Isenhour v. Universal Underwriters Ins. Co.

• Decision Date: 08 September 1995
• Docket Number: No. 47PA94,47PA94
• Citation: 461 S.E.2d 317,341 N.C. 597
• Parties: Dallas L. ISENHOUR, and wife, Sandra K. Isenhour v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, and Universal Underwriters Group.
• Court: North Carolina Supreme Court

Page 317

461 S.E.2d 317

341 N.C. 597

Dallas L. ISENHOUR, and wife, Sandra K. Isenhour v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, and Universal Underwriters Group.

No. 47PA94.

Supreme Court of North Carolina.

Sept. 8, 1995.

Pritchett, Cooke & Burch by David J. Irvine, Jr., Windsor, for plaintiffs-appellants.

Hutchins, Tyndall, Doughton & Moore by Kent L. Hamrick, Winston-Salem, for defendants-appellees.

FRYE, Justice.

On 29 April 1989, plaintiff Dallas Isenhour was injured when the vehicle he was operating collided with a vehicle driven by Willie Kate Clark. The vehicle Mr. Isenhour was operating was owned by his employer, Far East Motors, Inc. [hereinafter Far East Motors], and was a covered automobile under a multiple-coverage fleet insurance policy purchased by Far East Motors. The fleet policy was issued by defendants, Universal Underwriters Insurance Company and Universal Underwriters Group [hereinafter Universal].

On 12 March 1990, Dallas and Sandra Isenhour instituted an action against Willie Kate Clark for damages for personal injuries sustained in the accident. In the complaint, the Isenhours alleged, among other things, negligence in failing to keep a proper lookout and driving in a reckless manner. Mr. Isenhour asserted a claim for serious, painful, and permanent bodily injuries causing medical and other expenses and decreased earning capacity. Mrs. Isenhour asserted a claim for loss of consortium. At the time of the accident, both Clark and the Isenhours were insured by Nationwide Mutual Insurance Company [hereinafter Nationwide] under nonfleet personal automobile insurance policies.

The Isenhours' policy with Nationwide insured three vehicles and carried underinsured motorists (UIM) coverage limits of Thereafter, plaintiffs' attorney notified Universal of the Isenhours' intent to seek "additional compensation" under the UIM coverage in Far East Motors' policy with Universal. In a 17 July 1991 letter, plaintiffs' attorney informed Universal of his clients' demand for settlement of $1,200,000 and sent Universal copies of the complaint and other pertinent documents.

$100,000 per person/$300,000 per accident with a separate premium being paid for each vehicle. Ms. Clark's policy with Nationwide provided liability coverage limits of $50,000 per person/$100,000 per accident. On 11 July 1991, Nationwide paid to the Isenhours $50,000, the per-person liability limit under the Clark policy. Additionally, the Isenhours settled for $25,000 under the UIM portion of their Nationwide policy.

On 1 October 1991, plaintiffs' attorney notified Universal that the case was set on the 14 October 1991 trial calendar. Universal did not appear for trial. Universal sent plaintiffs' attorney a letter dated 31 January 1992 in which it denied it was a party to the suit and produced its insurance policy for review.

The trial court entered judgment in the underlying action against Ms. Clark on 10 March 1992 in the amount of $750,000 for Mr. Isenhour and $150,000 for Mrs. Isenhour. The judgment stated that the parties had waived trial by jury and specific findings of fact and conclusions of law and provided that the plaintiffs could recover from Ms. Clark to "the extent of underinsured motorist's [sic] coverage provided by an underinsured motorist carrier other than Nationwide Mutual Insurance Company," as per a partial release negotiated by the parties. This partial release limited Nationwide's total liability under the Clark and Isenhour policies to $75,000, the total amount of the settlement.

In a letter dated 12 May 1992, Universal notified plaintiffs' attorney that the maximum that might be available to the Isenhours under the Far East Motors fleet policy was $60,000 and that an umbrella provision in the policy did not apply to the Isenhours' claim. Universal explained that the coverage parts for the underlying policy and the umbrella policy were separate and distinct forms of coverage, adding that UIM coverage is added to the umbrella policy only by specific endorsement. Universal stated that only $60,000 in UIM coverage existed via specific endorsement and that no UIM coverage had been endorsed onto the umbrella provision. Accordingly, Universal tendered $60,000 in settlement of the UIM claim under its fleet policy.

On 8 June 1992, the Isenhours filed suit against Universal alleging (1) gross negligence, (2) unfair and deceptive acts or practices in violation of N.C.G.S. § 58-63-15(11) and N.C.G.S. § 75-16, and (3) liability by virtue of N.C.G.S. § 20-279.21(b)(4). Universal filed its answer on 23 July 1992, denying liability and defending on the basis that (1) the policy is a fleet policy under N.C.G.S. § 20-279.21(b)(4) and cannot be stacked onto a nonfleet policy; (2) plaintiffs are not insureds under the policy; and (3) Universal was not a party to the underlying action against Clark, did not participate in the settlement agreement, and cannot be bound by that agreement.

