Hairston v. Harward ( 2017 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-570
Filed: 7 November 2017
Davidson County, No. 11 CVS 2590
WILLIAM HAIRSTON, JR., Plaintiff,
v.
ASHWELL BENNETT HARWARD, JR., Defendant.
Appeal by plaintiff from judgment entered 1 December 2015 by Judge Joseph
N. Crosswhite in Superior Court, Davidson County. Heard in the Court of Appeals
30 November 2016.
Maynard & Harris, Attorneys at Law, PLLC, by C. Douglas Maynard, Jr., for
plaintiff-appellant.
Davis and Hamrick, L.L.P., by Kent L. Hamrick and Ann C. Rowe, for
defendant-appellee Ashwell Bennett Harward, Jr.
Burton, Sue & Anderson, LLP, by Stephanie W. Anderson, for unnamed
defendant-appellee Erie Insurance Exchange.
Whitley Law Firm, by Ann C. Ochsner, and Martin & Jones, PLLC, by
Huntington M. Willis, for North Carolina Advocates for Justice, amicus curiae.
Pinto Coates Kyre & Bowers, PLLC, by Deborah J. Bowers and Andrew G.
Pinto, for North Carolina Association of Defense Attorneys, amicus curiae.
STROUD, Judge.
Plaintiff William Hairston, Jr. (“plaintiff”) appeals from the trial court’s
judgment allowing defendant Ashwell Bennett Harward, Jr. (“defendant Harward”)’s
HAIRSTON V. HARWARD
Opinion of the Court
motion for credits and setoffs against the tort judgment for the money plaintiff
received through its underinsured motorist (“UIM”) provider, unnamed defendant
Erie Insurance Exchange (“unnamed defendant Erie”). The trial court’s judgment
also found that unnamed defendant Erie waived its right to subrogation and had no
further duty. On appeal, plaintiff argues that the trial court should not have allowed
the credit and that the court abused its discretion by not permitting plaintiff to take
depositions of defendant’s insurance provider, State Farm, and unnamed defendant
Erie representatives. We hold that the trial court did not err in allowing defendant
Harward the credit against the judgment for unnamed defendant Erie’s payment
under the settlement agreement, since unnamed defendant Erie waived all rights to
subrogation. We further hold that the trial court did not abuse its discretion by not
allowing plaintiff to take the additional requested depositions.
Facts
Plaintiff filed a complaint on 27 July 2011 against defendant Harward seeking
to recover for injuries plaintiff received in a car crash between plaintiff and defendant
Harward. Plaintiff later amended his complaint seeking additional relief from two
other defendants; those defendants were later dismissed without prejudice and are
not parties to this appeal. Unnamed defendant Erie filed a notice of appearance on
17 April 2013. On 14 August 2014, a jury returned a verdict finding plaintiff was
-2-
HAIRSTON V. HARWARD
Opinion of the Court
injured by defendant Harward’s negligence and that he was entitled to recover
$263,000.00 for his personal injuries.
On 15 September 2014, defendant Harward moved for setoffs and credits
against the trial court’s judgment. The trial court entered an order on 16 October
2014 reducing the judgment to $230,000.00 after finding that “[t]he parties agree that
[defendant Harward] is entitled to setoffs or credits totaling $33,000.00 for the
reasons set out in [defendant Harward’s] September 15, 2014 Motion and that said
setoffs or credits should be applied so that the judgment amount will be
$230,000.00[.]” The court’s order noted that the parties disagreed over whether
defendant Harward should receive a credit for payment plaintiff received -- following
the jury verdict -- from unnamed defendant Erie, his underinsured motorist coverage
(“UIM”) provider.
Plaintiff filed a response to defendant’s motion for setoffs and credits against
the judgment on 17 September 2015. On 25 September 2015, unnamed defendant
Erie’s attorney filed an affidavit that included as “Exhibit ‘A’ ” a settlement
agreement between unnamed defendant Erie and plaintiff, entered on or about 3
October 2014. Under the settlement agreement, unnamed defendant Erie agreed to
pay $145,000.00 in UIM coverage under plaintiff’s policy. The affidavit noted:
Following the verdict, Erie paid the remaining balance of
$145,000.00 of its [UIM coverage] to the plaintiff in
exchange for a Full and Final Release of All Claims . . .,
which clearly releases Erie’s right of reimbursement and
-3-
HAIRSTON V. HARWARD
Opinion of the Court
does not require the plaintiff to hold any amounts
recovered from the defendant in trust.
