Meinck v. City of GastoniaÂ

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-892-2
Filed: 2 January 2019
Gaston County, No. 15 CVS 423
JOAN A. MEINCK, Plaintiff,
v.
CITY OF GASTONIA, a North Carolina Municipal Corporation, Defendant.
Appeal by plaintiff from order entered 1 June 2016 by Judge Lisa Bell in
Gaston County Superior Court. Originally heard in the Court of Appeals 22 February
2017. Meinck v. City of Gastonia, __ N.C. App. __, 798 S.E.2d 417 (2017). Upon
remand from the Supreme Court of North Carolina by opinion issued 26 October
2018. Meinck v. City of Gastonia, __ N.C. __, 819 S.E.2d 353 (2018).
Law Office of Thomas D. Bumgardner, PLLC, by Thomas D. Bumgardner, for
plaintiff-appellant.
Stott, Hollowell, Palmer & Windham, L.L.P., by Martha Raymond Thompson
and Ryan L. Bostic for defendant-appellee.
TYSON, Judge.
This case returns to this Court upon remand by the opinion of our Supreme
Court. As stated in the Supreme Court’s opinion:
Because the Court of Appeals determined that defendant
was not entitled to governmental immunity, it did not
address whether the trial court correctly ruled that
defendant did not waive governmental immunity by
purchasing liability insurance. We remand this case to the
MEINCK V. CITY OF GASTONIA
Opinion of the Court
Court of Appeals to address that issue.
Meinck, __ N.C. at __, 819 S.E.2d at 367. Pursuant to the Supreme Court’s
instructions, we review whether the City of Gastonia (the “City” or “Defendant”)
waived governmental immunity by the purchase of insurance. We reverse the trial
court’s ruling and remand for further proceedings.
I. Background
The facts underlying this case are set forth in detail in our previous opinion
and the Supreme Court’s subsequent opinion. Meinck v. City of Gastonia, __ N.C. App.
__, 798 S.E.2d 417 (2017), rev’d in part, disc. review improvidently allowed in part,
and remanded, __ N.C. __, 819 S.E.2d 353 (2018). We briefly summarize below.
The City is a local body politic, chartered as a public municipal corporation by
the General Assembly in 1877. Public Laws 1876-77, c. 52, § 1. The City and
surrounding Gaston County are named for the Honorable William Joseph Gaston, a
former Justice of the Supreme Court of North Carolina, who also served as a United
States Congressman. Justice Gaston is also the author of the official North Carolina
state song: “The Old North State”. Public Laws, 1927, c. 26; N.C. Gen. Stat. § 149-1(2017).
The City acquired and owns an historic commercial building located at 212
West Main Avenue in Gastonia. In 2013, Defendant leased the building to the Gaston
County Art Guild (“the Art Guild”), which is a private not-for-profit entity. As owner,
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Opinion of the Court
Defendant remained responsible under the lease for maintaining the exterior of the
premises and the right to inspect the building at any time.
The Art Guild utilized and subleased the building to attract artists’ studios,
and for use as an art gallery and gift shop. The lease agreement provided the Art
Guild was empowered to sublease portions of the building to subtenants to use as art
studios. Joan Meinck (“Plaintiff”) was one such artist and a subtenant.
On 11 December 2013, Plaintiff was leaving through the rear exterior exit of
the subject building while carrying several large picture. She lost her balance while
on a set of steps and fell. As a result of her fall, Plaintiff suffered a broken hip,
required hospitalization, and incurred medical expenses. Portions of the cement on
the steps had allegedly cracked and eroded. The large pictures she was carrying may
have prevented her from seeing where she was stepping.
On 4 February 2015, Plaintiff filed a complaint alleging Defendant had
negligently failed to maintain the exit stairs of the building or to warn her of the
dangerous condition of the steps and stairs. Plaintiff’s complaint alleged Defendant
had waived governmental immunity by purchasing liability insurance and also
alleged Defendant’s tortious conduct, while Defendant was engaged in a proprietary
function, rather than a governmental function, deprived Defendant of governmental
immunity.
