Wilson v. State Farm Mut. Auto. Ins. Co.

394 S.E.2d 807 (1990)

327 N.C. 419

James Eugene WILSON, Jeannette Wilson by her guardian ad litem, Ronald J. Short, and Christopher Wilson by his guardian ad litem, Ronald J. Short v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and North Carolina Farm Bureau Mutual Insurance Company.

No. 45PA89.

Supreme Court of North Carolina.

August 29, 1990.

*809 William Z. Wood, Jr., Winston-Salem, for plaintiffs-appellees.

Hutchins, Tyndall, Doughton & Moore by Richard Tyndall and Laurie L. Hutchins, Winston-Salem, for defendant-appellee State Farm Mut. Auto. Ins. Co.

Petree Stockton & Robinson by Richard J. Keshian, Winston-Salem, for defendant-appellant North Carolina Farm Bureau Mut. Ins. Co.

Nichols, Caffrey, Hill, Evans & Murrelle by Paul D. Coates, Greensboro, for Nat. Ass'n of Independent Insurers, amicus curiae.

Smith Helms Mulliss & Moore by Douglas W. Ey, Jr. and L.D. Simmons, II, Charlotte, for Royal Ins. Co. of America, Jefferson-Pilot Fire & Cas. Co., North Carolina Ass'n of Defense Attorneys and American Ins. Ass'n, amici curiae.

WEBB, Justice.

Defendant first argues that there was not sufficient evidence to submit either of the issues to the jury. N.C.G.S. § 20-279.21(b)(2) provides in part:

*810 (b) Such owner's policy of liability insurance: .... (2) Shall insure the person named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured, or any other persons in lawful possession, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle[.]

N.C.G.S. § 20-279.21(b)(3)b provides in part:

For purposes of this section "persons insured" means the named insured and, while resident of the same household, the spouse of any such named insured and relatives of either[.]

If Fields was driving his wife's vehicle with the permission of his wife or was a resident of the same household with his wife, he was covered by his wife's policy. Farm Bureau argues that there was not sufficient evidence that Fields was driving the motor vehicle with the permission of his wife or that he was residing in the same household with her to submit either issue to the jury. As to the issue of Fields' driving with his wife's permission, Farm Bureau, relying on Bailey v. Insurance Co., 265 N.C. 675, 144 S.E.2d 898 (1965); and Ins. Co. of North America v. Aetna Life & Casualty Co., 88 N.C.App. 236, 362 S.E.2d 836 (1987), rev. denied, 321 N.C. 743, 366 S.E.2d 860 (1988), argues that the evidence showed Mr. Fields' wife had specifically forbidden him from driving her automobile. It also argues that there was no course of conduct by Mr. Fields from which permission to drive the automobile could be inferred. As to the issue of Fields' residency in the same household with his wife, Farm Bureau, relying on Marlowe v. Insurance Co., 15 N.C.App. 456, 190 S.E.2d 417, cert. denied, 282 N.C. 153, 191 S.E.2d 602 (1972), argues that all the evidence shows that Fields had moved from the home and had not lived there for several months.

We hold that the evidence that Fields several times told the officer, including occasions in which his wife was present without denial by her, that his residence was 2916 Hondo Drive, which was his wife's address, together with his wife's giving this address for her husband when reporting the accident, is sufficient evidence for the residency issue to go to the jury. Farm Bureau argues that this does not resolve the question of coverage under the policy. It says residency does not satisfy the requirements for lawful possession set forth under the policy. Farm Bureau does not cite any authority for this proposition. The plain words of the statute say a person insured includes the spouse of an insured living in the same household. The question of lawful possession does not arise when an automobile is driven by a spouse of the insured who lives in the same household. The driver is then a person insured. See Heins Telephone Co. v. Grain Dealers Mutual Ins. Co., 57 N.C. App. 695, 292 S.E.2d 281 (1982); Insurance Co. v. Allison, 51 N.C.App. 654, 277 S.E.2d 473 (1981).

