N.C. Farm Bureau Mut. Ins. Co. v. Hull

• Decision Date: 30 December 2016
• Docket Number: No. COA16-522,COA16-522
• Citation: 251 N.C.App. 429,795 S.E.2d 420
• Court: North Carolina Court of Appeals
• Parties: NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, Plaintiff, v. Lillian Dianne HULL and Annitta B. Crook, Defendants.

251 N.C.App. 429

795 S.E.2d 420

NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, Plaintiff,

v.Lillian Dianne HULL and Annitta B. Crook, Defendants.

No. COA16-522

Court of Appeals of North Carolina.

Filed: December 30, 2016

Caudle & Spears, P.A., Charlotte, by Harold C. Spears and Christopher P. Raab, for plaintiff-appellant.

Doran, Shelby, Pethel and Hudson, P.A., Salisbury, by Michael Doran, for defendants-appellees.

ENOCHS, Judge.

The North Carolina Farm Bureau Mutual Insurance Company ("Farm Bureau") appeals from the trial court's order dismissing its complaint pursuant to Lillian Dianne Hull's and Annitta B. Crook's ("Defendants") Rule 12(b)(6) motion to dismiss. After careful review, we affirm.

Factual Background

Farm Bureau is an insurer authorized and licensed to issue insurance policies in North Carolina. Hull was insured under a business automobile policy issued by Farm Bureau ("Farm Bureau Policy"). The Farm Bureau Policy, provided a single limit of $100,000.00 in uninsured motorist ("UM") and underinsured motorist ("UIM") coverage, through the North Carolina Uninsured Motorist Coverage Endorsement ("Endorsement"). Crook was listed as a driver under the policy.

In May 2011, Hull was a passenger inside a vehicle, owned and operated by Crook, when another vehicle, owned and operated by Deborah Branham ("Branham"), crossed the center line and collided with Crook's vehicle. Shortly after this initial collision, a third vehicle, operated by Brandon Robinson ("Robinson"), also struck Defendants’ vehicle.

Both Hull and Crook were injured during the collision and underwent medical treatment. Hull asserted medical expenses in excess of $58,000.00, and Crook asserted medical expenses in excess of $104,000.00. Five other individuals were injured in the accident, but none of them are parties to this action.

At the time of the accident, Branham was insured under an automobile liability insurance policy issued by Integon/GMAC ("GMAC") with policy limits of $30,000.00 per person and $60,000.00 per accident. Robinson was insured under automobile liability insurance policies by Allstate Insurance Company ("Allstate") with policy limits of $100,000.00 per person and $300,000.00 per accident, and by Mercury Insurance Company ("Mercury") with a policy limit of at least $250,000.00 per person.

As a result of the multiple claims asserted against Branham, GMAC tendered the limits of its liability coverage for Branham to Defendants and the five other individuals injured in the accident. Of those funds, Hull received $10,420.00 and Crook received $16,127.52, for a combined total of $26,547.52. Farm Bureau was given notice of GMAC's tender of Branham's policy limits.

Defendants claimed Branham qualified as an underinsured motorist under the Farm Bureau Policy and asserted a UIM claim. Farm Bureau did not advance, but offered to pay the Defendants’ UIM claims for $73,452.48, the $100,000.00 UIM policy limit minus the liability settlements Defendants received from GMAC, Branham's carrier. The letter proposing this particular settlement to Defendants offered to waive Farm Bureau's "subrogation rights to the above referenced claim." The "referenced claim" in this letter addressed only GMAC's tender of Branham's policy limits to Defendants and none others. This offer by Farm Bureau to tender the balance of its UIM limits was also subject to the express condition that Defendants execute and return a Release and Trust Agreement for Underinsured Motorist Coverage ("Settlement Agreement") before the funds accompanying the agreement were disbursed.

Consistent with the Farm Bureau Policy and Endorsement, this Settlement Agreement included a paragraph that expressly preserved Farm Bureau's subrogation rights against any other party from which Defendants might recover damages. This paragraph required Defendants to hold any such money in trust for payment to Farm Bureau pursuant to its subrogation rights. However, both Defendants struck through and initialed this paragraph, signed the altered Settlement Agreements, and returned them to Farm Bureau without the tendered proceeds on 14 March 2012.

Defendants subsequently asserted claims against Robinson, the driver of the third vehicle, for their damages suffered due to his negligence in the accident. When Farm Bureau learned of this additional potential recovery, it claimed subrogation rights against any recovery from Robinson or his insurance companies.

Farm Bureau subsequently filed the present Complaint for Declaratory Judgment to determine and establish those rights on 1 May 2015. On 9 July 2015, Defendants notified Farm Bureau their claims against Robinson and his insurance companies had settled. Crook settled her claim against Robinson for a payment of $140,000.00. Hull settled her claim for $75,000.00.

