Title: State v. Miller

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

NO. COA13-167 
NORTH CAROLINA COURT OF APPEALS 
Filed: 20 August 2013 
 
 
DOUGLAS KIRK LUNSFORD, 
 
Plaintiff, 
 
 
 
 
v. 
 
McDowell County 
No. 11 CVS 118 
THOMAS E. MILLS., JAMES W. 
CROWDER, III, and SHAWN T. 
BUCHANAN, 
Defendants. 
 
 
 
 
Appeal by Unnamed Defendant North Carolina Farm Bureau 
Mutual Insurance Company from order entered 13 November 2012 by 
Judge James U. Downs in McDowell County Superior Court.  Heard 
in the Court of Appeals 5 June 2013. 
 
Abrams & Abrams, P.A., by Noah B. Abrams, Douglas B. 
Abrams, and Melissa N. Abrams, for Plaintiff. 
 
Nelson Levine de Luca & Hamilton, by David L. Brown and 
Brady A. Yntema, for Unnamed Defendant North Carolina Farm 
Bureau Mutual Insurance Company. 
 
 
DILLON, Judge. 
 
 
Unnamed 
Defendant 
North 
Carolina 
Farm 
Bureau 
Mutual 
Insurance Company (Farm Bureau) appeals from the trial court’s 
order granting summary judgment in favor of Douglas Kirk 
Lunsford (Plaintiff).  We affirm. 
I. Factual & Procedural Background 
-2- 
 
 
 
This appeal arises from a dispute between Farm Bureau and 
its insured, Plaintiff, concerning underinsured motorist (UIM) 
coverage in connection with two motor vehicle accidents that 
occurred on Interstate 40 in McDowell County on 18 September 
2009.  The first accident occurred when Defendant Thomas E. 
Mills lost control of his tractor trailer while traveling in the 
eastbound lane of Interstate 40, causing the vehicle to flip.  
At the time of this accident, Mr. Mills was acting within the 
scope of his employment with Defendant James Crowder.  
Plaintiff, a volunteer firefighter with the Crooked Creek 
Fire Department, was the first to respond to the scene and 
parked his vehicle on the right shoulder of the westbound travel 
lane.  Plaintiff crossed the freeway on foot to assist Mr. Mills 
and determined that “[Mr.] Mills was injured and that diesel 
fuel was leaking from” the tractor trailer.  As Plaintiff 
attempted to carry Mr. Mills “over the concrete median [and] . . 
. across the westbound lanes of I-40 to safety, to perform an 
assessment of [Mr. Mills’] injuries,” the second accident 
occurred when another motorist, Defendant Shawn T. Buchanan, who 
was traveling in the westbound lane, “was not paying attention 
to traffic in front of him which had slowed due to the wrecked 
tractor-trailer, nearly rear-ended a vehicle in front of him and 
-3- 
 
 
swerved suddenly to his left and struck Plaintiff.”  As a result 
of this collision, Plaintiff “suffered severe, permanent, and 
catastrophic injury.”    
At the time of these accidents, Mr. Mills and his employer, 
Mr. Crowder, were insured under a policy written by United 
States Fire Insurance Company (US Fire) providing liability 
coverage limits of $1 million.  Mr. Buchanan was insured under a 
policy 
written 
by 
Allstate 
Insurance 
Company 
(Allstate) 
providing liability coverage limits of $50,000.00.  Plaintiff 
held two insurance policies with Farm Bureau: (1) a business 
automobile policy with UIM coverage limits of $300,000.00; and 
(2) a personal automobile policy with UIM coverage limits of 
$100,000.00.   
 
On 14 February 2011, Plaintiff filed a complaint in 
McDowell County Superior Court asserting negligence claims 
against the named Defendants and alleging that Defendants were 
jointly and severally liable for his injuries.  All Defendants 
filed answers, and Defendants Buchanan and Crowder asserted 
crossclaims against one another seeking indemnification and 
contribution.  In addition, Farm Bureau, which had not been 
named as a party in the action, filed an answer asserting that 
it was entitled to an offset with respect to Plaintiff’s UIM 
-4- 
 
 
policies 
for 
any 
damages 
recovered 
by 
Plaintiff 
through 
insurance policies held by the named Defendants.  
 
