Court Opinion

ID: 2728509
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:33:30.446013+00
Date Added: 2024-06-11T15:43:42.079783
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

                                NO. COA13-768
                       NORTH CAROLINA COURT OF APPEALS

                                Filed: 20 May 2014

SUSAN HAUGH,
     Plaintiff,

      v.                                      Mecklenburg County
                                              No. 10-CVS-19441
NATIONWIDE MUTUAL FIRE INSURANCE
COMPANY and NATIONWIDE PROPERTY
AND CASUALTY INSURANCE COMPANY,
     Defendants.

      Appeal by Plaintiff from judgment entered 13 December 2012

by    Judge A. Robinson Hassell in Mecklenburg County Superior

Court.     Heard in the Court of Appeals 9 January 2014.

      Tin Fulton Walker & Owen, PLLC, by F. Lane Williamson and
      Nancy E. Walker, for Plaintiff-Appellant.

      Robinson, Elliott & Smith, by William C. Robinson                         and
      Katherine Tenfelde Armstrong, for Defendant-Appellees.

      DILLON, Judge.

      Susan Haugh (“Plaintiff”), a South Carolina resident, was

insured under two insurance policies issued by Defendants and

delivered to her in South Carolina.              She appeals the judgment of

the trial court filed on 13 December 2012 dismissing her claims

against Defendants        for Underinsured        Motorist (“UIM”) coverage
                                             -2-
under those policies for injuries she sustained in a motorcycle

accident, which occurred in North Carolina.                          For the following

reasons, we affirm in part and modify in part the trial court’s

judgment.

                    I. Factual & Procedural Background

      Plaintiff has lived in South Carolina since the mid-1980’s

and   worked    for    over        30    years   in   Charlotte,      North   Carolina.

Around 2005, Plaintiff renegotiated the terms of and renewed an

existing insurance policy (“Auto Policy”) issued by Defendant

Nationwide Property & Casualty Insurance Company to cover her

two automobiles.          The Auto Policy provided,                   inter alia,     UIM

coverage in the amount of $300,000.00.                           The Auto Policy was

issued and delivered to Plaintiff’s residence in South Carolina

and was renewed on a six-month cycle.

      In    early     2007,        Plaintiff     purchased       a   second   insurance

policy (“Motorcycle Policy”) from Defendant Nationwide Property

& Casualty Insurance Company covering her motorcycle.                          However,

Plaintiff      declined       to    purchase       the     UIM   coverage     under   the

Motorcycle Policy – a decision she confirmed by signing a South

Carolina “selection-rejection” form.

      On 17 September 2007, Plaintiff was injured in an accident

while      operating      her           motorcycle    in     North     Carolina       (the
                                          -3-
“Motorcycle        Accident”).          The     accident       was       caused    by     the

negligence of the driver of another vehicle.                              The negligent

driver     was     covered      under     an     automobile          insurance        policy

providing    a     bodily    injury     liability       limit       of   $50,000.00       per

person, which amount was tendered to Plaintiff following the

accident.

      Plaintiff filed this action claiming she was entitled to

UIM   coverage      under    both   the       Auto    Policy    and      the   Motorcycle

Policy.     Defendants counterclaimed seeking a declaration that no

UIM coverage was available under either policy for her injuries

sustained    in     the     Motorcycle        Accident.         A    bench     trial      was

conducted     on    10    September       2012,       during    which       the    parties

stipulated that Plaintiff’s rejection of UIM coverage under her

Motorcycle Policy was valid and binding.                       On 13 December 2012,

the trial court dismissed Plaintiff’s claims with prejudice and

entered judgment in favor of Defendants, from which Plaintiff

appeals.

                                    II. Analysis

      In   its     judgment,     the    trial        court   concluded         that     South

Carolina substantive law governed the interpretation of the Auto

Policy     and     that   the    “Other       Insurance”        provision         contained
                                                   -4-
therein       is        valid        and     enforceable          under     South       Carolina

substantive law.

       The    Auto       Policy           contained      the     following      UIM     coverage

language      (hereinafter            referred        to    as    the     “Other      Insurance”

provision):

              If a vehicle owned by you or a relative is
              involved in an accident where you or a
              relative sustains bodily injury or property
              damage, this policy shall:

              (a)       be primary if the involved vehicle is
                        your auto described on this policy; or
              (b)       be excess if the involved vehicle is
                        not your auto described on this policy.
                        The amount of coverage applicable under
                        this policy shall be the lesser of the
                        coverage limits under this policy or
                        the coverage limits on the vehicle
                        involved in the accident.