Farm Bureau also argues that although Fields may have been a resident of the same household as his wife, he is excluded under the policy provision which excludes coverage for any person using the automobile "without a reasonable belief that [he] is entitled to do so." Farm Bureau says that all the evidence shows Fields could not have had a reasonable belief that he was entitled to drive the automobile, and he is excluded from coverage by the terms of the policy. The provisions of N.C.G.S. § 20-279.21 are written into every automobile policy as a matter of law, and, when the terms of the policy conflict with the statute, the provisions of the statute will prevail. Insurance Co. v. Chantos, 293 N.C. 431, 238 S.E.2d 597 (1977); Insurance Co. v. Casualty Co., 283 N.C. 87, 194 S.E.2d 834 (1973). To exclude Fields from coverage under the policy because he did not have a reasonable belief that he was entitled to drive the automobile would conflict with the statutory provision of the policy that a spouse of the policyholder *811 living in the same household is a person insured.

Because we have held that Fields was covered by the policy as a spouse living in the household of the policyholder, we do not pass on the question of whether he was driving with the permission of his wife.

The next question presented is whether the plaintiffs may recover from Farm Bureau damages which exceeded the liability coverage for the Fields. We hold that they may not. Farm Bureau argues that the plaintiffs are not parties to the insurance contract between Farm Bureau and the Fields. Relying on authority from other jurisdictions, Scroggins v. Allstate Ins. Co., 74 Ill.App.3d 1027, 30 Ill.Dec. 682, 393 N.E.2d 718 (1979); Bean v. Allstate Ins. Co., 285 Md. 572, 403 A.2d 793 (1979); and Moradi-Shalal v. Firemen's Fund Ins. Co., 46 Cal. 3d 287, 250 Cal. Rptr. 116, 758 P.2d 58 (1988), Farm Bureau says the plaintiffs have no claim for a breach of this contract.

The purpose of compulsory motor vehicle liability insurance is to compensate victims who have been injured by financially irresponsible motorists, and in some cases the injured party has a claim against the motorists' insurance carrier. Insurance Co. v. Chantos, 293 N.C. 431, 238 S.E.2d 597; Proctor v. N.C. Farm Bureau Mutual Ins. Co., 324 N.C. 221, 376 S.E.2d 761 (1989). In this case we do not find it necessary to determine whether the plaintiffs, although they are not parties to the insurance contract, may proceed against Farm Bureau. We hold that the plaintiffs were not damaged by the failure of Farm Bureau to defend Fields. If Farm Bureau had defended the claim against Fields and the plaintiffs had recovered more than the policy limits, the plaintiffs could not have recovered this excess from Farm Bureau. The failure to defend did not put the plaintiffs in a worse position than if Farm Bureau had defended Fields. If it had any effect, the failure of Farm Bureau to defend should have helped the plaintiffs gain a recovery. Plaintiffs were not damaged by this failure to defend.

This is not the same as a case in which a carrier wrongfully refuses to defend its insured or wrongfully refuses to settle the claim and damages are recovered against the insured in excess of the coverage. In such a case the insured has been damaged and has a claim against the insurer. Thomas v. Insurance Co., 277 N.C. 329, 177 S.E.2d 286 (1970); Lumber Co. v. Insurance Co., 173 N.C. 269, 91 S.E. 946 (1917). The plaintiffs in this case were not damaged by Farm Bureau's failure to defend or settle. The two cases upon which the Court of Appeals relied to sustain the judgment against the defendant, Indiana Lumbermen's Mutual Ins. Co. v. Champion, 80 N.C.App. 370, 343 S.E.2d 15 (1986) and Ames v. Continental Casualty Co., 79 N.C.App. 530, 340 S.E.2d 479, disc. rev. denied, 316 N.C. 730, 345 S.E.2d 385 (1986), involved actions by the insured. They have no application to this case.

For the reasons stated in this opinion we affirm that part of the opinion of the Court of Appeals which holds that Farm Bureau is liable for damages within its policy limits. We reverse that part of the opinion of the Court of Appeals which holds Farm Bureau is liable for payment in excess of its coverage. We remand for further proceedings consistent with this opinion.

AFFIRMED IN PART; REVERSED IN PART AND REMANDED.