On 4 February 2016, the trial court heard Defendants’ Rule 12(b)(6) motion to dismiss. Prior to the hearing Farm Bureau amended its complaint to add a second claim for relief seeking monetary damages. Farm Bureau filed this amendment with both Defendants’ and the court's consent. At the hearing, Defendants informed the court that their pending Rule 12(b)(6) motion was also being asserted against the amendment to the complaint filed that day.

On 23 February 2016, the trial court entered an order granting Defendants’ Rule 12(b)(6) motion to dismiss for failure to state a claim. It is from this order that Farm Bureau appeals.

Analysis

On appeal, Farm Bureau contends that the trial court erred in granting Defendants’ motion to dismiss. We disagree.

The standard of review of an order granting a 12(b)(6) motion is whether the complaint states a claim for which relief can be granted under some legal theory when the complaint is liberally construed and all the allegations included therein are taken as true. On a motion to dismiss, the complaint's material factual allegations are taken as true. Dismissal is proper when one of the following three conditions is satisfied: (1) the complaint on its face reveals that no law supports the plaintiff's claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff's claim. On appeal of a 12(b)(6) motion to dismiss, this Court conducts a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct.

Podrebarac v. Horack, Talley, Pharr, & Lowndes, P.A. , 231 N.C.App. 70, 74, 752 S.E.2d 661, 663–64 (2013) (quoting Burgin v. Owen , 181 N.C.App. 511, 512, 640 S.E.2d 427, 428–29 (2007) ).

In the present case, Farm Bureau argues that its subrogation claims are not barred by the applicable statute of limitations. It contends that the breach of its insurance policies with Defendants occurred when Defendants reached a settlement with Robinson's insurance carrier and Defendants refused to pay Farm Bureau under the subrogation clause of Hull's policy.

Defendants, conversely, contend that the breach of Hull's policy occurred when they marked out the subrogation clause of the policy, initialed it, and remitted it to Farm Bureau along with a letter stating that they no longer intended to honor Farm Bureau's subrogation rights. If Farm Bureau is correct as to the time of breach, its claim is timely. However, if Defendants are correct, Farm Bureau's claim is time-barred.

" ‘The statute of limitations for a breach of contract action is three years. The claim accrues at the time of notice of the breach.’ "

Ludlum v. State , 227 N.C.App. 92, 94, 742 S.E.2d 580, 582 (2013) (quoting Henlajon, Inc. v. Branch Highways, Inc. , 149 N.C.App. 329, 335, 560 S.E.2d 598, 603 (2002) ).

In the present case, Farm Bureau's complaint reveals on its face that it alleged Defendants breached their contract on 14 March 2012 when Defendants expressly manifested their intent not to honor Farm Bureau's subrogation rights. The complaint plainly states the following:

11. By letter date March 9, 2012, Farm Bureau offered to settle Hull and Crook's UIM claims for the total sum of $73,452.48 (representing the difference between the UIM policy limits of $100,000.00 and the liability settlements in the sum of $26,547.52 that Hull and Crook received from Integon/GMAC) on the condition that Hull and Crook execute and return a Release and Trust Agreement for Underinsured Motorist Coverage. True, genuine and authentic copies of Farm Bureau's March 9, 2012, letter and the Release and Trust Agreement are attached hereto as Exhibit B and incorporated herein by reference.

12. Contrary to the express condition of settlement, Hull and Crook materially altered the Release and Trust Agreement by marking through its second paragraph, signed the altered Release and Trust Agreements, returned it to Farm Bureau by letter date March 14, 2012, and negotiated Farm Bureau's check. Copies of the March 14, 2012, letter and the altered Release and Trust Agreements are attached hereto as Exhibit C and incorporated herein by reference.

13. Hull and Crook had no authority or right to negotiate the settlement checks on any terms other than those offered by Farm Bureau.

14. Farm Bureau demanded that Hull and Crook return the settlement funds, but Hull and Crook refused to do so.

It is readily apparent from Farm Bureau's own complaint that it alleged breach of the subject insurance policy occurred on 14 March 2012 when Defendants (1) expressly stated to Farm Bureau that they were not honoring their subrogation rights; (2) marked out and initialed the paragraph on the Release and Trust Agreements for Underinsured Motorist Coverage concerning subrogation; and (3) refused to return the settlement funds despite Farm Bureau's express demand that they do so.

In the present case, there existed more than the mere apprehension or the mere threat of an action—indeed, Farm Bureau alleged two claims in its amended complaint and did not "relinquish"...