McMillian v. North Carolina Farm Bureau Mut. Ins. Co.

• Decision Date: 04 February 1997
• Docket Number: No. COA96-383,COA96-383
• Citation: 480 S.E.2d 437,125 N.C.App. 247
• Parties: Douglas H. McMILLIAN and Margaret S. McMillian, Plaintiffs v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, and Allstate Insurance Company, Defendants.
• Court: North Carolina Court of Appeals

Page 437

480 S.E.2d 437

125 N.C.App. 247

Douglas H. McMILLIAN and Margaret S. McMillian, Plaintiffs v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, and Allstate Insurance Company, Defendants.

No. COA96-383.

Court of Appeals of North Carolina.

Feb. 4, 1997.

Robert S. Hodgman and Associates by Robert S. Hodgman, Greensboro, for plaintiffs-appellants.

Henson & Henson, L.L.P. by Perry C. Henson, Jr. and Rachel Scott Decker, Greensboro, for defendant-appellee North Carolina Farm Bureau Mutual Insurance Company.

Smith Helms Mulliss & Moore, L.L.P. by Stephen P. Millikin, Greensboro, for defendant appellee Allstate Insurance Company.

SMITH, Judge.

This is a declaratory judgment action wherein the insurance companies involved seek to determine their obligations arising out of an automobile accident. On 2 April 1990 plaintiff Douglas H. McMillian was injured in an automobile accident in the course and scope of his employment. Plaintiff was a passenger in a car driven by James Laymond Boswell, a fellow employee. Mr. Boswell's vehicle collided with an automobile driven by Emanuel Canty, Jr., on North Carolina Highway 87 near Reidsville in Rockingham County, North Carolina. At the time of the collision, plaintiff was an employee of Winn-Dixie Stores, Inc., (Winn-Dixie). Winn-Dixie is a self-insured employer. Plaintiff Douglas H. McMillian filed a workers' compensation claim with the Industrial Commission, which action is still pending. As of 30 October 1995, plaintiff was still receiving weekly compensation of a temporary nature. As of 9 June 1993, plaintiff had been paid benefits in excess of $78,000.00.

Defendant Allstate Insurance Company (Allstate) provided uninsured motorist coverage (UM) in the names of Douglas H. and Margaret S. McMillian. Two vehicles, both registered in the name of Douglas McMillian were insured by the policy. The effective date of the policy was 22 October 1989. The policy provided coverage from 15 November 1989 to 15 May 1990 in the amount of $25,000.00 UM coverage for bodily injury and property damage. The Allstate policy contains the following exclusion:

Any amount otherwise payable for damages under this coverage shall be reduced by all sums:

* * * * * *

2. Paid or payable because of the bodily injury under any of the following or similar law: a. workers' compensation law....

Defendant North Carolina Farm Bureau Mutual Insurance Company (Farm Bureau) insured the automobile owned and operated by James L. Boswell. The coverage period of the policy was from 1 March 1990 to September 1990. The vehicles covered by the policy were a 1979 Ford pickup truck, a 1983 Ford Escort and the 1983 Oldsmobile which was involved in the accident. The policy provided UM/underinsured motorists (UIM) insurance coverage for bodily injuries in the amount of $50,000.00 per person. The Farm Bureau policy contains the following exclusion:

Any amount otherwise payable for damages under this coverage shall be reduced by all sums:

* * * * * *

2. Paid or payable because of the bodily injury under any of the following or similar law: a. workers' compensation law....

Plaintiffs brought an action against defendants Emanuel Canty, Jr., and James Laymond Boswell alleging personal injuries arising out of the automobile accident. Plaintiffs sought damages for the personal injury of Douglas H. McMillian and for loss of consortium on behalf of Margaret S. McMillian. Plaintiffs' complaint in the underlying action against Boswell has been dismissed, presumably because in the case of ordinary negligence on the part of a fellow employee, plaintiff is barred from bringing an action against the fellow employee because recovery is limited by the Workers' Compensation Act. Abernathy v. Consolidated Freightways, Corp., 321 N.C. 236, 240, 362 S.E.2d 559, 561 (1987); Bass v. Ingold, 232 N.C. 295, 299, 60 S.E.2d 114, 117 (1950); Burgess v. Gibbs, 262 N.C. 462, 467, 137 S.E.2d 806, 809 (1964). Plaintiffs' claim against defendant Canty is still pending.

Plaintiffs instituted this declaratory judgment action, to determine the coverage available under the automobile policies issued to plaintiffs and to defendant Boswell. The declaratory judgment action was heard 30 October 1995. The trial court ruled that plaintiffs were entitled to interpolicy stacking of UM coverage under the Allstate and Farm Bureau policies. However, both policies prohibit intrapolicy stacking of UM coverage, notwithstanding that multiple vehicles were listed in both policies. Plaintiffs have not assigned error to this issue and we do not address the same. The trial court also determined that the $50,000.00 Farm Bureau UM coverage and the $25,000.00 Allstate UM coverage were applicable to plaintiffs' claims against defendant Canty, but that the combined coverages of $75,000.00 were to be reduced by the $78,000.00 in workers' compensation benefits already paid to plaintiff Douglas H. McMillian. From this order plaintiffs appeal.

