Brown v. Lumbermens Mut. Cas. Co.

• Decision Date: 15 May 1974
• Docket Number: No. 48,48
• Parties: B. Walton BROWN, Administrator of the Estate of Ronald Wilson Walker v. LUMBERMENS MUTUAL CASUALTY COMPANY.
• Court: North Carolina Supreme Court

Page 829

204 S.E.2d 829

285 N.C. 313

B. Walton BROWN, Administrator of the Estate of Ronald Wilson Walker v. LUMBERMENS MUTUAL CASUALTY COMPANY.

No. 48.

Supreme Court of North Carolina.

May 15, 1974.

Ottway Burton, Asheboro, for plaintiff appellant.

Henson, Donahue & Elrod, by Joseph E. Elrod, III, Greensboro, for defendant appellee.

Robert Morgan, Atty. Gen., and Charles A. Lloyd, Asst. Atty. Gen., Randolph, for John Randolph Ingram, Comm. of Ins., amicus curiae.

SHARP, Justice:

This appeal presents one question: Is an action against an insurer, brought under the uninsured motorist insurance endorsement to an automobile liability insurance policy to recover damages for a death caused by the wrongful act of an uninsured motorist, subject to the two-year statute of limitations prescribed for the commencement of the tort action for wrongful death, G.S. § 1--53(4) or the three-year limitation prescribed for actions on contract, G.S. § 1--52(1)?

Neither the statute relating to uninsured motorist insurance nor the policy endorsement specifies the period of time within which such an action must be commenced. Whether that period is fixed by the statute of limitations governing actions on contract or the applicable wrongful death statute is a question which has not heretofore been presented to this Court, and it has not been decided in most jurisdictions. Thus far, California seems to be the only state to have clarified the problem by legislation which specifies a statute of limitations against the insured under the uninsured motorist coverage. Widiss, A Guide to Uninsured Motorist Coverage, § 2.25 (1969). See Id., 1973 Supplement.

To answer the question presented, this Court must construe the phrase 'legally entitled to recover,' which appears in defendant's undertaking. Were the defendant in this action the motorist whose wrong allegedly caused intestate's death, his plea of the two-year statute of limitations would be an absolute defense, clearly entitling him to summary judgment dismissing the action.

Plaintiff's argument that the three-year contract limitation is applicable to this action are the following:

(1) The two-year period now prescribed for the commencement of a wrongful death action is not a condition precedent annexed to the cause of action as was the one-year limitation specified in G.S. § 28--173 prior to its amendment in 1951. It is a statute of limitations. (See Country Mutual Insurance Co. v. National Bank of Decatur, 109 Ill.App.2d 133, 248 N.E.2d 299 (1969), and Franco v. Allstate Insurance Company, Tex.Civ.App., 496 S.W.2d 150 (1973), for a discussion of this situation.) The lapse of two years, therefore, does not discharge the defendant's liability or affect its legal obligation to pay pursuant to its contract; it merely bars recovery when properly pleaded. Williams v. Thompson, 227 N.C. 166, 41 S.E.2d 359 (1947).

(2) The phrase 'legally entitled to recover' denotes fault and means only that plaintiff must be able to establish negligence on the part of the uninsured motorist which proximately caused the death of plaintiff's intestate. Since defendant remains 'legally liable,' damages may be recovered against it in a suit on its policy endorsement instituted within three years of intestate's death.

(3) Even though the uninsured motorist's tortious conduct gives rise to plaintiff's rights under the policy, plaintiff's claim against defendant is based upon the insurance contract; therefore, the three-year contract limitation should apply.

(4) The intent of uninsured motorist endorsement, namely, to afford protection to innocent victims of uninsured motorists, should resolve the issue in favor of the longer statute of limitations. Notwithstanding the necessity that the insured establish the tort liability of the uninsured motorist, defendant's obligation to plaintiff arises from its contract of insurance and coverage may reasonably be construed to continue even after the insured's remedy in tort is barred. (See 48 Calif.L.Rev. 516, 531 (1960).)

