Court Opinion

ID: 4568060
Source: CourtListenerOpinion
Date Created: 2020-09-22 22:31:28.428281+00
Date Added: 2024-06-11T09:27:51.388052
License: Public Domain

UNPUBLISHED

                           UNITED STATES COURT OF APPEALS
                               FOR THE FOURTH CIRCUIT

                                          No. 19-1401

DAVID TODD VINCENT; SUSAN T. VINCENT,

                        Plaintiffs − Appellees,

                v.

AMCO INSURANCE COMPANY,

                        Defendant – Appellant,

                and

WENDY SMITH VICK; NATIONWIDE MUTUAL INSURANCE COMPANY;
ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY; LIBERTY
MUTUAL INSURANCE COMPANY; SAFECO INSURANCE COMPANY OF
AMERICA,

                        Defendants,

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,

                        Intervenor/Defendant.

-----------------------------

NORTH CAROLINA ADVOCATES FOR JUSTICE,

                        Amicus Supporting Appellee.

Appeal from the United States District Court for the Middle District of North Carolina, at
Greensboro. Loretta C. Biggs, District Judge. (1:17-cv-00762-LCB-JEP)
Submitted: March 26, 2020                                         Decided: August 4, 2020

Before MOTZ, DIAZ, and RUSHING, Circuit Judges.

Affirmed by unpublished opinion. Judge Diaz wrote the opinion, in which Judge Motz and
Judge Rushing joined.

David L. Brown, Martha P. Brown, GOLDBERG SEGALLA LLP, Greensboro, North
Carolina, for Appellant. John D. Loftin, Jason R. Jones, LOFTIN & LOFTIN, P.A.,
Hillsborough, North Carolina, for Appellees. T. Shawn Howard, MAGINNIS LAW,
PLLC, Raleigh, North Carolina; Jerome P. Trehy, Jr., JEROME P. TREHY, JR., P.A.,
Durham, North Carolina; Jon Ward, PINTO COATES KYRE & BOWERS, PLLC,
Greensboro, North Carolina, for Amicus North Carolina Advocates for Justice.

Unpublished opinions are not binding precedent in this circuit.

                                            2
DIAZ, Circuit Judge:

          In this insurance-coverage dispute, AMCO Insurance Company challenges the

district court’s grant of judgment on the pleadings for David and Susan Vincent, a married

couple. AMCO contends that the district court erred in holding that the Vincents are

entitled to coverage for a motor vehicle accident under a policy (the “AMCO policy”) that

AMCO issued to a company owned by the Vincents.

          We agree with the district court. The North Carolina Motor Vehicle Safety and

Financial Responsibility Act of 1953 (the “Act”) mandates that AMCO cover the Vincents’

injuries, even though the policy’s terms don’t contemplate coverage. This is because the

AMCO policy doesn’t fall within the Act’s exemption for policies “applicable solely to

fleet vehicles,” and because the Vincents are class one insureds under the Act, entitling

them to UIM coverage while occupying any vehicle.

          Thus, we affirm the district court’s judgment.

                                               I.

                                               A.

          On October 17, 2016, Mr. Vincent was riding his motorcycle, which he owned and

garaged at his residence, on US-70 when he crashed into Wendy Vick’s car. Vincent

suffered life-threatening injuries.      After exhausting other insurance, the Vincents’

remaining damages were $950,000, for which they sought compensation under the AMCO

policy.

                                               3
       The AMCO policy had been issued to a company that the Vincents owned: TSPC,

LLC d/b/a Todd’s Affordable Furniture (“TSPC”). The policy is eighty-nine pages long.

On many different pages, it includes a field labeled “Named Insured” and lists TSPC in

that field. See, e.g., J.A. 47, 56, 58, 59, 117, 119. It also provides TSPC with $1 million

in underinsured motorist (“UIM”) coverage, which protects persons who are injured by

underinsured drivers.

       According to the policy, this UIM coverage extends to anyone occupying a “covered

‘auto.’” 1 J.A. 89–90. When the policy was issued, five cars were listed as covered autos,

each of which (per the policy) was owned by, and garaged at, TSPC. The Vincents later

added two more vehicles to the policy, making a total of seven covered autos at the time

of Mr. Vincent’s accident. But the motorcycle Vincent crashed was never listed in the

policy, nor was it ever garaged at TSPC.