Universal moved for summary judgment on 25 August 1992. Universal submitted two affidavits in support of its motion for summary judgment. In the first affidavit, Universal's underwriting manager stated that Universal's policy issued to Far East Motors was a fleet policy that insured a multiple and changing number of motor vehicles used in Far East Motors' business. In the second affidavit, Nationwide, which had issued policies to both Clark (the tort-feasor) and the Isenhours, stated that both policies were nonfleet personal automobile insurance policies.

On the basis of these two affidavits and the Court of Appeals' decision in Watson v. American Nat'l Fire Ins. Co., 106 N.C.App. 681, 417 S.E.2d 814 (1992), aff'd on other grounds, 333 N.C. 338, 425 S.E.2d 696 (1993), the trial court granted summary judgment in favor of Universal and dismissed the Isenhours' claims on 10 November 1992. From the entry of summary judgment, plaintiffs appealed to the Court of Appeals.

The Court of Appeals held that its decision in Watson "bar[red] the coverage sought in Defendants contend that the Court of Appeals properly affirmed the trial court's entry of summary judgment because the trial court and the Court of Appeals correctly applied the Court of Appeals' decision in Watson. We disagree.

this case and [that] the trial court correctly granted summary judgment." Isenhour v. Universal Underwriters Ins. Co., 113 N.C.App. 152, 155, 437 S.E.2d 702, 704 (1993). We allowed plaintiffs' petition for discretionary review, and we now reverse the decision of the Court of Appeals which affirmed the trial court's entry of summary judgment in favor of defendants.

In Watson, the Court of Appeals held that "fleet policies may not be stacked onto nonfleet policies" under N.C.G.S. § 20-279.21(b)(4). Watson, 106 N.C.App. at 686, 417 S.E.2d at 818. The Court of Appeals stated that

the appellee's policy is a fleet policy under Sutton [v. Aetna Casualty & Surety Co., 325 N.C. 259, 382 S.E.2d 759, reh'g denied, 325 N.C. 437, 384 S.E.2d 546 (1989) ] and excluded from inter-policy stacking, since the stacking provisions of N.C.G.S. § 20-279.21(b)(4) cover only nonfleet private passenger motor vehicle insurance. Aetna Casualty and Sur. Co. v. Fields, 105 N.C.App. 563, 414 S.E.2d 69 [, disc. rev. denied, 331 N.C. 383, 417 S.E.2d 788] (1992). We recognize that inter-policy stacking is permitted so as to provide the innocent victim of an inadequately insured driver with an additional source of recovery; however, to allow stacking of a victim's fleet policy onto the nonfleet policy of the insured-tortfeasor is a result contemplated neither by the insurer when it wrote the fleet policy nor the legislature when it wrote the statute. We therefore hold that under N.C.G.S. § 20-279.21(b)(4) fleet policies may not be stacked onto nonfleet policies.

Watson, 106 N.C.App. at 686, 417 S.E.2d at 818.

This Court granted discretionary review of Watson and affirmed the Court of Appeals' decision on grounds different from those articulated by the Court of Appeals. Watson v. American Nat'l Fire Ins. Co., 333 N.C. 338, 425 S.E.2d 696 (1993). We determined that the insurance policy at issue was exempt, via N.C.G.S. § 20-279.32, from the requirements of the Financial Responsibility Act, since the vehicle involved was operating under a certificate of convenience and necessity issued by the Interstate Commerce Commission. Accordingly, the plaintiff was entitled to "only such coverage as is provided in the policy." Id. at 340, 425 S.E.2d at 697. We noted that "[b]y its plain words N.C.G.S. § 20-279.32 says that N.C.G.S. § 20-279.21(b)(4) does not apply in this case." Id. The present case differs from Watson because N.C.G.S. § 20-279.21(b)(4) is applicable.

This Court stated clearly in Sutton v. Aetna Casualty & Surety Co., 325 N.C. 259, 382 S.E.2d 759, reh'g denied, 325 N.C. 437, 384 S.E.2d 546 (1989), that no reason exists to distinguish between fleet and nonfleet policies under interpolicy stacking. Accordingly, we disavow the language of the Court of Appeals in Watson that the stacking provisions of N.C.G.S. § 20-279.21(b)(4) cover only nonfleet vehicle insurance. Under Sutton, the interpolicy stacking of fleet and nonfleet policies is permissible. Therefore, the Court of Appeals erred by relying on its holding in Watson in holding that the coverage sought by the Isenhours was barred.

We now proceed to the second issue, which is a matter of first impression for this Court. The issue is whether a multiple-coverage fleet insurance policy which includes umbrella coverage must offer UIM coverage equal to the liability limits under its umbrella coverage section.

We begin by looking at the nature and purpose of umbrella coverage. It is a form of insurance protection against losses in excess of the amount covered by other liability insurance policies. It provides coverage above basic or normal limits of liability. Black's Law Dictionary 808 (6th ed. 1990). The umbrella portion of the...