Indiana Lumbermen's Mut. Ins. Co. v. Champion

• Decision Date: 06 May 1986
• Docket Number: No. 8527SC1029,8527SC1029
• Citation: 80 N.C.App. 370,343 S.E.2d 15
• Parties: INDIANA LUMBERMEN'S MUTUAL INSURANCE COMPANY, Plaintiff, v. Boyce R. CHAMPION, Defendant. Boyce R. CHAMPION, Third-Party Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Third-Party Defendant. INDIANA LUMBERMEN'S MUTUAL INSURANCE COMPANY, Third-Party Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Third-Party Defendant.
• Court: North Carolina Court of Appeals

Page 15

343 S.E.2d 15

80 N.C.App. 370

INDIANA LUMBERMEN'S MUTUAL INSURANCE COMPANY, Plaintiff, v. Boyce R. CHAMPION, Defendant.

Boyce R. CHAMPION, Third-Party Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Third-Party Defendant.

INDIANA LUMBERMEN'S MUTUAL INSURANCE COMPANY, Third-Party Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Third-Party Defendant.

No. 8527SC1029.

Court of Appeals of North Carolina.

May 6, 1986.

George C. Collie and Charles M. Welling, Charlotte, for plaintiff Indiana Lumbermen's Mut. Ins. Co.

Hamrick, Mauney, Flowers, Martin & Deaton by Fred A. Flowers, Shelby, for defendant Boyce R. Champion.

Horn, West, Horn & Griffin, P.A. by J.A. West, Shelby, for third-party defendant Nationwide Mut. Ins. Co.

WELLS, Judge.

Nationwide's Appeal

Nationwide first contends the trial court erred in its order of 21 September 1984 by not permitting Nationwide to offer as a defense that the third-party actions had been brought in violation of the "no action" provision of its policy. In its pleadings, Nationwide alleged as a defense that the third-party actions were brought in violation of Condition Six of the policy it issued to Champion and that such actions were premature because the liability of Champion had not yet been judicially determined or agreed upon by the parties. Condition Six of the policy allegedly provides as follows in pertinent part:

No action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all the terms of this policy, nor until the amount of the Insured's obligation to pay shall have been finally determined either by Judgment against the Insured after actual trial or by written agreement of the Insured, the claimant and the Company.

Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. No person or organization shall have any right under this policy to join the Company as a party to any action against the Insured to determine the Insured's liability, nor shall the Company be impleaded by the Insured or his legal representative.

In the 21 September 1984 order, the trial court concluded that Nationwide was not entitled under the law to plead any policy defenses, relying on Nixon v. Insurance Co., 255 N.C. 106, 120 S.E.2d 430 (1961), and denied those defenses. Nationwide apparently contends the court's ruling was erroneous with respect to its defense based on Condition Six of the policy, the "no action" provision and argues that Nixon is distinguishable. We disagree.

In Nixon, our Supreme Court held that where a liability insurer denies liability for a claim asserted against the insured and unjustifiably refuses to defend an action therefor, such refusal constitutes a breach of the insurer's contract with the insured and the insured is released from certain provisions of the policy including a provision making the liability of the insurer dependent upon a final determination of its insured's obligation to pay either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company. As our Supreme Court recognized in Nixon, courts generally hold that where an insurer unjustifiably refuses to defend an action against its insured, the insurer waives its right to enforce a "no action" provision in the policy, such as the one in Condition Six of the policy concerned herein and cannot thereafter successfully invoke that provision. See also Annot., 49 A.L.R.2d 694 (1956); 44 Am.Jur.2d, Insurance § 1420 (1982 and Supp.1985); 14 Couch, Insurance 2d § 51:163 (1982). See, e.g., Satterwhite v. Stolz, 79 N.M. 320, 442 P.2d 810 (1968).

The obligation of a liability insurer to defend an action brought by an injured third party against the insured is absolute when the allegations of the complaint bring the claim within the coverage of the policy. Insurance Co. v. Insurance Co., 269 N.C. 358, 152 S.E.2d 513 (1967); Stanback v. Westchester Fire Ins. Co., 68 N.C.App. 107, 314 S.E.2d 775 (1984). See also Waste Management v. Insurance Co., 340 S.E.2d 374 (N.C.1986). The insurer's refusal to defend the action is unjustified if it is determined that the action is in fact within the coverage of the policy. 14 Couch, Insurance 2d § 51:156 (1982). This is so even if the refusal to defend is based on the insurer's honest but mistaken belief that the claim is outside the policy coverage. Id.

