Nationwide Mut. Ins. Co. v. Edwards

• Decision Date: 06 March 1984
• Docket Number: No. 825SC1326,825SC1326
• Citation: 312 S.E.2d 656,67 N.C.App. 1
• Court: North Carolina Court of Appeals
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY v. Robert A. EDWARDS, American Insurance Company and Etta W. Henry, Administratrix of the Estate of Donald Ray Henry.

Page 656

312 S.E.2d 656

67 N.C.App. 1

NATIONWIDE MUTUAL INSURANCE COMPANY v. Robert A. EDWARDS, American Insurance Company and Etta W.

Henry, Administratrix of the Estate of Donald Ray Henry.

No. 825SC1326.

Court of Appeals of North Carolina.

March 6, 1984.

Murchison, Taylor & Shell by Vaiden P. Kendrick, Wilmington, for plaintiff-appellant.

Yow, Yow, Culbreth & Fox by Stephen E. Culbreth, Wilmington, for defendant-appellee Etta W. Henry, Administratrix.

WHICHARD, Judge.

The court made findings of fact, which are supported by competent evidence and are thus conclusive on appeal. Broughton v. Broughton, 58 N.C.App. 778, 781, 294 S.E.2d 772, 775, disc. rev. denied, 307 N.C. 269, 299 S.E.2d 214 (1982). The sole issue is the propriety of the conclusion and adjudication that plaintiff's policy provided coverage to the extent of its limits.

While the court did not state the basis of its conclusion, it appears to be that because of its agent's knowledge of conditions extant at the issuance of the policy, plaintiff either waived or was estopped to assert the trailer exclusion. We find evidence neither of such knowledge nor of other facts sufficient to create a waiver or estoppel, and accordingly reverse.

Specific exclusions of coverage when an insured vehicle is used with an uninsured trailer, or when an insured trailer is used with an uninsured vehicle, consistently have been held valid and enforceable because of the added hazard created by towing a trailer. 12A M. Rhodes, Couch on Insurance 2d § 45:1089, at 745 (Rev. ed. 1981); 6C J. Appleman, Insurance Law and Practice § 4438, at 442-49 (1979); Annot., 31 A.L.R.2d 298, 302 (1953). Whether the towed trailer caused or contributed to the loss in question is immaterial. Maryland Casualty Co. v. Cross, 112 F.2d 58, 60 (5th Cir.), cert. denied, 311 U.S. 701, 61 S.Ct. 141, 85 L.Ed. 455 (1940); 6C J. Appleman, supra, at 457-58.

Under North Carolina law, coverage in excess of that required by the Financial Responsibility Act, G.S. 20-279.21, is voluntary. "The liability, if any, of the [carrier] for coverage in excess of that required by the Act must be judged according to the terms and conditions of the policy." Caison v. Insurance Co., 36 N.C.App. 173, 178, 243 S.E.2d 429, 432 (1978); see also Younts v. Insurance Co., 281 N.C. 582, 585, 189 S.E.2d 137, 139 (1972). Plaintiff concedes its liability to the limits set by the Act, but argues that it has no liability above those limits because of the exclusionary clause in the policy.

Our Supreme Court set forth general principles governing construction of insurance contracts in North Carolina in Trust Co. v. Insurance Co., 276 N.C. 348, 354-55, 172 S.E.2d 518, 522 (1970); see also Woods v. Insurance Co., 295 N.C. 500, 505-06, 246 S.E.2d 773, 777 (1978). Absent ambiguity reasonably susceptible to conflicting interpretations, courts must enforce the contract as written, giving effect to each word and clause. They "may not, under the guise of interpreting an ambiguous provision, remake the contract and impose liability upon the company which it did not assume and for which the policyholder did not pay." Trust Co., supra, 276 N.C. at 354, 172 S.E.2d at 522. See generally 1 R. Anderson, Couch on Insurance 2d §§ 15:15 to :17 (1959); 13 J. Appleman, Insurance Law and Practice §§ 7383-84 (1976).

The policy here covers the tractor and "any semi-trailer." This coverage is, however, "subject to all the terms of [the] policy having reference thereto." The "Basic Automobile Liability Insurance" section includes the "trailer exclusion" set forth above. The court found as facts that Brafford was the only named insured, that the trailer was owned by Edwards, that the trailer was not covered by "like insurance," and that the trailer was not designed for use with a four wheel private passenger automobile. At the time of the accident, then, the tractor fell within the precise language of the exclusionary clause, and Edwards was not an "insured" under its terms. Plaintiff promised to pay only on behalf of the "insured." Under the precise terms of the policy, then, plaintiff has no liability. No other reasonable interpretation or alternative basis for liability is presented. Thus, nothing else appearing, the company was entitled to a judgment declaring absence of coverage beyond that statutorily required.

An insurance company may waive its right to assert exclusions from coverage.

If an insurer, notwithstanding knowledge of facts then existing which by the language of the policy defeats the contract of insurance, nevertheless insures property, it will be held to have waived the policy provisions so far as they relate to the then existing conditions.

