Ennis v. Haswell

• Docket Number: COA23-534
• Decision Date: 16 January 2024
• Parties: PAUL ENNIS, as Guardian ad Litem of T.F.G., II, a Minor, Plaintiff, v. ALEXANDER HASWELL, RONALD HASWELL, JR., and BETTY HASWELL, Defendants, v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Intervenor.
• Court: North Carolina Court of Appeals

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PAUL ENNIS, as Guardian ad Litem of T.F.G., II, a Minor, Plaintiff, v. ALEXANDER HASWELL, RONALD HASWELL, JR., and BETTY HASWELL, Defendants, v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Intervenor.

No. COA23-534

Court of Appeals of North Carolina

January 16, 2024

Heard in the Court of Appeals 31 October 2023.

Appeal by intervenor from order entered 12 December 2022 by Judge James M. Webb in Chatham County Superior Court No. 18 CVS 269.

White & Stradley, PLLC, by J. David Stradley, and Brian D Westrom for plaintiff-appellee.

No brief filed for defendants-appellees.

Young Moore, and Henderson, P.A., by Walter E. Brock, Jr., and Matthew C. Burke, for intervenor-appellant.

ZACHARY, Judge.

Intervenor North Carolina Farm Bureau Mutual Insurance Company, Inc. ("Farm Bureau") appeals from the trial court's order denying its motion to enforce its right of subrogation in which Farm Bureau sought reimbursement of its $100,000 underinsured motorist ("UIM") coverage payment to Plaintiff from the proceeds of Plaintiffs settlement with Defendants. After careful review, we affirm.

I. Background

On 19 February 2016, T.F.G., II, ("T.F.G.") was severely injured while riding as a passenger in a vehicle operated by Defendant Alexander Haswell and owned by Alexander's parents, Defendants Ronald Haswell, Jr., and Betty Haswell. There is no dispute regarding the relevant insurance policies' coverage at the time of the incident.

As the trial court found in its order:

5. At the time of the Accident, Defendants were insured by an auto liability insurance policy issued by Nationwide General Insurance Company ("Nationwide") with limits of $300,000 per person and $300,000 per accident. This policy also provided [UIM] coverage in the amount of $300,000 per person and $300,000 per accident. The Nationwide policy provided UIM coverage for [T.F.G.], as a passenger in an insured vehicle, in the amount of $300,000 per person and $300,000 per accident.

6. At the time of the Accident, [T.F.G.] was an insured under a motor vehicle liability insurance policy issued by [Farm Bureau], The Farm Bureau policy provided UIM coverage for [T.F.G.] with a Emit of $100,000 per person.

On 16 March 2018, Plaintiffs counsel^[1] sent a letter to Nationwide, demanding that Nationwide tender its policy Emit within 30 days. Nationwide did not respond to this demand. Consequently, on 26 April 2018, Plaintiff, acting on T.F.G.'s behalf as his guardian ad litem, filed suit against Defendants in Chatham County Superior Court. In the complaint, Plaintiff alleged negligence by Defendant Alexander Haswell, and the vicarious liability of Defendants Ronald and Betty Haswell pursuant to the family purpose vehicle doctrine.

On 2 May 2018, Plaintiffs counsel notified Farm Bureau that (1) Nationwide had not responded to the time-limited demand, (2) Plaintiff had filed suit against Defendants, and (3) Farm Bureau had the right to participate in the litigation as an unnamed party.

On 9 May 2018, Plaintiffs counsel stated to defense counsel that Plaintiff "would not accept $300,000 from Nationwide at this point in time in settlement on behalf of. . . Defendants." On 24 May and 8 June 2018, Nationwide served Plaintiff with offers of judgment in the amount of $300,000 on Defendants' behalf. Plaintiffs counsel sent a copy of the 8 June offer of judgment to Farm Bureau on 14 June 2018, but Farm Bureau did not advance the amount of Nationwide's tender. Plaintiff did not accept the offer of judgment, and the litigation continued.

A month later, on 20 July 2018, Farm Bureau offered to pay Plaintiff $100,000 pursuant to its UIM coverage. Plaintiff accepted this offer, and by consent order entered on 28 January 2019, the trial court approved the parties' settlement of the Farm Bureau UIM claim. Farm Bureau "reserv[ed] any and all rights, if any, it may have to recover its payments from the tortfeasor, and acknowledg[ed] that [Defendants] contend that these rights have been waived."

On 23 September 2022, Plaintiff and Defendants participatedin court-ordered mediation, which culminated in an agreement to settle for an amount in excess of $300,000. That same day, Plaintiffs counsel notified Farm Bureau via email of the settlement agreement and suggested that Farm Bureau could "choose to advance to secure its subrogation rights." On 12 October 2022, Farm Bureau declined to advance the amount of the settlement agreement.

