Court Opinion

ID: 2763020
Source: CourtListenerOpinion
Date Created: 2014-12-19 17:06:58.966596+00
Date Added: 2024-06-11T11:27:13.652444
License: Public Domain

IN THE SUPREME COURT OF NORTH CAROLINA

                                  No. 385PA13

DOUGLAS KIRK LUNSFORD

             v.
THOMAS E. MILLS, JAMES W. CROWDER, III, and SHAWN T. BUCHANAN

      On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous

decision of the Court of Appeals,     ___ N.C. App. ___, 747 S.E.2d 390 (2013),

affirming an order of summary judgment entered on 13 November 2012 by Judge

James U. Downs in Superior Court, McDowell County.           Heard in the Supreme

Court on 15 April 2014.

      Abrams & Abrams, P.A., by Noah B. Abrams, Douglas B. Abrams, Margaret
      S. Abrams, and Melissa N. Abrams, for plaintiff-appellee.

      Nelson Levine de Luca & Hamilton, by David L. Brown, Brady A. Yntema,
      and David G. Harris, II, for unnamed defendant-appellant North Carolina
      Farm Bureau Mutual Insurance Company.

      White & Stradley, PLLC, by J. David Stradley; and Whitley Law Firm, by
      Ann C. Ochsner, for North Carolina Advocates for Justice, amicus curiae.

      Sparkman Larcade, PLLC, by George L. Simpson, IV, for North Carolina
      Association of Defense Attorneys and Property Casualty Insurers Association
      of America, amici curiae.

      BEASLEY, Justice.

      The primary issue in this appeal is whether an insured may, in a situation in

which there is more than one at-fault driver responsible for the accident causing the

insured’s injuries, recover under his or her underinsured motorist (UIM) policy
                                 LUNSFORD V. MILLS

                                  Opinion of the Court

before exhausting the liability insurance policies of all the at-fault drivers. We

conclude that the insured is only required to exhaust the liability insurance

coverage of a single at-fault motorist in order to trigger the insurer’s obligation to

provide UIM benefits. Accordingly, we affirm the Court of Appeals’ decision on this

issue. Because, however, the trial court’s award of interest and costs against the

insurer in this case exceeds the amount the insurer contractually promised to pay

under the terms of its policy with the insured, the Court of Appeals erred in

upholding that portion of the award.       In this respect, we reverse the Court of

Appeals.

                                        Facts

      The parties to this appeal have stipulated to the material facts, which tend to

establish that on 18 September 2009, defendant Thomas E. Mills was operating a

tractor-trailer owned by his employer, defendant James W. Crowder, III. Mills was

traveling eastbound on Interstate Highway 40 in McDowell County when he lost

control while rounding a curve, causing his vehicle to collide with the concrete

median barrier and flip. Plaintiff Douglas Kirk Lunsford, a volunteer firefighter,

responded first to the scene and found that Mills was injured and that diesel fuel

was leaking from the tractor-trailer. Lunsford, who was standing in the highway

median, attempted to lift Mills over the concrete divider so that he could carry Mills

to safety and assess his injuries. As Lunsford was doing so, defendant Shawn T.

Buchanan was driving westbound on Interstate Highway 40. When the vehicle in

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                                 LUNSFORD V. MILLS

                                  Opinion of the Court

front of Buchanan slowed down because of the tractor-trailer accident, Buchanan

swerved to the left to avoid the vehicle and struck Lunsford. Lunsford was dragged

underneath Buchanan’s car and suffered severe injuries, including multiple broken

bones, lacerations, and internal injuries.

      At the time of the accidents, Mills and Crowder were insured through

Crowder’s business motor vehicle policy with United States Fire Insurance

Company (U.S. Fire), which provided a liability coverage limit of $1 million. The

second driver, Buchanan, was insured under a policy written by Allstate Insurance

Company (Allstate), providing liability coverage of $50,000. Lunsford maintained

two policies with unnamed defendant North Carolina Farm Bureau Mutual

Insurance Company (Farm Bureau): (1) a business policy with UIM coverage of

$300,000; and (2) a personal policy with UIM coverage of $100,000.

      Lunsford subsequently filed a negligence action against Mills, Crowder, and

Buchanan (named defendants), claiming that they were jointly and severally liable

for his injuries. All named defendants filed answers, which included crossclaims for

indemnification and contribution. Farm Bureau, as an unnamed defendant, also

filed an answer in which it claimed that it would be entitled to an offset with

respect to Lunsford’s UIM policies for any damages he recovered through the

insurance policies held by the named defendants.

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                                LUNSFORD V. MILLS

                                 Opinion of the Court

      On 24 May 2011, Allstate tendered to Lunsford the $50,000 liability coverage

limit for Buchanan’s policy. Lunsford’s attorney notified Farm Bureau the next day

of Allstate’s tender and demanded that Farm Bureau tender payment on Lunsford’s

UIM claim. In a letter dated 7 June 2011, Farm Bureau indicated that (1) it would

not advance the liability policy limits tendered to Lunsford by Allstate; and (2) it

would review its legal options regarding Lunsford’s UIM claim and respond “at a

later date.” On 15 November 2011, Lunsford’s attorney informed Farm Bureau that

Lunsford had tentatively settled his claims against Mills and Crowder for $850,000,

which was to be paid through Crowder’s policy with U.S. Fire. At the time of these

settlements, Farm Bureau had not provided UIM coverage to Lunsford.

      On 12 January 2012, the trial court entered an order approving the

settlement agreements. On 19 July 2012, Farm Bureau filed a motion for summary

judgment on Lunsford’s UIM claim, arguing that he was not entitled to UIM

coverage because the total amount of his settlements with Buchanan, Mills, and

Crowder ($50,000 + $850,000 = $900,000) exceeded the aggregate amount of

Lunsford’s UIM policies ($300,000 + $100,000 = $400,000). Lunsford also moved for

summary judgment, maintaining that his UIM policies stacked and that he was

entitled to recover $350,000 from Farm Bureau—the amount of his aggregated UIM

coverage limit ($400,000) minus the $50,000 he recovered through his settlement

with Buchanan.

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                                 LUNSFORD V. MILLS

                                  Opinion of the Court

      After conducting a hearing on the parties’ motions, the trial court entered an

order on 13 November 2012 granting summary judgment in favor of Lunsford. The

trial court accordingly ordered Farm Bureau to pay Lunsford $350,000, plus costs

and pre- and post-judgment interest “as provided by law.”

      Farm Bureau appealed the trial court’s order to the Court of Appeals,

primarily arguing that the trial court erred in granting summary judgment in favor

of Lunsford and ordering Farm Bureau to pay $350,000 in UIM coverage because,

under the statute governing UIM coverage, Farm Bureau “was not required to

provide coverage until all applicable policies—meaning all policies held by all the

named Defendants—had been exhausted.” Lunsford v. Mills, ___ N.C. App. ___,

___, 747 S.E.2d 390, 393 (2013). The court disagreed based on its reading of the

UIM statute:    “ ‘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 bodily injury caused by the ownership, maintenance,

or use of the underinsured highway vehicle have been exhausted.’ ” Id. at ___, 747

S.E.2d at 393 (quoting N.C.G.S. § 20-279.21(b)(4) (emphasis added by court)). The

court interpreted this language “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.” Id. at ___, 747 S.E.2d at 393 (emphasis added).

