Erie Ins. Exch. v. Smith

Decision Date16 March 2021
Docket NumberNo. COA 20-246,COA 20-246
Citation856 S.E.2d 874
Parties ERIE INSURANCE EXCHANGE, Plaintiff v. Edward R. SMITH; Archie N. Smith, a minor; Emily A. Tobias, as Administrator of the Estate of John Pinto, Jr., Deceased; Valley Auto World, Inc.; Universal Underwriters Insurance Company; VW Credit Leasing, Ltd.; and Doe Insurance Companies 1-3, Defendants
CourtNorth Carolina Court of Appeals

Martineau King PLLC, Charlotte, by Lee M. Thomas and Elizabeth A. Martineau, for plaintiff-appellee Erie Insurance Exchange.

Van Camp, Meacham & Meacham, PLLC, Pinehurst, by Thomas M. Van Camp, for defendant-appellees the Smiths.

Gallivan, White & Boyd, P.A., by James M. Dedman, Charlotte, and Tyler L. Martin, for defendant-appellant Universal Underwriters Insurance Company.

HAMPSON, Judge.

Factual and Procedural Background

¶ 1 This appeal involves a Declaratory Judgment action filed consistent with N.C. Gen. Stat. § 1-283 et seq. , to establish the respective obligations, if any, of Erie Insurance Exchange (Erie) and Universal Underwriters Insurance Company (Universal) to provide insurance coverage for liability arising from a 2016 car accident. Specifically, Universal appeals from an Order entered 17 January 2020, granting in part Erie's Motion for Summary Judgment, denying Universal's cross Motion for Summary Judgment, and entering a Declaratory Judgment adjudicating:

¶ 2 1. Universal was obligated to provide liability insurance coverage with limits of $500,000.00, umbrella liability coverage with limits of $10,000,000.00, and that the aggregate coverage of $10,500,000.00 was the primary insurance coverage for the liability arising from the 2016 accident; and

¶ 3 2. Erie was obligated to provide excess liability insurance coverage with limits in the amount of $100,000.00 per person and $300,000.00 per accident.

¶ 4 The factual background giving rise to the present case is set forth in this Court's earlier opinion in Smith v. USAA Cas. Ins. Co. , 261 N.C. App. 40, 819 S.E.2d 610 (2018), involving a separate but related action arising from the same underlying facts.

On the morning of Saturday, 30 April 2016, Pinto went to [Valley Auto World (Valley)] for the purpose of trading in his 2004 Saturn and purchasing another vehicle. He ultimately decided to purchase the Beetle that had been traded in by Copes. Despite the fact that [Valley] did not actually own the vehicle, [Valley] sales representatives and Pinto nevertheless agreed upon a purchase price of $14,500 for the Beetle with a trade-in value of $2,000 for the Saturn. Because Pinto did not put any money down, a credit application was prepared and submitted by [Valley] to VW Credit for $12,500, the full amount necessary to fund the purchase.
At 12:05 p.m., while Pinto remained on the [Valley] premises, [Valley] received a fax from VW Credit containing VW Credit's approval of $11,990 in financing for Pinto's purchase of the Beetle. As a result, a $510 gap remained between the amount of financing approved by VW Credit and the total purchase price of the vehicle that had been agreed upon by Pinto and [Valley]. Despite this shortfall, Gary Carrington, the business manager of [Valley], believed that he would ultimately be able to secure the full financing amount by resubmitting Pinto's credit application to VW Credit the following Monday. For this reason, Carrington proceeded to assist Pinto in completing the necessary paperwork memorializing the sale.
Among the various documents executed by Pinto and [Valley] on 30 April 2016 was a Conditional Delivery Agreement ("CDA"). The CDA stated, in pertinent part, as follows: DEALER'S obligations to sell the SUBJECT VEHICLE to PURCHASER and execute and deliver the manufacturer's certificate of origin or certificate of title to SUBJECT VEHICLE are expressly conditioned on FINANCE SOURCE'S approval of PURCHASER'S application for credit as submitted AND dealer being paid in full by FINANCE SOURCE.
Upon signing the documents provided to him by Carrington, Pinto drove the Beetle off the [Valley] lot that afternoon. Later that evening, Pinto was driving the Beetle when he was involved in a head-on collision (the "30 April Accident") with another vehicle being driven by Edward Smith. Smith's son, Archie, was a passenger in his vehicle. Pinto was killed in the collision, and both Edward Smith and Archie Smith were seriously injured.
Unaware of Pinto's death, Carrington resubmitted his credit application to VW Credit on 2 May 2016. At 4:40 p.m. that day, VW Credit faxed [Valley] its approval for the full $12,500 that [Valley] had requested. The following day, [Valley] paid off the balance owed to VW Credit under Copes’ lease. On 9 May 2016, VW Credit executed a reassignment of title to [Valley]. [Valley], in turn, transferred title to Pinto on 23 May 2016.

