Opinion ID: 1353617
Heading Depth: 1
Heading Rank: 7

Heading: Payments Collected by the Department of Transportation for Lapses in Insurance Coverage

Text: This Court allowed the petition for discretionary review filed by defendants Howard and Ross on the issue of whether the Court of Appeals erred in holding that monies collected as civil penalties under section 20-309(e) are subject to Article IX, Section 7. Section 20-309(e) provides: The Division [of Motor Vehicles], upon receiving notice of a lapse in insurance coverage, shall notify the owner of the lapse in coverage, and the owner shall, to retain the registration plate for the vehicle registered or required to be registered, within 10 days from date of notice given by the Division either: (1) Certify to the Division that he had financial responsibility effective on or prior to the date of such termination; or (2) In the case of a lapse in financial responsibility, pay a fifty dollar ($50.00) civil penalty; and certify to the Division that he now has financial responsibility effective on the date of certification.... N.C.G.S. § 20-309(e) (2003). Additionally, section 20-309(e) requires, subject to certain conditions, that the insurer notify the Division of the termination of a policy providing financial responsibility within twenty business days of the termination. Id. Any person, firm or corporation failing to give notice of termination shall be subject to a civil penalty of two hundred dollars ($200.00) to be assessed by the Commissioner of Insurance upon a finding by the Commissioner of Insurance that good cause is not shown for such failure to give notice of termination to the Division. Id. Defendants argue that the payment by the owner is voluntary. We disagree. Subsequent language in the same subsection demonstrates that the fifty dollar civil penalty paid by the owner for lapsed coverage is not voluntary. Id. The statute further provides that if the owner fails to make the required certification, the registration is automatically revoked for thirty days if the registration plate has not been surrendered to the Division of Motor Vehicles before the termination date; and in order to reregister the vehicle, the owner must pay a restoration fee of fifty dollars plus the appropriate fee for a new registration plate. Id. Thus, the fifty dollar civil penalty for lapsed coverage is not a convenience to the owner as defendants contend. The purpose of the penalty is to penalize the owner of a vehicle who violates the statutes requiring financial responsibility to cover injury and damage occurring in the operation of an automobile on the highways of North Carolina. With respect to the payment by the insurer for failure to give the required notice of termination of insurance, defendants argue that because the purpose of the Financial Responsibility Act is remedial, this civil penalty imposed against the insurer is also remedial. We are not persuaded. This Court has previously held that: the General Assembly appears to have intended that the civil penalty be the exclusive sanction for failure to give DMV the required notice of termination. This interpretation is bolstered by the title to the chapter enacting the civil penalty: AN ACT TO REWRITE G.S. 20-309(E) TO PROVIDE FOR NOTICE OF TERMINATION RATHER THAN INTENT TO TERMINATE BY CARRIERS OF MOTOR VEHICLE LIABILITY INSURANCE COVERAGE AND PENALTY FOR NONCOMPLIANCE.  1975 N.C. Sess. Laws, ch. 302, § 1 (emphasis added). Allstate Ins. Co. v. McCrae, 325 N.C. 411, 417, 384 S.E.2d 1, 4-5 (1989). Moreover, defendants have not shown that the penalty is designed to compensate for particular damages incurred by the State or an individual victim. See Shore, 290 N.C. at 633-34, 227 S.E.2d at 559. We hold that the penalties imposed under N.C.G.S. § 20-309(e) are subject to Article IX, Section 7 and belong to the public schools. Plaintiffs in their argument on this issue also raise the issue of monies collected by DOT for the misuse of dealer license plates pursuant to N.C.G.S. § 20-79(e). The trial court ruled that these collections were subject to Article IX, Section 7. Although defendants assigned error to this issue, they did not make it the basis of an argument in the Court of Appeals. Therefore, the assignment of error is deemed abandoned. N.C. R.App. P. 28(a), (b)(6).