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                                 Opinion of the Court

      Noting that the issue of when UIM coverage is triggered in situations

involving multiple potential at-fault drivers is one of first impression in North

Carolina, the Court of Appeals believed that its interpretation of the UIM statute

was consistent with that court’s precedent suggesting that “insureds should [not] ‘be

kept hanging in limbo as they are forced to sue any and all possible persons . . .

before they could recover UIM benefits’ just because other potential tortfeasors also

happen to be covered under automobile policies.” Id. at ___, 747 S.E.2d at 394

(quoting Farm Bureau Ins. Co. of N.C. v. Blong, 159 N.C. App. 365, 373, 583 S.E.2d
307, 312, disc. rev. denied, 357 N.C. 578, 589 S.E.2d 125 (2003)). In light of this

rationale, the court determined that, in such a situation, UIM carriers are obligated

“to first provide coverage, and later seek an offset through reimbursement or

exercise of subrogation rights.” Id. at ___, 747 S.E.2d at 394. Consequently, the

court determined that upon the exhaustion of “all policies applicable to Mr.

Buchanan’s vehicle,” Lunsford’s “UIM coverage was triggered,” and “Farm Bureau

was not at liberty to withhold coverage until [Lunsford] reached settlement

agreements with Mr. Mills and Mr. Crowder.” Id. at ___, 747 S.E.2d at 394.

      Farm Bureau alternatively argued that, even it were required to provide UIM

coverage, the trial court nevertheless erred in ordering it to pay pre- and post-

judgment interest and costs. In support of this contention, Farm Bureau cited our

decision in Sproles v. Greene, 329 N.C. 603, 613, 407 S.E.2d 497, 503 (1991), in

which we concluded that North Carolina’s compulsory motor vehicle insurance laws

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                                   Opinion of the Court

do not impose an obligation on liability insurers to pay interest on a judgment in

excess of the insurer’s policy limits, but rather, such an obligation “is governed by

the terms of the [insurance] policy.” The Court of Appeals believed that Sproles was

distinguishable on the ground that Sproles held that a “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.” Lunsford, ___ N.C. App. at ___, 747 S.E.2d

at 395 (citing Sproles, 329 N.C. at 605, 407 S.E.2d at 498). Here, in contrast, “the

judgment was entered against Farm Bureau itself, not against its insured

(Plaintiff).” Id. at ___, 747 S.E.2d at 395. Thus the court concluded that Sproles

“ha[d] no bearing on the case at hand” and upheld the trial court’s award of interest

and costs. Id. at ___, 747 S.E.2d at 395 (2013).

      Farm Bureau petitioned this Court for discretionary review of the Court of

Appeals’ decision regarding both the UIM coverage and the judgment interest

issues. We allowed Farm Bureau’s petition with respect to both questions. 367
N.C. 259, 749 S.E.2d 843 (2013).

                                 Standard of Review

      Under Rule 56(c) of the North Carolina Rules of Civil Procedure, summary

judgment is appropriate when the record establishes that there are no genuine

issues of material fact and that any party is entitled to judgment as a matter of law.

N.C. R. Civ. P. 56(c); e.g., In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576

(2008). Here the parties have stipulated to the material facts, and therefore, the

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                                  Opinion of the Court

only question for our consideration is whether either party is entitled to judgment

as a matter of law. Answering this question primarily involves interpretation of the

Motor Vehicle Safety and Financial Responsibility Act of 1953 (commonly referred

to as the “FRA”), N.C.G.S. §§ 20-279.1 through -279.39 (2013), and examination of

the terms of Farm Bureau’s motor vehicle insurance policy, each a question of law.

See Brown v. Flowe, 349 N.C. 520, 523, 507 S.E.2d 894, 896 (1998) (“A question of

statutory interpretation is ultimately a question of law for the courts.”); Wachovia

Bank & Trust v. Westchester Fire Ins. Co., 276 N.C. 348, 354, 172 S.E.2d 518, 522

(1970) (observing that the interpretation of “the language used in [a] policy of

insurance” is “a question of law”). This Court reviews questions of law de novo,

meaning that we consider the matter anew and freely substitute our judgment for

the judgment of the lower court. In re Greens of Pine Glen Ltd. P’ship, 356 N.C.
642, 647, 576 S.E.2d 316, 319 (2003) (citation omitted).

                          Underinsured Motorist Coverage

      The parties’ principal dispute centers on the proper interpretation of

subdivision 20-279.21(b)(4), the FRA’s provision governing UIM coverage.         The

primary objective of statutory interpretation is to ascertain and effectuate the

intent of the legislature. Burgess v. Your House of Raleigh, Inc., 326 N.C. 205, 209,

388 S.E.2d 134, 137 (1990). “If the language of the statute is clear and is not

ambiguous, we must conclude that the legislature intended the statute to be

implemented according to the plain meaning of its terms.” Hyler v. GTE Prods. Co.,

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                                 LUNSFORD V. MILLS

                                  Opinion of the Court

333 N.C. 258, 262, 425 S.E.2d 698, 701 (1993) (citations omitted), superseded in part

by statute, Workers’ Compensation Reform Act of 1994, ch. 679, sec. 2.5, 1993 N.C.

Sess. Laws 394, 399-400, as recognized in N.C. Ins. Guar. Ass’n v. Bd. of Trs., 364
N.C. 102, 691 S.E.2d 694 (2010). Thus, in effectuating legislative intent, it is our

duty to give effect to the words actually used in a statute and not to delete words

used or to insert words not used. N.C. Dep’t of Corr. v. N.C. Med. Bd., 363 N.C. 189,

201, 675 S.E.2d 641, 649 (2009); accord In re Banks, 295 N.C. 236, 239, 244 S.E.2d
386, 388-89 (1978) (“[C]ourts must give [a clear and unambiguous] statute its plain

and definite meaning, and are without power to interpolate, or superimpose,

provisions and limitations not contained therein.”).

      The first paragraph of subdivision 20-279.21(b)(4) defines the term

“underinsured highway vehicle” 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.

N.C.G.S. § 20-279.21(b)(4).   The statute further sets out when UIM coverage is

triggered:

             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
             bodily injury caused by the ownership, maintenance, or
             use of the underinsured highway vehicle have been

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                                  Opinion of the Court

               exhausted.

Id. (“triggering provision”).

       Farm Bureau reads the reference to “all bodily injury liability bonds and

insurance policies applicable at the time of the accident” in the definition of an

underinsured highway vehicle to mean that, in determining whether UIM coverage

is triggered, the insured’s UIM coverage limit must be compared to the sum of all of

the liability limits of all the at-fault motorists. Thus, according to Farm Bureau, as

a prerequisite to receiving UIM benefits, Lunsford was required to exhaust not only

Buchanan’s liability limits, but also the policy limits of Mills and Crowder to the

extent that they are liable as joint tortfeasors. We read subdivision 20-279.21(b)(4)

differently.

       As an initial matter, the reference to “all bodily injury liability bonds and

insurance policies applicable at the time of the accident” is found in the UIM

statute’s definition of an “underinsured highway vehicle,” not in the triggering

provision. The location of the clause in a separate and distinct provision of the UIM

statute indicates that the clause relates solely to an underinsured highway vehicle

and not, as Farm Bureau suggests, to all the vehicles involved in an accident. See

Colonial Penn Ins. Co. v. Salti, 84 A.D.2d 350, 352, 446 N.Y.S.2d 77, 79 (N.Y. App.

Div. 1982) (“[T]he [UIM] endorsement affords coverage for bodily injury arising out

of the use of an underinsured highway vehicle and the clause ‘the limits of liability

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                                  LUNSFORD V. MILLS

                                   Opinion of the Court

under all bodily injury liability bonds or insurance policies applicable at the time of

the accident’ . . . should be read to relate . . . to [the underinsured] vehicle only, and

not, as [the insurer] contends, to the total number of vehicles involved in the

accident.” (emphasis added)).