A hearing was held on defendant Harward’s motion on 29 October 2015, and
on 1 December 2015, the trial court entered its judgment, which contained these
findings of fact:
1. Erie, Plaintiff’s underinsured motorists
(“UIM”) carrier, waived its subrogation rights prior to the
commencement of trial.
2. On September 11, 2014 counsel for Erie
mailed directly to Plaintiff’s counsel Erie’s check for
$145,000.00 which represented the remaining balance of
Plaintiff’s UIM coverage with Erie.
3. In exchange for said payment Plaintiff
executed a Full and Final Release of All Claims against
Erie which clearly showed that Erie waived any and all
rights of reimbursement and Plaintiff was not required to
hold any amounts recovered from Defendant in trust.
4. On October 9, 2014 State Farm, Defendant’s
liability carrier, mailed a check for $97,000.00 to Plaintiff’s
counsel.
5. North Carolina courts have adopted the
common law principle that a plaintiff should not be
permitted a double recovery for a single injury, Baity v.
Brewer, 122 N.C. App. 645, 470 S.E.2d 836 (1996); Seafare
Corp. v. Trenor Corp., 88 N.C. App. 404, 363 S.E.2d 643
(1987).
6. In Wood v. Nunnery, 222 N.C. App. 303, 730
S.E.2d 222 (2012) the Court of Appeals cited the UIM
statute:
In the event of payment, the underinsured motorist
-4-
HAIRSTON V. HARWARD
Opinion of the Court
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 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. Gen. Stat. § 20-279.21(b)(4) (2011). 88
N.C. App. at 307, 730 S.E.2d at 225.
7. In Wood, unlike this case, the UIM carrier
paid the money to the clerk and not to the plaintiff directly
and did not waive its right of subrogation; therefore, the
UIM carrier still retained the right of subrogation.
Because the UIM carrier’s subrogation right remained, the
Defendant in Wood was not entitled to credit for payments
made by the UIM carrier.
8. The Court has carefully considered
Defendant’s motion for credits and setoffs and is of the
opinion and so finds, in its sound discretion, that
Defendant’s motion should be allowed; Defendant is
entitled to a credit for the $97,000.00 paid by State Farm
directly to Plaintiff and is further entitled to a credit for the
$145,000.00 paid by Erie directly to Plaintiff.
9. Because Erie has waived its right to
subrogation and reimbursement, the Court is of the opinion
and does so find that Erie has no further duty in this
matter.
10. Plaintiff’s motion for leave to take further
depositions has been carefully considered by the Court and
the Court, in its sound discretion, is of the opinion and so
finds that . . . the motion should be denied at this time.
11. Plaintiff’s motions to strike the affidavits of
Kent L. Hamrick and Stephanie W. Anderson have also
been carefully considered by the Court and the Court, in its
-5-
HAIRSTON V. HARWARD
Opinion of the Court
sound discretion, is of the opinion and so finds that the
motions should be denied.
12. Counsel for Plaintiff argued that Plaintiff’s
UIM coverage is a collateral source and requested that the
Court enter an order to that effect, but the Court is of the
opinion that such is not necessary for the entry of this
judgment.
The trial court then concluded:
1. This court concludes as a matter of law that
the UIM carrier, Erie, has waived its right of subrogation,
waived any right to reimbursement and paid the
$145,000.00 it owed directly to the Plaintiff. Therefore,
since no subrogation rights remain, the Defendant
Harward is entitled to credit for the $145,000.00 payment
made by the UIM carrier. To find otherwise would create
a double recovery for the plaintiff which is disfavored by
the common law of North Carolina.
2. Defendant Harward is also entitled to a credit
for the $97,000.00 paid directly to Plaintiff by State Farm.
3. Because Erie has waived its rights of
subrogation and reimbursement, it has no further duty in
this matter.
