Bray v. North Carolina Farm Bureau Mut. Ins. Co.

• Decision Date: 06 October 1995
• Docket Number: No. 401PA94,401PA94
• Citation: 462 S.E.2d 650,341 N.C. 678
• Court: North Carolina Supreme Court
• Parties: Phyllis Tant BRAY and Husband, Wilbur Glover Bray v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY.

Page 650

462 S.E.2d 650

341 N.C. 678

Phyllis Tant BRAY and Husband, Wilbur Glover Bray v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY.

No. 401PA94.

Supreme Court of North Carolina.

Oct. 6, 1995.

Law Offices of G. Henry Temple, Jr. by G. Henry Temple, Jr., Kimberly W. Rabren, and Laura C. Brennan, Raleigh, for plaintiff-appellees and -appellants.

Poyner & Spruill, L.L.P. by George L. Simpson, III, and Randall R. Adams, Rocky Mount, for defendant-appellee and -appellant.

FRYE, Justice.

Plaintiff Wilbur Glover Bray purchased a personal automobile policy for his 1985 Nissan automobile from Allstate Insurance Company (Allstate), which provided uninsured motorist (UM) coverage in the amount of $25,000 per person/$50,000 per accident and medical payments coverage of $500. Mr. Bray also purchased two business insurance policies--an automobile policy and a garage policy--from defendant North Carolina Farm Bureau Mutual Insurance Company (Farm Bureau) for his automobile repair business. The two policies each provided liability coverage up to $300,000 per person/per accident.

On 10 July 1990, an automobile driven by Stacy Katherine Gold struck the Nissan automobile owned by plaintiff Wilbur Bray and driven by his wife, plaintiff Phyllis Tant Bray. Mrs. Bray was injured in the accident. It is undisputed that Ms. Gold's negligence was the sole proximate cause of the accident and that Ms. Gold was an uninsured motorist.

Plaintiffs brought an action against Ms. Gold seeking to recover damages for Mrs. Bray's personal injuries and Mr. Bray's loss of consortium. Plaintiffs served Allstate and Farm Bureau as their UM carriers pursuant to N.C.G.S. § 20-279.21(b)(3)(a), and both insurance companies filed answers in Ms. Gold's name. Allstate subsequently paid Mrs. Bray its $25,000 UM policy limit and its $500 medical payments limit, and Mrs. Bray signed a release in favor of Allstate which preserved her right to seek further recovery against Ms. Gold and Farm Bureau. At trial, Farm Bureau stipulated Ms. Gold's liability and defended solely on the issue of damages. The jury returned a verdict against Ms. Gold awarding $285,000 to Mrs. Bray and $15,000 to Mr. Bray. The trial court entered judgment on the verdict and assessed costs against Farm Bureau.

Plaintiffs then brought this action against Farm Bureau seeking to enforce the judgment under the UM provisions in Mr. Bray's two business insurance policies. Plaintiffs also alleged in their complaint that Farm Bureau had committed unfair trade practices and asked for punitive damages. Plaintiffs moved for partial summary judgment, alleging that they were entitled to $274,500 plus costs and interest under the UM provisions of Mr. Bray's two business insurance policies after crediting their $300,000 judgment with the $25,500 paid to plaintiffs by Allstate. The trial court granted plaintiffs' motion and ruled under N.C.G.S. § 1A-1, Rule 54(b) that this order was a final judgment as to that claim. From this order, Farm Bureau appealed to the Court of Appeals.

The Court of Appeals held that Mrs. Bray was entitled to $25,000 UM coverage under Mr. Bray's garage policy pursuant to an endorsement to the policy. As to this issue, we granted Farm Bureau's petition for discretionary review. Farm Bureau contended that neither the policy nor the endorsement provided any UM coverage. In plaintiffs' response to Farm Bureau's petition, plaintiffs contended that the garage policy provided $300,000 UM coverage by virtue of N.C.G.S. § 20-279.21(b)(3). We conclude that discretionary review was improvidently allowed with respect to this issue. Our discussion of the remaining two issues in this case will therefore be limited to the business automobile policy and does not relate to the garage policy.

The Court of Appeals also held that the "family member/household-owned vehicle" exclusion for UM coverage in Mr. Bray's business automobile policy was repugnant to the purpose of UM and underinsured motorist (UIM) coverage and was therefore invalid. We agree and affirm the Court of Appeals as to this issue.

The Court of Appeals further held that Mr. Bray's business automobile policy provided only $25,000 UM coverage to Mrs. Bray since such coverage was limited to the statutory minimum of $25,000 per person/$50,000 per accident on the grounds that coverage beyond the statutory minimum was "voluntary" and governed by the terms of the policy, which included the "family-owned vehicle" exclusion. We reverse the Court of Appeals on this issue and hold that Mrs. Bray is entitled to $300,000 UM coverage under the business automobile policy.

