Creed v Smith
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NO. COA11-1469 NORTH CAROLINA COURT OF APPEALS Filed: 21 August 2012 JAMES D. CREED, Plaintiff-Appellant, v. Catawba County No. 10 CVS 3788 BRETT A. SMITH and CAROLYN JEANETTE WYATT, Defendants-Appellees. Appeal by Plaintiff from order entered by Judge Timothy S. Kincaid in Superior Court, Catawba County. Heard in the Court of Appeals 22 May 2012. Patterson Harkavy LLP, by Burton Craige and Narendra K. Ghosh; and Ramsay Law Firm, P.A., by Martha L. Ramsay, for Plaintiff-Appellant. Davis and Hamrick, L.L.P., by H. Lee Davis, Jr.; and Frazier, Hill & Fury, R.L.L.P., by Torin Lane Fury, for Unnamed Defendants-Appellees Liberty Mutual Insurance Company and Integon National Insurance Company. Brown, Moore & Associates, PLLC, by Jon R. Moore; and White & Stradley, LLP, by J. David Stradley, for North Carolina Advocates for Justice, amicus curiae. McAngus, Goudelock & Courie, PLLC, by John P. Barringer and Jeffrey B. Kuykendal, for North Carolina Association of Defense Attorneys, amicus curiae. McGEE, Judge. James D. Creed (Plaintiff) filed a complaint against Brett -2A. Smith (Mr. Smith) and Carolyn Jeanette Wyatt (Defendants) on 30 November 2010 in Catawba County Superior Court. amended his complaint on 4 February 2011. alleged that collision Mr. that Smith occurred negligently on 2 Plaintiff Plaintiff's complaint caused February a motor 2008. vehicle Plaintiff's underinsured motorist (UIM) insurance carrier, Integon National Insurance Company (Integon), filed an answer on 8 April 2011. Plaintiff's employer's UIM insurance provider, Liberty Mutual Insurance Company (Liberty), filed an answer on 15 June 2011. Plaintiff filed a motion to compel arbitration between himself, Integon and Liberty on 29 June 2011. The trial court heard Plaintiff's and denying motion on Plaintiff's 1 August motion on 2011, 15 August entered an order 2011. Plaintiff appeals. I. Factual Background Plaintiff was driving a vehicle owned by his employer on 2 February Smith. under 2008 when he was involved in a collision with Mr. The record on appeal shows that Mr. Smith was insured a $50,000.00 Insurance Company insurance (Nationwide). policy from Plaintiff's Nationwide employer Mutual held a $1,000,000.00 policy with Liberty that provided UIM coverage to Plaintiff because Plaintiff was operating the vehicle "in the course and scope of his employment." held a $50,000.00 UIM policy with Plaintiff additionally Integon that was also in -3effect at the time of the accident. The provisions of the Liberty UIM policy indicated that Liberty would pay UIM coverage if (1) "[t]he limit of any applicable liability bonds or policies have been exhausted by payments of judgments or settlements; or" (2) if "[a] tentative settlement has been made between an 'insured' and the insurer" of an underinsured vehicle, Liberty "[has] been given prompt written notice of such tentative settlement[,]" and Liberty "[a]dvance[s] payment to the 'insured' in an amount equal to the tentative settlement notification." within 30 days after receipt of The Liberty UIM policy includes an exclusion provision that precludes coverage for "[a]ny claim settled by the 'insured' or any legal representative without [Liberty's] consent." of the 'insured' This exclusion does not apply, however, to settlements reached in compliance with the provision requiring notice and advance payment. Finally, provision Liberty's governing UIM when policy the insured includes may an arbitration demand arbitration. The policy states that if Liberty and the insured (1) "disagree whether the 'insured' is legally entitled to recover damages from the owner or driver of an 'uninsured motor vehicle,'" or (2) "do not recoverable arbitrated." agree by as that to the 'insured,' amount then of the damages matter that are may be The insured may demand arbitration, and if the -4insured decides not to arbitrate, "[Liberty's] liability will be determined only in an action against [Liberty]." Integon's UIM policy is substantively the same as Liberty's UIM policy as it pertains to the present case. Integon's UIM policy states that Integon will pay UIM coverage "only after the limits of policies liability have been under any exhausted applicable by liability payments or judgments of bonds or settlements," unless Integon is (1) "given written notice in advance of operator settlement of the between underinsured an insured and vehicle[,]" the and (2) owner or Integon "[c]onsent[s] to