       The AMCO policy contains a two-page endorsement titled “Drive Other Car

Coverage – Broadened Coverage for Named Individuals” (the “Endorsement”). J.A. 103.

The Endorsement identifies both Vincents by name as “insureds” and indicates that they

have $1 million in UIM coverage, for which TSPC pays a $14 premium. Below that, the

Endorsement includes two sections that are relevant here. Section B extends liability

       1
         “Auto,” as it’s used in the policy, encompasses any “land motor vehicle . . .
designed for travel on public roads,” J.A. 74, which includes cars and motorcycles, see
Vasseur v. St. Paul Mut. Ins. Co., 473 S.E.2d 15, 18 (N.C. Ct. App. 1996). Similarly, the
Act is intended to cover persons occupying cars or motorcycles because it uses the term
“motor vehicle.” N.C. Gen. Stat. § 20-279.21(b)(3).

                                            4
coverage to any vehicle that the Vincents borrow for personal use. And section C says the

following:

      C. Changes In Auto Medical Payments And Uninsured And
         Underinsured Motorists Coverages

          The following is added to Who Is An Insured:

          Any individual named in the Schedule and his or her “family members”
          are “insureds” while “occupying” or while a pedestrian when being struck
          by any “auto” you 2 don’t own except:

          Any “auto” owned by that individual or by any “family member[.]”

J.A. 104 (emphasis added). In other words, the policy provides UIM coverage to the

Vincents while they are pedestrians or occupying any auto that they don’t own, but not

while they are occupying any auto they do own, like the motorcycle. This type of provision

is referred to as an “owned-vehicle exclusion.”

      On appeal, the parties agree that the owned-vehicle exclusion, if enforceable, would

bar the Vincents’ UIM coverage claim.

                                            B.

      The Vincents filed suit in state court in August 2017, asserting claims for personal

injury, loss of consortium, and declaratory judgment against AMCO. AMCO removed this

case to federal court pursuant to 28 U.S.C. § 1332 and filed an answer and counterclaim

      2
         The policy defines “you” as “the Named Insured shown in the Declarations”—i.e.,
TSPC. J.A. 65. This doesn’t foreclose the possibility of there being other named insureds,
like the Vincents, whose names don’t appear in the Declarations (which are a section of
the policy). If the Endorsement had referred only to “the Named Insured,” that would more
clearly indicate that the policy has only one named insured.

                                            5
seeking a declaratory judgment that its policy doesn’t cover the Vincents’ claims. Both

parties filed Rule 12(c) motions for judgment on the pleadings.

       The district court entered judgment for the Vincents, finding that the Act requires

AMCO’s policy to cover their claims in spite of the owned-vehicle exclusion. In doing so,

the court relied on North Carolina case law holding that, under the Act, an owned-vehicle

exclusion is void when applied to “class one insureds,” which consist of the “named

insured,” his or her spouse, and resident relatives of either, Nationwide Mut. Ins. Co. v.

Mabe, 467 S.E.2d 34, 42–43 (N.C. 1996). In other words, class one insureds are entitled

to UIM coverage no matter what vehicle they are occupying. And in the court’s view, the

Vincents were named insureds—and thus class one insureds—because the Endorsement

identifies them by name as insureds entitled to UIM coverage.

       The court also rejected AMCO’s argument that its policy fell within an exemption

from the Act’s UIM-coverage mandate for policies “applicable solely to fleet vehicles,”

N.C. Gen. Stat. § 20-279.21(b)(4) (the “fleet exemption”). The court reasoned that, via the

Endorsement, the AMCO policy covered the Vincents while they occupied vehicles that

didn’t belong to them and weren’t listed in the policy, which couldn’t be considered “fleet

vehicles.” As such, the policy didn’t apply solely to fleet vehicles.

       This appeal followed. The North Carolina Advocates for Justice (the “Advocates”),

an organization of 2,500 attorneys who advocate for the rights of persons injured in motor

vehicle collisions, filed an amicus brief in support of the Vincents.