(emphasis      added.)               If     the    “Other      Insurance”       provision     is

determinative as to the amount of UIM coverage available under

the    Auto    Policy          for    Plaintiff’s          injuries       sustained      in   the

Motorcycle Accident, then the amount of coverage available would

be $0.00.          Specifically, since her motorcycle is not an “auto

described”         on    the    Auto        Policy,      the     amount    of   UIM     coverage

available is subject to the language contained in subsection

(b).    The language in subsection (b) provides that the amount of

UIM    coverage         available          under    the     Auto    Policy      for     injuries

arising from the Motorcycle Accident can be no more than “the
                                          -5-
coverage limits” applicable under the Motorcycle Policy.                      Since

Plaintiff had elected UIM coverage limits of $0.00 under her

Motorcycle Policy, the amount of UIM coverage under the Auto

Policy in this case is, likewise, $0.00.                     We agree with the

trial    court     and   affirm     the     judgment,       subject    to   certain

modifications striking findings of fact 2 and 5, for the reasons

set forth below.

                  A. South Carolina Substantive Law Applies

    We agree with the trial court that the substantive law of

South Carolina governs the interpretation of the Auto Policy.

For cases filed in North Carolina, “the general rule is that an

automobile     insurance   contract        should    be    interpreted      and   the

rights   and     liabilities   of    the    parties       thereto   determined     in

accordance with the laws of the state where the contract was

entered even if the liability of the insured arose out of an

accident in North Carolina.”               Fortune Ins. Co. v. Owens, 351

N.C. 424, 428, 526 S.E.2d 463, 465-66 (2000).                   Further, “[w]ith

insurance      contracts   the      principle       of    lex   loci    contractus

mandates that the substantive law of the state where the last

act to make a binding contract occurred, usually delivery of the

policy, controls the interpretation of the contract.”                        Id. at

428, 526 S.E.2d at 466 (emphasis added).                   In the present case,
                                      -6-
as reflected in the judgment, the parties stipulated that the

Auto Policy was delivered to Plaintiff at her South Carolina

residence.    Accordingly, under the “general rule” announced in

Fortune,    South   Carolina    substantive   law    would    apply    to   its

interpretation.

      Our Supreme Court recognizes an exception to the “general

rule” in N.C. Gen. Stat. § 58-3-1 (2013), which provides, in

relevant part, as follows:

            All contracts of insurance on property,
            lives, or interests in this State shall be
            deemed to be made therein[.]1

Id.   Our Supreme Court has construed N.C. Gen. Stat. § 58-3-1 to

provide that North Carolina substantive law applies to insurance

contracts--even where the contract was entered into in another

state--so    long   as   “a   close   connection   exists    between   [North

Carolina] and the interests insured by an insurance policy.”

Fortune, 351 N.C. at 428, 526 S.E.2d at 466.                 In the present

case, the parties have stipulated that              Plaintiff is a South

Carolina resident, that the Auto Policy was written under South

1
  The remainder of this statute provides that a contract of
insurance shall be deemed to have been made in North Carolina
where the “application” of insurance was taken in North
Carolina.   However, in the present case the trial court found
that the application for the Auto Policy was not taken in North
Carolina; and, therefore, this portion of the statute is not
relevant to our analysis.
                                       -7-
Carolina law to conform with South Carolina law and that all of

her   vehicles    identified    in    the     Auto     Policy   were    titled   and

registered in South Carolina.              Based on these facts, we do not

believe that there exists a “close connection” between North

Carolina and the interests insured by the Auto Policy sufficient

to trigger N.C. Gen. Stat. § 58-3-1, notwithstanding that the

Motorcycle Accident occurred in North Carolina.

      We   find   the   present     case    to    be   analogous   to    Johns    v.

