Court Opinion

ID: 9578449
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:45:22.134237+00
Date Added: 2024-06-11T13:20:27.935697
License: Public Domain

Justice MEYER
dissenting.
I respectfully dissent from both the reasoning and the result reached in the majority opinion. In my view the majority has effectively abrogated its responsibility to ensure that our legislature refrains from enacting laws which arbitrarily and unfairly discriminate against classes of persons in violation of their constitutional rights to equal protection. While the majority’s analysis may possess the attribute of simplicity, it is that very *417simplicity which forms the foundation of its inherent weakness. Its reasoning can be easily summarized:
1. The statute at issue, N.C.G.S. § 24-5, involves regulation in the area of economics and social welfare; therefore a court’s review is limited to whether “the classification’s relation to the objectives sought by the General Assembly attains a minimum level of rationality.”
2. There is a “fundamental” difference between liability insurance companies and self insurers: liability insurance companies are in the “business” of insurance; self insurers “only incidentally settle claims.”
3. There is a legitimate State purpose in promoting settlement of cases.
4. Insurance companies “have an incentive to delay litigation involving claims they insure,” because they are “required by statute to establish loss reserves, which are invested for profit until specific claims are paid off.”
5. Therefore there is a rational relation between the classification, liability insurance companies, and the objective sought, to promote settlement.
A careful analysis of the above “reasoning” leads inexorably to the conclusion that the majority has discovered an excuse rather than a rational basis for this legislation.
It is true that our courts have traditionally deferred to legislative judgment in reviewing equal protection challenges involving statutes of an economic nature. See, e.g., Glusman v. Trustees and Lamb v. Board of Trustees, 281 N.C. 629, 190 S.E. 2d 213 (cited by the majority). The authority of the legislature to enact such statutes is not, however, unlimited and it is the duty of the reviewing court to determine whether the limits have been transgressed. The equal protection clauses of the United States Constitution and the North Carolina Constitution require that in making classifications such as the legislature has made in this case,, no arbitrary distinction be drawn between similarly situated persons. See, e.g., Cheek v. City of Charlotte, 273 N.C. 293, 160 S.E. 2d 18 (1968). The test under the equal protection clauses, is whether the difference in treatment made by the law has a rea*418sonable basis in relation to the purpose and subject matter of the legislation. Indemnity Co. v. Ingram, Comr. of Insurance, 290 N.C. 457, 226 S.E. 2d 498 (1976); Guthrie v. Taylor, 279 N.C. 703, 185 S.E. 2d 193 (1971), cert. denied, 406 U.S. 920, 32 L.Ed. 2d 119 (1972). Thus, rationality and fairness may be said to provide the keystones to a constitutionally valid economic regulation. I find neither to be present in the statute under discussion. In my opinion, N.C.G.S. § 24-5 arbitrarily discriminates between similarly situated plaintiffs and similarly situated defendants, if not under the federal constitution, then certainly under the North Carolina Constitution. Compare McGowan v. Maryland, 366 U.S. 420, 6 L.Ed. 2d 393 (1961) with Cheek v. City of Charlotte, 273 N.C. 293, 160 S.E. 2d 18.
I find neither significant nor helpful the “fundamental” difference between liability insurance companies and self insurers observed by the majority. The question, of course, is whether this difference has a reasonable basis in relation to the goal of the legislature. In the present case, the fact that liability insurance companies are in the business of settling claims bears no relation whatsoever to the State’s goal of promoting settlements.1 Rather, it is the majority’s position that the goal of promoting settlement might be somewhat enhanced because these insurance companies are required by law to establish loss reserves which could result in an incentive to delay litigation.2
In support of this tenuous conclusion, the majority explains that loss reserves are invested for profit. What the majority fails *419to recognize is that as a practical matter in order to comply with N.C.G.S. § 58-35.2, insurance companies must transfer loss reserves from long-term accounts yielding high returns to short-term accounts yielding substantially lower returns. (The same with self insureds.) The more expedited the litigation, the sooner these funds can be returned to long-term accounts, in the event defendant prevails. (The same with self insureds.) It is therefore at best pure speculation that liability insurance companies will be motivated to delay litigation on this basis.
On the other hand, as the majority recognizes, self insurers and other defendants can and do delay litigation. I would point out that plaintiffs, too, delay litigation. In fact, it is frequently the plaintiffs decision to “hold out” for amounts in excess of insurance coverage, amounts upon which prejudgment interest is presumably not due,3 that results in failure to settle and protracted litigation. I find it patently unfair that our laws penalize a discrete minority of insurers who, with no demonstrable certainty, are charged with purposefully delaying litigation for financial gain when others similarly situated can be, and frequently are, equally dilatory. That the law is arbitrary and unreasonable with respect to liability insurance companies is demonstrated by the fact that these companies are subject to the additional assessment of prejudgment interest while others similarly situated, for no apparent reason, are not.
Furthermore, the law unreasonably discriminates against defendants covered by liability insurance who will undoubtedly bear the burden of higher insurance rates to compensate for the additional cost of prejudgment interest.
The statute also clearly discriminates amongst similarly situated plaintiffs. The law excludes:
*420(a) Self insurers (even though their claims may be handled by the adjusting departments of commercial insurers);
(b) Persons or corporations obtaining bonds executed by surety companies or bonds executed by two individual sureties each owning real estate within the state (N.C.G.S. § 20-279.24);
(c) Persons or corporations meeting the requirements of the Motor Vehicles Safety and Financial Responsibility Act of 1953, by depositing $60,000.00 in cash or securities (N.C.G.S. § 20-279.25);
(d) Persons or corporations in whose name more than 25 motor vehicles are registered, who qualify as self insurers under the provisions of N.C.G.S. § 20-279.33;
(e) Governmental bodies.
As a result of these exclusions, the law arbitrarily discriminates against the class of plaintiffs who are injured by the acts of a defendant who falls into one of the above categories. The converse, of course, is that the law favors those plaintiffs who are fortunate enough to be injured by the acts of a defendant who is covered by liability insurance.4
In my opinion, this aspect of the statutory classification results in the grant of “exclusive or separate emoluments or privileges” to certain plaintiffs in violation of our constitution. See Lowe v. Tarble, 312 N.C. 467, 323 S.E. 2d 19 (1984) (Meyer, J., dissenting) (holding to the contrary). In this regard, I would simply point out that this Court would not be so eager to dismiss the equal protection challenge had the pertinent part of N.C.G.S. § 24-5 been couched in the following language:
The portion of all money judgments designated by the fact-finder as compensatory damages in actions other than contract shall bear interest from the time of the verdict until the *421judgment is paid and satisfied Except As To Any Plaintiff whose claim is covered by liability insurance in which event that plaintiff is entitled to interest from the time the action is instituted until the judgment is paid.
Under this language the result would be no different than it stands now under the majority’s holding, and in my view would be unsupportable as granting to one class of plaintiffs exclusive privilege.
In conclusion, N.C.G.S. § 24-5 is unconstitutionally discriminatory: its classification arbitrarily discriminates against liability insurance companies, their insureds and a large class of plaintiffs whose claims are brought against defendants who are not so insured. Moreover, it does not constitute a reasonable means by which to promote the expeditious disposition of non-contract claims. Accordingly, the statute violates the fundamental principles of equal protection. Though I believe the statute as it now stands is unconstitutional, I would find no objection if it applied to all non-contract claims without regard to insurance coverage.
I vote to affirm the order of the trial court denying plaintiff s motion for prejudgment interest.
Justices Copeland and Mitchell join in this dissenting opinion.