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Opinion of the Court
On 12 January 2016, Defendant filed a motion for summary judgment
asserting that the City was entitled to governmental immunity, that Defendant was
not negligent as a matter of law, and that Plaintiff was contributorily negligent as a
matter of law. The trial court determined that Defendant’s liability insurance policy
“contained an express non-waiver provision” and that Defendant had not waived
governmental immunity. The trial court also determined Defendant was engaged in
a governmental function, was entitled to governmental immunity, and granted
summary judgment to Defendant on that basis. Plaintiff appealed to this Court.
In this Court’s unanimous prior opinion, we held Defendant was engaged in a
proprietary function and, as such, was not entitled to governmental immunity.
Meinck, __ N.C. App. at __, 798 S.E.2d at 424. We also held Defendant was not
entitled to summary judgment on the issue of Plaintiff’s contributory negligence. Id.
Because we concluded Defendant was engaged in a proprietary function, we did not
further address Plaintiff’s argument that the City’s non-waiver provision in its
liability insurance contract did not preserve the City’s sovereign or governmental
immunity.
Defendant sought discretionary review with our Supreme Court seeking
review of this Court’s unanimous decision on 20 April 2017. Plaintiff filed a
conditional petition for discretionary review on 28 April 2017, seeking review of the
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Opinion of the Court
issue of Plaintiff’s contributory negligence. Our Supreme Court allowed both
petitions on 8 June 2017.
By an opinion filed 26 October 2018, the Supreme Court reviewed this Court’s
decision and held “the trial court correctly determined that defendant was engaged
in a governmental function[.]” Meinck, __ N.C. at __, 819 S.E.2d at 367. The Supreme
Court remanded the issue of “whether the trial court correctly ruled that defendant
did not waive governmental immunity by purchasing liability insurance” to this
Court. Id. at __, 819 S.E.2d at 367. The Supreme Court also held discretionary review
of this Court’s decision on the issue of Plaintiff’s contributory negligence was
improvidently allowed. Id. We address whether Defendant waived governmental
immunity by purchasing liability insurance.
II. Standard of Review
Summary judgment is proper where “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that any party is entitled to a
judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2017).
In reviewing a motion for summary judgment, the trial court must “view the
pleadings and all other evidence in the record in the light most favorable to the
nonmovant and draw all reasonable inferences in that party’s favor.” N.C. Farm
Bureau Mut. Ins. Co. v. Sadler, 365 N.C. 178, 182, 711 S.E.2d 114, 117 (2011). “The
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Opinion of the Court
party moving for summary judgment ultimately has the burden of establishing the
lack of any triable issue of fact.” Draughon v. Harnett Cty. Bd. of Educ., 158 N.C. App.
208, 212, 580 S.E.2d 732, 735 (2003) (citation and internal quotation marks omitted),
aff’d per curiam, 358 N.C. 131, 591 S.E.2d 521 (2004).
We review a trial court’s summary judgment order de novo. Sturgill v. Ashe
Mem’l Hosp., Inc., 186 N.C. App. 624, 626, 652 S.E.2d 302, 304 (2007), disc. review
denied, 362 N.C. 180, 658 S.E.2d 662 (2008).
III. Analysis
Plaintiff asserts the trial court erred by granting summary judgment to
Defendant on the grounds Defendant did not waive governmental immunity by
purchasing liability insurance. Defendant contends it did not waive governmental
immunity by purchasing insurance because of an exclusionary provision contained
within an endorsement to its general liability policy.
“Under the doctrine of governmental immunity, a county or municipal
corporation ‘is immune from suit for the negligence of its employees in the exercise of
governmental functions absent waiver of immunity.’” Estate of Williams v.
Pasquotank Cty., 366 N.C. 195, 198, 732 S.E.2d 137, 140 (2012) (quoting Evans ex rel.
Horton v. Hous. Auth., 359 N.C. 50, 53, 602 S.E.2d 668, 670 (2004) (internal quotation
marks omitted)).
