Markham v. Nationwide Mut. Fire Ins. Co.

• Citation: 125 N.C.App. 443,481 S.E.2d 349
• Decision Date: 04 March 1997
• Docket Number: No. COA96-436,COA96-436
• Court: Court of Appeal of North Carolina (US)
• Parties: Michael G. MARKHAM and Terry Markham Gibson, Plaintiffs-Appellees, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellant, v. K. J. SMITH BUILDERS & REALTY, INC., Third-Party Defendant-Appellee.

Page 349

481 S.E.2d 349

125 N.C.App. 443

Michael G. MARKHAM and Terry Markham Gibson, Plaintiffs-Appellees, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellant, v. K. J. SMITH BUILDERS & REALTY, INC., Third-Party Defendant-Appellee.

No. COA96-436.

Court of Appeals of North Carolina.

March 4, 1997.

Richard M. Warren and Adams, Kleemeier, Hagan, Hannah & Fouts by James W. Bryan, Greensboro, for plaintiffs-appellees.

Wilson & Iseman, L.L.P. by Urs R. Gsteiger, Winston-Salem, for defendant-appellant.

Carruthers & Roth, P.A. by Kenneth R. Keller and John M. Flynn, Greensboro, for third-party defendant-appellee.

MARK D. MARTIN, Judge.

Defendant Nationwide Mutual Fire Insurance Company (Nationwide) appeals from jury verdict awarding plaintiffs Michael Markham and Terry Markham Gibson (Markhams) ¹ $275,000 in damages for the "structural collapse" of their residence.

On 28 February 1986 the Markhams purchased a lot located at 8103 Willow Glen Trail in Guilford County, North Carolina. On 4 March 1986 the Markhams entered into a contract with third-party defendant K.J. Smith Builders & Realty (Smith Builders) for the construction of a residence on the above lot.

In or around late November 1986, Michael Markham purchased an Elite Homeowners Policy HO-3 (Elite policy) from Nationwide. The Elite policy, by its own terms, covers "structural collapse," but excludes "inherent vice; latent defect; ... settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings."

After moving into the house, the Markhams experienced a stream of problems relating to, among other things, the walls, foundation, and footings. These problems continued until the Markhams, on 19 July 1991, abandoned their residence because it was structurally unsafe for habitation.

In or about April 1991, the Markhams filed a claim under the Elite policy which Nationwide subsequently denied. On 19 August 1993 the Markhams instituted an action against Smith Builders and K.J. Smith, individually--case no. 93 CVS 8698 (Smith case). On 20 August 1993 the Markhams instituted the present action against Nationwide alleging contractual and extra-contractual claims. On 6 December 1993 Nationwide filed a third-party complaint against Smith Builders asserting, "if a judgment is entered for [the Markhams] for any damages alleged in their complaint, [ ] Nationwide have and recover of [Smith Builders] the amount of such judgment, plus costs and attorneys fees[.]"

On 25 January 1995 Nationwide made a motion to consolidate the instant case and the Smith case. The trial court denied Nationwide's motion to consolidate. On 1 February 1995 the Markhams agreed to settle the Smith case for $150,000. On 22 February 1995 the trial court granted summary judgment to Smith Builders on Nationwide's third-party subrogation claim.

After hearing all the evidence in the present case, the jury returned the following verdict:

1. Did the [Markhams'] residence structurally collapse?

[Yes.]

2. Was coverage of the damage to [the Markhams'] home excluded by the policy?

[No.]

3. Did the collapse occur after August 20, 1990?

[Yes.]

If "yes", go to Issue 4 and 5. If "no", return to the courtroom.

4. What amount of damages are the [Markhams] entitled to recover for covered damage to [their] home?

$275,000.

5. What amount of damage are the [Markhams] entitled to recover for loss of use?

$0 for Mr. Markham.

$0 for Ms. Gibson.

The above verdict was entered by the trial court on 27 October 1995. On 27 September 1995 Nationwide filed a motion for judgment notwithstanding the verdict (JNOV) and for a new trial, or, in the alternative, for a $150,000 credit on the judgment. On 13 November 1995 the trial court denied Nationwide's post-trial motions.

On appeal, Nationwide contends the trial court erred by: (1) failing to consolidate the instant case and the Smith case; (2) granting summary judgment to Smith Builders; (3) denying Nationwide's motions for directed verdict and JNOV; (4) failing to properly instruct the jury; (5) refusing to grant Nationwide a $150,000 credit on the judgment; and (6) ordering Nationwide to post a $2000 appeal bond.

At the outset we note Nationwide failed to cite any authority in support of its contention the trial court erroneously instructed the jury, and we, thus, decline to consider this issue. See N.C.R.App. P. 28(b)(5).

__________

I.

Nationwide first alleges the trial court abused its discretion by refusing to consolidate the present action with the Smith case.