                                              6
                                            II.

       On appeal, AMCO repeats the arguments it made in the district court: (1) the Act’s

requirements don’t apply to its policy because the policy is “applicable solely to fleet

vehicles,” and (2) even if the Act applies, it doesn’t require coverage for the Vincents

because they’re not class one insureds. If either argument is correct, we must reverse.

       We review rulings on Rule 12(c) motions de novo. Korotynska v. Metropolitan Life

Ins. Co., 474 F.3d 101, 104 (4th Cir. 2006). As this is a diversity action involving an

insurance policy issued in North Carolina, we must apply that state’s law.                See

Assicurazioni Generali, S.p.A. v. Neil, 160 F.3d 997, 1000 (4th Cir. 1998). In interpreting

the Act, we must predict how the Supreme Court of North Carolina would rule, Stahle v.

CTS Corp., 817 F.3d 96, 100 (4th Cir. 2016), and follow any “fully reasoned holding” by

the North Carolina Court of Appeals unless we are “convinced that the state’s highest court

would not follow that holding,” Assicurazioni, 160 F.3d at 1003 (cleaned up).

                                            A.

       We begin with AMCO’s first argument, which requires us to examine the Act and

its fleet exemption.

                                            1.

       The North Carolina Motor Vehicle Safety and Financial Responsibility Act “is the

principal North Carolina statute governing compulsory motor vehicle insurance laws.” W.

Am. Ins. Co. v. Terra Designs, Inc., No. 5:11-CV-80, 2014 WL 1309110, at *8 (W.D.N.C.

Mar. 31, 2014). It requires, among other things, that most types of motor vehicle insurance

                                            7
policies provide their policyholders with UIM coverage. See N.C. Gen. Stat. § 20-

279.21(b)(4).

       The Act’s “avowed purpose . . . is to compensate the innocent victims of financially

irresponsible motorists.” Liberty Mut. Ins. Co. v. Pennington, 573 S.E.2d 118, 120 (N.C.

2002) (cleaned up). “The provisions of this statute are deemed to be a part of every

automobile insurance policy written in North Carolina and control over contrary provisions

contained in such policies.” Wood v. Nunnery, 730 S.E.2d 222, 225 (N.C. Ct. App. 2012).

Additionally, the Act “is to be liberally construed” because its purpose “is best served when

every provision . . . is interpreted to provide the innocent victim with the fullest possible

protection.” Pennington, 573 S.E.2d at 120 (cleaned up).

       In 2008, the Act was amended to include, among other things, the following

language: “[N]o policy of motor vehicle liability insurance . . . applicable solely to fleet

vehicles shall be required to provide underinsured motorist coverage.” N.C. Sess. Laws

2008-124, H.B. 738 (emphasis added). The following year, the state legislature added

another sentence: “When determining whether a policy is applicable solely to fleet

vehicles, the insurer may rely upon the number of vehicles reported by the insured at the

time of the issuance of the policy for the policy term in question.” N.C. Sess. Laws 2009-

561, S.B. 749 (emphasis added). These two sentences now appear consecutively in the

Act. See N.C. Gen. Stat. § 20-279.21(b)(4).

       While North Carolina courts haven’t interpreted the fleet exemption, they have

discussed the meaning of the term “fleet vehicle” in other contexts. Another North

Carolina statute defines a “[n]onfleet” vehicle as “one of four or fewer motor vehicles hired

                                              8
under a long-term contract or owned by the insured named in the policy.” N.C. Gen. Stat.

§ 58-40-10(2). The state’s courts have cited that definition for the proposition that, to be a

“fleet policy,” a policy must cover at least five vehicles that are used in the named insured’s

business. See Hlasnick v. Federated Mut. Ins. Co., 524 S.E.2d 386, 389 (N.C. Ct. App.

2000) (stating that a policy was “a fleet policy” because it covered more than four vehicles),

aff’d in part and review dismissed as improvidently granted in part, 539 S.E.2d 274 (N.C.

2000); McCaskill v. Pa. Nat. Mut. Cas. Ins. Co., 454 S.E.2d 842, 844 (N.C. Ct. App. 1995)

(finding that a policy was “nonfleet” because, while it covered five vehicles, none were

used for the insured’s business); cf. Sutton v. Aetna Cas. & Sur. Co., 382 S.E.2d 759, 763

(N.C. 1989) (indicating that fleet vehicles are one of a “number of motor vehicles used in

an insured’s business” (emphasis added)).