4. Plaintiff’s motion for leave to take post-
verdict depositions is addressed to the discretion of the
Court and the Court concludes that the motion is not
supported by sufficient facts to be allowed.
5. Plaintiffs have not presented the Court with
sufficient facts why the affidavits of Kent L. Hamrick and
Stephanie W. Anderson should not be considered.
6. The Court makes no ruling on whether
Plaintiff’s UIM coverage is a collateral source as such issue
would be more properly addressed by the Appellate Courts.
-6-
HAIRSTON V. HARWARD
Opinion of the Court
The trial court then ordered:
1. Defendant Harward’s motion for credits and
setoffs is allowed;
2. Plaintiff shall have and recover from
Defendant Harward the sum of $46,527.121 with post-
judgment interest on said sum at the daily rate of $10.1977
from the date of the entry of this judgment until paid; In
light of this Court’s order of October 16, 2014, Plaintiff
shall not be entitled to recover any pre-judgment interest
on said sum;
3. Because Erie has waived its right to
subrogation and reimbursement, it has no further duty in
this matter;
4. All parties, named and unnamed, shall bear
their own court costs, expenses and attorney’s fees;
5. Plaintiff’s motions to strike the affidavits of
Kent L. Hamrick and Stephanie W. Anderson are, in the
Court’s discretion, denied.
6. Plaintiff’s motion to take post-verdict
depositions in the Court’s discretion, denied at this time[.]
Plaintiff timely appealed to this Court.
Discussion
1 We have been unable to determine, based on the record on appeal, precisely how the trial
court reached this sum as the remaining amount plaintiff could recover from defendant Harward after
all credits and setoffs were allowed. Defendant Harward paid plaintiff $46,669.92 in December 2015.
Based on our math, it appears that plaintiff ultimately recovered more than $321,000.00 -- on a
$263,000.00 jury verdict -- from multiple insurance companies and defendants. We realize that interest
on the judgment would have increased the amount owed. But since no one has disputed the
mathematical calculations on appeal -- other than regarding whether the $145,000 payment from
unnamed defendant Erie should have been credited against the judgment -- we leave the trial court’s
calculations undisturbed.
-7-
HAIRSTON V. HARWARD
Opinion of the Court
Plaintiff raises two issues on appeal: first, whether the trial court erred when
it allowed defendant Harward to receive credit against the tort judgment for the
money plaintiff received from his UIM provider, Erie; and second, whether the trial
court abused its discretion when it denied plaintiff’s motion for leave to take post-
verdict depositions of defendant Erie and State Farm personnel. We find no error
and no abuse of discretion with the trial court’s judgment.
I. Defendant Harward’s Credit for UIM Compensation Received
Plaintiff first argues that “the trial court erred when it credited the tort
judgment against [defendant] Harward with the money plaintiff received in contract
from plaintiff’s insurance carrier [UIM coverage].” (All caps and underlined in
original). The trial court concluded in the present case that “since no subrogation
rights remain, the Defendant Harward is entitled to credit for the $145,000.00
payment made by the UIM carrier [unnamed defendant Erie].”
When we review an order from a non-jury trial, we
are strictly limited to determining whether the trial judge’s
underlying findings of fact are supported by competent
evidence, in which event they are conclusively binding on
appeal, and whether those factual findings in turn support
the judge’s ultimate conclusions of law. Conclusions of law
drawn by the trial court from its findings of fact are
reviewable de novo on appeal.
Holloway v. Holloway, 221 N.C. App. 156, 164, 726 S.E.2d 198, 204 (2012) (citations
and quotation marks omitted).
-8-
HAIRSTON V. HARWARD
Opinion of the Court
Plaintiff’s brief begins with a discussion of the collateral source rule, and
plaintiff argues that UIM benefits are a collateral source, so defendant Harward
cannot reduce his tort liability for those benefits received from plaintiff’s provider,
unnamed defendant Erie.
