Silvers v. Horace Mann Ins. Co.

• Decision Date: 03 May 1988
• Docket Number: No. 8711SC317,8711SC317
• Citation: 90 N.C.App. 1,367 S.E.2d 372
• Court: North Carolina Court of Appeals
• Parties: Nancy SILVERS, Individually and as Administratrix of the Estate of Stuart Martin Williams, Deceased v. HORACE MANN INSURANCE COMPANY, Roger Matthews, As Agent, and Individually, James Richard Bell, and Robert Earl Bell.

Page 372

367 S.E.2d 372

90 N.C.App. 1

Nancy SILVERS, Individually and as Administratrix of the Estate of Stuart Martin Williams, Deceased v. HORACE MANN INSURANCE COMPANY, Roger Matthews, As Agent, and Individually, James Richard Bell, and Robert Earl Bell.

No. 8711SC317.

Court of Appeals of North Carolina.

May 3, 1988.

Anderson, Broadfoot, Johnson & Pittman by Henry L. Anderson, Jr. and Clay A. Collier, Wrightsville, for plaintiff-appellant.

Patterson, Dilthey, Clay, Cranfill, Sumner & Hartzog by Grady S. Patterson, Jr. and Theodore B. Smyth, Raleigh, for defendants-appellees Horace Mann Ins. Co. and Roger Matthews.

Downing, David & Maxwell by Edward J. David, Fayetteville, for defendants-appellees James Richard Bell and Robert Earl Bell.

GREENE, Judge.

This is an action to collect underinsurance benefits and damages arising out of an automobile accident. Plaintiff appeals from the entry of summary judgment against her.

The plaintiff, Nancy Silvers (hereinafter "Silvers") brought this suit individually and in her capacity as administratrix of the estate of her deceased son against defendants James Richard Bell, Robert Earl Bell (hereinafter the "Bells"), Horace Mann Insurance Company (hereinafter "Horace Mann") and its agent, Roger Matthews (hereinafter "Matthews"). Plaintiff seeks payment pursuant to an insurance policy issued by Horace Mann for underinsured motorist (hereinafter "UIM") benefits as well as damages for breach of contract, negligence, fraud, bad faith and unfair and deceptive trade practices. This appeal concerns plaintiff's right to underinsurance benefits from Horace Mann.

On 14 March 1984, plaintiff's son was involved in a one-car automobile accident in which James Richard Bell was driving a car owned by his father, Robert Earl Bell. On 20 March 1984, plaintiff's son died from the injuries he received in the accident. Plaintiff, as the administratrix of her son's estate, then sued the Bells for the wrongful death of her son on 4 May 1984. On 14 May 1984, plaintiff, the Bells, and the liability insurance carrier for the Bells, Indiana Lumbermans Mutual Insurance Company, entered into a consent judgment granting plaintiff recovery of $25,000 against the Bells and Indiana Lumbermans. The consent judgment provided:

THIS CAUSE, coming on to be heard and being heard before the undersigned Judge upon statement of counsel for Plaintiff and Defendants that this cause has been settled and adjusted between the parties by agreement under the terms of which the Plaintiff shall have and recover judgment in the amount of Twenty-Five Thousand Dollars ($25,000.00); AND IT FURTHER APPEARING TO THE COURT from the face of the Complaint that this is an action for recovery for wrongful death of Plaintiff's intestate for which damages far exceed the liability coverage of the Defendants' insurance carrier, Indiana Lumbermans Mutual Insurance Co.; AND IT FURTHER APPEARING TO THE COURT, upon statement of counsel, that the liability of Indiana Lumbermans Mutual Insurance Company, which is the insurance carrier for the Defendant, is limited to Twenty-Five Thousand Dollars ($25,000.00) per person for bodily injury; AND IT FURTHER APPEARING TO THE COURT that the primary carrier, Indiana Lumbermans Mutual Insurance Co., wishes to pay the policy limits in order to avoid unnecessary litigation costs as liability on the part of the Defendants is clear and the damages of the Plaintiff's intestate far exceed the policy limits covered by the primary liability carrier, Indiana Lumbermans Mutual;

AND IT FURTHER APPEARING TO THE COURT that the Plaintiff's intestate was covered by underinsured motorist coverage through The Horace Mann Company and that this consent judgment is not to be construed in any way to adversely affect the rights of Plaintiff or her intestate concerning any such underinsured coverage;

NOW, THEREFORE, IT IS BY CONSENT ORDERED AND ADJUDGED that the Plaintiff's intestate have and recover of and from the Defendants, by and through their primary liability insurance carrier, Indiana Lumbermans Mutual Insurance Company, the sum of Twenty-Five Thousand Dollars ($25,000.00) and that the same shall be a full and final release of Indiana Lumbermans Mutual Insurance Company and the Defendants. It is hereby further ordered that this consent judgment shall not release nor relinquish any rights that the Plaintiff's intestate has or might have against Horace Mann Company under any underinsured liability coverage.