                                              2.

       AMCO now argues that any policy covering at least five vehicles is categorically a

policy “applicable solely to fleet vehicles.” We disagree, based on the word “solely.”

       The seven vehicles listed in the AMCO policy are fleet vehicles because they are

each used in TSPC’s business. But, via sections B and C of the Endorsement, the policy

also applies to many other vehicles, including any vehicle that the Vincents borrow from a

friend for personal use. Such a vehicle isn’t a “fleet vehicle” because it’s not used in any

insured’s business. See McCaskill, 454 S.E.2d at 844 (indicating that five vehicles covered

by a policy were nonfleet because they “were not used for the insured’s business”). Nor is

such a vehicle “hired under a long-term contract or owned by [any] insured named in the

policy.” See N.C. Gen. Stat. § 58-40-10(2). Because the AMCO policy covers both fleet

                                              9
and nonfleet vehicles, it isn’t “applicable solely to fleet vehicles,” and isn’t exempt from

the Act, as the district court correctly held. AMCO’s contrary interpretation would read

the word “solely” out of the fleet exemption.

       None of the three cases that have interpreted the fleet exemption support AMCO’s

position. In two of them, the policy at issue covered only vehicles that were used in the

named insured’s business and the court relied on that fact to conclude that the policy was

exempt from the Act. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Njuguna, 15 F.

Supp. 3d 637, 643 (E.D.N.C. 2014) (“These vehicles were used in General Parts’

business.”); W. Am. Ins. Co., 2014 WL 1309110, at *9 (“The policy contains a schedule of

covered vehicles, each purportedly used in operation of Terra Designs’ business.”

(emphasis added)). Even were we to agree with the Eastern District of North Carolina that

vehicles used for both business and personal purposes can be fleet vehicles, see Njuguna,

15 F. Supp. 3d at 644, the problem for AMCO remains that the Endorsement covers

vehicles that aren’t used in any insured’s business. And the third case is inapposite because

the plaintiff there argued that another provision of the Act (one not relevant here) conflicted

with the fleet exemption, not that the relevant policy wasn’t applicable solely to fleet

vehicles. See Travelers Prop. Cas. Co. of Am. v. Seretta Constr. Mid-Atl., LLC, 333 F.

Supp. 3d 540, 545 (W.D.N.C. 2018) (addressing the plaintiff’s argument that “a mixture

of commercial and noncommercial motor vehicles in a fleet policy requires underinsured

motorist coverage” because of the Act’s express application to any “policy that insures

both commercial motor vehicles . . . and noncommercial motor vehicles”).

                                              10
         AMCO also relies on the Act’s statement that “[w]hen determining whether a policy

is applicable solely to fleet vehicles, the insurer may rely upon the number of vehicles

reported by the insured at the time of the issuance of the policy for the policy term in

question.” N.C. Gen. Stat. § 20-279.21(b)(4). This, AMCO insists, means that we should

look only to whether a policy covers at least five vehicles in assessing whether it falls

within the exemption.

         But we find more plausible the Advocates’ explanation for why the North Carolina

legislature added this provision one year after enacting the fleet exemption. In their view,

this language was only meant to clarify that changes to the number of vehicles covered by

a policy after its issuance don’t affect its status. In other words, if a policy falls within the

fleet exemption when it’s issued, but vehicles are later removed from the policy—taking

the total number of insured vehicles below five—the policy remains within the exemption’s

scope. For support, the Advocates point to the provision’s emphasis on “the time of the

issuance of the policy,” and to a December 2008 letter from the North Carolina Reinsurance

Facility (an entity through which auto insurers pool risks) expressing concern that a

policy’s status could change if an insured “add[ed] or delete[d] vehicles on a policy mid-

term.” N.C. Reinsurance Facility, Circular Letter to All Member Companies (Dec. 12,

2008),                http://www.ncrb.org/Portals/5/ncrf/circular%20letters/RF-08-23%20-

%20Cedable%20Limits.pdf.

