Register v. White

• Citation: 587 S.E.2d 95,160 NC App. 657
• Decision Date: 21 October 2003
• Docket Number: No. COA02-1585.,COA02-1585.
• Court: North Carolina Court of Appeals
• Parties: Melissa REGISTER, Plaintiff, v. Steve Allen WHITE, Defendant.

587 S.E.2d 95

160 NC App. 657

Melissa REGISTER, Plaintiff, v. Steve Allen WHITE, Defendant.

No. COA02-1585.

Court of Appeals of North Carolina.

October 21, 2003.

Duffus & Melvin, P.A., by J. David Duffus, Jr., and Benjamin E. Waller, Greenville, for plaintiff-appellant.

Harris, Creech, Ward and Blackerby, P.A., by Charles E. Simpson, Jr., and Joseph E. Elder, New Bern, for unnamed defendant-appellee.

CALABRIA, Judge.

Melissa Register ("plaintiff") appeals the 5 August 2002 order denying her motion to compel arbitration. Since we find plaintiff's claim was not barred by the applicable statute of limitations and plaintiff did not waive her right to arbitration, we reverse.

On 30 June 1998, plaintiff was involved in an automobile accident while riding as a passenger in Steve Allen White's ("defendant") car. Thereafter, plaintiff filed suit against defendant. On 8 August 2001, defendant's insurance company tendered the full limits of its policy, $50,000.00, to plaintiff. On 24 September 2001, plaintiff demanded arbitration with unnamed defendant, North Carolina Farm Bureau Insurance Company ("Farm Bureau"), who provided underinsured motorist coverage ("UIM") to plaintiff. The trial court held "[p]laintiff failed to demand arbitration of Farm Bureau Insurance of North Carolina, Inc. within the time allowed by contract, thus, barring her claim for arbitration." The court further concluded, pursuant to the factors in Sullivan v. Bright, 129 N.C.App. 84, 497 S.E.2d 118 (1998), plaintiff waived her right to arbitration. We disagree.

Although an order denying arbitration is interlocutory, the parties do not dispute it is immediately appealable because it involves a substantial right that might be lost were the right to appeal delayed. Park v. Merrill Lynch, ___ N.C.App. ___, ___, 582 S.E.2d 375, 377 (2003). Therefore, we properly have jurisdiction to consider plaintiff's appeal.

"In considering a motion to compel arbitration, the trial court must determine (1) whether the parties have a valid agreement to arbitrate, and (2) whether the subject in dispute is covered by the arbitration agreement. The trial court's conclusion is reviewable de novo by this Court." Brevorka v. Wolfe Constr., Inc., 155 N.C.App. 353, 356, 573 S.E.2d 656, 658-59 (2002) (internal citations omitted). In determining whether an enforceable agreement exists, the court considers whether the parties have waived their contractual right to arbitrate and whether the demand for arbitration was timely. Sullivan, 129 N.C.App. at 86, 497 S.E.2d at 120 (regarding waiver); Adams v. Nelsen, 313 N.C. 442, 329 S.E.2d 322 (1985) (regarding waiver and time limitation). The trial court concluded a valid contract existed and provided for arbitration, but that plaintiff failed to demand arbitration within the time limit set forth in the contract, and, alternatively, she waived her right to arbitration by taking advantage of judicial discovery procedures.

"North Carolina has a strong public policy favoring the settlement of disputes by arbitration. Our strong public policy requires that the courts resolve any doubts concerning the scope of arbitrable issues in favor of arbitration." Johnston County v. R .N. Rouse & Co., 331 N.C. 88, 91, 414 S.E.2d 30, 32 (1992). This rule applies "`"whether the problem at hand is the construction of the contract language itself or an allegation of waiver[,]"`" the issues we now consider. Id., (quoting Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984)(quoting Moses H. Cone Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765, 785 (1983))).

I. Time Limitation

Plaintiff asserts the trial court erred in concluding she failed to assert her right to arbitration of her UIM coverage from Farm Bureau within the time limitation provided in the contract. We agree.

An insurance policy is a contract and "its provisions govern the rights and duties of the parties thereto. `As with all contracts, the goal of construction is to arrive at the intent of the parties when the policy was issued.'" Brown v. Lumbermens Mut. Casualty Co., 326 N.C. 387, 392, 390 S.E.2d 150, 153 (1990) (quoting Woods v. Insurance Co., 295 N.C. 500, 505, 246 S.E.2d 773, 777 (1978)). "`All parts of a contract are to be given effect if possible. It is presumed that each part of the contract means something.'" Brown, 326 N.C. at 393, 390 S.E.2d at 153 (quoting Bolton Corp. v. T.A. Loving Co., 317 N.C. 623, 628, 347 S.E.2d 369, 372 (1986)). However, "`[a] latent ambiguity may arise where the words of a written agreement are plain, but by reason of extraneous facts the definite and certain application of those words is found impracticable.'" Jefferson-Pilot Life Ins. Co. v. Smith Helms Mulliss & Moore, 110 N.C.App. 78, 81, 429 S.E.2d 183, 185 (1993) (quoting Miller v. Green, 183 N.C. 652, 654, 112 S.E. 417, 418 (1922)).

