Driver's, Passenger's UIM Stackable Even Though Liability and UIM Limits Equal
In Benton v. Hanford, 2009 WL 129727 (N.C. App), the plaintiff Benton was a passenger in a 2001 Toyota driven by defendant Hanford when the Toyota collided with a tree causing injury to Benton.
At the time of the accident, the defendant was insured as a named driver on a Nationwide Policy that provided $50,000 per person in liability coverage and $50,000 per person in UIM coverage for a person occupying the covered vehicle. The plaintiff was insured as a “household resident” on a Progressive policy owned by his mother, plaintiff Tyndall, that provided $100,000 per person in UIM coverage. After the accident, Nationwide paid plaintiffs $50,000 in liability insurance benefits under its policy.
The plaintiffs sought a judicial determination as to whether Progressive was responsible for paying up to a total of $100,000 in UIM coverage for the claim. Progressive asserted that its $100,000 UIM policy limit should be reduced by a credit for Nationwide's payment of $50,000, thereby limiting Progressive's UIM coverage to only $50,000. Progressive moved for summary judgment, requesting the trial court declare that Progressive's coverage was limited to $50,000.
The trial court entered summary judgment in favor of the plaintiffs, declaring the Nationwide policy provided UIM coverage in the sum of $50,000 for the damages sustained by the plaintiffs in the accident; that the Nationwide policy provided primary UIM coverage for purposes of the damages sustained by the plaintiffs; that the Progressive policy provided excess UIM insurance benefits; that Nationwide was entitled to a credit of $50,000 to its $50,000 UIM limit for the amount of the liability insurance paid under Nationwide's policy to the plaintiffs; that the Progressive policy was entitled to no credit for the liability proceeds paid under the Nationwide policy to the plaintiffs; and that the Progressive policy provided available UIM coverage for $100,000 for damages sustained by the plaintiffs.
Defendant Progressive appealed, first arguing that the Nationwide policy did not provide UIM coverage to Benton as a passenger in the Toyota because the car was not an “underinsured vehicle” for purposes of the Nationwide policy. Progressive argued that the definition of “underinsured motor vehicle” found in the Nationwide policy was dispositive, particularly the provision which excluded “any vehicle … [w]hich is insured under Liability Coverage of this policy if such policy's limit of liability for Combined Uninsured/Underinsured Motorists Coverage is equal to or less than its limit of liability for Liability Coverage.” Progressive reasoned that because the liability limits and the UIM limits in the Nationwide policy were equal, the Toyota did not meet the definition of an “underinsured motor vehicle” under the terms of the policy and therefore the Nationwide policy did not provide UIM coverage to the plaintiff.
The court of appeals of North Carolina disagreed, first stating that the Financial Responsibility Act defined “underinsured highway vehicle” generally as: 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 underinsured motorist coverage for the vehicle involved in the accident and insured under the owner's policy.
The court stated that interpretation of the Act began with the cardinal principle of statutory construction, which was that the intent of the legislature was controlling. And, in ascertaining the legislative intent, courts should consider the language of the statute, the spirit of the statute, and what it sought to accomplish. The stated purpose of the Financial Responsibility Act, according to the North Carolina Supreme Court, was to compensate the innocent victims of financially irresponsible motorists. In addition, the Act was remedial in nature and was to be liberally construed so that the beneficial purpose intended by its enactment could be accomplished. Further, the purpose of the Act was best served when every provision was interpreted to provide the innocent victim with the fullest possible protection.
In keeping with the purpose of the Act, the court held that the applicable UIM coverage could be stacked interpolicy to calculate the applicable limits of UIM coverage for the Toyota for the purpose of determining if the vehicle was an underinsured highway vehicle.
The court also stated that the statute defining “underinsured motor vehicle” to exclude a vehicle if the owner's policy insuring that vehicle provided UIM coverage with limits that are less than or equal to that policy's bodily injury liability limits applied only to accidents with multiple claimants and that definition followed the definition of “underinsured highway vehicle” in the multiple claimant context and was preceded by the language “Notwithstanding the immediately preceding sentence.” If neither auto policy had an “other insurance” clause for UIM coverage or if each policy had an “other insurance” clause which effectively canceled out the other, the credit for the liability insurer's payment should be shared pro rata between the two UIM carriers.
According to the “other insurance” clauses in both policies, the UIM coverage for the vehicle owned by the policy holder was primary. Here, this was the Nationwide policy covering the Toyota involved in the accident. The Progressive policy insured the injured party as a household resident of a named insured, in a vehicle not owned by the named insured. According to North Carolina precedent and the language of the policy, this was excess coverage. As the provider of primary coverage, Nationwide was entitled to the entire credit from the liability payment.
Therefore, the court held, the plaintiffs were entitled to stack both the Nationwide and the Progressive policies in determining whether the Toyota involved in the accident was an “underinsured highway vehicle” for purposes of UIM insurance coverage, and Nationwide was entitled to the entire credit for its liability payment as the primary insurer. Accordingly, the order of the trial court granting summary judgment in favor of plaintiffs was affirmed.