Smith v. Nationwide Mut. Ins. Co.

• Decision Date: 07 February 1991
• Docket Number: No. 130A90,130A90
• Citation: 328 N.C. 139,400 S.E.2d 44
• Court: North Carolina Supreme Court
• Parties: Michael A. SMITH, Individually and as Administrator of the Estate of Crystal Michelle Smith, Deceased v. NATIONWIDE MUTUAL INSURANCE COMPANY.

Page 44

400 S.E.2d 44

328 N.C. 139

Michael A. SMITH, Individually and as Administrator of the Estate of Crystal Michelle Smith, Deceased v. NATIONWIDE MUTUAL INSURANCE COMPANY.

No. 130A90.

Supreme Court of North Carolina.

Feb. 7, 1991.

Appeal by defendant pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of the Court of Appeals, 97 N.C.App. 363, 388 S.E.2d 624 (1990), reversing and remanding the judgment entered by Ellis, J., on 11 August 1988, in the Superior Court, Wake County. Heard in the Supreme Court 8 October 1990.

Patterson, Dilthey, Clay, Cranfill, Sumner & Hartzog by Theodore B. Smyth, Raleigh, for plaintiff-appellant.

LeBoeuf, Lamb, Leiby & MacRae by Peter M. Foley and Stephanie L. Hutchins, Raleigh, for defendant-appellee.

FRYE, Justice.

The issue presented in this appeal is whether the Court of Appeals erred in holding that the underinsured motorist (UIM) coverages provided in two separate automobile insurance policies issued to the individual plaintiff may not be aggregated or "stacked" to compensate for the death of his daughter who was killed while driving a vehicle owned by the individual plaintiff and the daughter, given that the daughter and the vehicle were listed in only one of the policies. The Court of Appeals, while acknowledging that a different result might be reached if writing on a clean slate, concluded that it was "compelled to follow the Driscoll rule enforcing the household-owned vehicle exclusion." Smith v. Nationwide Mutual Ins. Co., 97 N.C.App. 363, 370, 388 S.E.2d 624, 629 (1990). Finding no "household-owned vehicle exclusion" applicable to the UIM coverage in the policies at issue in Driscoll or in the present case, we overrule Driscoll v. U.S. Liability Ins. Co., 90 N.C.App. 569, 369 S.E.2d 110, disc. rev. denied, 323 N.C. 364, 373 S.E.2d 544 (1988), and reverse the decision of the Court of Appeals in the case now before the Court.

On 2 October 1986, Crystal Smith was fatally injured in an accident while driving a 1977 Toyota Corolla automobile owned by Crystal Smith and her father, Michael Smith. The Toyota was insured under a liability insurance policy No. 61J097608 (Policy A) issued by Nationwide Mutual Insurance Company (Nationwide). Both Crystal Smith and Michael Smith were listed as insureds under Policy A. Michael Smith also had automobile liability insurance with Nationwide under policy No. 61E449873 (Policy B) which insured two other vehicles. Crystal Smith was not a named insured under Policy B, and she was not the owner of either of the two vehicles listed on Policy B. Crystal Smith was a member of her father's household at the time of the accident. Each of the Nationwide policies provided UIM coverage at limits of $100,000/$300,000.

The other vehicle involved in the accident was driven by Ricky Eugene Bates and owned by his wife, Virginia Bates. The Bates vehicle was insured by an automobile liability insurance policy issued by Farm Bureau Mutual Insurance Company (Farm Bureau). Farm Bureau paid its single limit liability coverage of $50,000 to the Estate of Crystal Michelle Smith.

On 13 January 1988, Michael Smith, individually and as administrator of his deceased daughter's estate, brought this declaratory judgment action pursuant to N.C.G.S. § 1-253 seeking a judgment for a "declaration of the rights that Michael Smith has in relation to two insurance policies issued by the defendant Nationwide Mutual Insurance Company." After setting out the factual dispute between plaintiff and defendant, plaintiff asked the Court to "enter a judgment declaring that underinsured motorist coverages provided for in the Nationwide policies numbered 61E449873 [Policy B] and 61J097608 [Policy A] may be stacked in calculating the total underinsured motorist coverage provided for to satisfy any settlement or judgment for the wrongful death of Crystal Michelle Smith." A wrongful death action, which sought to recover damages from the Bates for the wrongful death of Crystal Smith, was filed in Wake County Civil Superior Court by Michael Smith as Administrator of Crystal Smith's Estate.