Automobile Club Ins. Co., 118 N.C. App. 424, 455 S.E.2d 466,

disc. review denied, 340 N.C. 568, 460 S.E.2d 318 (1995).                         In

Johns the plaintiff, who resided in Tennessee with her husband

and her adult son, was injured in an automobile accident while

riding in her son’s car in North Carolina.                      Id. at 425, 455

S.E.2d at 467. The plaintiff sought UM/UIM coverage under her

own automobile policy, a policy that did not provide coverage

for her son’s vehicle.          Id.     Her insurance company denied UIM

coverage,     citing    the     “family       member     exclusion”      provision

therein, which stated that UM/UIM coverage did not apply if the

insured sustained injuries while occupying a vehicle owned by a

“relative resident in the same household.”                  Id.    The insurance

company     argued   that     the    policy      was    governed   by    Tennessee

substantive law and that the “family member exclusion” contained
                                        -8-
therein was enforceable under Tennessee substantive law.                    Id. at

426, 455 S.E.2d at 468.              The plaintiff, on the other hand,

argued    that     the    policy    should    be     interpreted    under    North

Carolina substantive law and that the “family member exclusion”

was    contrary    to    our   Financial     Responsibility    Act,   N.C.    Gen.

Stat. § 20-279.21(b) (1993), and, therefore, not enforceable.

Id. at 427, 455 S.E.2d at 468-69.                   The trial court concluded

that North Carolina substantive law applied and granted summary

judgment for the plaintiff-insured.                Id. at 426, 455 S.E.2d at

468.     However, we reversed the trial court, concluding that

Tennessee substantive law applied.                Id. at 428-29, 455 S.E.2d at

469.    In reaching this conclusion, we stated as follows:

            There are no significant contacts with North
            Carolina in this insurance contract action
            other than the fact that the injuries
            occurred in North Carolina. All of the
            significant    connections     occurred   in
            Tennessee.   The   contract   was    made in
            Tennessee,  the   parties   intended   to be
            obligated by the Tennessee policy, and the
            parties involved resided in Tennessee; thus,
            the accident is the only contact the parties
            had with North Carolina. Thus, Tennessee law
            governs coverage of the insurance policy
            herein.

Id. at 427, 455 S.E.2d at 468.

       Plaintiff    makes      a   number    of    arguments   to   support    her

position that North Carolina substantive law, rather than South
                                         -9-
Carolina law, governs the interpretation of the Auto Policy.

However, we do not find these arguments persuasive.

       First, Plaintiff argues that our Supreme Court’s decision

in Collins & Aikman Corp. v. Hartford Acc. & Indem. Co., 335

N.C. 91, 436 S.E.2d 243 (1993), and our decision in Martin v.

Continental Ins. Co., 123 N.C. App. 650, 474 S.E.2d 146 (1996)

support her contention that a “close connection,” sufficient to

trigger N.C. Gen. Stat. § 58-3-1, is present with respect to her

Auto     Policy.          However,       Collins     and      Martin    are   both

distinguishable from the present case because the policies in

those cases covered a fleet of company vehicles, many of which

were titled and maintained in North Carolina, whereas the Auto

Policy in the present case covered two private automobiles of a

South Carolina resident that were titled and registered in South

Carolina.        See Collins, 355 N.C. at 93, 436 S.E.2d at 244;

Martin, 123 N.C. App. at 651, 474 S.E.2d at 146.                       In Collins,

the    Supreme    Court    found    a    “close    connection”      between   North

Carolina    and    an   insurance       policy    delivered    in   another   state

because most of the trucks that the policy covered, including

the truck involved in the accident, were titled and garaged in

North Carolina.         355 N.C. at 95, 436 S.E.2d at 246.             The Supreme

Court, though, specifically distinguished this holding from its
                                       -10-
decisions in Connor v. Insurance Co., 265 N.C. 188, 143 S.E.2d

98 (1965), and Roomy v. Insurance Co., 256 N.C. 318, 123 S.E.2d

817 (1962), in which the Court concluded that North Carolina

substantive law did not apply in those cases, recognizing that

“Connor     and    Roomy    involved   automobile      liability     policies        on

vehicles owned by residents of other states . . . [and where

the] vehicle in each case was titled in another state and the

insurance policy was purchased in another state.”                    Collins, 335

N.C. at 94, 436 S.E.2d at 245.

