Progressive American Ins. Co. v. Vasquez, 286PA98.

CourtUnited States State Supreme Court of North Carolina
Citation515 S.E.2d 8
Decision Date09 June 1999
Docket NumberNo. 286PA98.,286PA98.
PartiesPROGRESSIVE AMERICAN INSURANCE COMPANY, a Corporation v. Francisco VASQUEZ, Javier Luna, Tyvolia Faison, Administrator of the Estate of Daryell Glen Carlisle, Virginia Lassiter, Administrator of the Estate of Amos H. Bryant, Norman Johnson, Jr., William T. Parker, T.A. Loving, Inc., a Corporation, and Aetna Casualty & Surety Company, a Corporation.

Barnes, Braswell & Haithcock, P.A., by Glenn A. Barfield, Goldsboro, for defendant-appellant and -appellee Johnson; Mast, Schulz, Mast, Mills & Stem, P.A., by David F. Mills, Smithfield, for defendant-appellant and -appellee Faison; Law Offices of Jonathan S. Williams, by Jonathan S. Williams, Goldsboro, for defendant-appellant and -appellee Parker; Whitley, Jenkins & Riddle, by Eugene G. Jenkins, Kinston, for defendant-appellant and -appellee Lassiter.

Womble Carlyle Sandridge & Rice, PLLC, by Richard T. Rice and Garth A. Gersten, Winston-Salem, for defendant-appellant and -appellee Aetna Casualty and Surety Company.

Yates, McLamb & Meyher, L.L.P., by Andrew A. Vanore, III, Raleigh, for defendant-appellant and -appellee Aetna Casualty and Surety Company.

Battle, Winslow, Scott & Wiley, P.A., by Marshall A. Gallop, Jr., Rocky Mount, on behalf of the North Carolina Association of Defense Attorneys, amicus curiae.

ORR, Justice.

In this case, we are asked to decide, inter alia, the threshold issue of whether N.C.G.S. § 20-279.21 of the Financial Responsibility Act requires a commercial excess liability policy to offer separate uninsured and underinsured motorist ("UM" and "UIM," respectively) coverage in addition to what is offered by the underlying policy.

On 1 April 1994, defendant Aetna Casualty & Surety Company (now known as Travelers Casualty and Surety Company) issued a "Business Auto Coverage Policy" ("BAP") and a separate "Commercial Excess Liability Insurance Policy" to "T.A. Loving Company." The BAP provided UIM coverage limits and bodily injury liability limits of $1,000,000 per accident. The excess liability policy provided a $20,000,000 limit of liability for bodily injury for any one occurrence arising out of third-party liability claims made against Loving in excess of the underlying limits. The excess liability policy referenced the BAP as the underlying insurance.

On 8 July 1994, Amos H. Bryant and Daryell Carlisle were killed and Norman Johnson, Jr., and William T. Parker were injured when a flatbed truck, owned by Francisco Vasquez and driven by Javier Luna, collided with a pickup truck owned by T.A. Loving, Inc., and driven by Carlisle, a Loving employee. Bryant, Johnson, and Parker were also Loving employees. Tyvolia Faison, administratrix of Carlisle's estate; Virginia Lassiter, administratrix of Bryant's estate; Johnson; and Parker ("claimants") received $250,000 of primary liability coverage from plaintiff Progressive American Insurance Company ("Progressive American"), the liability insurer for Vasquez.

On 1 June 1995, Progressive American filed this action seeking a declaratory judgment that it had no obligation to defendants, under a policy issued to Vasquez by Progressive American which purported to cover the flatbed truck, with respect to any injuries or damages sustained in the accident. Defendant Aetna Casualty & Surety Company ("Aetna") filed an answer and cross-claim for declaratory judgment requesting, in part, a declaration that the excess liability policy issued by Aetna did not provide UM or UIM coverage above or in addition to that provided by the underlying auto policy.

Aetna subsequently filed a motion for summary judgment, which was heard at the 21 February 1997 session of Superior Court, Wake County. Although the trial court, in its "Memorandum Decision" of 4 March 1997 and its subsequent order of 3 April 1997, granted Aetna's motion for summary judgment, Aetna disagreed with that portion of the trial court's order regarding UIM coverage under the excess liability policy as set forth in the following conclusions of law:

2. The Aetna Business Auto Coverage Policy, number 25 FJ 1078005 CCA, provides One Million Dollars ($1,000,000.00) in underinsured motorist coverage for the aggregate of all claims and all claimants seeking recovery for wrongful death or personal injury arising out of a single incident. Under this policy, the maximum obligation of Aetna is a total of One Million Dollars ($1,000,000.00), reduced by the amount of primary carrier liability coverage paid by Progressive American Insurance Company, which amount is Two Hundred Fifty Thousand Dollars ($250,000.00). The net amount of Seven Hundred Fifty Thousand Dollars ($750,000.00) is further reduced by the aggregate amounts paid or payable under any workers' compensation policy to all claimants.
3. The Commercial Excess Liability Policy, Number 025 XS 23999348 CCA (the umbrella policy), provides additional underinsured motorist coverage, in addition to that provided in the auto coverage policy; however, the Court rules that such additional coverage is limited to One Million Dollars ($1,000,000.00) of excess coverage for underinsured motorist liability incurred, above the initial One Million Dollars ($1,000,000.00) coverage in the auto policy. This One Million Dollars ($1,000,000.00) limit is in the aggregate for all claims and all claimants; however, it is not reduced by any workers' compensation payments made to claimants.

