 December 1988. Regarding the credit issue, the Court of Appeals observed that in the record on appeal the parties stipulated that the $10,000 medical expenses incurred by plaintiff and paid by Nationwide were reasonable, were proximately caused by Brown and were specifically included on a dollar for dollar basis in the judgment of $100,000 in the tort action. The Court of Appeals held that the parties may stipulate to such facts and that plaintiff is therefore bound by that stipulation. Id. at 422, 410 S.E.2d at 14.

On 4 March 1992, this Court allowed Nationwide's petition for discretionary review of the prejudgment interest issue. The issue regarding credit for the medical payments coverage that was remanded was heard before Judge William C. Gore, Jr., at the 6 April 1992 session of Civil Superior Court, Robeson County. The court entered judgment on 20 April 1992. On 11 May 1992 the trial court entered a superseding judgment, holding that Nationwide was not entitled to a credit for the payment made under the medical payments section of the policy. Nationwide appealed to the Court of Appeals. Plaintiff petitioned this Court for discretionary review prior to determination by the Court of Appeals. Plaintiff's petition was denied on 16 July 1992, then allowed by supplemental order on 24 November 1992. The supplemental order consolidated the two issues for decision and both are now before us. We note that the issue of Allstate's liability for prejudgment interest as the liability carrier is not before us.

I.

We first consider the prejudgment interest issue. It has been established by this Court that when a statute is applicable to the terms of a policy of insurance, the provisions of that statute become 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 prevail. Sutton v. Aetna Cas. & Surety Co., 325 N.C. 259, 263, 382 S.E.2d 759, 762, reh'g denied, 325 N.C. 437, 384 S.E.2d 546 (1989).

N.C.G.S. § 20-279.21, which defines "motor vehicle liability policy," is silent on the issue of prejudgment interest. We have previously held that the prejudgment interest statute, N.C.G.S. § 24-5, is not a part of the Financial Responsibility Act so as to be written into every liability policy. Sproles v. Greene, 329 N.C. 603, 613, 407 S.E.2d 497, 503 (1991). In so holding, we observed that, in the absence of a statutory provision, a liability insurer's obligation to pay interest in addition to its policy limits is governed by the language of the policy. Id. at 612-13, 407 S.E.2d at 502-03. This case is different in that the question raised by the parties is whether the UIM carrier, Nationwide, is obligated to pay pre-judgment interest up to its policy limits. We hold that under the terms of its policy it is so obligated. Because we find that the The contractual language that supports our holding is Nationwide's promise to pay, up to its UIM policy limit,

policy itself provides for such coverage, we do not reach the issue of whether the Financial Responsibility Act itself mandates such coverage within the policy limit.

damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of:

1. Bodily injury sustained by a covered person and caused by an accident; and

2....