"[T]he meaning of ambiguous language within an insurance policy is a question of law for the court." Markham v. Nationwide Mut. Fire Ins. Co., 125 N.C.App. 443, 452-53, 481 S.E.2d 349, 355 (1997). "Any ambiguity in the policy language must be resolved against the insurance company and in favor of the insured." Brown, 326 N.C. at 392, 390 S.E.2d at 153. "Further, as our courts are not favorably disposed toward provisions limiting the scope of coverage, exclusions are `"to be strictly construed to provide the coverage which would otherwise be afforded by the policy."`" Markham, 125 N.C.App. at 454, 481 S.E.2d at 356 (quoting Durham City Bd. of Education v. National Union Fire Ins. Co., 109 N.C.App. 152, 156, 426 S.E.2d 451, 453 (1993) (quoting Maddox v. Insurance Co., 303 N.C. 648, 650, 280 S.E.2d 907, 908 (1981))).

With these principals in mind we turn to the issue of time limitation in the case at bar. Plaintiff sought to enforce the UIM provision of the insurance contract, which provides:

We will also pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury sustained by an insured caused by an accident. The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the underinsured motor vehicle. We will pay for these damages only after the limits of liability under any applicable liability bonds or policies have been exhausted by payments of judgments or settlements....

Therefore, an insured may seek UIM coverage only after the liability policy has paid to the full extent of its limits. The policy language tracks the statutory language of N.C. Gen.Stat. § 20-279.21(b)(4) which explains UIM coverage.¹ To enforce this provision, the contract further provided, "the insured may demand to settle the dispute by arbitration." Finally, the contract provided the following time limitation for demanding arbitration: "[a]ny arbitration action against the company must begin within the time limit allowed for bodily injury or death actions in the state where the accident occurred." This language is precisely as required by the North Carolina Rate Bureau in Rate Bureau Amendatory Endorsement NC 00 09 (Ed. 5-94) for personal auto policies.² Since the accident in the case at bar occurred in North Carolina, a three-year time limit is applicable and begins when the bodily harm reasonably should have become, or actually became, apparent. N.C. Gen.Stat. § 1-52(16) (2001). The terms of the contract, on their face, appear plain and enforceable. The coverage provision states that UIM insurance is triggered only when the liability policy has been exhausted; the arbitration provision provides plaintiff must demand arbitration of a UIM claim within the time limit for bodily injury claims. Farm Bureau asserts there is no ambiguity because the three-year limitation is an independent provision, and an insured must demand arbitration of the UIM coverage regardless of whether her right thereto has arisen.³ We disagree.

In considering the interaction between the UIM and arbitration provisions of an identical insurance contract, this Court held a plaintiff's arbitration rights do not arise until her right to UIM coverage arises, which is when she is offered a settlement for the full extent of the liability policy.⁴ Hackett v. Bonta, 113 N.C.App. 89, 97, 437 S.E.2d 687, 692 (1993). Therefore, a plaintiff's right to demand arbitration for UIM coverage does not arise until the liability insurer offers a settlement exhausting its limits. Since the insured's right to arbitration of UIM coverage is dependent upon a full settlement from the liability insurer, and such a settlement may occur after the three-year time limitation has expired, a latent ambiguity exists regarding the time limitation for demanding arbitration. See Jefferson-Pilot, 110 N.C.App. at 81,

429 S.E.2d at 185 (a latent ambiguity is where the words appear clear until facts make application of those words "impracticable"). A latent ambiguity must be resolved in favor of the insured and providing coverage. See Brown, 326 N.C. at 392,

390 S.E.2d at 153 (in favor of the insured); Markham, 125 N.C.App. at 454,

481 S.E.2d at 356 (in favor of coverage). Moreover, "[i]n no event can the limitations period begin to run until the injured party is at liberty to sue." Glover v. First Union National Bank, 109 N.C.App. 451, 455, 428 S.E.2d 206, 208 (1993). We see no reason to distinguish arbitration, and hold this rule also applies to injured parties who have foregone their right to sue in favor of arbitration. We hold a UIM insured's right to demand arbitration arises when the liability insurer has offered a settlement exhausting its coverage, and only once this right has arisen may the time limitation for demanding arbitration commence. Applying this rule in the case at bar, plaintiff's right to demand arbitration did not arise when she was injured on 30 June 1998, but rather arose on 8 August 2001, and therefore she timely...