Aetna and the claimant-defendants appealed the trial court's decision to the Court of Appeals.

The Court of Appeals, in a unanimous decision, reversed that part of the trial court's order limiting the level of UIM coverage under the excess liability policy to $1,000,000. Instead, the Court of Appeals held "that the umbrella policy [excess liability policy] provides UIM coverage in the amount of $20,000,000.00 per accident." Progressive Am. Ins. Co. v. Vasquez, 129 N.C.App. 742, 748, 502 S.E.2d 10, 15 (1998). We allowed Aetna's petition for discretionary review as to this issue.

Claimants present two arguments as to why the Court of Appeals was correct in holding that the excess liability policy was required to offer UM/UIM coverage. First, they contend that the excess liability policy meets the statutory requirements of N.C.G.S. § 20-279.21. In essence, their argument is that N.C.G.S. 20-279.21(b)(3) refers to a "policy of bodily injury liability insurance," which constitutes a broader category of coverage than a motor vehicle liability policy. Thus, they argue, the excess liability policy was a "policy of bodily injury liability insurance," and therefore, UM and UIM coverage was required to be offered. Secondly, they contend that this Court's decision in Isenhour v. Universal Underwriters Ins. Co., 341 N.C. 597, 461 S.E.2d 317 (1995), mandates such a conclusion. For the reasons that follow, we disagree with claimants' position and, accordingly, reverse the Court of Appeals as to this issue.

We begin our discussion with a brief review of the history of the statute in question. The main statutory provisions controlling UM and UIM insurance in North Carolina are codified as subdivisions (b)(3) and (b)(4), respectively, of N.C.G.S. § 20-279.21. The UM provision, (b)(3), was first adopted by the General Assembly in 1961, and the UIM provision, (b)(4), was adopted in 1979. Both subdivisions have been amended several times over the years.

The purposes behind the original enactments are clear. "Our uninsured motorist statute was enacted by the General Assembly as a result of public concern over the increasingly important problem arising from property damage, personal injury, and death inflicted by motorists who are uninsured and financially irresponsible." Moore v. Hartford Fire Ins. Co. Group, 270 N.C. 532, 535, 155 S.E.2d 128, 130 (1967). Likewise, the UIM addition to the statute was passed to address circumstances where " `the tortfeasor has insurance, but his [or her] coverage is in an amount insufficient to compensate the injured party for his full damages.' " Harris v. Nationwide Mut. Ins. Co., 332 N.C. 184, 189, 420 S.E.2d 124, 127 (1992) (quoting James E. Snyder, Jr., North Carolina Automobile Insurance Law § 30-1 (1988)). "Under North Carolina law, an insured may purchase UM coverage alone or UM and UIM coverage in combination, but he [or she] may not purchase UIM coverage by itself." George L. Simpson III, North Carolina Uninsured and Underinsured Motorist Insurance xvii (1998) [hereinafter N.C. UM and UIM Insurance ].

N.C.G.S. § 20-279.21, which encompasses the UM and UIM provisions, is titled " `Motor vehicle liability policy' defined" and begins with subsection (a), which provides that in North Carolina, insurers may issue two kinds of motor vehicle liability policies: an "owner's policy" or an "operator's policy." The requirements of these two types of policies are substantially different.

While not defined in the statute, an "owner's policy" is a motor vehicle liability policy that insures "the holder against legal liability for injuries to others arising out of the ownership, use or operation of a motor vehicle owned by him [or her]." Howell v. Travelers Indem. Co., 237 N.C. 227, 229, 74 S.E.2d 610, 612 (1953). The requirements for an owner's policy are set forth in subsection (b). "[Subsection] (b) requires that an owner's policy designate the particular vehicles it insures and that it provide bodily injury and property damage liability coverage to the named insured and certain other persons while using [the] vehicles." N.C. UM and UIM Insurance at 103.

In 1961, the General Assembly enacted chapter 640 of the Session Laws, titled: "An Act to Amend G.S. § 20-279.21 Defining Motor Vehicle Liability Insurance Policy for Financial Responsibility Purposes so as to Include Protection Against Uninsured Motorists." The Act provided in part:

(2) Striking out the period at the end of subdivision 2 [of N.C.G.S. § 20-279.21(b) ] and inserting in lieu
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