The purpose of the collateral source rule is to exclude
evidence of payments made to the plaintiff by sources other
than the defendant when this evidence is offered for the
purpose of diminishing the defendant tortfeasor’s liability
to the injured plaintiff. The policy behind the rule is to
prevent a tortfeasor from reducing his own liability for
damages by the amount of compensation the injured party
receives from an independent source. This rule is punitive
in nature, and is intended to prevent the tortfeasor from a
windfall when a portion of the plaintiff’s damages have
been paid by a collateral source. In this [s]tate, and many
others, the collateral source rule typically is applied only in
actions arising under tort law.
Wilson v. Burch Farms, Inc., 176 N.C. App. 629, 638-39, 627 S.E.2d 249, 257 (2006)
(citations, quotation marks, and brackets omitted) (emphasis added). See also
Badgett v. Davis, 104 N.C. App. 760, 764, 411 S.E.2d 200, 203 (1991) (“In summary,
the collateral source rule excludes evidence of payments made to the plaintiff by
sources other than the defendant when this evidence is offered for the purpose of
diminishing the defendant tortfeasor’s liability to the injured plaintiff.”). But the
collateral source rule is not relevant to the issue presented here, since there is no
question regarding evidence presented at the trial. Rather, the issue before us is the
proper sources of payment of the jury verdict and the allocation of the liability among
-9-
HAIRSTON V. HARWARD
Opinion of the Court
defendant Harward’s liability insurer (State Farm), plaintiff’s underinsured carrier
(unnamed defendant Erie), and defendant Harward.
The closest case to have touched on the issue in this case appears to be Wood
v. Nunnery, 222 N.C. App. 303, 730 S.E.2d 222 (2012) (“Wood I”)2. In Wood I, this
Court found that the trial court had erred when it concluded that payments the
plaintiff received from the defendant’s insurer (State Farm) and plaintiff’s UIM
provider (Firemen’s) “constituted satisfaction of the judgment entered against
defendant.” Id. at 305, 730 S.E.2d at 224. This Court concluded in Wood that the
defendant was only entitled to a credit against the judgment for the amount paid by
State Farm, the defendant’s insurer, but not for the amount paid by Firemen’s,
plaintiff’s UIM carrier. Id. at 308, 730 S.E.2d at 225-26. In so concluding, this Court
noted the reason defendant could not receive a credit for Firemen’s payment was
Firemen’s still had a statutory right of subrogation:
Since Firemen’s paid $202,627.58 into the office of
the Clerk of Court for Forsyth County, and not to plaintiff
directly, there would have been no “assignment” or
subrogation receipt executed by plaintiff to Firemen’s.
However, under subsection (b) of [N.C. Gen. Stat. § 20-
279.21 (2011)], Firemen’s would be subrogated to plaintiff’s
right against defendant to the extent of its payment
($202,627.58). Because of this statutory right of
subrogation, defendant cannot be entitled to a credit
2 This Court issued a subsequent unpublished decision after Wood I was remanded to the trial
court. See Wood v. Nunnery, 232 N.C. App. 523, 757 S.E.2d 526, 2014 WL 640884, 2014 N.C. App.
Lexis 219 (2014) (unpublished) (“Wood II”). The North Carolina Supreme Court had the opportunity
to review Wood II, but instead found discretionary review was improvidently allowed. Wood v.
Nunnery, 368 N.C. 30, 771 S.E.2d 762 (2015) (per curiam).
- 10 -
HAIRSTON V. HARWARD
Opinion of the Court
against the judgment for payments made by Firemen’s as
a UIM carrier. Since no party has raised the issue of
whether Firemen’s is estopped from seeking subrogation
from defendant by adopting defendant’s brief, we do not
address that issue.
Id. at 307, 730 S.E.2d at 225.
Here, unnamed defendant Erie waived its right to subrogation in the
settlement agreement with plaintiff, so the same argument would not apply. Unlike
Firemen’s in Wood I, unnamed defendant Erie is no longer a party and no longer has
a right to subrogation, so the amount is final and will not change in the future. The
issue of whether UIM coverage should be credited against payments made on a tort
judgment when subrogation and the right of reimbursement have been waived is an
issue this Court has not explicitly addressed. But based on this Court’s decision in
Wood I and other prior decisions, we hold that the trial court did not err in this case
when it allowed defendant Harward to credit unnamed defendant Erie’s UIM
payment towards the tort judgment amount.