The allegations of the complaint filed by Indiana Lumbermen against Champion were sufficient to bring the claim set forth therein within the coverage of Nationwide's policy yet Nationwide denied coverage under its policy and refused to defend the action. In the 21 September 1984 order, the court concluded that Nationwide had a duty to defend the action and determined that Indiana Lumbermen's claim was within the coverage of Nationwide's policy. Since the claim was within the coverage of Nationwide's policy, Nationwide's refusal to defend the action was unjustified and therefore Nationwide was not entitled to successfully invoke the "no action" provision in its policy as a defense. See Nixon v. Insurance Co., supra; 14 Couch, Insurance 2d §§ 51:156 and 51:163 (1982). Accordingly, we find no error in the court's ruling as to this policy defense.

Nationwide contends the court erred in the 21 September 1984 order by not permitting it to offer the defense of "no coverage" and by determining that its policy provided coverage to Champion. Nationwide argues that the 1954 Dodge van truck driven by Champion at the time of the collision was not "a private passenger, farm or utility automobile" as defined in its policy and that therefore its policy did not cover Champion's liability arising from his operation of that vehicle.

The record does not show that the court refused to permit Nationwide to offer the defense of "no coverage"; rather, it tends to show that Nationwide simply elected not to offer any evidence at the 17 September 1984 hearing concerning whether the 1954 Dodge vehicle was one covered by its policy. If any evidence was presented by Nationwide at the hearing on the third-party actions, it has not been included in the record on appeal. When the evidence is not in the record, it is presumed that the court's findings are supported by competent evidence and the findings are conclusive on appeal. Steadman v. Pinetops, 251 N.C. 509, 112 S.E.2d 102 (1960); Town of Mount Olive v. Price, 20 N.C.App. 302, 201 S.E.2d 362 (1973). The record does contain the affidavit of Champion and the verified pleadings of Indiana Lumbermen. These materials were considered by the court in entering the 21 September 1984 order and are either consistent with or support the findings made by the court. The remaining pleadings in the record are unverified.

It is clear from the findings made that the court determined that the 1954 Dodge vehicle driven by Champion at the time of the collision was a utility automobile as defined in Nationwide's policy. The affidavit of Champion supports this determination. We are unable to say based on the record before us that such finding was error. The court concluded that Nationwide's policy covered Champion's liability arising out of his operation of the 1954 Dodge truck on the date of the collision, relying on Devine v. Casualty & Surety Co., 19 N.C.App. 198, 198 S.E.2d 471, cert. denied, 284 N.C. 253, 200 S.E.2d 653 (1973). The findings made by the court are sufficient to support this conclusion. We therefore find no error in the court's determination that Nationwide's policy provided coverage to Champion in these circumstances.

Nationwide next assigns as error the court's conclusion in the 21 September 1984 order that the three-year statute of limitations is not applicable to the third-party action instituted against Nationwide by Indiana Lumbermen. The insurance policy issued by Nationwide to Champion has not been made a part of the record on appeal. Where the record is silent on a particular point, it is presumed that the trial court acted correctly. State v. Dew, 240 N.C. 595, 83 S.E.2d 482 (1954). In the absence of the policy from the record, we presume the trial court was correct in finding, concluding and ruling that the three-year statute of limitations does not apply to the action.

Nationwide assigns as error the trial court's denial of its motions for summary judgment and judgment on the pleadings. Since material outside the pleadings was presented to and considered by the court, specifically Champion's affidavit, Nationwide's motions for judgment on the pleadings were to be treated as ones for summary judgment. N.C.Gen.Stat. § 1A-1, Rule 12(c) of the Rules of Civil Procedure. Our Supreme Court recently held in Harris v. Walden, 314 N.C. 284, 333 S.E.2d 254 (1985), that "the denial of a motion for summary judgment is not reviewable during appeal from a final judgment rendered in a trial on the merits." We find such law controlling in the present case and therefore overrule this assignment of error.

Lastly, Nationwide contends the trial court erred by refusing to allow it to offer evidence supporting its defenses at the jury trial and by concluding that a judgment against Champion would automatically be a judgment against Nationwide. Nationwide had an opportunity to present evidence supporting its defenses at the 17 September 1984 hearing on the third-party actions. It apparently elected not to offer any evidence at that time. By the judgment entered 21 September 1984, the court rejected Nationwide's defenses and in effect determined that Nationwide was liable in the event the liability of its insured, Champion, was established. The entry of that judgment determined that issue in this case. Since Nationwide's liability had been established and the parties had stipulated to the amount of...