Plaintiffs first argue that the trial court erred in reducing the amount of UM coverage by the amount of workers' compensation benefits paid to plaintiff because the applicable policies were personal rather than business policies. We agree and reverse the ruling of the trial court.

The general purpose of the Workers' Compensation Act, in respect to compensation for disability, is to substitute, for common-law or statutory rights of action and grounds of liability, a system of money payments by way of financial relief for loss of capacity to earn wages. There is no compensation provided for physical pain or discomfort. Branham v. Denny Roll & Panel Co., 223 N.C. 233, 236, 25 S.E.2d 865, 867 (1943). "[O]ne of the purposes of the [Workers'] Compensation Act is to relieve against hardship rather than to afford full compensation for injury. The fixing of maximum and minimum awards in industry is a compromise." Kellams v. Carolina Metal Products, Inc., 248 N.C. 199, 203, 102 S.E.2d 841, 844 (1958).

The fundamental purpose of the Motor Vehicle Safety and Financial Responsibility Act of 1953, N.C. Gen.Stat. § 20-279.1 to -.39, " 'is to compensate the innocent victims of financially irresponsible motorists.' " Ohio Casualty Group v. Owens, 99 N.C.App. 131, 133, 392 S.E.2d 647, 648 (quoting Nationwide Mutual Insurance Co. v. Aetna Life & Casualty Co., 283 N.C. 87, 90, 194 S.E.2d 834, 836 (1973)), disc. review denied, 327 N.C. 484, 396 S.E.2d 614 (1990); see also Ohio Casualty Ins. Co. v. Anderson, 59 N.C.App. 621, 625-26, 298 S.E.2d 56, 59 (1982), cert. denied, 307 N.C. 698, 301 S.E.2d 101 (1983) (purpose and scope of act). "Although uninsured/underinsured motorist coverage can be specifically rejected by an insured, it is not voluntary insurance governed exclusively by the terms of the particular insurance contract." Id. at 133, 392 S.E.2d at 649 (citing Lichtenberger v. American Motorists Ins. Co., 7 N.C.App. 269, 272-73, 172 S.E.2d 284, 286-87 (1970); Nationwide Mutual Ins. Co. v. Chantos, 293 N.C. 431, 440-41, 238 S.E.2d 597, 603-04 (1977)). "The provisions of the Motor Vehicle Safety and Financial Responsibility Act are, in effect, written " 'into every automobile liability policy as a matter of law, and, when the terms of the policy conflict with the statute, the provisions of the statute will prevail.' " " Id. (quoting Chantos, 293 N.C. at 441, 238 S.E.2d at 604 (1977)). N.C. Gen.Stat. § 20-279.21(b)(4) (1993) provides that

[u]nderinsured motorist coverage is deemed to apply when, by reason of payment of judgment or settlement, all liability bonds or insurance policies providing coverage for bodily injury caused by the ownership, maintenance, or use of the underinsured highway vehicle have been exhausted. Exhaustion of that liability coverage for the purpose of any single liability claim presented for underinsured motorist coverage is deemed to occur when either (a) the limits of liability per claim have been paid upon the claim, or (b) by reason of multiple claims, the aggregate per occurrence limit of liability has been paid. Underinsured motorist coverage is deemed to apply to the first dollar of an underinsured motorist coverage claim beyond amounts paid to the claimant under the exhausted liability policy.

In any event, the limit of underinsured motorist coverage applicable to any claim is determined to be the difference between the amount paid to the claimant under the exhausted liability policy or policies and the limit of underinsured motorist coverage applicable to the motor vehicle involved in the accident.

Id.

Section 20-279.21(b)(4) allows an insurer to reduce its uninsured/underinsured coverage only by the amount of liability insurance in force at the time of the accident. Moreover, our courts have repeatedly held that where policy terms purporting to exclude certain risks from uninsured/underinsured coverage are in conflict with the provisions of the Motor Vehicle Safety and Financial Responsibility Act such exclusions are unenforceable.

Ohio Casualty, 99 N.C.App. at 133-34, 392 S.E.2d at 649 (citations omitted). N.C. Gen.Stat. § 20-279.21(e) (1993) provides that motor vehicle liability policies, "need not insure against loss from any liability for which benefits are in whole or in part either payable or required to be provided under any workers' compensation law." Our Supreme Court has found two public policies inherent in this provision. "First, the section relieves the employer of the burden of paying double premiums (one to its workers' compensation carrier and one to its automobile liability policy carrier), and second, the section denies the windfall of a double recovery to the employee." Manning v. Fletcher, 324 N.C. 513, 517, 379 S.E.2d 854, 856, reh'g denied, 325 N.C. 277, 384 S.E.2d 517 (1989).

In Manning...