Additional case law indicates that subrogation may be relevant to the payment
of a judgment, as opposed to the evidence the jury can consider, because factoring in
subrogation at that stage helps prevent a windfall profit. For example, in Baity v.
Brewer, 122 N.C. App. 645, 646-47, 470 S.E.2d 836, 837-38 (1996), this Court found
that the trial court erred when it denied a defendant -- defendant Poole -- credit for
- 11 -
HAIRSTON V. HARWARD
Opinion of the Court
the settlement payment the plaintiff received from another defendant, defendant
Brewer. This Court explained:
Defendant Poole based her motion for credit not on any
right of contribution under Chapter 1B but on the common-
law principle that a plaintiff should not be permitted a
double recovery for a single injury.
In Holland v. Southern Public Utilities Co., 208 N.C.
289, 180 S.E. 592 (1935), our Supreme Court stated that
“any amount paid by anybody, whether they be joint tort-
feasors or otherwise, for and on account of any injury or
damage should be held for a credit on the total recovery in
any action for the same injury or damage.” Id. at 292, 180
S.E. at 593-94. . . . The rule in Holland is directly on point
here and mandates reversal of the portion of the trial
court’s judgment denying Poole a credit.
Baity, 122 N.C. App. at 647, 470 S.E.2d at 837-38.
The amicus briefs and the parties have addressed public policy arguments at
some length, including plaintiff’s argument that if this Court finds the trial court’s
order was correct and its reasoning was allowed to remain, “it would foster collusion
between liability and UIM carriers to reach secret waivers of subrogation forcing
more cases to trial and depriving a plaintiff of his right to arbitrate under his UIM
policy which is contingent of the offer of policy limits by the liability carrier.” Plaintiff
may or may not be right, but this Court is not at liberty to change the law. These
same public policy arguments were raised in Wood II’s appeal to the Supreme Court,
and rather than address them further, the Court dismissed the case per curiam by
finding discretionary review was improvidently allowed. Wood, 368 N.C. at 30, 771
- 12 -
HAIRSTON V. HARWARD
Opinion of the Court
S.E.2d at 762. Thus, Wood I remains controlling law. And there was no secret waiver
of subrogation in this case; unnamed defendant Erie’s settlement agreement is in the
record on appeal and referenced in several documents presented to the trial court.
We hold that unnamed defendant Erie’s waiver of its right to subrogation was
relevant and the trial court appropriately concluded that defendant Harward could
use unnamed defendant Erie’s payment to plaintiff as a credit against the jury verdict
judgment.
II. Denial of Plaintiff’s Motion for Leave to Take Post-Verdict Depositions
Plaintiff also argues that the trial court erred when it denied plaintiff’s motion
to take depositions of State Farm and unnamed defendant Erie representatives.
Specifically, plaintiff contends that “the trial court erred and abused its discretion
when [it] refused to permit Plaintiff to take post-judgment depositions of State Farm
and [unnamed defendant] Erie representatives to determine the facts and
[c]ircumstances concerning the waiver of subrogation.”
Plaintiff filed a motion on 29 October 2015 to strike the affidavit of unnamed
defendant Erie’s counsel and moved for leave of the trial court to take post-verdict
depositions of “appropriate Erie and State Farm personnel and their agents to
determine the facts and circumstances concerning the purported waiver of
subrogation by Erie and including but not limited to whether State Farm agreed not
to tender its policy limits in exchange for a waiver of subrogation by [unnamed
- 13 -
HAIRSTON V. HARWARD
Opinion of the Court
defendant Erie] . . . .” The trial court concluded that “Plaintiff’s motion to take post-
verdict depositions is, in the Court’s discretion, denied at this time[.]”
A motion to take a deposition is a discovery order, and “our review of a trial
court’s discovery order is quite deferential: the order will only be upset on appeal by
a showing that the trial court abused its discretion.” Isom v. Bank of Am., N.A., 177
N.C. App. 406, 410, 628 S.E.2d 458, 461 (2006). “The abuse of discretion standard is
intended to give great leeway to the trial court and a clear abuse of discretion must
be shown.” Hill v. Hill, 173 N.C. App. 309, 315, 622 S.E.2d 503, 508 (2005) (citation
and quotation marks omitted).