      Second, Plaintiff argues that two of the findings contained

in    the    judgment      are   inconsistent       with    the    trial       court’s

conclusion that North Carolina substantive law does not govern

the interpretation of the Auto Policy.                 Defendants argue that

these findings should be stricken from the judgment.                            First,

Plaintiff     cites      the   trial   court’s    finding    of    fact        2,   that

“Plaintiff had more than casual, substantial and close contacts

with the State of North Carolina[,]” arguing that this finding

can   only    support      a   conclusion    that    Plaintiff     has     a    “close

connection” with North Carolina, and, therefore, North Carolina

substantive law should govern the interpretation of the Auto

Policy.       To   the     extent   that    the   phrase   “more    than       casual,

substantial and close contacts” is synonymous with the phrase
                                            -11-
“close connection,” we agree with Defendants that this finding

is, in fact, a conclusion of law to be reviewed by this Court de

novo.     Though there is evidence that Plaintiff had connections

with North Carolina--e.g., that she worked in Charlotte for over

30 years, driving to work from her South Carolina residence;

that she lived in North Carolina in the mid-1980s; and that she

inherited land in North Carolina--we do not believe that under

our case law such connections                 are sufficient to trigger             the

application of N.C. Gen. Stat. § 58-3-1 for a personal auto

policy issued to a South Carolina resident covering her personal

vehicles, all of which are titled, registered, and garaged in

South Carolina.           Accordingly, we modify the judgment by striking

the   trial     court’s        statement     that    “Plaintiff      had    more   than

casual, substantial and close contacts with the State of North

Carolina.”

      The second finding in the judgment cited by Plaintiff is

finding    of      fact   5,    which    states     that   “[t]he    2005    insurance

transaction for the purchase of the Auto Policy occurred within

the State of North Carolina.”                 We believe that the trial court

intended      to    state      that   the    transaction     occurred       in   “South

Carolina,” and that its reference to “North Carolina” was made

in    error.        We     note   that      the    trial   court’s    statement     is
                                      -12-
immediately preceded by a finding that the “Auto Policy was not

issued    in   North    Carolina[,]”    and    immediately      followed       by   a

finding that “[t]he final act taken for the application with

respect to the Auto Policy in 2005 occurred in South Carolina.”

In any event, even if the trial court intended to state that the

transaction occurred in “North Carolina,” we find no evidence to

support such     a finding.         Defendants have requested that the

finding be stricken from the judgment.                  Because the evidence

does not support this finding, we agree and modify the judgment,

striking finding of fact 5 from the judgment.

         B. The “Other Insurance” Provision Is Valid Under South
                          Carolina Substantive Law

    We agree with the trial court that under South Carolina

substantive law, the “Other Insurance” provision in Plaintiff’s

Auto Policy, limiting the amount of UIM coverage available to

Plaintiff      thereunder    for     her     injuries       sustained     in    the

Motorcycle     Accident     to     $0.00,     is    valid    and     enforceable.

Specifically,     our     interpretation       of    the    “Other      Insurance”

provision is controlled by the South Carolina Supreme Court’s

decision in Burgess v. Nationwide Mut. Ins. Co., 373 S.C. 37,

644 S.E.2d 40 (2007).        Like the present case, Burgess involved

an insured who purchased two policies, one covering his three

autos for which he elected UIM coverage, and the other insuring
                                     -13-
his motorcycle for which he declined UIM coverage.               Id. at 39,

644 S.E.2d at 41.         When he was injured on his motorcycle, he

sought UIM coverage under his policy insuring his cars.                     Id.

This auto policy contained a provision identical to the Other

Insurance Provision in the Auto Policy.            Id. at 39, 644 S.E.2d

at 41-42.     The South Carolina Court of Appeals held that the

provision   was   invalid    and   unenforceable   under     South    Carolina

substantive law.        See Burgess v. Nationwide Mut. Ins. Co., 361

S.C. 196, 603 S.E.2d 861 (2004).             The South Carolina Supreme

Court, however, reversed the Court of Appeals, concluding that

the   provision   was    valid,    and,   therefore,   the   amount    of   UIM

coverage available to the insured for his motorcycle accident

under his auto policy was $0.00:

            We hold that public policy is not offended
            by an automobile insurance policy provision
            which limits the portability of basic “at-
            home” UIM coverage when the insured has a
            vehicle involved in the accident. . . .
            Upholding   this    limit   on    portability
            encourages persons to purchase UIM insurance
            on all their vehicles. To hold, as did the
            [South Carolina] Court of Appeals, that
            basic UIM is portable even in this situation
            permits an individual who owns multiple
            vehicles to purchase UIM insurance on only
            one vehicle, yet have basic UIM coverage on
            all. We find this result undesirable.