N.C. Gen.Stat. § 1A-1, Rule 42(a) provides, in pertinent part, that "[w]hen actions involving a common question of law or fact are pending in one division of the court, the judge ... may order all the actions consolidated...." Id. (1990) (emphasis added). A trial court's ruling on a Rule 42 motion will not be reversed on appeal absent a manifest abuse of discretion. In re Moore, 11 N.C.App. 320, 322, 181 S.E.2d 118, 120 (1971). Indeed, when the trial court's failure to consolidate is assigned as error, the appellant must establish that it was injured or prejudiced. Id.

Admittedly, the present case and the Smith case share a common nucleus of basic facts. These two cases, however, have few, if any, common legal issues. Consolidation of the instant action and the Smith case would therefore have created an extremely cumbersome case for the trial court to manage while also unnecessarily increasing the burden on the jury. Accordingly, the trial court did not abuse its discretion by denying Nationwide's motion to consolidate.

II.

Nationwide next contends the trial court erred by granting summary judgment to Smith Builders because Nationwide's right of subrogation was not extinguished by settlement of the Smith case.

A motion for summary judgment should be granted if, and only if, "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen.Stat. § 1A-1, Rule 56(c) (1990). Such evidence must be viewed in the light most favorable to the non-moving party with all reasonable inferences also drawn in favor of the non-movant. Whitley v. Cubberly, 24 N.C.App. 204, 206-207, 210 S.E.2d 289, 291 (1974) " 'Irrespective of who has the burden of proof at trial ..., upon a motion for summary judgment the burden is upon the party moving therefor to establish that there is no genuine issue of fact ... and that he is entitled to judgment as a matter of law.' " Id. at 206, 210 S.E.2d at 291 (quoting First Federal Savings & Loan Assoc. v. Branch Banking & Trust Co., 282 N.C. 44, 51, 191 S.E.2d 683, 688 (1972)). The burden does not shift to the non-movant until the movant proffers sufficient evidence to "negative[ ] [the non-movant's] claim ... in its entirety." Id.

"[I]t is a well established rule that if an insured settles with or releases a wrongdoer from liability for a loss before payment of the loss has been made by the insurance company, the insurance company's right of subrogation against the wrongdoer is thereby destroyed." Hilley v. Blue Ridge Insurance Co., 235 N.C. 544, 549, 70 S.E.2d 570, 574 (1952). Cf. Allstate Insurance Co. v. Old Republic Insurance Co., 49 N.C.App. 32, 38, 270 S.E.2d 510, 514 (1980) (insurer may not be subrogated to greater rights than possessed by insured). Nevertheless, a tortfeasor or wrongdoer cannot avoid the subrogation rights of an insurer by simply executing a release when, at a minimum, (a) the insurer was involved in the adjustment process, and (b) the tortfeasor or wrongdoer was on notice of the insurer's potential subrogation rights. See Nationwide Mut. Insurance Co. v. Canada Dry Bottling Co., 268 N.C. 503, 507, 151 S.E.2d 14, 17 (1966). As stated by our Supreme Court,

" 'After the loss has been paid by the insurer, or the insurance is in the process of adjustment, a third person, having knowledge of the fact, cannot make settlement with insured for the loss, his liability being to insurer to the extent of the insurance paid; and if a third person makes such settlement it is no defense to a suit by insurer against him.' "

Id. (quoting Nationwide Mut. Insurance Co. v. Spivey, 259 N.C. 732, 734, 131 S.E.2d 338, 340 (1963)) (emphasis added).

In the instant action, on 8 November 1993, Nationwide filed a third-party complaint against Smith Builders alleging potential subrogation rights. Smith Builders was thus on notice of Nationwide's potential subrogation rights prior to its release by the Markhams around February 1995. Therefore Nationwide's subrogation rights were preserved if, and only if, Nationwide was engaged in the adjustment process after it denied the Markhams' claim in 1991.

"In the law of insurance, the adjustment of a loss is the ascertainment of its amount and the ratable distribution of it among those liable to pay it." BLACK'S LAW DICTIONARY 43 (6th ed.1990). The term adjustment "has also been defined as the settling and ascertaining of the amount of indemnity which the insured, after making all proper allowances, is entitled to receive...." 44 AM JUR.2D Insurance § 1674 (1982). Neither definition necessarily implies an insurer must admit liability on a claim to be involved in the adjustment process. See id. The above definitions do indicate, however, that an insurer which outright denies a potential claim is not involved in the adjustment process. Cf. Sexton v. Continental Casualty Co., 816 P.2d 1135, 1137 (Okla.1991); Roberts v. Fireman's Ins. Co., 376 Pa. 99, 101 A.2d 747, 749-750 (1954). Simply put, "[a]n insurer may not complain of its ... loss of subrogation rights when the settlement comes after the insurer denied coverage under the policy." Sexton, 816 P.2d at 1138. See also Roberts, 101 A.2d at 749-750. To hold otherwise would result in an insured "los[ing] the true value of that...