Nationwide does not deny that Crystal Smith was covered under Policy A; however, Nationwide does contest the issue of whether Policy B also provided UIM coverage for Crystal Smith. The trial court on 11 August 1988 denied defendant's motion to dismiss the action and granted plaintiff's motion for summary judgment. The trial court concluded that Crystal Smith was covered under the UIM provisions of Policy A and Policy B, which together provided a total of $200,000 in UIM coverage in favor of the Estate of Crystal Smith, subject to a $50,000 setoff representing payments received by the plaintiff from the tortfeasor's liability insurance carrier. On appeal by Nationwide, the Court of Appeals reversed, holding that "because the Toyota driven by Crystal was a household-owned vehicle not insured under Policy B, the UIM coverage provided by that policy is not available to compensate Mr. Smith for Crystal's death." Smith v. Nationwide, 97 N.C.App. at 370, 388 S.E.2d at 629. Judge Phillips dissented concluding that under this Court's decision in Sutton v. Aetna Casualty & Surety Co., 325 N.C. 259, 382 S.E.2d 759, reh'g denied, 325 N.C. 437, 384 S.E.2d 546 (1989), the UIM coverages of both policies are available to the plaintiff. Id. 97 N.C.App. at 371, 388 S.E.2d at 629. Plaintiff appealed to this Court on the basis of the dissenting opinion.

When examining cases to determine whether insurance coverage is provided by a particular automobile liability insurance policy, careful attention must be given to the type of coverage, the relevant statutory provisions, and the terms of the policy. In the present case, the type of coverage at issue is UIM coverage. The policies in question, Policy A and Policy B, both include uninsured motorist (UM) coverage and UIM coverage in addition to the standard liability coverage and medical payments coverage.

The relevant statute in this case is N.C.G.S. § 20-279.21 (1989). The policy requirements for liability coverage are found in N.C.G.S. § 20-279.21(b)(2), supplemented by other provisions of § 20-279.21. Uninsured motorist coverage is governed by N.C.G.S. § 20-279.21(b)(3), supplemented by other provisions of § 20-279.21. Underinsured motorist coverage is governed by N.C.G.S. § 20-279.21(b)(4), supplemented by other provisions of § 20-279.21.

As noted above, § 20-279.21(b)(3) addresses UM coverage. It includes the following definition of "persons insured":

For purposes of this section "persons insured" means the named insured and, while resident of the same household, the spouse of any named insured and relatives of either, while in a motor vehicle or otherwise, and any person who uses with the consent, expressed or implied, of the named insured, the motor vehicle to which the policy applies and a guest in such motor vehicle to which the policy applies or the personal representative of any of the above or any other person in lawful possession of such motor vehicle.

N.C.G.S. § 20-279.21(b)(3) (1989). Section 20-279.21(b)(4) addresses UIM coverage and incorporates by reference the same definition of "persons insured." See N.C.G.S. § 20-279. (b)(4) (1989). Thus, § 20-279.21(b)(3) defines "persons insured" for purposes of UM coverage and UIM coverage.

Our Court of Appeals explained the term "person insured" in Crowder v. N.C. Farm Bureau Mut. Ins. Co., 79 N.C.App. 551, 340 S.E.2d 127, disc. rev. denied, 316 N.C. 731, 345 S.E.2d 387 (1986).

In essence, N.C.Gen. Stat. 20-279.21(b)(3) establishes two "classes" of "persons insured": (1) the named insured and, while resident of the same household, the spouse of the named insured and relatives of either and (2) any person who uses with the consent, express or implied, of the named insured, the insured vehicle, and a guest in such vehicle.

Id. 79 N.C.App. at 554, 340 S.E.2d at 129. Members of the second class are "persons insured" for the purposes of UM and UIM coverage only when the insured vehicle is involved in the insured's injuries. Members of the first class are "persons insured" even where the insured vehicle is not involved in the insured's injuries. Id. at 554, 340 S.E.2d at 130. We are concerned in this case with the first group or "class" of "persons insured" under N.C.G.S. § 20-279.21(b)(3) for purposes of UIM coverage. The individual plaintiff (Michael Smith) and his daughter Crystal are clearly members of the first class and thus "persons insured" under both policies without regard to whether the insured vehicle is involved in the insured's injuries.

Both Policy A and Policy B are virtually identical, with the exception of the Declarations page of each policy. The policy contains definitions of certain terms used in the policy, including the following:

Throughout this policy, "you" and "your" refer to:

1. The "named insured" shown in the Declarations; and

2. The spouse if a resident of the same household.

"We," "us" and "our" refer to the Company providing this insurance ....

"Family member" means a person related to you by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child.

In the instant case, "you" and "your" refer to Michael Smith as to Policy B and either Michael Smith or his daughter Crystal in Policy A. Crystal Smith was clearly a family member under Policy B.

Part D, the UM coverage section of both policies, provides that Nationwide

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....

Covered person, as used in this type of coverage, includes "[y]ou or any family member." The definition of an uninsured motor vehicle in Part D of the policy is expanded by an UM/UIM Endorsement to include an underinsured motor vehicle. Thus, under Part D of both...