Plaintiff claims that the waiver of subrogation was not disclosed until after the
jury verdict in August 2014, but the waiver of subrogation was not relevant to the
jury’s verdict. The jury verdict simply found that plaintiff was injured by defendant
Harward’s negligence and set the amount of damages plaintiff could recover from
defendant Harward. The waiver of subrogation was disclosed in affidavits before the
trial court ruled on plaintiff’s motion for post-verdict depositions. The majority of
plaintiff’s arguments on this issue suggest collusion and conspiracy between various
insurance providers. Plaintiff once again argues that this Court should consider the
public policy impact of such claims of collusion or conspiracy, but as noted above,
there is no legal remedy available here. Again, many of the same arguments were
raised before our Supreme Court in the Wood II appeal, and the Supreme Court,
- 14 -
HAIRSTON V. HARWARD
Opinion of the Court
issuing a per curiam decision, declined to address those issues further. See Wood,
368 N.C. at 30, 771 S.E.2d at 762. It is the role of the General Assembly to address
any public policy implications for this sort of potential “collusion” between insurance
companies. We therefore hold that the trial court did not abuse its discretion.
Conclusion
We conclude that the trial court did not err when it allowed defendant Harward
to setoff and receive a credit against the tort judgment for the $145,000.00 payment
plaintiff received from unnamed defendant Erie. We further find that the trial court
did not abuse its discretion when it did not permit plaintiff to conduct depositions of
defendant’s insurer, State Farm, and unnamed defendant Erie’s representatives.
AFFIRMED.
Judge DAVIS concur.
Judge HUNTER, JR. dissents in separate opinion.
- 15 -
No. COA16-570 – Hairston v. Harward
HUNTER, JR., Robert N., Judge, dissenting in a separate opinion.
I respectfully dissent from the majority’s holding the trial court did not err in
crediting Plaintiff’s judgment against Defendant with the UIM benefits Plaintiff
received from unnamed Defendant Erie.
The majority concluded this Court’s opinion in Wood v. Nunnery, 222 N.C. App.
303, 730 S.E.2d 222 (2012) is distinguishable from the instant case since unnamed
Defendant Erie waived its right to subrogation. This distinction is not outcome
determinative since Plaintiff’s recovery in Wood, like the Plaintiffs’ recovery in this
case, is based on a jury verdict finding Defendant’s negligence responsible for
Plaintiff’s injuries.
The language in Wood which the majority relies upon is obiter dictum:
Since Firemen’s paid $202,627.58 into the office of
the Clerk of Court for Forsyth County, and not to plaintiff
directly, there would have been no “assignment” or
subrogation receipt executed by plaintiff to Firemen’s.
However, under subsection (b) of [N.C. Gen. Stat. § 20-
279.21 (2011)], Firemen’s would be subrogated to plaintiff’s
right against defendant to the extent of its payment
($202,627.58). Because of this statutory right of
subrogation, defendant cannot be entitled to a credit
against the judgment for payments made by Firemen’s as
a UIM carrier. Since no party has raised the issue of
whether Firemen’s is estopped from seeking subrogation
from defendant by adopting defendant’s brief, we do not
address that issue.
Id. at 307, 730 S.E.2d at 225.
HAIRSTON V. HARWARD
HUNTER, JR., J., dissenting in a separate opinion
The facts in Wood are essentially identical to the case at bar. In Wood this
Court recognized the trial court “conflated the concepts of the amounts owed by
defendant as the tortfeasor” and the amount owed by the UIM:
Plaintiff instituted this action against defendant, seeking
monetary damages for personal injuries proximately
caused by the negligence of defendant. . . . The trial court
entered judgment against only defendant. This judgment
was based upon defendant’s negligence and was a tort
recovery.
The liability of [the UIM] is based in contract, not in
tort.