On 24 May 2011, Allstate tendered to Plaintiff the 
$50,000.00 coverage limit for Buchanan’s policy.  The following 
day, counsel for Plaintiff notified Farm Bureau of Allstate’s 
tender and demanded that Farm Bureau tender payment for 
Plaintiff’s UIM claim.  By letter dated 7 June 2011, Farm Bureau 
responded that it would “not advance the liability policy limits 
tendered to [Plaintiff] by Allstate” and that “[a]s for the 
demand for our [UIM] policy limits, we are currently reviewing 
the situation with counsel based on the apparent existence of 
other potential recoverable liability insurance policies and 
will respond to your demand at a later date.”  More than six 
months later, Farm Bureau still had not provided UIM coverage to 
Plaintiff when Plaintiff settled his claims against Mr. Mills 
and Mr. Crowder for $850,000.00, which was paid under their 
policy with US Fire.  On 12 January 2012, an order was entered 
in McDowell County Superior Court approving the settlement of 
Plaintiff’s claims against Defendants Buchanan, Mills, and 
Crowder; and, accordingly, all claims and crossclaims filed in 
Plaintiff’s original action were dismissed with prejudice. 
-5- 
 
 
Farm 
Bureau, 
however, 
never 
tendered 
any 
monies 
to 
Plaintiff under Plaintiff’s UIM policies.  Instead, on 19 July 
2012, Farm Bureau moved for summary judgment, seeking a 
declaration that Plaintiff was not entitled to UIM coverage 
because the aggregate amount of Plaintiff’s settlements - 
$900,000.00 - exceeded the aggregate amount of the UIM coverage 
- $400,000.00 – provided under Plaintiff’s Farm Bureau policies.  
In response, Plaintiff filed a cross motion for summary 
judgment, contending that the policy limits under his Farm 
Bureau policies stack and that he was entitled to judgment 
against Farm Bureau in the amount of $350,000.00, which 
represented his aggregate UIM coverage minus the $50,000.00 that 
he had received pursuant to his settlement with Mr. Buchanan.   
The matter of Farm Bureau’s motion for summary judgment and 
Plaintiff’s cross motion for summary judgment came on for 
hearing in McDowell County Superior Court on 15 October 2012.  
By order filed 13 November 2012, the trial court granted 
Plaintiff’s motion for summary judgment, denied Farm Bureau’s 
motion for summary judgment, and entered judgment in Plaintiff’s 
favor and against Farm Bureau in the amount of $350,000.00, plus 
costs and pre and post-judgment interest.  Farm Bureau appeals. 
II. Analysis 
-6- 
 
 
This appeal raises the question of when UIM coverage is 
triggered in instances in which the insured is injured in a 
motor vehicle accident caused by multiple tortfeasors.  More 
specifically, 
we 
must 
determine 
whether 
Farm 
Bureau 
was 
obligated to provide UIM coverage to Plaintiff once Allstate had 
tendered its policy limits to Plaintiff on behalf of Mr. 
Buchanan, or, whether Farm Bureau was entitled to withhold 
coverage until Plaintiff had recovered (or attempted to recover) 
under the liability policies insuring the tractor trailer driven 
by Mr. Mills.   
Farm Bureau argues that it was not required to provide 
coverage until all applicable policies – meaning all policies 
held by all the named Defendants – had been exhausted; that 
Plaintiff settled his claims against the named Defendants for a 
total of $900,000.00, an amount that far exceeded Plaintiff’s 
total UIM coverage limits of $400,000.00; and that permitting 
Plaintiff to recover UIM coverage of $350,000.00 in addition to 
the $900,000.00 he had already received from the tortfeasors 
provided Plaintiff with a windfall.    
Plaintiff counters that his $50,000.00 settlement with 
Allstate on behalf of Mr. Buchanan triggered Farm Bureau’s 
obligation to provide UIM coverage in the amount of $350,000.00, 
-7- 
 