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“A municipality may, however, waive its governmental immunity to the extent
it has purchased liability insurance.” Hart v. Brienza, 246 N.C. App. 426, 433, 784
S.E.2d 211, 216 (internal quotation marks and citation omitted), review denied, 369
N.C. 69, 793 S.E.2d 223 (2016); see N.C. Gen. Stat. § 160A-485(a) (2017) (“Any city is
authorized to waive its immunity from civil liability in tort by the act of purchasing
liability insurance.”). “A governmental entity does not waive sovereign immunity if
the action brought against them is excluded from coverage under their insurance
policy.” Hart, 246 N.C. App. at 433, 784 S.E.2d at 217 (internal quotation marks and
citation omitted).
A. Interpretation of Insurance Policies
“Our courts have long followed the traditional rules of contract construction
when interpreting insurance policies.” Dawes v. Nash Cty., 357 N.C. 442, 448, 584
S.E.2d 760, 764, reh’g denied, 357 N.C. 511, 587 S.E.2d 417-18 (2003). “When
interpreting provisions of an insurance policy, provisions that extend coverage are to
be construed liberally to ‘provide coverage, whenever possible by reasonable
construction.’” Plum Properties, LLC v. N.C. Farm Bureau Mut. Ins. Co., Inc., __ N.C.
App. __, __, 802 S.E.2d 173, 175-76 (2017) (quoting State Capital Ins. Co. v.
Nationwide Mut. Ins. Co., 318 N.C. 534, 538, 350 S.E.2d 66, 68 (1986)).
“If the language in an exclusionary clause contained in a policy is ambiguous,
the clause is ‘to be strictly construed in favor of coverage.’” Daniel v. City of Morganton,
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125 N.C. App. 47, 53, 479 S.E.2d 263, 267 (1997) (emphasis supplied) (quoting State
Auto. Mut. Ins. Co. v. Hoyle, 106 N.C. App. 199, 201-02, 415 S.E.2d 764, 765 (1992)).
“As a general rule, ambiguities in insurance policies are to be strictly construed
against the drafter, the insurance company, and in favor of the insured and coverage
since the insurance company prepared the policy and chose the language.” Lambe
Realty Inv., Inc. v. Allstate Ins. Co., 137 N.C. App. 1, 11, 527 S.E.2d 328, 335 (2000)
(citations, internal quotation marks, and alterations omitted). Exclusions from
coverage in insurance policies are disfavored under North Carolina law, and are
narrowly construed. Stanback v. Westchester Fire Ins. Co., 68 N.C. App. 107, 114, 314
S.E.2d 775, 779 (1984).
“‘If the meaning of the policy is clear and only one reasonable interpretation
exists, the courts must enforce the contract as written; they may not, under the guise
of construing an ambiguous term, rewrite the contract or impose liabilities on the
parties not bargained for and found therein.’” Dawes, 357 N.C. at 449, 584 S.E.2d at
764 (citation and internal quotation marks omitted). With these principles of
insurance policy interpretation in mind, we analyze the general liability policy
purchased by Defendant.
B. The City’s Insurance Policy
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Opinion of the Court
Defendant’s general liability insurance policy expressly provides for coverage
up to a limit of $1,000,000 for “bodily injury.” The insurance policy specifically states,
in part:
1. “Bodily Injury” and “Property Damage” Liability
We will pay on behalf of the insured those sums in
excess of the “retained limit” that the insured
becomes legally obligated to pay as “loss” because of
“bodily injury” or “property damage” to which this
insurance applies. However; we will have no duty to
pay any “loss” for “bodily injury” or “property
damage” to which this insurance does not apply.
The coverage provisions of Defendant’s general liability policy unambiguously
provide coverage to Defendant for the bodily injuries sustained by Plaintiff. See
Dawes, 357 N.C. at 449, 584 S.E.2d at 764.