Id. at 305-06, 730 S.E.2d at 224. Here, as in Wood, Defendant’s tort liability is a
separate entity from unnamed Defendant Erie’s contractual obligation. Plaintiff
contracted with unnamed Defendant Erie and purchased underinsured motorist
coverage. Even though unnamed Defendant Erie is now released from its contractual
liability to Plaintiff, this does not mean Defendant is released from the $263,000.00
judgment he owes Plaintiff.3
Additionally, N.C. Gen. Stat. § 20-279.21(b)(4) pertains to UIM coverage and
is part of the Financial Responsibility Act of 1953. This statute provides for UIM
coverage to apply when a Defendant’s liability policy is exhausted. Id. As the
consideration for the payment of policy limits, the injured party may execute a
covenant not to enforce a judgment against a tortfeasor. Id. The effect of this allows
3 Assume a person murders a man with a substantial life insurance policy. Under the
majority’s analysis, would the murderer would be entitled to a credit for the victim’s life insurance
proceeds?
2
HAIRSTON V. HARWARD
HUNTER, JR., J., dissenting in a separate opinion
a plaintiff to proceed against separate defendants, or to proceed with claims for
benefits under the applicable UIM coverage. Id.
The pertinent statutory provision provides:
As consideration for payment of policy limits by a
liability insurer on behalf of the owner, operator, or
maintainer of an underinsured motor vehicle, a party
injured by an underinsured motor vehicle may execute a
contractual covenant not to enforce against the owner,
operator, or maintainer of the vehicle any judgment that
exceeds the policy limits. A covenant not to enforce
judgment shall not preclude the injured party from
pursuing available underinsured motorist benefits, unless
the terms of the covenant expressly provide otherwise, and
shall not preclude an insurer providing underinsured
motorist coverage from pursuing any right of subrogation.
N.C. Gen. Stat. § 20-279.21(b)(4) (2016). This statute provides no language stating
that a tortfeasor is entitled to a credit from a plaintiff’s UIM insurer. There is also
no language stating a tortfeasor has a right to avoid the enforcement of a judgment.
Rather, this statute reveals the North Carolina public policy of an injured party’s
right to either enforce or not enforce a judgment against a tortfeasor: when the policy
limits of the tortfeasor’s liability insurer have been paid, an injured party may, at his
option, covenant to forego his right to enforce a judgment under the statute.
Unnamed Defendant Erie waived its statutory right of recovery. This action
only affects Erie. Unnamed Defendant Erie’s agreement to waive subrogation from
Plaintiff does not bar Plaintiff’s right to seek satisfaction of the judgment against
Defendant. Nothing under N.C. Gen. Stat. § 20-279.21(b)(4) provides Plaintiff with
3
HAIRSTON V. HARWARD
HUNTER, JR., J., dissenting in a separate opinion
a “double recovery” in this case just because Erie abandoned its right to recovery. The
fact Erie elected to not pursue its legal right to subrogation is immaterial to Plaintiff’s
right to have his judgment against Defendant satisfied by Defendant. To apply
Plaintiff’s UIM benefits as a credit against the judgment results in an improper
windfall for Defendant.
The operative statue balances the interests of the tortfeasor, its liability
insurer, the injured victim and the UIM insurer. Under N.C. Gen. Stat. § 20-
279.21(b)(4) the liability insurer must seek resolution of the claim within its policy
limits. Here, the liability carrier protects its insured and is released from any
obligation to participate in the defense of the injured victim’s claim. At the same
time, the statute also provides opportunities for the UIM to recoup the payments
made to its insured. This way the statute protects UIM’s interests as well as the
victim’s contractual rights. The UIM has the right of subrogation when it honors its
contractual obligations towards its insured. It also fulfills the purpose of the UIM
provision of the Financial Responsibility Act as it serves “to compensate innocent
victims injured by financially irresponsible motorists.” Wilmoth v. State Farm Mut.
Auto Ins. Co., 127 N.C. App. 260, 264, 488 S.E.2d 628, 631 (1997). If a tortfeasor
receives credit for UIM payments, the statutory right of subrogation is meaningless,
and this upsets the statutory balance among competing interests.
4
HAIRSTON V. HARWARD
HUNTER, JR., J., dissenting in a separate opinion
5