Fortune Ins. Co. v. Owens
| Decision Date | 07 April 2000 |
| Docket Number | No. 154PA99.,154PA99. |
| Citation | 526 S.E.2d 463 |
| Court | North Carolina Supreme Court |
| Parties | FORTUNE INSURANCE COMPANY v. Gary Edgar OWENS, Johna R. Hart, Louis L. Gilmore. |
Kurdys & Lovejoy, P.A., by Jeffrey S. Bolster, Charlotte, for plaintiff-appellee.
Price, Smith, Hargett, Petho & Anderson, P.A., by Wm. Benjamin Smith, Charlotte, for defendant-appellants Johna Hart and Louis Gilmore.
This action arose out of a motor vehicle accident that occurred in Mecklenburg County, North Carolina, on 29 January 1990 when a vehicle, owned and operated by Gary Edgar Owens (Owens) struck a motor vehicle driven by Louis L. Gilmore and occupied by Johna R. Hart (defendants). That vehicle was owned by a third party and was not insured. At the time of the accident, Owens was insured under a policy of insurance issued by Fortune Insurance Company (Fortune), a Florida corporation. The policy provided, in pertinent part:
Both defendants instituted actions against Owens in January 1993, each claiming damages for personal injury. Fortune hired attorney Rex C. Morgan in Charlotte, North Carolina, to defend Owens in both actions. Mr. Morgan filed answers on Owens' behalf despite the fact that he was never able to locate Owens. On 17 July 1995 Mr. Morgan filed a motion to withdraw as counsel of record wherein he stated that Fortune "advised that it had sent a reservation of rights letter to Mr. Owens and advised that it took the position that it had no coverage" and that Fortune had instructed that he "close his files."
On 21 July 1995 Fortune instituted this declaratory judgment action requesting the court to declare that Fortune had no obligation to defend Owens or to pay any judgment entered against Owens in the actions by defendants. Fortune thereafter amended its petition for declaratory judgment asserting that Fortune is a corporation existing under the laws of the State of Florida. In their answer filed 20 September 1995, defendants asserted that Fortune should be "estopped to deny coverage." On 31 July 1997 Fortune moved for summary judgment.
On 20 January 1997 defendants' actions against Owens were consolidated and tried at a nonjury Civil Session of Superior Court, Mecklenburg County. In its judgment the trial court concluded that Owens was liable to both defendants for personal injuries and ordered Owens to pay each defendant $18,500. Defendants subsequently filed a motion to amend their answer in this action to add a counterclaim incorporating the judgment in the underlying action and asking for costs, treble damages, and punitive damages. The trial court denied the motion to amend on 24 July 1997.
In October 1997 after a hearing on Fortune's petition for declaratory judgment, the trial court entered judgment finding that the Fortune policy was issued to Owens in Florida; that the address listed for Owens on 27 December 1989 was Destin, Okaloosa County, Florida; that the only vehicle described in the application was a 1966 Chevrolet pickup truck with a Florida identification number; that at the time of the accident, Owens had a Florida driver's license; and that Owens was operating the 1966 Chevrolet pickup truck with a Florida license plate and a Florida identification number. The trial court also found that no evidence was adduced to suggest that Fortune was authorized to transact business and issue policies in North Carolina. Based on these and other findings of fact, the trial court concluded that "Florida law does not require the extension of bodily injury liability coverage to defendants" and that the Fortune policy does not provide bodily injury coverage to defendants since "they are not protected persons under the Personal Injury Protection section of the policy." The trial court further concluded that the North Carolina Motor Vehicle Safety and Financial Responsibility Act does not apply to the Fortune policy "given the insignificant connection between the Fortune Insurance Policy and the State of North Carolina." Accordingly, the trial court determined that Fortune was not obligated to pay the judgments obtained by defendants against Owens arising out of the motor vehicle accident.
Defendants appealed to the Court of Appeals, arguing that the Fortune policy is subject to North Carolina law and, alternatively, that Fortune was estopped from denying coverage. On 2 March 1999 the Court of Appeals affirmed the trial court, holding that "the connection between North Carolina and the interests insured is too slight to allow us to interpret the Owens Policy in accordance with North Carolina law." Fortune Ins. Co. v. Owens, 132 N.C.App. 489, 493, 512 S.E.2d 487, 489 (1999). Enforcing the terms of the Fortune policy, the Court of Appeals held that bodily injury liability coverage did not extend to defendants. Id. The Court of Appeals also held that Fortune was not estopped from denying coverage. Id. at 494, 512 S.E.2d at 490. On 24 June 1999 this Court allowed defendants' petition for discretionary review.
The two issues before this Court are whether the Court of Appeals correctly concluded (i) that the Fortune insurance policy was not subject to North Carolina law and did not provide coverage to defendants and (ii) that Fortune was not estopped from denying coverage. With respect to the coverage issue, defendants make three arguments.
Defendants first argue that the Court of Appeals erred in holding that a significant connection did not exist between the insured interests and North Carolina to make the policy subject to North Carolina law. We disagree. As the Court of Appeals properly noted, the general rule is that an automobile insurance contract should be interpreted and the rights and liabilities of the parties thereto determined in accordance with the laws of the state where the contract was entered even if the liability of the insured arose out of an accident in North Carolina. See Roomy v. Allstate Ins. Co., 256 N.C. 318, 322, 123 S.E.2d 817, 820 (1962)
. With insurance contracts the principle of lex loci contractus mandates that the substantive law of the state where the last act to make a binding contract occurred, usually delivery of the policy, controls the interpretation of the contract. Id. Construing N.C.G.S. § 58-3-1, this Court recognized an exception to this general rule where a close connection exists between this State and the interests insured by an insurance policy. See Collins & Aikman Corp. v. Hartford Accident & Indem. Co., 335 N.C. 91, 95, 436 S.E.2d 243, 245-46 (1993). However, the mere presence of the insured interests in this State at the time of an accident does not constitute a sufficient connection to warrant application of North Carolina law.
When an action is tried before the trial court without a jury, the trial court is the fact finder; and on appeal, the appellate courts are bound by the trial court's findings if competent evidence in the record supports these findings. See Williams v. Pilot Life Ins. Co., 288 N.C. 338, 342, 218 S.E.2d 368, 371 (1975)
. In this case the trial court found, based on competent evidence, that the policy was issued by Fortune to Owens in Florida; that the insured vehicle which Owens was driving at the time of the accident had a Florida identification number and a Florida license plate; that from 5 March 1976 until the date of the accident, Owens had a Florida driver's license issued to him; that according to the record at the North Carolina Division of Motor Vehicles, Owens never had a North Carolina driver's license issued to him; and that the only contact between the Fortune policy and North Carolina is that "the automobile accident on January 29, 1990, occurred in North Carolina and following the accident Gary Edgar Owens provided the officer with a temporary North Carolina address." Based on these findings, we hold that the Court of Appeals did not err in upholding the trial court's conclusion that no significant connections existed between the Fortune policy and this State. All of the significant connections occurred in Florida. The insurance contract was entered into in Florida, and the parties to the contract were Florida residents. Thus, the Fortune policy must be construed in accordance with Florida law.
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