      An examination of the actual language of the triggering provision further

undermines Farm Bureau’s reading of the statute to provide that UIM coverage is

not triggered until “all liability limits applicable ‘at the time of the accident’ ” are

exhausted. The plain language of the triggering provision identifies the liability

bonds and insurance policies relevant to determining whether UIM coverage is

triggered as those bonds and policies relating to “the ownership, maintenance, or

use of the underinsured highway vehicle.” N.C.G.S. § 20-279.21(b)(4) (emphasis

added). A statute’s use of the definite article—“the”—indicates that the legislature

intended the term modified to have a singular referent. See Renz v. Grey Adver.,

Inc., 135 F.3d 217, 222 (2d Cir. 1997) (“Placing the article ‘the’ in front of a word

connotes the singularity of the word modified.”); see also Gen. Accident Ins. Co. v.

Wheeler, 221 Conn. 206, 211, 603 A.2d 385, 387 (1992) (concluding, under an

insurance regulation providing that “the ‘insurer shall undertake to pay on behalf of

the insured all sums which the insured shall be legally entitled to recover as

damages from the owner or operator of an uninsured [or underinsured] motor

vehicle because of bodily injury sustained by the insured caused by an accident

involving the uninsured [or underinsured] motor vehicle,’ ” that an insured is

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                                  LUNSFORD V. MILLS

                                    Opinion of the Court

required to exhaust “the insurance coverage of only one tortfeasor” in order to

recover UIM benefits (brackets in original)).

      Farm Bureau’s interpretation effectively rewrites the triggering provision to

provide that UIM coverage applies only once all liability bonds or insurance policies

providing coverage for any party potentially liable for the insured’s bodily injuries

have been exhausted. But that is not what the statute says. The plain language of

the triggering provision establishes that when an insured suffers bodily injury

caused by the ownership, maintenance, or use of an underinsured highway vehicle,

and when the liability bonds or insurance policies providing coverage for that

vehicle have been exhausted, UIM coverage is triggered.             Accordingly, a UIM

carrier’s statutory obligation to provide UIM benefits is triggered when the insurer

of a single vehicle meeting the definition of an underinsured highway vehicle

tenders its liability limits to the UIM claimant through an offer of settlement or in

satisfaction of a judgment. See Register v. White, 358 N.C. 691, 698, 599 S.E.2d 549,

555 (2004) (“Exhaustion occurs when the liability carrier has tendered the limits of

its policy in a settlement offer or in satisfaction of a judgment.”).

      Farm Bureau contends, however, that this interpretation of subdivision 20-

279.21(b)(4) has been “expressly rejected by the legislature.” In support of this

argument, Farm Bureau points to the General Assembly’s consideration and

ultimate rejection of a bill proposed in the 1983 legislative session that was

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                                  LUNSFORD V. MILLS

                                   Opinion of the Court

designed “to clarify the law concerning UIM coverage.” The proposed bill would

have completely repealed subdivision 20-279.21(b)(4), the FRA’s provision governing

UIM coverage, and amended subdivision 20-279.21(b)(3), the provision governing

uninsured motorist coverage, so that an underinsured motor vehicle would have

constituted an “uninsured motor vehicle” to the extent of “the difference between

the limits of the bodily injury liability insurance and property damage liability

insurance coverages on such motor vehicle and the limits of the uninsured motorist

coverage provided under the insured’s motor vehicle liability insurance policy.” H.

60, 135th Gen. Assemb., Reg. Sess. (N.C. 1983) (emphasis added).

      The fact that this proposed bill was not enacted is unavailing. When, as here,

“the language of a statute expresses the legislative intent in clear and unambiguous

terms, the words employed must be taken as the final expression of the meaning

intended unaffected by its legislative history.”          Piedmont Canteen Serv., Inc. v.

Johnson, 256 N.C. 155, 161, 123 S.E.2d 582, 586 (1962) (citations omitted); accord

Wake Cares, Inc. v. Wake Cnty Bd. of Educ., 190 N.C. App. 1, 25, 660 S.E.2d 217,

232 (2008) (explaining that “[l]egislative history cannot . . . be relied upon to force a

construction on [a] statute inconsistent with the plain language”), aff’d, 363 N.C.
165, 675 S.E.2d 345 (2009).

      Farm Bureau’s construction of the UIM statute also undermines the statute’s

purpose.   Section 20-279.21 “was passed to address circumstances where ‘ “the

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                                  Opinion of the Court

tortfeasor has insurance, but his [or her] coverage is in an amount insufficient to

compensate the injured party for his [or her] full damages.” ’ ” Progressive Am. Ins.

Co. v. Vasquez, 350 N.C. 386, 390, 515 S.E.2d 8, 10-11 (1999) (first alteration in

original) (quoting Harris v. Nationwide Mut. Ins. Co., 332 N.C. 184, 189, 420 S.E.2d
124, 127 (1992), superseded by statute, Act of July 12, 1991, ch. 646, secs. 1, 2, 1991

N.C. Sess. Laws 1550, 1559).        We have recognized the remedial nature of

subdivision 20-279.21(b)(4) and explained that the statute should be “liberally

construed” in order to accomplish its purpose of “protect[ing] . . . innocent victims

who may be injured by financially irresponsible motorists.” Proctor v. N.C. Farm

Bureau Mut. Ins. Co., 324 N.C. 221, 224-25, 376 S.E.2d 761, 763 (1989). To that

end, subdivision 20-279.21(b)(4)—as well as the FRA as a whole—should be

“interpreted to provide the innocent victim with the fullest possible protection.” Id.

at 225, 376 S.E.2d at 764.

      If Farm Bureau’s interpretation were adopted, insureds would be required to

pursue all claims, including weak, tenuous ones, against all potentially liable

parties, no matter how impractical, before being eligible to collect their contracted-

for UIM benefits. Placing this burden on insureds—who, like Lunsford, commonly

suffer serious injuries and need prompt payment of benefits to pay medical

expenses and other costs—would substantially delay the recovery of UIM benefits

and promote litigation expenses that reduce insureds’ overall recovery.            See

Wheeler, 221 Conn. at 213, 603 A.2d at 388 (observing that if the insured is not

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                                   Opinion of the Court

permitted to recover UIM benefits until exhausting all liability limits of all joint

tortfeasors,   “the insured could be required to pursue claims of weak liability

against third parties, thereby fostering marginal and costly litigation in our

courts”).    Because Farm Bureau’s interpretation of subdivision 20-279.21(b)(4)

would fail to provide innocent victims “the fullest possible protection,” we reject

Farm Bureau’s proposed construction. See Proctor, 324 N.C. at 225-26, 376 S.E.2d

at 764 (rejecting insurer’s construction of subdivision 20-279.21(b)(4) that

“result[ed] in the least possible protection for the innocent victim of an

underinsured tortfeasor” and thus “undermine[d] the intent and purpose of the

statute”).

       Our conclusion that an insured may recover UIM benefits upon exhausting

the liability limits of a single at-fault motorist is further buttressed by examining

the subrogation provision of section 20-279.21. See Faizan v. Grain Dealers Mut.

Ins. Co., 254 N.C. 47, 53, 118 S.E.2d 303, 307 (1961) (construing provisions of the

FRA in pari materia). The third paragraph of subdivision 20-279.21(b)(4) states in

pertinent part:

                      An underinsured motorist insurer may at its
               option, upon a claim pursuant to underinsured motorist
               coverage, pay moneys without there having first been an
               exhaustion of the liability insurance policy covering the
               ownership, use, and maintenance of the underinsured
               highway vehicle.       In the event of payment, the
               underinsured motorist insurer shall be either: (a) entitled
               to receive by assignment from the claimant any right or
               (b) subrogated to the claimant’s right regarding any claim

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                                  Opinion of the Court

             the claimant has or had against the owner, operator, or
             maintainer of the underinsured highway vehicle, provided
             that the amount of the insurer’s right by subrogation or
             assignment shall not exceed payments made to the
             claimant by the insurer.