advance payment to the insured in the amount equal to the tentative settlement." Integon's exclusion provision precludes UIM coverage if the insured settles a claim against the underinsured driver without consent from Integon. However, the exclusion does not apply if the underinsured motorist and the liability insurer reach a settlement following written notice to Integon and Integon does not "advance payment to the insured in an amount equal to the tentative settlement within thirty days[.]" Integon's UIM policy also includes an arbitration provision which states if Integon and the insured disagree on "[w]hether recover compensatory uninsured motor that insured is legally entitled to damages from the owner or driver of an vehicle or underinsured motor vehicle[,]" or "[a]s to the amount of such damages[,]" the insured may demand -5arbitration. Defendants' counsel notified Plaintiff's counsel on 26 April 2011 that Nationwide had tendered its liability limits of $50,000.00 in return for a covenant not to enforce judgment with Plaintiff. Plaintiff's counsel notified Liberty and Integon of the tender on 12 May 2011. Plaintiff Integon. requested Six days later, on 18 May 2011, binding arbitration with Liberty and Liberty advanced $50,000.00 to Plaintiff's counsel on 9 June 2011 to preserve its subrogation rights, and Plaintiff's counsel returned Nationwide's $50,000.00 payment. Plaintiff filed his "motion to compel binding arbitration and stay further proceedings" on Plaintiff's motion policies were not 29 June on 15 2011. August applicable The 2011, because trial finding the court that liability denied the UIM insurer's policy had not been "exhausted" under N.C. Gen. Stat. § 20 279.21. II. Issue on Appeal The sole issue raised on appeal is whether the trial court erred by denying Plaintiff's motion to compel arbitration on the basis of a determination that Nationwide's liability insurance limits had not been "exhausted" for the purposes of N.C. Gen. Stat § 20-279.21 and the UIM insurance policies of Liberty and Integon. III. Standard of Review -6We consider de novo the issue of whether Plaintiff's motion to compel arbitration was properly dismissed. See Raspet v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d 676, 678 (2001) ("[A] trial court's conclusion as to whether a particular dispute is subject to arbitration is a conclusion of law, reviewable de novo by the appellate court."); see also Register v. White, 358 N.C. 691, 693, 599 S.E.2d 549, 552 (2004) ("Questions concerning the meaning of contractual provisions in an insurance policy are reviewed de novo on appeal."). IV. Exhaustion of Liability Insurance Plaintiff argues that the trial court erred by denying his motion to compel arbitration. Plaintiff contends that Nationwide's liability insurance was exhausted on 26 April 2011, meaning that Liberty's and Integon's UIM coverage was applicable when Plaintiff requested binding arbitration. Upon review of the relevant law, we find that Nationwide's liability insurance was exhausted on 26 April 2011, and that the trial court improperly dismissed Plaintiff's motion to compel arbitration. N.C. Gen. Stat. § 20-279.21(b)(4) states the following: 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. Exhaustion of that liability coverage for -7the purpose of any single liability claim presented for underinsured motorist coverage is deemed to occur when either (a) the limits of liability per claim have been paid upon the claim, or (b) by reason of multiple claims, the aggregate per occurrence limit of liability has been paid. N.C. Gen. Stat. § 20-279.21(b)(4) (2011). In Register, our Supreme Court unambiguously interpreted N.C. Gen. Stat. § 20279.21(b)(4) to mean that "[e]xhaustion occurs when [a] liability carrier has tendered the limits of its policy in a settlement offer or in satisfaction of a judgment." 