 
the amount by which Plaintiff’s $400,000.00 UIM coverage with 
Farm Bureau exceeded the settlement.  Plaintiff argues that Farm 
Bureau could have recouped its payment through a subrogation 
claim when Plaintiff subsequently received the proceeds of his 
$850,000.00 settlement with Mr. Mills and Mr. Crowder, but that 
Farm Bureau forfeited its subrogation rights by refusing to 
tender coverage at the time of Plaintiff’s settlement with Mr. 
Buchanan.   
“[T]he governing statute [concerning UIM coverage] is the 
version of N.C. Gen. Stat. § 20-279.21(b)(4) in effect at the 
time the policy was issued.”  Vasseur v. St. Paul Mut. Ins. Co., 
123 N.C. App. 418, 420, 473 S.E.2d 15, 16 (1996).  N.C. Gen. 
Stat. § 20-279.21(b)(4) is a provision of the Financial 
Responsibility Act (the Act), which “is remedial in nature and 
must be liberally construed . . . in order to protect ‘innocent 
victims 
who 
may 
be 
injured 
by 
financially 
irresponsible 
motorists.’”  Sanders v. Am. Spirit Ins. Co., 135 N.C. App. 178, 
181, 519 S.E.2d 323, 325 (1999) (citation omitted).  The 
applicable 
version 
of 
N.C. 
Gen. 
Stat. 
§ 
20-279.21(b)(4) 
provides, in pertinent part, as follows:  
Underinsured motorist coverage is deemed to 
apply when, by reason of payment of judgment 
or 
settlement, 
all 
liability 
bonds 
or 
insurance policies providing coverage for 
-8- 
 
 
bodily 
injury 
caused 
by 
the 
ownership, 
maintenance, or use of the underinsured 
highway vehicle have been exhausted.   
 
N.C. Gen. Stat. § 20-279.21(b)(4) (2011) (emphasis added).  This 
provision also defines an “underinsured highway vehicle” as 
follows:    
[A]n “underinsured highway vehicle[”] 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 underinsured motorist coverage for the 
vehicle involved in the accident and insured 
under the owner’s policy.  
 
Id.  As discussed below, we interpret the plain language of this 
provision to mean that UIM coverage is triggered the moment that 
an insured has recovered under all policies applicable to “a” – 
meaning one – “underinsured highway vehicle” involved in a motor 
vehicle accident resulting in injury to the insured.   
 
We note that neither Plaintiff nor Farm Bureau offers any 
North Carolina case law addressing the rights and obligations of 
a UIM insurer in a situation involving liability policies 
covering multiple vehicles that are potentially liable to the 
injured insured.  This Court has, however, ruled on a UIM 
coverage 
issue 
involving 
multiple 
tortfeasors 
where 
the 
liability of one of the tortfeasors arose from the operation of 
-9- 
 
 
a motor vehicle.  Farm Bureau Ins. Co. of N.C., Inc. v. Blong, 
159 N.C. App. 365, 583 S.E.2d 307 (2003).  In Blong, the victim 
(Lawler) was killed by a drunk driver (Marvin) in an automobile 
accident.  Id. at 366, 583 S.E.2d at 308.  At the time of her 
death, Lawler was insured under a Farm Bureau policy which 
provided UIM coverage with limits of $100,000.00 per person, 
$300,000.00 per accident.  Id. at 367, 583 S.E.2d at 308.  
Marvin’s automobile insurance carrier tendered its policy limits 
of $50,000.00 “almost immediately after the accident”; however, 
that amount was insufficient to compensate Lawler (and the 
families of the other victims who had been killed in the 
accident) and thus “dram shop” lawsuits were filed against two 
local bars which had served alcohol to Marvin.  Id. at 366-67, 
583 S.E.2d at 308.  The victims subsequently reached settlement 
agreements with both Marvin and the bars, and Farm Bureau, which 
had previously tendered its UIM limits under Lawler’s policy, 
sought a declaratory judgment that it was entitled to an offset 
to the extent of the UIM coverage it had provided.  Id. at 367-
68, 583 S.E.2d at 309.  On appeal, we affirmed the trial court’s 
ruling that Farm Bureau was entitled to an offset and stated the 
following concerning the rights and obligations of a UIM insurer 
where multiple tortfeasors are involved:   
-10- 
 