N.C.G.S. § 20-279.21(b)(4); see also id. § 20-279.21(b)(3) (providing an insurer a

right to reimbursement from settlement proceeds to the extent the insurer has

made a “payment to any person under the coverage required by this section and

subject to the terms and conditions of coverage”).

      If, as Farm Bureau argues, insureds were required to exhaust the liability

policies of all at-fault motorists as a prerequisite to recovering UIM coverage, there

would be no need to provide UIM carriers subrogation or reimbursement rights, and

consequently, these provisions would be rendered meaningless. See Leslie v. W.H.

Transp. Co., 338 F. Supp. 2d 684, 689 (S.D. W. Va. 2004) (“The reservation of a

subrogation right indicates that [the insurer] foresees situations in which an

insured receives UIM benefits and [the insurer] then pursues a claim against a

tortfeasor who is legally liable for the damages suffered by the insured.      If the

insured were required to exhaust every tortfeasor’s policy limit before receiving

UIM benefits, it is hard to imagine a UIM scenario in which subrogation rights

would arise.”). Yet it is a fundamental principle of statutory interpretation that

courts should “evaluate [a] statute as a whole and . . . not construe an individual

section in a manner that renders another provision of the same statute

meaningless.” Polaroid Corp. v. Offerman, 349 N.C. 290, 297, 507 S.E.2d 284, 290

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                                    Opinion of the Court

(1998) (citation omitted), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d
671 (1999), abrogated on other grounds by Lenox, Inc. v. Tolson, 353 N.C. 659, 548
S.E.2d 513 (2001).

       Moreover, given the General Assembly’s provision of subrogation and

reimbursement rights for the financial protection of insurers, we cannot agree with

Farm Bureau’s argument that the trial court’s order resulted in a “windfall” for

Lunsford. Farm Bureau could have preserved its subrogation rights by advancing

its UIM policy limits. See State Farm Mut. Auto. Ins. Co. v. Blackwelder, 332 N.C.
135, 138-39, 418 S.E.2d 229, 231 (1992) (concluding that the insurer of the injured

party’s vehicle had “preserved its subrogation rights” against the estate of the

deceased tortfeasor by advancing the deceased tortfeasor’s liability limits to its

insured and by advancing an additional amount to settle its insured’s UIM claim).

Had Farm Bureau elected to do so, it would have been entitled to recoup the

advanced funds from the proceeds of the settlements with Mills and Crowder.1

       1 Farm Bureau further contends that Lunsford’s recovery of an amount greater than
his contracted-for UIM coverage limit is inconsistent with the purpose of the UIM statute,
as articulated by the Court of Appeals in Nationwide Mutual Insurance Co. v. Haight, 152
N.C. App. 137, 566 S.E.2d 835 (2002), disc. rev. denied, 356 N.C. 675, 577 S.E.2d 627
(2003), in which the court stated: “UIM coverage is intended to place a policy holder in the
same position that the policy holder would have been in if the tortfeasor had had liability
coverage equal to the amount of the . . . UIM coverage.” Id. at 142, 566 S.E.2d at 838
(citations, emphasis, and quotation marks omitted). We perceive no inherent conflict
between Haight’s articulation of the intended purpose of the UIM statute and the principle
we reaffirmed in Proctor that subdivision 20-279.21(b)(4), as a remedial statute, must be
“interpreted to provide the innocent victim with the fullest possible protection.” Proctor,
324 N.C. at 225, 376 S.E.2d at 764. Even if, as we have held, a UIM carrier is required to

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                                   Opinion of the Court

N.C.G.S. § 20-279.21(b)(3). But by not advancing its policy limits, Farm Bureau

waived its subrogation rights. See N.C.G.S. § 20-279.21(b)(4) (prohibiting insurers

from exercising any right of subrogation when “the insurer fails to advance a

payment to the insured in an amount equal to the tentative settlement within 30

days” of receiving written notice of the proposed settlement).

      In sum, we believe that the structure and plain language of subdivision 20-

279.21(b)(4), the purpose behind the UIM statute, and the legislature’s inclusion of

subrogation rights for insurers, compel the conclusion that UIM coverage is

triggered upon the exhaustion of the policy limits of a single at-fault motorist.

Accordingly, upon Allstate’s tender of its policy limit of $50,000 on behalf of

Buchanan, UIM coverage was triggered under subdivision 20-279.21(b)(4), and

Lunsford was entitled to recover UIM benefits according to the terms of his policy

with Farm Bureau. We therefore affirm the Court of Appeals’ decision on this issue.

                            Judgment Interest and Costs

      Farm Bureau also challenges the Court of Appeals’ determination that

Lunsford is entitled to pre- and post-judgment interest and costs. Farm Bureau

contends that the award of these damages, taxed in excess of Lunsford’s UIM

provide UIM coverage upon exhaustion of the liability limits of a single tortfeasor, the
carrier may still seek recovery of any overpayment through the exercise of its rights to
subrogation or reimbursement. Through these mechanisms, insurers are able to recoup
any overpayment and insureds are divested of any so-called “windfall.”

                                          -18-
                                 LUNSFORD V. MILLS

                                   Opinion of the Court

coverage limits, conflicts with our decision in Baxley v. Nationwide Mutual

Insurance Co., 334 N.C. 1, 430 S.E.2d 895 (1993). We agree.

      We have established that “when a statute is applicable to the terms of a

policy of insurance, the provisions of that statute become terms of the policy to the

same extent as if they were written in it, and if the terms of the policy conflict with

the statute, the provisions of the statute prevail.” Id. at 6, 430 S.E.2d at 898 (citing

Sutton v. Aetna Cas. & Surety Co., 325 N.C. 259, 263, 382 S.E.2d 759, 762 (1989)).

Section 20-279.21 is silent with respect to pre- and post-judgment interest, and thus

subsection 24-5(b), the statute governing judgment interest, “is not a part of the

Financial Responsibility Act so as to be written into every liability policy.”       Id.

(citing Sproles, 329 N.C. at 613, 407 S.E.2d at 503). When, as here, no statutory

provision dictates a liability insurer’s obligation to pay interest in excess of its

policy limits, such an obligation “is governed by the language of the policy.” Id.

(citing Sproles, 329 N.C. at 612-13, 407 S.E.2d at 502-03) (emphasis omitted).

      The pertinent language in Lunsford’s business and personal policies states

that Farm Bureau promises to pay, up to its UIM policy limit,

             all sums the “insured” is legally entitled to recover as
             compensatory damages from the owner or driver of:

                    a. An “uninsured motor vehicle” because of “bodily
                       injury” sustained by the “insured” and caused
                       by an “accident”; and

                    b. b. An “uninsured motor vehicle” as defined in

                                          -19-
                                 LUNSFORD V. MILLS

                                   Opinion of the Court

                       Paragraphs a. and c. of the definition of
                       “uninsured motor vehicle”, because of “property
                       damage” caused by an “accident”.

             The owner’s or driver’s liability for these damages must
             result from the ownership, maintenance or use of the
             “uninsured motor vehicle”.

(Emphasis added.) The policies’ definition of an “uninsured motor vehicle” includes

an “underinsured motor vehicle.”