Defendant's arguments that the two-year statute of limitations specifically governing actions for wrongful death is applicable are summarized as follows:

(1) The right of action for wrongful death is created by G.S. 28--173. To establish his right to recover from defendant insurer plaintiff must prove that the tortious conduct of an uninsured motorist proximately caused his intestate's death. Thus, albeit plaintiff's right to proceed against defendant derives from the policy endorsement, this is actually a tort action in which the insurer is a substitute defendant for the uninsured motorist, its liability being dependent upon his.

(2) The purpose of the uninsured motorist endorsement is to put an insured (or his personal representative) who is the innocent victim of the negligence of an uninsured motorist, in the same position as one who has been injured by the negligence of an insured motorist. There is no reason why an insured should have a greater length of time to proceed against his insurance company than he had against the tort-feasor who injured him.

(3) Having waited more than two years to institute his action for wrongful death, upon defendant's plea of the applicable statute, G.S. § 1--53(4), plaintiff was no longer 'legally entitled to recover' from the uninsured motorist.

(4) The application of the three-year contract statute of limitations could extinguish the insurer's right of subrogation against a known uninsured motorist. Where the right to subrogation exists 'and where the uninsured motorist's identity is known, suit against the insurer after the tort statute of limitations has run would in effect make the insurance company the liability insurer of the uninsured motorist. . . . This situation could foster collusion between the uninsured motorist and the insured in that the insured could delay maintaining his claim until after the tort statute of limitations had run. This would bar any recourse against the uninsured motorist for his negligence, since the tort statute of limitations would bar the claim against the uninsured motorist.' Cox, Uninsured Motorist Coverage, 34 Mo.L.Rev., 1, 36 (1969). But see 14 U. of Fla.L.Rev. 455, 472 (1962); 48 Calif.L.Rev. 516, 531 (1960). (Since the theory of plaintiff's case is that the death of his intestate was caused by the negligence of an unknown hit-and-run driver, the contention that to apply the three-year contract limitation would bar defendant's claim against the uninsured motorist has no relevancy here.)

The argument generally accepted by the courts of last resort which have considered the question is that 'despite the necessity that the insured established that a tort was committed by the uninsured motorist, and that injury resulted, the action is nevertheless one based upon the insurance contract, on which the liability of the insurer depends, and that the contract limitation period therefore controls.' Annot., 28 A.L.R.3d 580, 584--585 (1969); Widiss, A Guide to Uninsured Motorist Coverage, § 2.25 (1969 and 1973 Supp.) Our research has produced the following decisions by courts of last resort which support this view:

Schlief v. Hardware Dealer's Mutual Fire Insurance Company, 218 Tenn. 489, 404 S.W.2d 490 (1966); DeLuca v. Motor Vehicle Accident Indemnification Corp., 17 N.Y.2d 76, 268 N.Y.S.2d 289, 215 N.E.2d 482 (1966); Booth v. Firemen's Fund Insurance Company, 253 La. 521, 218 So.2d 580 (1968); Sahloff v. Western Casualty and Surety Co., 45 Wis.2d 60, 171 N.W.2d 914 (1969); Turlay v. Farmer's Insurance Exchange, 259 Or. 612, 488 P.2d 406 (1971); Pickering v. American Employers Insurance Co., 109 R.I. 143, 282 A.2d 584 (1971).

See also the following cases from trial and intermediate appellate courts:

Hartford Accident & Indemnity Co. v. Mason, 210 So.2d 474 (Fla.App.1968); Schultz v. Allstate Insurance Co., 17 Ohio Misc. 83, 244 N.E.2d 546 (Court of Common Pleas for Franklin County (1968)); Breen v. New Jersey Manufacturers Indemnity Insurance Co., 105 N.J.Super. 302, 252 A.2d 49 (1969); Hartford Accident and Indemnity Co. v. Holada, 127 Ill.App.2d 472, 262 N.E.2d 359 (1970); Witkowski v. Covenant Security Insurance Co., 1 Ill.App.3d...