Liberty Mut. Ins. Co. v. Pennington

• Decision Date: 20 December 2002
• Docket Number: No. 185PA01.,185PA01.
• Citation: 356 N.C. 571,573 S.E.2d 118
• Court: North Carolina Supreme Court
• Parties: LIBERTY MUTUAL INSURANCE CO. v. Judy Bass PENNINGTON and Rick Pennington.

573 S.E.2d 118

356 N.C. 571

LIBERTY MUTUAL INSURANCE CO. v. Judy Bass PENNINGTON and Rick Pennington.

No. 185PA01.

Supreme Court of North Carolina.

December 20, 2002.

Cranfill, Sumner & Hartzog, L.L.P. by Edward C. LeCarpentier III, Raleigh, for plaintiff-appellant.

Thompson, Smyth & Cioffi, L.L.P. by Theodore B. Smyth; and Pipkin, Knott, Clark and Berger, L.L.P. by Joe T. Knott, III, Raleigh, for defendant-appellees.

BUTTERFIELD, Justice.

Plaintiff Liberty Mutual Insurance Company instituted this action for declaratory judgment seeking an affirmation that the insurance policy issued to defendants Judy and Rick Pennington afforded defendants no underinsured motorist (UIM) coverage for injuries arising out of an automobile accident involving Judy Pennington and an underinsured motorist. The underlying facts are as follows: Judy Pennington and her daughter, Christy, were injured on 9 December 1993, when a truck driven by Clee Earp and owned by Blackburn Logging Company caused Judy's vehicle to collide with other vehicles. At the time of the accident, defendants were insured under an automobile liability policy issued by plaintiff, which provided UIM coverage pursuant to the provisions of N.C.G.S. § 20-279.21(b)(4).

On 5 June 1996, the Penningtons brought an action against Earp and Blackburn Logging (collectively, the tortfeasors) to recover damages for personal injuries sustained in the 9 December 1993 accident. The case underwent court-ordered mediation on 10 December 1997, at which time the Penningtons learned for the first time that $25,000/ $50,000 were the limits of liability on the policy covering Blackburn Logging. The parties thereafter reached a tentative mediated settlement agreement wherein the tortfeasors' insurance provider agreed to tender its policy limits. However, immediately following the mediation, the Penningtons notified Liberty Mutual that they intended to seek coverage under their $50,000/$100,000 UIM policy because the liability limits under the tortfeasors' policy were insufficient to fully compensate the Penningtons for their damages. Prior to that time, the Penningtons had not informed Liberty Mutual of their personal injury action against the tortfeasors.

On 22 December 1997, the Penningtons' attorney sent written notice of the proposed settlement agreement to Liberty Mutual. Liberty Mutual chose not to review the settlement documents or to advance $25,000 to the Penningtons in order to preserve its subrogation rights under N.C.G.S. § 20-279.21(b)(4). Instead, Liberty Mutual sought to avoid the Penningtons' UIM claim on the ground that notice thereof was untimely.

Plaintiff Liberty Mutual filed this action on 29 May 1998 requesting a judicial declaration that it was not required to provide UIM coverage to defendants because of their failure to comply with the notice provisions of the policy and to notify plaintiff of the UIM claim prior to the expiration of the three-year statute of limitations period set forth in N.C.G.S. § 1-52. Plaintiff and defendants filed cross-motions for summary judgment, and by order dated 24 August 1999, the trial court entered summary judgment for plaintiff. Specifically, the trial court concluded "that there is no genuine issue as to any material fact, which was specifically stipulated to by the parties during the hearing" and "that plaintiff ... is entitled to judgment as a matter of law, declaring that its policy affords no underinsured motorist coverage for the [9 December 1993] accident."

Defendants appealed to the Court of Appeals, which unanimously reversed the entry of summary judgment by the trial court. The Court of Appeals held that N.C.G.S. § 20-279.21(b)(4) did not require an insured to notify her carrier of a claim for UIM coverage within the three-year statute of limitations applicable to the tortfeasor. The Court of Appeals further concluded that there remained issues of fact as to whether plaintiff was entitled to deny UIM coverage to defendants based on their failure to adhere to the notification provisions contained in the policy. Plaintiff then petitioned this Court for writ of certiorari to review the decision of the Court of Appeals, which we allowed on 3 May 2001.

I.