. Though not addressed by the majority opinion I would question whether insurance companies as a class (and not just auto insurance companies) are any better able to expedite claims and avoid litigation delays than many self insureds. It is not unusual for insurance companies to depend on private claims adjusting firms for the investigation and settlement of claims against their insureds. In many instances the very same adjusting firms are employed by self insurers. In such instances are the insurance companies any better equipped to expedite the claims than the self insureds? Likewise, is a small insurance company (or a large one with little business in the liability field) with a small claims department any better able to handle claims than the large claims, and legal departments of the giant corporation which is self insured?

. Are insurance companies really different because they are required by law to establish reserves whereas giant corporations which are self insureds establish reserves because it is good business practice? Is this not a distinction without a difference?

. Under the statute prejudgment interest applies “only to claims covered by liability insurance.” (Emphasis added.) I presume the majority would say that the “claim” refers to all damages sought and recovered and not just to that portion of the compensatory damages covered by insurance. Must the liability insurer pay prejudgment interest on the uninsured portion of the “claim,” that is, the portion in excess of the policy limits? Must the individual defendant pay it? Or does prejudgment interest apply at all to the uninsured portion? These questions are left unanswered by the statute as are a number of others. For instance — does the term “claim covered by liability insurance” include claims under uninsured motorists coverage or suits defended by the carrier under a reservation of rights in a non-waiver agreement?

. Indeed, if prejudgment interest is not recoverable on the uninsured portion of the compensatory damages award, does the statute not create three classes of plaintiffs —the unlucky ones who sue uninsured defendants, those luckier ones who sue defendants with minimum or low coverage and those even luckier ones who sue heavily insured defendants?