Burgess, 373 S.C. at 42, 644 S.E.2d at 43.
                                        -14-
       Plaintiff argues that even if South Carolina law applies,

she is, nonetheless, entitled to coverage.                     First, Plaintiff

contends that since her Auto Policy was issued in 2005 which was

prior to the         South Carolina Supreme Court’s reversal of                  the

South Carolina Court of Appeals’ 2004 decision in Burgess, the

Auto Policy should be construed in accordance with that state’s

court of appeals decision, since that was the law in effect at

the time the Auto Policy was issued.                   We find this argument

unconvincing.         We find nothing in the South Carolina Supreme

Court’s decision in Burgess to indicate that it was only to have

a prospective effect.             Second, Plaintiff argues that under the

Auto     Policy’s     conformity      clause    (“Conformity       Clause”),     the

policy    must      adjust   to     provide    coverage      required   by     North

Carolina, citing our opinion in Cartner v. Nationwide Mut. Fire

Ins.   Co.,    123    N.C.   App.    251,     472   S.E.2d   389   (1996).       The

Conformity Clause in the Auto Policy provides as follows:

              We will adjust this policy to comply:

              1. With the financial responsibility law of
                 any state or province which requires
                 higher   liability   limits    than   those
                 provided by this policy.
              2. With the kinds and limits of coverage
                 required    of   non-residents     by   any
                 compulsory motor vehicle insurance law, or
                 similar law.
                                     -15-
(Emphasis added).       In Cartner, we held that a Florida automobile

policy which contained a provision identical to the Conformity

Clause in the Auto Policy “mandate[s] that [the insurer] provide

the ‘kinds of coverage’ required by North Carolina’s Financial

Responsibility Act[.]”        Id. at 253, 473 S.E.2d at 390 (emphasis

added).     In Cartner, a husband and wife from Florida purchased a

Florida auto policy.        Id. at 252, 473 S.E.2d at 389.          The wife

was subsequently killed in North Carolina while riding in a car

driven by her husband.        Id.    The wife’s estate sought coverage

under the liability section of the policy.                Id.     The policy

contained    a    “family   member    exclusion”     which   excluded     from

coverage injuries to any insured or member of the insured’s

household.       Id.   at 252-53, 473 S.E.2d at 390.            We held that

though Florida substantive law applied, the conformity provision

in   the    policy     increased    the   coverage   to   that    which    was

“required” under North Carolina law.           Id. at 254-55, 473 S.E.2d

at 390-91.       We further held that “liability coverage for insured

persons injured through the negligence of a family member while

riding in the insured vehicle is a ‘kind of coverage’ required

by North Carolina’s Financial Responsibility Act.”               Id. at 255,

473 S.E.2d at 391.          Accordingly, we held that the conformity

clause in the Florida policy operated to adjust the limits of
                                    -16-
that policy to provide coverage to the wife’s estate, since such

coverage is required by North Carolina law.              Id.

      The present case is distinguishable from Cartner.                  Unlike

the   “kind    of   insurance”     involved      in     Cartner,    which    was

“required” by the Financial Responsibility Act, the present case

involves a kind of insurance that is not required under North

Carolina law.       The purpose of the Conformity Clause is not to

require that the other clauses under the contract to be subject

to interpretation under North Carolina substantive law.                 Indeed,

like in Cartner, the policy is still governed by the substantive

law of the state where the policy was delivered.                   Rather, its

purpose is to provide additional coverage not otherwise provided

in the policy, which, in this case, would be the “kinds and

limits of coverage” that is required by North Carolina law.

Applying    South   Carolina    substantive      law,    the   amount   of   UIM

coverage    applicable   under     the   Other    Insurance     provision     is

$0.00.     North Carolina law does not require an insured to carry

more than $0.00 of UIM coverage.           Therefore, we do not believe

that the Conformity Clause operates to create UIM coverage for

Plaintiff in this case.

                               III. CONCLUSION
                               -17-
     We modify the judgment by striking findings of fact 2 and

5.   We affirm the judgment in all other respects.

     AFFIRMED in part, MODIFIED in part.

     Judge STROUD and Judge HUNTER, JR. concur.

     Report per Rule 30(e).