Defendant contends that the Court of Appeals erred in holding that the "family member/household-owned vehicle" exclusion for UM coverage in the business automobile insurance policy issued to plaintiff husband is repugnant to the purpose of UM and UIM coverage and is therefore invalid.

"When examining cases to determine whether insurance coverage is provided by a particular automobile liability insurance policy careful attention must be given to the type of coverage, the relevant statutory provisions, and the terms of the policy." Smith v. Nationwide Mut. Ins. Co., 328 N.C. 139, 142, 400 S.E.2d 44, 47, reh'g denied, 328 N.C. 577, 403 S.E.2d 514 (1991). In the present case, the type of coverage at issue is UM coverage. The business automobile policy in question, which was issued by Farm Bureau to Mr. Bray, included UM coverage. The relevant statute at the time of the automobile accident is N.C.G.S. § 20-279.21(b)(3) (Supp.1988), supplemented by other provisions of § 20-279.21.

The UM section of the business automobile policy issued by Farm Bureau to Mr. Bray contains the following provisions:

A. COVERAGE

1. We will pay all sums the "insured" is legally entitled to recover as damages from the owner or driver of:

a. an "uninsured motor vehicle" because of "bodily injury" sustained by the "insured" and caused by an "accident"....

B. WHO IS AN INSURED

1. You.

2. If you are an individual, any "family member."

....

C. EXCLUSIONS

This coverage does not apply to:

....

4. "Bodily injury" sustained by you or any "family member" while "occupying" or struck by any vehicle owned by you or any "family member" that is not a covered "auto."

....

F. ADDITIONAL DEFINITIONS

The following are added to the DEFINITIONS Section:

1. "Family member" means a person related to you by blood, marriage, or adoption who is a resident of your household, including a ward or foster child.

The coverage section of the policy extends coverage to family members of individual insureds, while the exclusions section purports to take coverage away from a "family member" who sustains bodily injury while "occupying" or when struck by any vehicle that is not a covered "auto" and is owned by the individual insured or any "family member" of the insured. Thus, under the express terms of the business automobile policy, Mrs. Bray, as the wife of the individual insured, would be excluded from coverage under the circumstances of this case since she was occupying an automobile owned by Mr. Bray, the individual insured, and that automobile was not a covered "auto" under the policy.

However, when a statute is applicable to the terms of an insurance policy, the provisions of the statute become a part of the policy as if written into it. If the terms of the statute and the policy conflict, the statute prevails. Sutton v. Aetna Cas. & Sur. Co., 325 N.C. 259, 382 S.E.2d 759, reh'g denied, 325 N.C. 437, 384 S.E.2d 546 (1989); Nationwide Mut. Ins. Co. v. Chantos, 293 N.C. 431, 238 S.E.2d 597 (1977). At the time of the accident, N.C.G.S. § 20-279.21(b)(3) provided in relevant part:

For purposes of this section "persons insured" means the named insured and, while resident of the same household, the spouse of any such named insured and relatives of either, while in a motor vehicle or otherwise, and any person who uses with the consent, express or implied, of the named insured, the motor vehicle to which the policy applies and a guest in such motor vehicle to which the policy applies or the personal representative of any of the above or any other person or persons in lawful possession of such motor vehicle.

N.C.G.S. § 20-279.21(b)(3) (Supp.1988).

Under this statute there are two classes of "persons insured":

(1) the named insured and, while resident of the same household, the spouse of the named insured and relatives of either and (2) any person who uses with the consent, express or implied, of the named insured, the insured vehicle, and a guest in such vehicle.

Smith, 328 N.C. at 143, 400 S.E.2d at 47. Members of the first class are "persons insured" for the purposes of UM coverage regardless of whether the insured vehicle is involved in the insured's injuries. Id. Members of the second class are "persons insured" only when the insured vehicle is involved in their injuries. Id.

Turning to the present case, the question becomes whether Mrs. Bray was a "person insured" of the first class under the UM provisions of N.C.G.S. § 20-279.21(b)(3). It is undisputed that Mr. Bray is the named insured under the Farm Bureau business automobile policy. It is also undisputed that Mrs. Bray is the spouse of Mr. Bray and that they reside in the same household. Therefore, Mrs. Bray was a "person insured" of the first class under the UM statute.

As a person insured of the first class, Mrs. Bray was entitled to UM benefits under Mr. Bray's business automobile policy whether she was struck by an uninsured motor vehicle while riding in an insured vehicle, or on a motorcycle, or just walking down the street. Bass v. N.C. Farm Bureau Mut. Ins. Co., 332 N.C. 109, 418 S.E.2d 221 (1992). Thus, under subsection (b)(3) of N.C.G.S. § 20-279.21, Mrs. Bray is a person insured of the first class without regard to whether she was an occupant of any vehicle.

The family member/household-owned vehicle exclusion attempts to limit...