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

• Decision Date: 02 March 1989
• Docket Number: No. 384A88,384A88
• Court: North Carolina Supreme Court
• Parties: George L. PROCTOR, Administrator of the Estate of Joyce Batts Proctor v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY and Bobby F. Jones, Administrator C.T.A. of the Estate of William Gray Edwards, Jr.

Page 761

376 S.E.2d 761

324 N.C. 221

George L. PROCTOR, Administrator of the Estate of Joyce Batts Proctor v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY and Bobby F. Jones, Administrator C.T.A. of the Estate of William Gray Edwards, Jr.

No. 384A88.

Supreme Court of North Carolina.

March 2, 1989.

Bridgers, Horton & Rountree by Charles S. Rountree, Tarboro, for the plaintiff appellee.

Poyner & Spruill by Diane Dimond, Rocky Mount, and Poyner & Spruill by Mary Beth Forsyth Johnston, Raleigh, for defendant-appellant.

MITCHELL, Justice.

The sole question presented by this appeal is what amount of underinsured motorist coverage is required by law when an insurer has not complied with N.C.G.S. § 20-279.21(b)(4) and the liability insurance policy in which the underinsured motorist coverage is required does not state the existence or the amount of such coverage. The trial court and the majority in the Court of Appeals concluded that under such circumstances the statute, as it was written at the time relevant to this case, ¹ required underinsured motorist coverage equal to the maximum liability coverage provided by the policy. We affirm.

The facts controlling this case were stipulated by the parties in the trial court. The plaintiff's decedent, Joyce Batts Proctor, was killed in a traffic accident on 27 September 1984 while driving a van owned by Country Manor Antiques, a partnership in which she was a partner. The wrongful death of the plaintiff's decedent was caused by the negligence of William Gray Edwards, Jr., who was driving another vehicle involved in the accident. Edwards was covered by a liability insurance policy with maximum coverage limits of $25,000 per person and $50,000 per accident. The plaintiff's decedent was covered by a policy issued to Country Manor Antiques by the defendant, North Carolina Farm Bureau Mutual Insurance Co., with maximum liability coverage limits for wrongful death of $100,000 per person and $300,000 per accident, as well as uninsured motorist coverage.

Neither Country Manor Antiques nor the plaintiff's decedent had ever rejected underinsured motorist coverage in the policy issued by the defendant, as required by N.C.G.S. § 20-279.21(b)(4) if underinsured motorist coverage was not to be provided. The defendant had written the policy with a clause purportedly requiring that the insured request underinsured motorist coverage before it would be provided. The defendant now concedes that the clause contradicted N.C.G.S. § 20-279.21(b)(4) and that, by operation of the statute, underinsured motorist coverage was provided in its policy covering the plaintiff's decedent, even though premiums had never been paid for such coverage.

The plaintiff, George L. Proctor, administrator of Joyce Proctor's estate, sued the defendant insurance company for proceeds from the underinsured motorist coverage provided in its policy by operation of the statute. The trial court granted summary judgment for the plaintiff in the amount of $75,000. The plaintiff's wrongful death damages had been found to be in excess of $100,000. After determining that the $100,000 per person maximum liability coverage of the policy issued by the defendant was the amount of underinsured motorist coverage required by the statute, the trial court deducted from that amount Edwards' maximum liability coverage of $25,000 to arrive at the $75,000 that the defendant owed the plaintiff, such deduction also being provided for by the statute as it was then written.

The defendant contends that the statute as written at the time of the accident was not intended to provide the maximum amount of underinsured motorist coverage in cases such as this where the insurer failed to comply with the statute and the existence and amount of such coverage were not stated in the policy. The defendant contends that when underinsured motorist coverage was provided solely by operation of the former version of the statute, it was only provided at the minimum level of underinsured motorist coverage offered by the insurer at the time, which in this case would have been $50,000. That is particularly appropriate in this case, the defendant contends, because the insured had opted to purchase only the minimum amount of uninsured motorist coverage. Accordingly, the defendant argues that the trial court should have awarded the plaintiff only $25,000, after deducting Edwards' $25,000 liability limit from the $50,000 minimum underinsured motorist coverage offered by the defendant.

The language of the statute was not explicit as to the amount of underinsured motorist coverage required at the time of this accident. Absent the insured's rejection of such coverage, the statute as written at that time required underinsured motorist coverage in all insurance policies that provided more than the statutory minimum liability coverage and which included uninsured motorist coverage. The statute provided that the underinsured motorist coverage was "not to exceed" the policy limits for automobile bodily injury liability as specified in the owner's policy. The statute's only other reference to the amount of such coverage was in its formula for the limit of the insurer's payment under such coverage, the limit then being "only the difference between the limits of the liability insurance [of the underinsured motorist] that is applicable and the limits of the underinsured motorist coverage as specified in the owner's policy." N.C.G.S. § 20-279.21(b)(4) (1983). ²

In order to determine what level of coverage the statute as formerly written was intended to mandate under the circumstances of this case, we must look to the purpose of the statute and the needs it was intended to address. The purpose of this State's compulsory motor vehicle insurance laws, of which the underinsured motorist provisions are a part, was and is the protection of innocent victims who may be injured by financially irresponsible motorists. See Nationwide Mutual Insurance Co. v. Chantos, 293 N.C. 431, 238 S.E.2d 597 (1977).

The innocent plaintiff's damages in this case were in excess of $100,000, of which only $25,000 was recoverable (the plaintiff actually recovered less) from the liability coverage of the underinsured motorist who caused the accident. The defendant insurance company, which created the ambiguity confronting us in this case by its failure to comply with the statute, asks this Court to resolve the ambiguity in its favor. That would provide the plaintiff with an additional $25,000--$50,000 underinsured motorist coverage, less the $25,000 liability limit of the underinsured motorist's policy--leaving in excess of $50,000 in damages uncompensated by operation of the statute.

Under the plaintiff's interpretation of the statute's requirements at the time of the accident, adopted by the trial court and the Court of Appeals, the statute would provide $100,000 of underinsured motorist coverage--an amount equal to the liability coverage in the defendant's policy--for the death of this innocent victim of a tortfeasor who was financially unable to make full compensation. Thus, the general purpose of the statute would be served better and more fully by the plaintiff's...