         Of course, the Advocates have no direct evidence that the North Carolina legislature

relied on this letter. Indeed, no party points to any relevant legislative history. But the

Advocates’ reading comports better with the fleet exemption’s inclusion of the word

                                               11
“solely.” When interpreting a North Carolina statute, we must “give every word of the

statute effect, presuming that the legislature carefully chose each word used.” N.C. Dep’t

of Corr. v. N.C. Med. Bd., 675 S.E.2d 641, 649 (N.C. 2009). Had the legislature wanted to

exempt any policy covering more than four vehicles from the Act’s requirements, the

exemption would say “applicable to fleet vehicles,” not “applicable solely to fleet

vehicles.” And to the extent that there is any ambiguity here, we must construe the Act

liberally, in favor of coverage. See Pennington, 573 S.E.2d at 120.

      In sum, the Act’s UIM-coverage requirements apply to the AMCO policy.

                                           B.

      Next, we consider whether the Act mandates that the AMCO policy cover Mr.

Vincent for the injuries he suffered while operating his motorcycle, despite the

Endorsement’s owned-vehicle exclusion. As we explain, this issue turns on whether the

Vincents are “named insureds” under the policy.

      The Act recognizes two classes of insureds. Mabe, 467 S.E.2d at 42. Class one

insureds consist of “the named insured and, while resident of the same household, the

spouse of the named insured and relatives of either,” while class two insureds consist of

“any person who uses with the consent, express or implied, of the named insured, the

insured vehicle, and a guest in such vehicle.” Id. (cleaned up); see N.C. Gen. Stat. § 20-

279.21(b)(3) (where these definitions come from).

      The Act requires auto insurance policies to cover class one members regardless of

whether a vehicle listed in the policy was involved in their injuries. Mabe, 467 S.E.2d at

42. By contrast, the Act protects class two insureds only if they are occupying a vehicle

                                           12
insured by the policy. Nationwide Mut. Ins. Co. v. Williams, 472 S.E.2d 220, 223 (N.C.

Ct. App. 1996). In other words, UIM protection for class one insureds is “person-oriented,”

while coverage for class two insureds is “vehicle-oriented.” Mabe, 467 S.E.2d at 42–43

(cleaned up). Therefore, owned-vehicle exclusions are unenforceable as to class one

insureds, Mabe, 467 S.E.2d at 43, but valid as to class two insureds, Brown v. Truck Ins.

Exch., 404 S.E.2d 172, 175 (N.C. Ct. App. 1991).

       TSPC is undisputedly a named insured because the AMCO policy identifies it as

such. But the Vincents’ ownership of TSPC doesn’t make them named insureds, see Busby

v. Simmons, 406 S.E.2d 628, 630 (N.C. Ct. App. 1991), and as a corporation, TSPC cannot

have a spouse or relatives, see Sproles v. Greene, 407 S.E.2d 497, 500 (N.C. 1991). So,

the only way that the Vincents can be class one insureds is if they are named insureds via

the Endorsement.

       That begs the question: how can we tell whether a party is a named insured? It’s

not as easy as one might expect. Neither the Act nor the AMCO policy define the term.

The North Carolina Court of Appeals has suggested (in dictum, we believe) a narrow

definition of that term that would exclude the Vincents because their names don’t appear

in the policy’s declarations pages. See Busby, 406 S.E.2d at 630–31 (“‘Named insured’

has a common sense and explicit meaning. It is the named individual (or corporation) on

the declarations page of the policy.”).

       But more recent cases have rejected this view, making clear that an insurance policy

can have multiple named insureds and that persons (or entities) can be named insureds

without the policy identifying them as such. See Beddard v. McDaniel, 645 S.E.2d 153,

                                            13
155–56 (N.C. Ct. App. 2007) (finding that three individuals were named insureds even

though the policy didn’t identify them as such and did identify a corporation as a named

insured); Stockton v. N.C. Farm Bureau Mut. Ins. Co., Inc., 532 S.E.2d 566, 568–69 (N.C.