Before proceeding to plaintiff's arguments, we think it useful to outline some predominant features of the North Carolina Motor Vehicle Safety and Financial Responsibility Act (commonly referred to as the Financial Responsibility Act), of which N.C.G.S. § 20-279.21(b)(4) is a part. As this Court recognized in Sutton v. Aetna Cas. & Sur. Co., 325 N.C. 259, 265, 382 S.E.2d 759, 763 (1989), "[t]he avowed purpose of the Financial Responsibility Act ... is to compensate the innocent victims of financially irresponsible motorists." The Act is remedial in nature and is "to be liberally construed so that the beneficial purpose intended by its enactment may be accomplished." Id. The purpose of the Act, we have said, "is best served when [every provision of the Act] is interpreted to provide the innocent victim with the fullest possible protection." Proctor v. N.C. Farm Bureau Mut. Ins. Co., 324 N.C. 221, 225, 376 S.E.2d 761, 764 (1989).

Plaintiff contends that, pursuant to N.C.G.S. § 20-279.21(b)(4),¹ defendants had an obligation to notify plaintiff of their claim for UIM coverage within the three-year statute of limitations prescribed for personal injury actions, N.C.G.S. § 1-52(16) (1993) (amended 1996). Failure to do so, plaintiff argues, precluded defendants from recovering UIM benefits. The notification provision of N.C.G.S. § 20-279.21(b)(4) reads, in pertinent part, as follows:

A party injured by the operation of an underinsured highway vehicle who institutes a suit for the recovery of moneys for those injuries and in such an amount that, if recovered, would support a claim under underinsured motorist coverage shall give notice of the initiation of the suit to the underinsured motorist insurer as well as to the insurer providing primary liability coverage upon the underinsured highway vehicle. Upon receipt of notice, the underinsured motorist insurer shall have the right to appear in defense of the claim without being named as a party therein, and without being named as a party may participate in the suit as fully as if it were a party.

N.C.G.S. § 20-279.21(b)(4), para. 4 (1993) (amended 1997) (emphasis added). The issue of whether notice of a UIM claim must be given within the statute of limitations governing the underlying tort action is one not previously considered by this Court. Resolution of this issue depends upon our construction of the notice requirement of N.C.G.S. § 20-279.21(b)(4). We set about this task pursuant to well-defined tenets of statutory interpretation.

The primary goal of statutory construction is to effectuate the purpose of the legislature in enacting the statute. Woodson v. Rowland, 329 N.C. 330, 338, 407 S.E.2d 222, 227 (1991); Sutton, 325 N.C. at 265, 382 S.E.2d at 763. "The legislative purpose of a statute is first ascertained by examining the statute's plain language." Correll v. Division of Soc. Servs., 332 N.C. 141, 144, 418 S.E.2d 232, 235 (1992). "`Where the language of a statute is clear and unambiguous, there is no room for judicial construction[,] and the courts must give [the statute] its plain and definite meaning, and are without power to interpolate, or superimpose, provisions and limitations not contained therein.'" State v. Camp, 286 N.C. 148, 152, 209 S.E.2d 754, 756 (1974) (quoting 7 Strong's North Carolina Index 2d Statutes § 5 (1968)).

With these principles in mind, we conclude that under N.C.G.S. § 20-279.21(b)(4), there is no requirement that the UIM carrier be notified of a claim within the limitations period applicable to the underlying tort action. The language of the statute is clear, and nothing therein suggests that the notification requirement is subject to a statute of limitations. To the contrary, the statute merely directs the insured to "give notice of the initiation of the suit to the underinsured motorist insurer." N.C.G.S. § 20-279.21(b)(4), para. 4 (emphasis added). The statute does not prescribe the type of notice, the content of the notice, or the method by which it is to be executed. The statute is similarly devoid of any particulars as to the time within which notice to the insurer must be provided. Given the lack of direction and specificity of N.C.G.S. § 20-279.21(b)(4) regarding the notification requirement, we cannot conclude that the failure to provide such notice within the statute of limitations applicable to the underlying tort action operates to bar recovery of UIM benefits.

Plaintiff notes, nonetheless, that under N.C.G.S. § 20-279.21(b)(4), the UIM carrier shall, upon receiving notice, have "the right to appear in defense of the claim" and to "participate in the suit as fully as if it were a party." Id. Plaintiff argues that "full" participation is impossible without prompt notice of the suit; therefore, the legislature must have intended to require that notice be given within the limitations period for the underlying action. Again, we do not believe that such a construction follows from a plain reading of N.C.G.S. § 20-279.21(b)(4). The statute simply affords the insurer the right to choose to fully participate in the underlying action at such time as the insurer receives notice of the suit. Contrary to plaintiff's contention, we find nothing in the aforementioned language to suggest that the insured is obligated to notify the UIM carrier of a claim within the statute of limitations applicable to the underlying action.

A comparison of the language of N.C.G.S. § 20-279.21(b)(4) to that of N.C.G.S. § 20-279.21(b)(3), which applies to uninsured motorist (UM) coverage, lends support to the construction we adopt here. Under N.C.G.S. § 20-279.21(b)(3), all liability insurance policies are subject to the following:

A provision that the insurer shall be bound by a final

...