(Emphasis supplied.)

On 27 March 1985, plaintiff instituted this action against the Bells and Horace Mann for recovery of UIM benefits under the automobile insurance policy issued by Horace Mann to plaintiff. In addition, plaintiff sued Horace Mann and Matthews for breach of contract, negligence, fraud, bad faith and unfair and deceptive trade practices. Defendants Horace Mann and Matthews moved to dismiss the action under N.C.G.S. Sec. 1A-1, Rule 12(b)(6) (1983), asserting various violations of the policy as a bar to plaintiff's recovery.

Defendants Bell moved to dismiss based on the previous consent judgment. The court considered matters outside the pleadings and treated the motion as one for summary judgment under N.C.G.S. Sec. 1A-1, Rule 56. The trial judge granted defendants' motions for summary judgment. Plaintiff appeals the grant of these motions.

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This appeal presents the following issues: (I) Whether plaintiff is barred from recovery from Horace Mann because she is not legally entitled to recover additional damages from the tortfeasors; and (II) whether plaintiff's failure to obtain Horace Mann's consent before settling with the tortfeasors bars her recovery from Horace Mann.

Summary judgment is proper where pleadings, depositions, interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue as to any material fact and that a party is entitled to judgment as a matter of law. Cutchin v. Pledger, 71 N.C.App. 279, 281, 321 S.E.2d 462, 464 (1984).

At the outset, we note the statute in effect at the time the policy was issued and at the time of the accident, N.C.G.S. Sec. 20-279.21 (1983), was the version of the statute amended in 1983. Effective 1 October 1985, the statute was again significantly amended to provide for different procedures in claims for underinsurance benefits. Therefore, our discussion of the applicable statutory provisions concerns only the 1983 version.

I

Under the terms of N.C.G.S. Sec. 20-279.21(b)(4) and the policy in question, an underinsured motor vehicle is included within the definition of an uninsured motor vehicle (hereinafter "UM"). The statutory definition of an underinsured motor vehicle, which is similar to the definition given in the policy, provides:

An "uninsured motor vehicle," as described in subdivision (3) of this subsection, includes an "underinsured highway vehicle," which means a highway vehicle with respect to the ownership, maintenance, or use of which, the sum of the limits of liability under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the applicable limits of liability under the owner's policy.

N.C.G.S. Sec. 20-279.21(b)(4). This definition evinces a public policy to place the insured in the position that would have existed if the tortfeasor had carried liability insurance limits equal to the liability coverage carried by the insured. See 2 A Widiss, Uninsured and Underinsured Motorist Insurance Secs. 32.2 at 13 and 35.2 at 44 (2d ed. 1987) (provision requiring insurers to make available UIM coverage limits in an amount equal to amounts selected by insured for his liability coverage clearly manifests public policy of assuring indemnification to insured). UIM coverage is required unless a named insured in the policy rejects the coverage. See N.C.G.S. Sec. 20-279.21(b)(4). The statute is remedial in nature and is to be liberally construed to effectuate its purpose of providing coverage for damages to injured parties caused by insured motorists with liability coverage not sufficient to provide complete compensation for the damages. See American Tours, Inc. v. Liberty Mut. Ins. Co., 315 N.C. 341, 346, 338 S.E.2d 92, 96 (1986) (avowed purpose of Financial Responsibility Act, of which Section 279.21 is a part, is to compensate innocent victims of financially irresponsible motorists); Hendricks v. U.S. Fidelity and Guaranty Co., 5 N.C.App. 181, 184, 167 S.E.2d 876, 877 (1969).

Subdivision (4) also states that "[t]he [UM coverage] provisions of subdivision (3) shall apply to the coverage required by this subdivision." N.C.G.S. Sec. 20-279.21(b)(4); see also Crowder v. North Carolina Farm Bureau Mut. Ins. Co., 79 N.C.App. 551, 556, 340 S.E.2d 127, 130-31, disc. rev. denied, 316 N.C. 731, 345 S.E.2d 387 (1986). Subdivision (3) requires automobile liability policies issued in North Carolina to contain coverage "for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles ... because of bodily injury, ... including death, resulting therefrom...." N.C.G.S. Sec. 20-279.21(3).

The policy also includes underinsured motorists within the definition of uninsured motorists and provides:

We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of:

1. Bodily injury sustained by a covered person and caused by an accident; and

2. Property damage caused by an accident.

Horace Mann argues that because plaintiff entered into the consent judgment, she is no longer "legally entitled to recover damages" from the Bells so that she may not recover UIM benefits from Horace Mann.

The clear language of the consent judgment was that it was to be a "full and final release" of the Bells and their liability insurer. Therefore, plaintiff is barred from recovering further damages from...