Ct. App. 2000) (finding that a farm’s two owners were named insureds under an auto

insurance policy that identified the farm as the named insured, reasoning that the farm was

not a legal entity and couldn’t bring an action on the policy). That said, the appearance of

the Vincents’ names in the Endorsement doesn’t necessarily make them named insureds;

the context in which their names appear is also relevant. See Williams, 472 S.E.2d at 222

(finding that a plaintiff wasn’t a named insured because his name was included in the policy

only for underwriting purposes).

       In finding that the Vincents were named insureds, the district court relied on

Beddard. There, the North Carolina Court of Appeals considered a policy that (1) listed a

corporation (owned by at least one of the three plaintiffs) in a field entitled “Name of

Insured,” and (2) separately identified each of the three plaintiffs as “designated

individuals” for UIM coverage. Id. at 154. The Court of Appeals concluded that the

plaintiffs were named insureds entitled to person-oriented coverage, reasoning that they

“were named as ‘designated individuals’ on the Elective Options Form for UIM coverage;

as such, and as conceded by [the insurer] in its brief, they qualify under Endorsement 092

of the policy as ‘named insureds’ for the UIM Coverage Part.” Id. at 155 (emphasis added).

       The district court found no meaningful difference between Beddard and this case.

The court also held that it was bound to follow Beddard—even though the insurer in that

                                            14
case conceded that the Beddards were named insureds—because the Court of Appeals used

the words “as such” before referring to the insurer’s concession.

       AMCO now contends that Beddard is distinguishable and that (in any event) we

shouldn’t defer to it because the insurer’s concession means that Beddard’s holding wasn’t

fully reasoned, see Assicurazioni, 160 F.3d at 1002. We need not address those points

because, whether or not Beddard controls here, the district court’s conclusion was correct:

the Vincents are class one insureds. We reach this conclusion by working backwards from

the Act’s definition of class two insureds.

       As stated above, class two insureds include persons who use vehicles “with the

consent, express or implied, of the named insured.” Mabe, 467 S.E.2d at 42 (cleaned up).

But here, the Endorsement affords the Vincents UIM coverage so long as they occupy any

vehicle that they don’t own, even without the consent of TSPC (who, per AMCO, is the

only named insured). That distinguishes this case from the ones AMCO cites, like Brown,

where the plaintiff was in class two because he was only covered if he drove a car “in the

business of the named insured,” 404 S.E.2d at 175. So, the Vincents have broader UIM

coverage than a class two insured.

       What does this mean? The Act (and the cases interpreting it) don’t definitively tell

us whether persons with broader coverage than a class two insured must be class one

insureds. Because there are no other classes of insureds under the Act, the Supreme Court

of North Carolina has suggested that each person covered by the Act must fall into one of

the two classes, see Sproles, 407 S.E.2d at 500 (“All other persons [who are not class one

insureds] are class two insureds . . .”). And, as stated above, the policy is ambiguous as to

                                              15
whether the Vincents are named insureds because it never defines that term or refers to

class one or class two, and because it gives the Vincents broad coverage.

       We must construe any ambiguity in the Act or the policy in the Vincents’ favor. See

Pennington, 573 S.E.2d at 120; Stockton, 532 S.E.2d at 567. Therefore, we conclude that

the Vincents are class one insureds, and specifically named insureds.

       We come to this result even as we acknowledge that AMCO allegedly didn’t view

the Vincents as named insureds when it drafted the policy. Regardless, AMCO had notice

of the definition of class two insured. Yet it gave the Vincents broader UIM coverage than

a class two insured enjoys. And now, it points to no case where a person with such

coverage was deemed a class two insured. This ambiguity must “be strictly construed

against the drafter,” AMCO, “since [it] prepared the policy and chose the language.”

Stockton, 532 S.E.2d at 567 (cleaned up).

       In sum, we predict that the Supreme Court of North Carolina would rule that, if a

motor vehicle policy gives an entity broader UIM coverage than that of a class two insured,

that entity is necessarily a class one insured. On that basis, we affirm the district court’s

holding that the Act requires the AMCO policy to cover the Vincents’ injuries.

                                            III.

       For the reasons given, the district court’s judgment is

                                             16
                                                                        AFFIRMED. 3

      3
         We dispense with oral argument because the facts and legal contentions are
adequately presented in the materials before this court and argument would not aid the
decisional process.

                                         17