 
The UIM carrier pays out what it owes its 
insured after judgment or settlement has 
been reached with the underinsured driver.  
If there are parties that exist that may be 
made “legally responsible” through proper 
court channels, the UIM insurer may pursue 
them via their subrogation rights.  As it 
happened here, such an offer was made, but 
refused by the insured.  As the structure of 
the 
Act 
and 
definition 
of 
exhaustion 
provide, a UIM carrier cannot require an 
insured 
to 
pursue 
these 
parties 
before 
exhaustion can occur.  Recovered proceeds 
from legally responsible parties can only 
flow back to the UIM carrier after the fact. 
There is no entitlement or subrogation by 
the UIM carrier to those proceeds unless 
payment to the insured was made when the 
underinsured 
vehicle’s 
limits 
were 
exhausted, or otherwise in accordance with 
the Act.  Money paid out by UIM insurer is 
to be recouped, not reduced then paid out.  
The fear . . . that insureds will be kept 
hanging in limbo as they are forced to sue 
any 
and 
all 
possible 
persons 
or 
organizations for years before they could 
recover 
their 
UIM 
benefits 
are 
[sic] 
unfounded. Such actions on the part of UIM 
carriers would be in the realm of bad faith. 
 
Id. at 373, 583 S.E.2d at 312.   
We see no reason why the rights and obligations of a UIM 
insurer should differ in the present case simply because the 
additional tortfeasor was a motorist covered under an automobile 
liability policy.  In other words, we see no reason why insureds 
should “be kept hanging in limbo as they are forced to sue any 
and all possible persons . . . before they could recover UIM 
-11- 
 
 
benefits” just because other potential tortfeasors also happen 
to be covered under automobile policies.1  Here, Plaintiff’s UIM 
coverage was triggered the moment that all policies applicable 
to Mr. Buchanan’s vehicle had been exhausted; Farm Bureau was 
not at liberty to withhold coverage until Plaintiff reached 
settlement agreements with Mr. Mills and Mr. Crowder, as Blong 
clearly obligates the UIM carrier to first provide coverage, and 
later seek an offset through reimbursement or exercise of 
subrogation rights.  We believe that this result comports with 
the Act’s purpose which is “best served when the statute is 
interpreted to provide the innocent victim with the fullest 
possible protection . . . from the negligent acts of an 
underinsured motorist.”  Sanders, 135 N.C. App. at 181-82, 519 
S.E.2d at 325 (quoting Proctor v. N.C. Farm Bureau Mut. Ins. 
Co., 324 N.C. 221, 224, 376 S.E.2d 761, 763 (1989)) (emphasis in 
original).   Moreover, Farm Bureau’s contention that the trial 
court’s order resulted in a windfall to Plaintiff is unavailing.  
                     
1 We note that decisions of courts in other jurisdictions are in 
accord with our holding.  See, e.g., Gen. Acc. Ins. Co. v. 
Wheeler, 221 Conn. 206, 214, 603 A.2d 385, 388-89 (1992) 
(holding that “the insured need only exhaust the ‘liability bond 
or insurance policies’ of one tortfeasor in order for the 
insured to be eligible to pursue underinsured benefits”) (citing 
Mulholland v. State Farm Mutual Automobile Ins. Co., 171 Ill. 
App.3d 600, 617, 122 Ill. Dec. 657, 527 N.E.2d 29 (1988), and 
Motorist Mutual Ins. Co. v. Tomanski, 27 Ohio St.2d 222, 223, 
271 N.E.2d 924 (1971)).   
-12- 
 
 
Had Farm Bureau tendered its policy limits in accordance with 
this Court’s mandate in Blong, it would have had the opportunity 
for reimbursement and there would have been no windfall.  To 
hold otherwise would not only punish the insured, but also 
reward UIM insurers for withholding coverage when due. 
Finally, Farm Bureau contends that the trial court erred in 
awarding Plaintiff costs and pre and post-judgment interest “as 
provided by law.”  Farm Bureau cites Sproles v. Greene, 329 N.C. 
603, 407 S.E.2d 497 (1991), in support of its contention that 
“[a]n insurer has no statutory duty . . . to pay interest or 
costs in excess of its policy limits” and that “any obligation 
on the part of an insurer to pay such interest or costs is 
governed by the terms and conditions of its policy.”  Greene, 
however, holds that the UIM carrier is not required to pay pre 
and post-judgment interest on behalf of the insured where the 
judgment has been entered against the insured, id. at 605, 407 
S.E.2d at 498, and thus has no bearing on the case at hand, in 
which the judgment was entered against Farm Bureau itself, not 
against its insured (Plaintiff).  This contention is without 
merit and is accordingly overruled.      
III. Conclusion 
-13- 
 
 
 
For the foregoing reasons, the trial court’s 13 November 
2012 order is hereby 
AFFIRMED. 
Judges BRYANT and STEPHENS concur.