Fire Fighters Club v. Casualty Co., 259 N.C. 582, 585, 131 S.E.2d 430, 432 (1963); see Rea v. Casualty Co., 15 N.C.App. 620, 625, 190 S.E.2d 708, 712, cert. denied, 282 N.C. 153, 191 S.E.2d 759 (1972); see also Cato v. Hospital Care Association, 220 N.C. 479, 484, 17 S.E.2d 671, 674 (1941); Midkiff v. Insurance Co., 198 N.C. 568, 571-72, 152 S.E. 792, 794 (1930); Midkiff v. Insurance Co., 197 N.C. 139, 143, 147 S.E. 812, 814 (1929); Aldridge v. Insurance Co., 194 N.C. 683, 686, 140 S.E. 706, 708 (1927) (all finding waiver based on actual knowledge of agent). But see Iowa National Insurance Co. v. Coltrain, 143 F.Supp. 87, 89 (M.D.N.C.1956) (general knowledge of operations insufficient where agent had no specific knowledge of operation of trucks by third party in violation of policy provision); Midkiff v. Insurance Co., 197 N.C. 144, 145, 147 S.E. 814, 815 (1929) (knowledge of general practice in community insufficient; agent must have knowledge of particular insured's violation of provision of policy at time policy issued); Greene v. Insurance Co., 196 N.C. 335, 340, 145 S.E. 616, 618 (1928) (knowledge of agent of insured's violation, when acquired after issuance of policy, not imputed to insurer so as to create waiver or estoppel). The claimant has the burden, on a waiver issue, of establishing knowledge by the agent of facts existing at the issuance of the policy. Fire Fighters, supra, 259 N.C. at 586, 131 S.E.2d at 433.

The evidence here shows that plaintiff's agent knew defendant Edwards was in the process of acquiring the tractor, that he would operate it, and that the named insured had no use of it or interest in it except as the holder of legal title while awaiting the outstanding balance of the purchase price. It does not show that the agent knew Edwards intended to operate the tractor with an uninsured trailer. The insurance would have remained in effect had he driven the tractor alone or with a trailer not owned or hired by him. The record establishes that he did not purchase the trailer until six days after the policy was issued. The claimant thus has failed to show that the agent possessed any knowledge which would evoke a finding of waiver.

Knowledge by the agent of events occurring after issuance of the policy cannot support waiver. Greene v. Insurance Co., supra, 196 N.C. at 340, 145 S.E. at 618. Arrangements between Edwards and plaintiff or its agent subsequent to the accident are thus irrelevant.

Defendant has argued, in effect, that the actions of plaintiff's agent amounted to a misrepresentation which equitably estops plaintiff's assertion of the exclusion. Estoppel is an affirmative defense which must be specially pleaded. G.S. 1A-1, Rule 8(c); Stuart v. Insurance Co., 18 N.C.App. 518, 522, 197 S.E.2d 250, 253 (1973). Failure to plead an affirmative defense ordinarily results in waiver thereof. Smith v. Hudson, 48 N.C.App. 347, 352, 269 S.E.2d 172, 176 (1980). The parties may, however, still try the issue by express or implied consent. G.S. 1A-1, Rule 15(b).

Defendant-administratrix neither pled nor tried the case on this theory. She thus cannot now present it on appeal. Delp v. Delp, 53 N.C.App. 72, 76, 280 S.E.2d 27, 30, disc. rev. denied, 304 N.C. 194, 285 S.E.2d 97 (1981); Grissett v. Ward, 10 N.C.App. 685, 687, 179 S.E.2d 867, 869 (1971).

Had defendant-administratrix properly presented the issue, she did not offer sufficient evidence thereon to support a judgment in her favor. The party claiming protection under the rule of equitable estoppel has the burden of establishing facts warranting its application. In re Will of Covington, 252 N.C. 546, 549, 114 S.E.2d 257, 260 (1960); 31 C.J.S. Estoppel § 160 (1964). Defendant has not sustained this burden.

Our Supreme Court has stated:

[T]he essential elements of an equitable estoppel as related to the party estopped are: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is reasonably calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party afterwards attempts to assert; (2) intention or expectation that such conduct shall be acted upon by the other party, or conduct which at least is calculated to induce a reasonably prudent person to believe such conduct was intended or expected to be relied and acted upon; (3) knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, they are: (1) lack of knowledge and the means of knowledge of the truth as to the facts in question; (2) reliance upon the conduct of the party sought to be estopped; and (3) action based thereon of such a character as to change his position prejudicially.

Hawkins v. Finance Corp., 238 N.C. 174, 177-78, 77 S.E.2d 669, 672 (1953), quoted with approval in Transit, Inc. v. Casualty Co., 285 N.C. 541, 549, 206 S.E.2d 155, 160 (1974).

It is not necessary that the conduct of the party estopped be intentional; negligence may provide a basis for application of the doctrine. Transit, Inc., supra, 285 N.C. at 550-51, 206 S.E.2d at 160-61 (failure to inform insured of changed business coverage in renewal); see also 16B J. Appleman, Insurance Law and Practice § 9088, at 560 (1981); 28...