On 26 October 2022, Farm Bureau filed (1) a motion to intervene in the action and (2) a motion to enforce its subrogation right, pursuant to N.C. Gen. Stat. § 20-279.21(b)(4) (2021). The matter came on for hearing on 31 October 2022.

After entering a sealed order approving the confidential settlement, the trial court heard Farm Bureau's motions. The trial court granted Farm Bureau's motion to intervene without objection from the other parties. On 12 December 2022, the trial court entered an order denying Farm Bureau's motion to enforce its subrogation right. Farm Bureau timely filed notice of appeal.

II. Discussion

This case involves the interpretation of N.C. Gen. Stat. § 20-279.21(b)(4): in sum, the question presented is whether Farm Bureau was required to advance to Plaintiff the amount of the liability settlement offer in order to preserve its subrogation claim against the proceeds of any recovery from the tortfeasor.

Farm Bureau argues that, because it paid its UIM policy limit before the liability insurer exhausted its policy limits, pursuant to § 20-279.21(b)(4), "Farm Bureau became subrogated to the extent of that payment and therefore earned the right to reimbursement of its $100,000 payment from any money that Plaintiff recovered from the owner or operator of the underinsured vehicle or their liability insurer." Plaintiff, on the other hand, contends that the plain text of § 20-279.21(b)(4) is clear-if a UIM insurer "wishes to preserve its subrogation rights against the tortfeasor, it must advance a payment to the insured in the amount of the tentative settlement with a liability insurer within 30 days of the date it receives notice of the offer. If it does not, it loses all subrogation rights." For the reasons that follow, we agree with Plaintiff.

A. Standard of Review

The question presented is purely a matter of law. "Answering this question primarily involves interpretation of the Motor Vehicle Safety and Financial Responsibility Act of 1953 (commonly referred to as the 'FRA'), and examination of the terms of Farm Bureau's motor vehicle insurance policy, each a question of law." Lunsford v. Mills, 367 N.C. 618, 622-23, 766 S.E.2d297, 301 (2014) (citation omitted). "This Court reviews questions of law de novo, meaning that we consider the matter anew and freely substitute our judgment for the judgment of the lower court." Id. at 623, 766 S.E.2d at 301.

B. Analysis

"According to well-established North Carolina law, the intent of the Legislature controls the interpretation of a statute." C Invs. 2, LLC v. Auger, 383 N.C. 1, 8, 881 S.E.2d 270, 276 (2022) (citation omitted).

"The avowed purpose of the [FRA], of which [ N.C. Gen. Stat.] § 20-279.21(b)(4) is a part, is to compensate the innocent victims of financially irresponsible motorists. It is a remedial statute to be liberally construed so that the beneficial purpose intended by its enactment may be accomplished." Sutton v. Aetna Cas. & Sur. Co., 325 N.C. 259, 265, 382 S.E.2d 759, 763 (citations omitted), reh'g denied, 325 N.C. 437, 384 S.E.2d 546 (1989).

One portion of N.C. Gen. Stat. § 20-279.21(b)(4) addresses a UIM insurer's right to subrogation:

An underinsured motorist insurer may at its option, upon a claim pursuant to underinsured motorist coverage, pay moneys without there having first been an exhaustion of the liability insurance policy covering the ownership, use, and maintenance of the underinsured highway vehicle. In the event of payment, the underinsured motorist insurer shall be either: (a) entitled to receive by assignment from the claimant any right or (b) subrogated to the claimant's right regarding any claim the claimant has or had against the owner, operator, or maintainer of the underinsured highway vehicle, provided that the amount of the insurer's right by subrogation or assignment shall not exceed payments made to the claimant by the insurer. No insurer shall exercise any right of subrogation or any right to approve settlement with the original owner, operator, or maintainer of the underinsured highway vehicle under a policy providing coverage against an underinsured motorist where the insurer has been provided with written notice before a settlement between its insured and the underinsured motorist and the insurer fails to advance a payment to the insured in an amount equal to the tentative settlement within 30 days following receipt of that notice.

N.C. Gen. Stat. § 20-279.21(b)(4) (emphases added).

Farm Bureau contends that this section of the statute creates two kinds of subrogation rights, differentiated by whether the UIM insurer pays a claim before the insured exhausts the tortfeasor's liability insurance coverage or after the exhaustion of coverage. According to Farm Bureau, if a UIM insurer elects to make a pre-exhaustion payment, as it did in the instant case, the insurer "become[s] subrogated to the claimant's rights against the tortfeasor, to the extent of [the insurer's] payment." Notably, Farm Bureau only cites the first two sentences of the above-quoted portion of § 20-279.21(b)(4) to support this "type of subrogation"; Farm Bureau's citation ends before the sentence limiting "any right of subrogation . . where the insurer has been provided with written notice before a settlement between its insured and the underinsured...