Ohio Cas. Group v. Owens

• Decision Date: 19 June 1990
• Docket Number: No. 8926SC689,8926SC689
• Citation: 99 N.C.App. 131,392 S.E.2d 647
• Parties: OHIO CASUALTY GROUP, Plaintiff, v. Christine R. OWENS, Julian A. Coleman, Alamance County Hospital, Grain Dealers Mutual Ins. Company, and Amerisure Insurance Companies, Defendants.
• Court: North Carolina Court of Appeals

Page 647

392 S.E.2d 647

99 N.C.App. 131

OHIO CASUALTY GROUP, Plaintiff, v. Christine R. OWENS, Julian A. Coleman, Alamance County Hospital, Grain Dealers Mutual Ins. Company, and Amerisure Insurance Companies, Defendants.

No. 8926SC689.

Court of Appeals of North Carolina.

June 19, 1990.

Hedrick, Eatman, Gardner & Kincheloe by Scott C. Lovejoy, Charlotte, for plaintiff.

William Benjamin Smith, Charlotte, for defendant, Christine R. Owens.

Carruthers & Roth, P.A. by Charles J. Vinicombe, Greensboro, for defendants Alamance County Hosp. and Amerisure Ins. Companies.

COZORT, Judge.

Plaintiff Ohio Casualty Group (Ohio Casualty) initiated the case below to have the court declare its legal obligation to defendant Christine R. Owens.

On 22 May 1985, Ms. Owens, driving her automobile and acting within the course and scope of her employment, collided with a vehicle driven by Julian A. Coleman. He was insured by Grain Dealers Mutual Insurance Company (Grain Dealers), which has stipulated that it is prepared to tender its policy limit of $25,000. Workers' compensation insurance for Ms. Owens' employer Alamance County Hospital was provided by Amerisure Insurance Companies (Amerisure). By 16 March 1987, Amerisure on behalf of Ms. Owens' employer had paid her $20,392.70 in medical expenses and compensation benefits.

At the time of the accident, Ms. Owens' automobile liability insurance contract with Ohio Casualty provided "uninsured/underinsured motorist coverage" to a maximum of $50,000. Under that provision she made a claim for $25,000 (the difference between her policy limit and the $25,000 payable by Coleman's liability insurer Grain Dealers). Ohio Casualty refused to pay that claim, tendering instead $4,607.30 as satisfaction in full of its obligation.

Ohio Casualty maintained that it was entitled to reduce its $50,000 limit in underinsured motorist coverage by the $25,000 in liability coverage payable by Grain Dealers and the $20,392.70 in workers' compensation benefits paid by Amerisure. Ohio Casualty based its position on the following provision in its contract with Ms. Owens:

[D]amages under this [uninsured/underinsured motorist] coverage shall be reduced by all sums:

1. Paid because of the bodily injury or property damage [to our insured] by or on behalf of persons or organizations who may be legally responsible ...; and

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

a. workers' compensation law; or

b. disability benefits law.

On 12 May 1988, Ohio Casualty filed a complaint for declaratory judgment. After further pleadings, plaintiff Ohio Casualty and defendant Christine Owens made cross-motions for summary judgment. The trial court denied Ms. Owens' motion, granted Ohio Casualty's motion, and declared

[t]hat Plaintiff's obligation and liability to the Defendant, Christine R. Owens, pursuant to their contract of insurance is $4,607.30 ... representing the difference between the Plaintiff's $50,000.00 underinsured motorist coverage and the $25,000.00 of primary coverage heretofore tendered by ... Grain Dealers [and the] $20,392.70, heretofore paid to ... Christine R. Owens, by the Defendant, Amerisure....

On appeal, the defendants contend that the trial court's order is contrary to North Carolina's Motor Vehicle Safety and Financial Responsibility Act and applicable case law. We agree.

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." Nationwide Insurance Co. v. Aetna Casualty Co., 283 N.C. 87, 90, 194 S.E.2d 834, 836 (1973); 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. Lichtenberger v. American Motorists Ins. Co., 7 N.C.App. 269, 272-73, 172 S.E.2d 284, 286-87 (1970); Nationwide Ins. Co. v. Chantos, 293 N.C. 431, 440, 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." Chantos, 293 N.C. at 441, 238 S.E.2d at 604 (1977).

In the case below, Ms. Owens' contract with Ohio Casualty was a motor vehicle liability policy as defined in N.C.Gen.Stat. § 20-279.21. Her policy included uninsured/underinsured motorist coverage. Section 20-279.21(b)(4) provides, regarding such coverage, that

Underinsured motorist coverage shall be 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 such liability coverage for purpose of any single liability claim presented for underinsured motorist coverage shall be deemed to occur when either (a) the limits of liability per claim have been paid upon such claim, or (b) by reason of multiple claims, the aggregate per occurrence limit of liability has been paid. Underinsured motorist coverage shall be deemed to apply to the first dollar of an underinsured motorist coverage claim beyond amounts paid to the claimant pursuant to 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 pursuant to the exhausted liability policy and the total limits of the owner's underinsured motorist coverages provided in the owner's policies of insurance; it being the intent of this paragraph to provide to the owner, in instances where more than one policy may apply, the benefit of all limits of liability of underinsured motorist coverage under all such policies: Provided that this paragraph shall apply only to nonfleet private passenger motor vehicle insurance as defined in G.S. 58-40-15(9) and (10). [Emphasis added.]

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. See, e.g., Indiana Lumbermens Mutual Insurance Co. v. Parton, 147 F.Supp. 887 (M.D.N.C.1957); Crowder v. N.C. Farm Bureau Mut. Ins. Co., 79 N.C.App. 551, 340 S.E.2d 127, disc. review denied, 316 N.C. 731, 345 S.E.2d 387 (1986).

The Legislature's intent with regard to N.C.Gen.Stat. § 20-279.21(b)(4) is plain when it is read in conjunction with the Workers' Compensation Act. N.C.Gen.Stat. § 97-10.2 provides for the subrogation of the workers' compensation insurance carrier (here Amerisure) to the employer's right, upon reimbursement of the employee, to any payment, including uninsured/underinsured motorist insurance proceeds, made to the employee by or on behalf of a third party as a...