      In Baxley, 334 N.C. at 6-7, 430 S.E.2d at 899, we examined substantially

similar policy language:

                    The contractual language [at issue] is [the UIM
             carrier]’s promise to pay, up to its UIM policy limit,

             damages which a covered person is legally entitled to
             recover from the owner or operator of an uninsured motor
             vehicle because of:

                    1. Bodily injury sustained by a covered person and
                       caused by an accident; and

                    2. Property damage caused by an accident.

Holding that interest is an element of “damages,” id. at 11, 430 S.E.2d at 901, we

held that, based on the pertinent policy language, the UIM carrier in Baxley was

“obligated to pay pre-judgment interest up to its policy limits.” Id. at 6, 430 S.E.2d

at 898 (emphasis omitted). Our reasoning in Baxley regarding judgment interest

has similarly been applied to costs. See Wiggins v. Nationwide Mut. Ins. Co., 112
N.C. App. 26, 35-36, 434 S.E.2d 642, 648 (1993) (rejecting, based on Baxley, the

insurer’s contention “that ‘damages’ does not include costs or interest”).

                                          -20-
                                 LUNSFORD V. MILLS

                                  Opinion of the Court

       The relevant language in Farm Bureau’s policy is, we believe, materially

indistinguishable from the policy language at issue in Baxley.      Accordingly, the

Court of Appeals erred in concluding that Farm Bureau was required to pay pre-

and post-judgment interest and costs in excess of its remaining UIM policy limit of

$350,000.     Because Farm Bureau contractually capped its obligation to pay

“compensatory damages” at its UIM coverage limit, Farm Bureau is not required to

pay interest and costs over and above the $350,000 coverage amount. See Baxley,

334 N.C. at 11, 430 S.E.2d at 901 (“Since [the UIM carrier] promised to pay [the

insured]’s resulting damages, it must now do so, up to, but not in excess of, its UIM

policy limits.”).

       Lunsford nonetheless claims that Farm Bureau should be required to pay

pre- and post-judgment interest because the judgment “was entered directly against

Farm Bureau” due to Farm Bureau’s “breach of its obligations under its insurance

contract.” This argument is misplaced. There is no underlying breach of contract

claim against Farm Bureau in this case, and thus, such a claim could not have been

the basis for the trial court’s award of interest and costs. Rather, the basis for the

award is Farm Bureau’s promise to pay, up to its UIM coverage limit, the

“compensatory damages” resulting from the named defendants’ negligence. In such

circumstances, our precedent “clearly establish[es]” that the extent to which a UIM

carrier is required to pay judgment interest is controlled by “the specific terms of

[the] policy.” Nationwide Mut. Ins. Co. v. Mabe, 342 N.C. 482, 491, 467 S.E.2d 34,

                                         -21-
                                 LUNSFORD V. MILLS

                                  Opinion of the Court

40 (1996). Farm Bureau was permitted to, and did in fact, cap its liability for

damages, including interest, at the amount of its UIM coverage limit.              We

accordingly reverse the Court of Appeals’ decision with respect to interest and costs.

                                     Conclusion

        We affirm that part of the decision of the Court of Appeals holding than an

insured is only required to exhaust the liability insurance coverage of a single at-

fault motorist in order to trigger the insurer’s obligation to provide UIM benefits.

We reverse the decision of the Court of Appeals awarding interest and costs against

the insurer in an amount that exceeds the amount the insurer contractually

promised to pay under the terms of its policy with the insured.          This case is

remanded to the Court of Appeals for further remand to the Superior Court,

McDowell County, for proceedings not inconsistent with this opinion.

        AFFIRMED IN PART; REVERSED IN PART, AND REMANDED.

        Justice HUNTER did not participate in the consideration or decision of this

case.

                                         -22-
No. 385PA13 – Lunsford v. Mills

          Justice NEWBY dissenting in part and concurring in part.

          The purpose of underinsured motorist (UIM) coverage in our state is to serve

as a safeguard when tortfeasors’ liability policies do not provide sufficient

recovery—that is, when the tortfeasors are “under insured.” That is simply not the

case here. Plaintiff incurred damages amounting to $900,000. He brought suit

jointly and severally against responsible tortfeasors whose total liability limits were

$1,050,000. Those combined liability limits were more than sufficient to satisfy

plaintiff’s damages and were more than twice as high as plaintiff’s $400,000 UIM

limits.     Not only does the majority incorrectly hold that UIM coverage was

necessary in this instance, but the majority’s outcome leaves plaintiff with $350,000

in excess of his agreed-to damages. By contrast, I would hold that UIM coverage

was not activated in this case.        Rather, under the UIM statute, coverage only

applies when the policyholder’s UIM limits are more than the combined limits of the

insurance coverage of all jointly and severally liable tortfeasors against whom the

plaintiff files suit. Consequently, I respectfully dissent.

          At the time of the accident, the jointly and severally liable tortfeasors, Mills,

his employer Crowder, and Buchanan, carried liability policies totaling $1,050,000

while plaintiff was covered by two UIM policies with North Carolina Farm Bureau

Mutual Insurance Company (Farm Bureau) with combined limits of $400,000.

After plaintiff filed suit against Mills, Crowder, and Buchanan, Buchanan’s
                                  LUNSFORD V. MILLS

                    Newby, J., dissenting in part and concurring in part

provider, Allstate, tendered to plaintiff the $50,000 limits of Buchanan’s policy. Six

months later, plaintiff settled his claim with defendants Mills’ and Crowder’s

coverage provider for $850,000. After the trial court approved plaintiff’s settlement

with the named defendants, Farm Bureau, as an unnamed defendant, moved for

summary judgment, contending that plaintiff was not entitled to UIM coverage

because the combined policy limits of the defendants exceeded plaintiff’s UIM

limits. Plaintiff also moved for summary judgment, insisting that Buchanan was an

underinsured driver and that plaintiff was thus entitled to Farm Bureau’s UIM

policy limits of $400,000 less an offset of $50,000 for Buchanan’s Allstate insurance

payment. The trial court entered judgment in plaintiff’s favor for $350,000, plus

costs and pre- and post-judgment interest. Thus, plaintiff received $50,000 from

Buchanan’s insurer, $850,000 from the settlement with Mills and Crowder, and

$350,000 from his own UIM policy with Farm Bureau for a total of $1,250,000 while

settling his damages claims with the actual tortfeasors for only $900,000, which left

untapped $150,000 of tortfeasor insurance.

      The majority’s holding is based on a fundamental misunderstanding of UIM

coverage and the implementing statute, as well as a misunderstanding of Farm

Bureau’s argument. UIM insurance in North Carolina developed out of uninsured

motorist (UM) insurance.       James E. Snyder, Jr., North Carolina Automobile

Insurance Law § 30-1 (3d ed. 1999).           UM insurance provides recovery for a

policyholder injured in an auto accident by the motor vehicle of a tortfeasor who has

                                            -2-
                                  LUNSFORD V. MILLS

                    Newby, J., dissenting in part and concurring in part

no liability insurance.   Id.   By comparison, UIM coverage provides a secondary

source of recovery for an insured when the tortfeasor has insurance, but the

tortfeasor’s liability limits are insufficient to compensate the injured party. Sutton

v. Aetna Cas. & Sur. Co., 325 N.C. 259, 263, 382 S.E.2d 759, 762 (1989), superseded

on other grounds by statute, Act of July 12, 1991, ch. 646, 1991 N.C. Sess. Laws

1550 (captioned “An Act to Prohibit the Stacking of Uninsured and Underinsured

Motorist Coverage”). The UM and UIM statute is part of North Carolina’s Motor

Vehicle Safety and Financial Responsibility Act of 1953 (Act). N.C.G.S. §§ 20-279.1

to 279.39 (2013). The Act’s purpose is

             to compensate the innocent victims of financially
             irresponsible motorists. The Act is remedial in nature
             and is to be liberally construed so that the beneficial
             purpose intended by its enactment may be accomplished.
             The purpose of the Act, we have said, is best served when
             [every provision of the Act] is interpreted to provide the
             innocent victim with the fullest possible protection.

Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571, 573-74, 573 S.E.2d 118, 120

(2002) (alteration in original) (citations and internal quotation marks omitted).

Even though the Act is intended to provide “the fullest possible protection,” id. at

574, 573 S.E.2d at 120, it is only activated when a plaintiff is “under insured.” A

plaintiff cannot, under the statute, obtain UIM proceeds if the tortfeasors’ insurance

is greater than the UIM coverage or is sufficient to compensate his damages.

N.C.G.S. § 20-279.21(b)(4). The recovery provided by UIM coverage is only meant to

augment inadequate recoveries obtained from underinsured tortfeasors.              Id.

                                            -3-
                                   LUNSFORD V. MILLS

                     Newby, J., dissenting in part and concurring in part

(reducing UIM amounts by amounts received by the plaintiff from a tortfeasor’s

exhausted policy or policies).     In other words, UIM coverage puts the insured

claimant back in the position he would have occupied had the tortfeasor been

insured at limits equal to the claimant’s UIM limits. See Nationwide Mut. Ins. Co.

v. Haight, 152 N.C. App. 137, 142, 566 S.E.2d 835, 838 (2002) (noting the statute’s

goal of putting a policy holder “in the same position that the policy holder would

have been in if the tortfeasor had had liability coverage equal to the amount of the

UM/UIM coverage” (citations and emphasis omitted)), disc. rev. denied, 356 N.C.
675, 577 S.E.2d 627 (2003).

      Two provisions in the UIM statute in particular demonstrate this intent by

the legislature to make UIM coverage a source of compensation secondary to

tortfeasors’ liability policies. Elec. Supply Co. of Durham v. Swain Elec. Co., 328
N.C. 651, 656, 403 S.E.2d 291, 294 (1991) (observing that, inter alia, “we are guided

by the structure of the statute” in determining legislative intent (citations omitted)).

The first is the reduction provision, which states:

                    In any event, the limit of underinsured motorist
             coverage applicable to any claim is determined to be the
             difference between the amount paid to the claimant under
             the exhausted liability policy or policies and the limit of
             underinsured motorist coverage applicable to the motor
             vehicle involved in the accident.

                                             -4-
                                     LUNSFORD V. MILLS

                       Newby, J., dissenting in part and concurring in part

N.C.G.S. § 20-279.21(b)(4) (“reduction provision”). Under the reduction provision, a

UIM carrier reduces its applicable policy limits by amounts paid to the claimant

from tortfeasors’ exhausted policies.

       The second supporting provision is the offset or recovery provision found in

N.C.G.S. § 20-279.21(b)(3), which is incorporated by reference into subdivision 20-

279.21(b)(4):

                       In the event of payment to any person under the
                coverage required by this section and subject to the terms
                and conditions of coverage, the insurer making payment
                shall, to the extent thereof, be entitled to the proceeds of
                any settlement for judgment resulting from the exercise of
                any limits of recovery of that person against any person or
                organization legally responsible for the bodily injury for
                which the payment is made, including the proceeds
                recoverable from the assets of the insolvent insurer.

Id. at § 20-279.21(b)(3). This provision entitles a UIM carrier to use a claimant’s

judgment proceeds to recoup the UIM carrier’s payments to the claimant.                The

presence of the reduction and offset provisions in the statute evinces a legislative

intent for UIM coverage to be applicable only to the extent that other sources of

recovery fail to compensate for the injury up to the UIM limits.2 Elec. Supply Co.,
328 N.C. at 656, 403 S.E.2d at 294 (“An analysis utilizing the plain language of the

statute and the canons of construction must be done in a manner which harmonizes

       2 By contrast, some states apply an “excess coverage” approach whereby UIM
coverage is activated when a tortfeasor’s liability limits are exceeded by the insured’s
damages. 3 Irvin E. Schermer & William J. Schermer, Automobile Liability Insurance §
38:9, at 38-31 (4th ed. Dec. 2004).

                                               -5-
                                   LUNSFORD V. MILLS

                     Newby, J., dissenting in part and concurring in part

with the underlying reason and purpose of the statute.” (citation omitted)); State v.

Hart, 287 N.C. 76, 80, 213 S.E.2d 291, 295 (1975) (“A construction which operates to

defeat or impair the object of the statute must be avoided if that can reasonably be

done without violence to the legislative language.” (citation omitted)). The insured’s

UIM limits, not the insured’s total damages, provide the ceiling for recovery. See

Fasulo v. State Farm Mut. Auto. Ins. Co., 108 N.M. 807, 810-11, 780 P.2d 633, 636-

37 (1989) (discussing a UIM statute similar to subsection 20-279.21(b)(4)). Thus, an

insured plaintiff’s UIM recovery “is controlled contractually by the amount of the

UIM policy limits purchased and available to her, not fortuitously by the number of

tortfeasors involved in the accident.” Nikiper v. Motor Club of Am. Cos., 232 N.J.

Super. 393, 398-99, 557 A.2d 332, 335, certification denied, 117 N.J. 139, 564 A.2d
863 (1989). The majority’s holding runs contrary to the nature and purpose of UIM

coverage.

      With this understanding of the UIM statute’s purpose in mind, it is necessary

to consider closely the statute’s controlling provision in this case—the activation

provision. As an initial matter, the majority misreads Farm Bureau’s argument.

Farm Bureau is not insisting that the statute requires plaintiff “to exhaust not only

Buchanan’s liability limits, but also the policy limits of Mills and Crowder to the

extent that they are liable as joint tortfeasors” in order for plaintiff to receive UIM

benefits. Rather, Farm Bureau is asserting that UIM coverage is not applicable at

all because plaintiff implicated $1,050,000 in liability coverage when he sued the

                                             -6-
                                     LUNSFORD V. MILLS

                       Newby, J., dissenting in part and concurring in part

three tortfeasors.    Because of this mischaracterization, the majority errs in its

approach to the statute by focusing on the UIM’s triggering (exhaustion) provision

without first fully considering subdivision (b)(4)’s activation provision.3                The

distinction between the activation and triggering provisions is critical because if no

vehicle meets the definition of an underinsured vehicle under the activation

provision, then consideration of the subsequent triggering provision is unnecessary.

       The activation provision is found in subdivision (b)(4), which is the portion of

the statute governing UIM coverage. N.C.G.S. § 20-279.21(b)(4). A UIM carrier

pays on its policy to an injured claimant when (1) the auto accident involves a

tortfeasor who meets the statute’s definition of an underinsured highway vehicle

(the activation provision); and (2) the underinsured highway vehicle’s liability

coverage has been exhausted (triggering provision).                 Id.4      The UIM statute’s

activation provision defines an underinsured highway vehicle 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

       3 The majority’s analysis and interpretation of the activation provision is relegated
to one paragraph with a citation to a case from New York interpreting, against the insurer,
a provision in a claimant’s insurance policy. That case did not interpret a statute and offers
no support for an interpretation of North Carolina’s statute.
       4 The relevant portions of the current version of this statute are identical to the 2009

version of the statute, which is the version applicable to this case. White v. Mote, 270 N.C.
544, 555, 155 S.E.2d 75, 82 (1967) (“Laws in effect at the time of issuance of a policy of
insurance become a part of the contract . . . .”).

                                               -7-
                                    LUNSFORD V. MILLS

                      Newby, J., dissenting in part and concurring in part

              coverage for the vehicle involved in the accident and
              insured under the owner’s policy.