358 N.C. at 698, 599 S.E.2d at 555. of the word Black's "tender," Law this Dictionary, In considering the meaning Court has previously which Register, defines relied upon "tender" as "[a]n unconditional offer of money or performance to satisfy a debt or obligation[.]" Black's Law Dictionary 1479 (7th ed. 1999); see also Morrison v. Public Serv. Co. of N.C., 182 N.C. App. 707, 710-11, 643 S.E.2d 58, 61-62 (2007). Further, the record on appeal in Register shows that our Supreme Court intended to indicate that exhaustion occurs upon tender, rather policy limit. than upon payment, of a liability insurer's In Register, the Supreme Court indicated that the "liability carrier, State Farm, tendered its liability limits of $50,000.00 on 8 August 2001." S.E.2d at 551. Register, 358 N.C. at 692, 599 Then, "[i]n a letter to Farm Bureau dated 24 -8September 2001, plaintiff demanded arbitration pursuant to the UIM provision in Mr. Register's insurance policy." Id. From a review of the record in Register, it appears that actual payment by the liability insurer did not occur until at least 8 October 2001, when Covenant the Not plaintiff To Enforce signed a Judgment," "Settlement which was Agreement "[f]or and and in consideration of the sum of $50,000.00, the receipt of which [thereby was] acknowledged." Nonetheless, the trial court found that "plaintiff's right to demand arbitration of her UIM claim could not have arisen prior to 8 August 2001, when defendant White's insurance policy[,]" company meaning that tendered the the full "plaintiff's 24 limits of September its 2001 demand for arbitration fell within the three-year 'time-limit' referenced in the policy[.]" S.E.2d at 556. Register, 358 N.C. at 701, 599 Had the Supreme Court in Register held that exhaustion had occurred upon payment of the liability policy rather than tender, the plaintiff's 24 September 2001 demand for arbitration would have occurred before exhaustion and would have been untimely. We are bound by our Supreme Court's interpretation of N.C. Gen. Stat. § 20-279.21(b)(4) and we therefore hold that the limits of Nationwide's liability policy were exhausted on 26 April 2011, when Nationwide tendered payment of $50,000.00 to Plaintiff. Accordingly, Plaintiff's 18 May 2011 written request -9for binding arbitration occurred at a time when Plaintiff's right to UIM arbitration was available under both N.C. Gen. Stat. § 20-279.21 and under the terms of Liberty's and Integon's UIM policies. V. Commitment to Follow Supreme Court Interpretation Defendants correctly point out that our Supreme Court has interpreted "exhaustion" differently in previous decisions. See Brown v. Lumbermens Mut. Casualty Co., 326 N.C. 387, 396, 390 S.E.2d 150, 155 (1990) (finding that if an insurer "merely tenders its limits without obtaining a settlement of any claim for its insured, a strong argument can be made that it has neither 'exhausted' fiduciary duty to its policy discharge limits its nor policy fulfilled its obligations[.]"). Defendants also assert that the plain language of N.C. Gen. Stat. § 20-279.21(b)(4) uses the word "paid" rather than "tendered" to define when exhaustion occurs for the purpose of determining when UIM insurance policies apply. See N.C. Gen. Stat. § 20-279.21(b)(4) ("Exhaustion . . . is deemed to occur when either (a) the limits of the liability per claim have been paid upon the claim, or (b) by reason of multiple claims, the aggregate per occurrence limit of liability has been paid." (emphasis added)). Nonetheless, a straightforward application of the Supreme Court's unambiguous language in Register clearly demonstrates -10that N.C. Gen. Stat. § 20-279.21(b)(4) should be interpreted to mean that "[e]xhaustion occurs when [a] liability carrier has tendered the limits of its policy in a settlement offer or in satisfaction of a judgment." S.E.2d at 555. Register, 358 N.C. at 698, 599 "[I]t is not our prerogative to overrule or ignore clearly written decisions of our Supreme Court." Kinlaw v. Long Mfg., 40 N.C. App. 641, 643, 253 S.E.2d 629, 630, rev d on other grounds, 298 N.C. 494, 259 S.E.2d 552 (1979); see also Bray v. N.C. Dep't of Crime Control and Pub. Safety, 151 N.C. App. 281, 285, 564 S.E.2d 910, 913 (2002) (holding that it is not the prerogative of the North Carolina Court of Appeals to reconsider the North Carolina Supreme Court's application of a gross negligence standard for an officer in pursuit) (citations omitted). Finding that Nationwide's policy was exhausted at the time of Plaintiff's request for binding arbitration, this Court need not consider the additional issues presented by Plaintiff. In accordance with the UIM polices and N.C. Gen. Stat. § 20-279.21, exhaustion of Nationwide's liability policy allowed plaintiff to "make a written disagreement with demand the UIM for arbitration" insurers over to resolve Plaintiff's legal entitlement to recover or the amount of damages recoverable. find, therefore, that the trial court Plaintiff's motion to compel arbitration. erred by a We denying -11Reversed. Judges STEELMAN and ERVIN concur.
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