In support of its motion for summary judgment, Defendant submitted the
affidavit of Gastonia’s City Manager, Edward C. Munn. Munn’s affidavit referenced
an endorsement of exclusion of coverage provided by Defendant’s general liability
insurance policy, entitled “Sovereign Immunity and Damages Caps”. The
endorsement states:
12. Sovereign Immunity and Damages Caps
For any amount for which the Insured would not be liable
under applicable governmental or sovereign immunity but
for the existence of this Policy; the issuance of this
insurance shall not be deemed a waiver of any statutory
immunities by or on behalf of any insured, nor of any
statutory limits on the monetary amount of liability
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applicable to any Insured were this Policy not in effect; and
as respects to any “claim”, we expressly reserve any and all
rights to deny liability by reason of such immunity, and to
assert the limitations as to the amount of liability as might
be provided by law. (Emphasis supplied)
The City contends the quoted endorsement “clearly and unambiguously retains
Gastonia’s governmental immunity.” The City does not dispute that it has purchased
general liability insurance or that its general liability policy would otherwise provide
coverage for claims attributable to Plaintiff’s injuries, but for the exclusionary
language of the endorsement.
In analyzing the endorsement, the emphasized language of the first clause is
ambiguous. It is ungrammatical and does not clearly convey whether governmental
immunity is waived under the policy. It is not a complete sentence or clause, and
does not convey any clear meaning on its own. Moreover, this provision is one of
fourteen separate provisions contained in the endorsement entitled “North Carolina
Common Policy Conditions.” Each of the other thirteen provisions is listed with a
similarly numbered heading. Unlike this provision, the others all begin with
complete, grammatical sentences.
Were this opening clause a complete sentence or independent clause, the entire
provision could be interpreted as clear and unambiguous. Consider for example, the
following hypothetical version of the same policy provision, with the first clause
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Opinion of the Court
written as a complete, grammatical clause that mirrors other, similar exclusions
elsewhere in the policy:
12. Sovereign Immunity and Damages Caps
This policy does not apply to any amount for which the
Insured would not be liable under applicable governmental
or sovereign immunity but for the existence of this Policy;
the issuance of this insurance shall not be deemed a waiver
of any statutory immunities by or on behalf of any insured,
nor of any statutory limits on the monetary amount of
liability applicable to any Insured were this Policy not in
effect; and as respects to any “claim”, we expressly reserve
any and all rights to deny liability by reason of such
immunity, and to assert the limitations as to the amount
of liability as might be provided by law. (Emphasis
supplied).
This hypothetical clause clearly excludes coverage in two separate
circumstances: first, where the purchase of liability coverage otherwise would waive
sovereign immunity or governmental immunity, which are long-standing common
law doctrines; and, second, where the purchase of liability coverage otherwise would
waive immunities and damages caps created by statute.
The title of this provision is “Sovereign Immunity and Damages Caps” and
demonstrates that it necessarily addresses both common law sovereign immunity
concepts and statutory limits on liability. “Sovereign immunity” is a common law
concept. A “damages cap” is a statutory law concept. Lovelace v. City of Shelby, 351
N.C. 458, 460, 526 S.E.2d 652, 654 (2000) (“As early as this Court’s decision in Hill v.
Aldermen of Charlotte, 72 N.C. 55 (1875), the state and its agencies have been
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immune from tort liability under the common law doctrine of sovereign immunity.”);
Davis v. Town of S. Pines, 116 N.C. App. 663, 673, 449 S.E.2d 240, 246 (1994) (“Under
the common law doctrine of governmental immunity, a municipality is immune from
liability for the torts of its officers committed while they were performing a
governmental function.” (citation and quotation marks omitted)); N.C. Gen. Stat. §
1D-25 (2017) (providing a statutory damages cap on punitive damages).
Defendant asserts the endorsement is similar to exclusions from three other
cases where this Court had determined local governments did not waive immunity.
The controlling provisions in those cases are clearly distinguishable from the
ambiguous exclusionary endorsement presented here.
In Hart v. Brienza, Gaston County had a liability insurance policy containing
a provision entitled “Preservation of Governmental Immunity—North Carolina”,
which stated:
1. The following is added to each Section that provides
liability coverage: This insurance applies to the tort
liability of any insured only to the extent that such tort
liability is not subject to any defense of governmental
immunity under North Carolina law. Tort liability means
a liability that would be imposed by law in the absence of
any contract or agreement.
2. . . . . Your purchase of this policy is not a waiver, under
North Carolina General Statute Section 160A–485 or any
amendments to that section, of any governmental
immunity that would be available to any insured had you
not purchased this policy.