Id.   The activation provision applies a comparison of limits approach—UIM

coverage is activated when the insured’s UIM policy limits are greater than the

liability limits of policies connected with the tortfeasor’s ownership, maintenance, or

use of a highway vehicle. 3 Irvin E. Schermer & William J. Schermer, Automobile

Liability Insurance § 38:7 (4th ed. Dec. 2004) [hereinafter Automobile Liability

Insurance].      In a scenario involving a single insured claimant and a single

tortfeasor, application of the statute’s activation provision is straightforward. If the

insured’s UIM limits are greater than the tortfeasor’s liability limits, the insured’s

UIM coverage is activated. N.C.G.S. § 20-279.21(b)(4). Only then does subdivision

(b)(4)’s triggering provision become relevant.

      Under the triggering provision, once the tortfeasor’s liability limits have been

paid out to the insured, if the injuries have not been adequately compensated, the

insured can collect from the UIM carrier up to the maximum amount of the UIM

coverage limits minus the amount paid to the claimant under the tortfeasor’s

exhausted policy. Id. The net effect is that UIM coverage puts the insured claimant

back in the position he would have occupied had the tortfeasor been insured at

limits equal to the claimant’s UIM limits. See Haight, 152 N.C. App. at 142, 566
S.E.2d at 838.

                                              -8-
                                    LUNSFORD V. MILLS

                      Newby, J., dissenting in part and concurring in part

       Though the activation provision’s application is clear when only one

tortfeasor is involved, we have not previously addressed whether, in a multiple

tortfeasor scenario, the insured’s UIM policy limits should be compared individually

to each tortfeasor’s liability limits or compared to the sum of the liability limits of

all tortfeasors.   When read in the broader context of the statute, the UIM’s

activation provision instructs comparing the insured’s policy limits to the sum of the

liability of all jointly and severally liable tortfeasors. More specifically, a vehicle is

underinsured when “the sum of the limits of liability under all bodily injury liability

bonds and insurance policies applicable at the time of the accident” with respect to

the use of the vehicle is less than an insured’s UIM limits.                 N.C.G.S. § 20-

279.21(b)(4).

       This interpretation of the activation provision is in consonance with the

surrounding provisions of the statute and in keeping with the overall legislative

intent of requiring UIM coverage to provide a limited source of compensation when

a claimant is injured by tortfeasors who are collectively underinsured. 5 Automobile

Liability Insurance § 41.3 at 41-42 (noting that under “comparison of limits”

statutes like North Carolina’s, “an underinsured motorist carrier may defeat

underinsured motorist coverage by pointing to other liability coverages available to

       5The legislative history of the statute asserted by Farm Bureau and addressed by
the majority provides additional support for this interpretation. Because the activation
provision is susceptible to multiple interpretations, the majority’s dismissive “plain
meaning” response to Farm Bureau’s argument is unavailing.

                                              -9-
                                  LUNSFORD V. MILLS

                    Newby, J., dissenting in part and concurring in part

the tortfeasor which, when aggregated, produce a totality of limits in excess of the

underinsured motorist insured’s limits, or by aggregating the liability coverages of

joint tortfeasors.” (emphasis added) (footnote call number omitted)); see Nikiper, 232
N.J. Super. at 397, 557 A.2d at 334 (“We conclude that where the amount paid by

the insurors for the multiple tortfeasors equals or exceeds the amount of the UIM

coverage, plaintiff has no UIM claim.”); see also Sutton, 325 N.C. at 265, 382 S.E.2d

at 763 (observing that “[l]egislative intent can be ascertained not only from the

phraseology of the statute but also from the nature and purpose of the act and the

consequences which would follow its construction one way or the other”). In the

case at hand it is contrary to the purpose of the statute to conclude that Buchanan’s

vehicle alone activates UIM coverage when the combined liability limits of the

jointly and severally liable tortfeasors is $1,050,000 and plaintiff’s UIM coverage is

$400,000. Likewise, it is nonsensical to say a party is “underinsured” when the

injured party settles with the tortfeasors for $150,000 less than their policies’

coverage. State v. Beck, 359 N.C. 611, 614, 614 S.E.2d 274, 277 (2005) (“[W]here a

literal interpretation of the language of a statute will lead to absurd results, or

contravene the manifest purpose of the Legislature, as otherwise expressed, the

reason and purpose of the law shall control and the strict letter thereof shall be

disregarded.” (citations and internal quotation marks omitted)).

      Interpreting the first portion of the activation provision to require comparing

UIM limits to the combined limits of jointly and severally liable tortfeasors is in

                                           -10-
                                   LUNSFORD V. MILLS

                     Newby, J., dissenting in part and concurring in part

harmony with the immediately succeeding portion of the activation provision which

addresses UIM coverage in the context of multiple victims. State ex rel. Comm’r of

Ins. v. N. C. Auto. Rate Admin. Office, 287 N.C. 192, 202, 214 S.E.2d 98, 104 (1975)

(“We are further guided by rules of construction that statutes in pari materia, and

all parts thereof, should be construed together and compared with each other.”

(citation omitted)). The succeeding portion of the provision states:

             For purposes of an underinsured motorist claim asserted
             by a person injured in an accident where more than one
             person is injured, a highway vehicle will also be an
             “underinsured highway vehicle” if the total amount
             actually paid to that person 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.

N.C.G.S. § 20-279.21(b)(4) (emphasis added).              This provision unambiguously

contemplates comparing an insured plaintiff’s UIM limits broadly to payments the

plaintiff has received under all liability policies applicable at the time of the

accident. It does not restrict the comparison of limits test to a single tortfeasor.

Because this second portion of the activation provision requires aggregation of

liability limits for the purposes of comparison in a multiple victim scenario, under

the first portion of the activation provision, in a multiple tortfeasor scenario, the

same aggregation of liability limits must apply. Otherwise, in a multiple victim,

multiple tortfeasor scenario, the activation provision would produce conflicting

determinations as to the existence of an underinsured highway vehicle with the

                                            -11-
                                   LUNSFORD V. MILLS

                     Newby, J., dissenting in part and concurring in part

first portion requiring a one-to-one comparison and the second portion requiring a

one-to-all comparison.    An interpretation of the activation provision that limits

policy comparisons to a single tortfeasor violates a basic rule of statutory

interpretation by creating this conflict. Nationwide Mut. Ins. Co. v. Chantos, 293
N.C. 431, 440, 238 S.E.2d 597, 603 (1977) (“Obviously, the Court will, whenever

possible, interpret a statute so as to avoid absurd consequences.” (citations

omitted)).

      The majority contends that under Farm Bureau’s approach, “insureds would

be required to pursue all claims, including weak, tenuous ones, against all

potentially liable parties, no matter how impractical, before being eligible to collect

their contracted-for UIM benefits.”       As noted above, this conclusion arises from

mischaracterizing Farm Bureau’s argument as stating that UIM benefits should

only be paid after plaintiff exhausts all applicable policies. The majority’s policy

concern disappears, however, when Farm Bureau’s position is correctly understood

to be that UIM coverage is not activated when the sum of the jointly and severally

liable tortfeasors’ policy limits is higher than plaintiff’s UIM limits. In the instant

case plaintiff chose to bring suit against the three defendants jointly and severally;

no one was being “forced to sue any and all possible persons,” Lunsford v. Mills, ___

N.C. App. ___, ___, 747 S.E.2d 390, 394 (2013), or “required to pursue all claims,” as

the majority insists. An attempt by a UIM carrier to demand that plaintiff pursue

the other tortfeasors before being eligible for UIM benefits “would be in the realm of