Id. at 42-43, 819 S.E.2d at 612 (footnote and quotation marks omitted).

¶ 5 After the accident, the Smiths filed a Complaint alleging a Negligence action against Pinto's Estate and a Declaratory Judgment action seeking to establish, in part, the respective obligations of Erie and Universal to provide insurance coverage. Id. at 43, 819 S.E.2d at 612. Erie brought a crossclaim for Declaratory Judgment in that action. Id. In that case, the trial court also entered Summary Judgment concluding Universal was obligated to provide aggregate primary insurance coverage of up to $10,500,000.00 and Erie's policy provided excess coverage. Id. at 44, 819 S.E.2d at 613. On appeal, this Court vacated that order and remanded that case for additional proceedings after concluding there was a failure to join necessary parties precluding entry of a Declaratory Judgment. Id. at 49-50, 819 S.E.2d at 616-17. On remand, the trial court entered a Consent Order severing the Smiths’ Negligence action from the Declaratory Judgment action and permitting Erie to re-plead its claim for Declaratory Judgment. Id.

¶ 6 As a result, on 19 November 2018, Erie, who issued the auto insurance policy to Pinto covering his 2004 Saturn, initiated this action by filing a Complaint for Declaratory Judgment "seeking a determination [by the trial court] concerning its rights and obligations under a policy of insurance issued by it[.]" Universal, as the insurer for Valley, the dealer that sold the Beetle to Pinto, filed its Answer to Erie's Complaint on 30 January 2019, in which it also asserted counterclaims against Erie and sought Declaratory Judgment. On 21 October 2019, both Erie and Universal filed cross Motions for Summary Judgment seeking a determination of the application of N.C. Gen. Stat. § 20-75.1 addressing the conditional delivery of vehicles by a dealer to a purchaser and the obligations of a dealer to provide liability insurance in conditional delivery transactions.

¶ 7 After hearing arguments from the parties on 13 December 2019, the trial court entered its Order on 17 January 2020, ultimately granting Erie's Motion for Summary Judgment in part, denying Universal's Motion for Summary Judgment, and entering Judgment against Universal and Erie. The trial court determined "all necessary parties to this dispute have been joined and provided the opportunity to be heard in this matter." Then, the trial court concluded the transaction between Pinto and Valley, as the dealer, was a conditional sale and delivery and "Pinto was operating a covered vehicle with permission, [and] he became an insured under the terms of the Dealer's policy[ ]" and, therefore, N.C. Gen. Stat. § 20-75.1 applied. As it related to the policies’ respective coverage, the trial court ordered:

2. With respect to the 30 April 2016 accident, Universal's policy issued to Dealer provides to Estate liability coverage of $500,000.00 and umbrella liability coverage of $10,000,000.00. This aggregate coverage of $10,500,000.00 is primary.
3. Erie's policy issued to Pinto provides to Estate excess liability coverage in the amount of $100,000.00 per person and $300,000.00 per accident, collectible only after Universal's aggregate policy limits of $10,500,000.00 have been exhausted.

¶ 8 Universal filed Notice of Appeal from the trial court's Order on 29 January 2020. The trial court's Order, which fully and conclusively establishes the rights and responsibilities of the parties in a Declaratory Judgment, operates as a final judgment. See N.C. Gen. Stat. § 1-283 (2019). Thus, this Court has jurisdiction to review Universal's appeal as a final judgment of a superior court. N.C. Gen. Stat. § 7A-27(b)(1). In addition, without taking a cross appeal, Erie purports to challenge the trial court's ruling it is obligated to provide excess insurance coverage for the accident.

Issues

¶ 9 The dispositive issues in this appeal are: (I) whether Valley's sale and delivery of the Beetle to Pinto was a conditional delivery under N.C. Gen. Stat. § 20-75.1 such that Universal, as the dealer's insurer, was obligated to provide insurance coverage at the time of the accident; and if so, (II) whether such insurance coverage by Universal operated as the primary or excess insurance coverage; (III) what coverage limits are applicable under Universal's liability insurance policy with the dealer; (IV) whether Universal is obligated to provide additional coverage for the accident under its umbrella insurance policy covering the dealer; and (V) whether this Court has appellate jurisdiction to review Erie's separate challenge to the trial court's Order concluding Erie is obligated to provide excess insurance coverage for liability arising from the accident.

Standard of Review

¶ 10 We review a trial court's grant of summary judgment de novo. Forbis v. Neal , 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007) (citation omitted). We also review questions of statutory interpretation and a "lower court's interpretation of an insurance policy's language[,]" de novo. Satorre v. New Hanover Cnty. Bd. of Comm'rs , 165 N.C. App. 173, 176, 598 S.E.2d 142, 144 (2004) ; JVC Enters., LLC v. City of Concord , 269 N.C. App. 13, 16, 837 S.E.2d 206,...

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