United Services Auto. Ass'n v. Universal Underwriters Ins. Co., 506PA91

• Decision Date: 04 September 1992
• Docket Number: No. 506PA91,506PA91
• Citation: 420 S.E.2d 155,332 N.C. 333
• Parties: UNITED SERVICES AUTOMOBILE ASSOCIATION v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY and Warden Motors, Inc., d/b/a Clemmons Traders.
• Court: North Carolina Supreme Court

Page 155

420 S.E.2d 155

332 N.C. 333

UNITED SERVICES AUTOMOBILE ASSOCIATION v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY and Warden Motors,

Inc., d/b/a Clemmons Traders.

No. 506PA91.

Supreme Court of North Carolina.

Sept. 4, 1992.

On discretionary review pursuant to N.C.G.S. § 7A-31(a) of an opinion of the Court of Appeals, 104 N.C.App. 206, 408 S.E.2d 750 (1991), affirming the declaratory judgment entered in favor of plaintiff by Beaty, J., in the Superior Court, Forsyth County on 2 October 1990. Heard in the Supreme Court 13 March 1992.

This case involves a dispute as to which of two insurance companies has provided liability insurance to the driver of a truck involved in a collision. The driver of the truck had a liability insurance policy with the plaintiff. He was driving the truck with the permission of Warden Motors, Inc., which owned it, for the purpose of deciding whether he would purchase it. Warden had a garage owner's liability policy with the defendant Universal Underwriters Insurance Company.

The superior court held that the defendant Universal provided liability coverage and the Court of Appeals affirmed this holding. We allowed the defendant Universal's petition for discretionary review.

Nichols, Caffrey, Hill, Evans & Murrelle by Karl N. Hill, Jr., Greensboro, for plaintiff-appellee.

Petree, Stockton & Robinson by James H. Kelly, Jr., Winston-Salem, for defendant-appellant.

WEBB, Justice.

We faced a situation very similar to the one in this case in Insurance Co. v. Insurance Co., 269 N.C. 341, 152 S.E.2d 436 (1967). We hold that pursuant to Insurance Co. we are bound to reverse the Court of Appeals.

In Insurance Co. we held that an insurer by the terms of its policy could exclude liability coverage under a garage owner's liability policy if the driver of a vehicle owned by the garage was covered under his own policy for the minimum amount of liability coverage required by the Motor Vehicle Safety and Financial Responsibility Act, N.C.G.S. § 20-279.1 et seq. Whether such an exclusion occurs depends on the terms of the policy. Insurance Co. holds that N.C.G.S. § 20-279.21(j) allows either of the two policies which provides for the required liability coverage to satisfy the financial responsibility required by the Act.

In Insurance Co. the garage owner's policy contained a provision that coverage for the driver was provided, "only if no other valid and collectible automobile liability insurance, either primary or excess, ... is available to such person." The driver's policy provided that in the event there was other coverage, the driver's coverage would be excess coverage. This Court held that this excess coverage provision in the driver's policy was an event which excluded coverage for the driver in the garage owner's policy.

In this case, we must examine the two policies to determine if either of them excludes coverage. We note that there is not a contention that the driver of the truck is not covered by liability insurance. The question is which of the two policies provides coverage.

The policy issued by the plaintiff to the driver of the truck provided in its coverage section as follows:

We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident. We will settle or defend, as we consider appropriate any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted.

"Covered person" as used in this Part means:

1. You or any family member for the ownership, maintenance or use of any auto or trailer.

The policy issued by the plaintiff also contained the following "other insurance" provision:

If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance.

The policy issued by the defendant Universal identified the following as insureds with respect to the auto hazard:

1. YOU;

2. Any of YOUR partners, paid employees, directors, stockholders, executive officers, a member of their household or a member of YOUR household, while using an AUTO covered by this Coverage Part, or when legally responsible for its use. The actual use of the AUTO must be by YOU or within the scope of YOUR permission;

3. Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission.

The limits of the policy issued by Universal are as follows:

Regardless of the number of INSUREDS or AUTOS insured by this Coverage Part, persons or organizations who sustain INJURY, claims made or suits brought, the most WE will pay is:

1. With respect to GARAGE OPERATIONS and AUTO HAZARD, the limit shown in the declarations for any one OCCURRENCE.

The portion of the limit applicable to persons or organizations required by law to be an INSURED is only the amount (or amount in excess of any other insurance available to them) needed to comply with the minimum limits provision of such law in the jurisdiction where the OCCURRENCE takes place.

The "other insurance" provision of the policy issued...