                                            -12-
                                  LUNSFORD V. MILLS

                    Newby, J., dissenting in part and concurring in part

bad faith.” Farm Bureau Ins. Co. of N.C. v. Blong, 159 N.C. App. 365, 373, 583
S.E.2d 307, 312, disc. rev. denied, 357 N.C. 578, 589 S.E.2d 125 (2003).          Our

General Statutes already prohibit such actions. N.C.G.S. § 58-63-15(11)(f) (2013)

(“Unfair Claim Settlement Practices”); see also Gray v. N.C. Ins. Underwriting

Ass’n, 352 N.C. 61, 71, 529 S.E.2d 676, 683 (2000) (concluding that “the act or

practice of ‘[n]ot attempting in good faith to effectuate prompt, fair and equitable

settlements of claims in which liability has become reasonably clear,’ also engages

in conduct that embodies the broader standards of N.C.G.S. § 75-1.1” (alteration in

original) (quoting N.C.G.S. § 58-63-15(11)(f))).        The decision whether to pursue

further litigation is within the control of the plaintiff unless he subrogates his

claims to the insurer; a UIM carrier “cannot require an insured to pursue [other

alleged tortfeasors] before exhaustion can occur.” Blong, 159 N.C. App. at 373, 583

S.E.2d at 312. If plaintiff in this case had preferred to sue Buchanan alone and

collect on his $50,000 policy limits, plaintiff’s UIM coverage would have been

activated and triggered. Having chosen, however, to pursue simultaneously claims

against multiple tortfeasors whose combined liability limits far exceeded plaintiff’s

own UIM coverage, plaintiff was no longer able to access his UIM policy limits.

      The majority further asserts, again under a misunderstanding of Farm

Bureau’s position, that requiring exhaustion before the receipt of UIM benefits

would render “meaningless” the provisions granting UIM carriers subrogation and

reimbursement rights. Under a proper consideration of Farm Bureau’s position and

                                           -13-
                                     LUNSFORD V. MILLS

                       Newby, J., dissenting in part and concurring in part

based on a proper reading of the activation provision, the provisions in question

would not be surplusage.         The subrogation provision noted by the majority is

applicable when (a) underinsured motorist coverage is activated, and (b) a UIM

carrier voluntarily pays out to the insured before the triggering provision has been

satisfied.   N.C.G.S. § 20-279.21(b)(4).          This subrogation right is a necessary

assurance to a UIM carrier who voluntarily, id. (“at its option”), chooses to pay its

insured before exhaustion of a tortfeasor’s policy limits. Granted, this scenario is

not likely to occur. George L. Simpson, III, North Carolina Uninsured and

Underinsured Motorist Insurance § 4:2, at 351 (2013-2014 ed.) (noting that these

occasions are likely to be few). Nevertheless, this does not make the provision

superfluous.

       Lastly,   the    majority     misapprehends         subdivision        (b)(4)’s   thirty-day

advancement-of-payment provision. The majority is incorrect in concluding that

Farm Bureau has forfeited its rights to recovery from the proceeds of the Mills and

Crowder settlement, N.C.G.S. § 20-279.21(b)(3) (incorporated into subdivision (b)(4)

and entitling the UIM carrier to “the proceeds of any settlement for judgment”

related to the plaintiff’s injuries), because it failed to “preserve its subrogation

rights” by not advancing its policy limits to plaintiff in a timely manner. When a

UIM carrier fails to advance payment within thirty days of notice of a settlement

with an underinsured motorist, it only forfeits its subrogation rights as to the

underinsured motorist under N.C.G.S. § 20-279.21(b)(4) (“No insurer shall exercise

                                              -14-
                                    LUNSFORD V. MILLS

                      Newby, J., dissenting in part and concurring in part

any right of subrogation or any right to approve settlement with the original owner,

operator, or maintainer of the underinsured highway vehicle under a policy

providing coverage against an underinsured motorist where the insurer has been

provided with written notice before a settlement between its insured and the

underinsured motorist and the insurer fails to advance a payment to the insured in

an amount equal to the tentative settlement within 30 days following receipt of that

notice.” (emphasis added)).       That thirty-day deadline does not affect the UIM

carrier’s recovery rights against remaining tortfeasors.             Furthermore, the offset

provision in N.C.G.S. § 20-279.21(b)(3) contains no requirement that a UIM carrier

first pay out its limits before being entitled to a recovery against the proceeds paid

by tortfeasors. Nothing in the statute dictates that a UIM carrier forfeits its rights

to offset against judgment recoveries from other parties by not paying out benefits

in a timely manner.

      The case relied on by the majority in support of its forfeiture conclusion, State

Farm Mutual Automobile Insurance Co. v. Blackwelder, determined that the insurer

preserved subrogation rights against the underinsured tortfeasor; it does not

address a UIM carrier’s right to recover proceeds paid by other tortfeasors. 332
N.C. 135, 418 S.E.2d 229 (1992). In Blong, upon which the Court of Appeals relied

in arriving at a conclusion similar to that of the majority, a UIM carrier paid out its

policy limits to an insured and then argued it was entitled to an offset against any

amounts received by the insured in subsequent actions against additional parties.

                                             -15-
                                     LUNSFORD V. MILLS

                       Newby, J., dissenting in part and concurring in part
159 N.C. App. at 367-68, 583 S.E.2d at 308-09.                Noting the UM/UIM statute’s

remedial nature, Blong nonetheless concluded that “the Act appears to allow for the

type of subrogation that plaintiff claims.” Id. at 373, 583 S.E.2d at 312. Blong

answered the question whether the UIM carrier was entitled to an offset after

having already paid out its UIM limits and gave a sequence of “how the procedure

may play out.”   Id.     (emphasis added).        The holding in Blong does not “clearly

obligate[ ] the UIM carrier to first provide coverage, and later seek [recovery]”.

Lunsford, ___ N.C. App. at ___, 747 S.E.2d at 394. Neither the UIM statute nor

case law provides the necessary support for the majority’s timing and forfeiture

determination regarding Farm Bureau’s entitlement to recovery.                Furthermore,

reading the UIM statute as requiring Farm Bureau to pay out its UIM limits

promptly in order to protect the UIM policyholder is unnecessary; a UIM claimant

is already protected by the Unfair Claim Settlement Practices statute from delayed

payment, as noted above. Regardless whether UIM coverage was activated in this

case, Farm Bureau should nevertheless be entitled to recovery.

       The majority’s insistence on reading the activation provision as limited only

to a comparison of the UIM policy limits and an individual tortfeasor’s policy limits

in this case allows plaintiff to collect from his $400,000 UIM policy even though he

has already settled damages claims for $900,000 with the tortfeasors, which is

$150,000 less than the maximum primary insurance coverage available.                  The

legislature never intended for UIM coverage to serve this role, providing plaintiff an

                                              -16-
                                   LUNSFORD V. MILLS

                     Newby, J., dissenting in part and concurring in part

excess recovery of $350,000. Rather the legislature intended for plaintiff’s UIM

policy to serve as a safeguard to protect plaintiff in the event the tortfeasors’

liability policies failed to compensate plaintiff for injuries up to $400,000. This

legislative intent is best carried out by first comparing plaintiff’s UIM limits to the

combined limits of all the auto policies implicated in the lawsuit. Even though the

majority’s holding provides “the fullest possible protection,” Pennington, 356 N.C. at

574, 573 S.E.2d at 120, it contravenes the activation provision’s requirements and

the legislature’s intent to reduce UIM payouts by amounts recovered from all liable

parties.   Accordingly, the trial court erred in requiring Farm Bureau to make the

$350,000 payment. Nevertheless, were UIM coverage properly implicated, I agree

with the majority that the awarding of costs and interests against the insurer is

limited contractually by the terms of the insured’s policy.             Thus, I respectfully

concur in part and dissent in part.

                                            -17-