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Hart, 246 N.C. App. at 434, 784 S.E.2d at 217 (emphasis omitted).
In Estate of Earley v. Haywood Cty. Dep’t of Soc. Servs., Haywood County had
purchased a liability insurance policy that specifically and explicitly excluded
coverage for “[a]ny claim, demand, or cause of action against any Covered Person as
to which the Covered Person is entitled to sovereign immunity or governmental
immunity under North Carolina Law.” 204 N.C. App. 338, 342, 694 S.E.2d 405, 408-
09 (2010). The policy also contained a specific provision clarifying the intentions of
the parties, which stated:
The parties to this Contract intend for no coverage to exist
under Section V (Public Officials Liability Coverage) as to
any claim for which the Covered Person is protected by
sovereign immunity and/or governmental immunity under
North Carolina law. It is the express intention of the
parties to this Contract that none of the coverage set out
herein be construed as waiving in any respect the
entitlement of the Covered Person to sovereign immunity
and/or governmental immunity.
Id. (emphasis supplied).
In Patrick v. Wake Cty. Dep’t of Human Servs., Wake County purchased a
liability insurance policy that contained a provision stating:
This policy is not intended by the insured to waive its
governmental immunity as allowed by North Carolina
General Statutes Sec. 153A–435. Accordingly, subject to
this policy and the Limits of Liability shown on the
Declarations, this policy provides coverage only for
occurrences or wrongful acts for which the defense of
governmental immunity is clearly not applicable or for
which, after the defense[] is asserted, a court of competent
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jurisdiction determines the defense of governmental
immunity not to be applicable.
188 N.C. App. 592, 596, 655 S.E.2d 920, 923 (2008) (emphasis supplied).
This Court recognized and concluded the relevant language was unambiguous
in the policies of Hart, Earley, and Patrick and those policies did not cover claims for
which sovereign immunity would otherwise be waived by the purchase of insurance.
Hart, 246 N.C. App. at 434, 784 S.E.2d at 217; Earley, 204 N.C. App. at 342, 694
S.E.2d at 408-09; Patrick, 188 N.C. App. at 596, 655 S.E.2d at 923.
Unlike the clear and explicit contract exclusionary provisions in Hart, Earley,
and Patrick, the endorsement at issue here is ambiguous. See id. Hart, Earley, and
Patrick provide prominent examples for how exclusionary clauses have been drafted
to be clear and unambiguous. Under the endorsement at issue, it is unclear whether
the exclusion for coverage applies to claims for which sovereign or governmental
immunity would apply.
With the ambiguous language in the endorsement, we “strictly construe” the
insurance policy Defendant purchased as providing coverage for claims which clearly
stated provisions preserving governmental immunity would otherwise bar. See
Daniel, 125 N.C. App. at 53, 479 S.E.2d at 267 (“If the language in an exclusionary
clause contained in a policy is ambiguous, the clause is to be strictly construed in
favor of coverage.” (citation and internal quotation marks omitted)).
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With the purchase of liability insurance coverage, Defendant has waived
governmental immunity up to the amount of its general liability policy limits of
$1,000,000. See N.C. Gen. Stat. § 160A-485(a) (“Immunity shall be waived only to the
extent that the city is indemnified by the insurance contract from tort liability.”). The
ambiguous exclusionary endorsement, strictly construed in favor of coverage and
against the drafter, does not exclude the express coverage the City obtained when it
purchased the liability insurance policy. Furthermore, the unambiguous provisions
of the City’s general liability policy clearly provides coverage for “bodily injury” up to
a limit of $1,000,000.
Following our precedents and construing the coverage provisions of the policy
liberally and the ambiguous exclusionary provision narrowly, Defendant has not
preserved governmental immunity to the extent of the $1,000,000 coverage limit. See
Lambe Realty, 137 N.C. App. at 11, 527 S.E.2d at 335; Stanback, 68 N.C. App. at 114,
314 S.E.2d at 779.
The trial court’s grant of summary judgment to Defendant, partly on the basis
the City did not waive governmental immunity by purchasing liability insurance
through the exclusionary provision, is reversed.
IV. Conclusion
Applying well-established canons of contract interpretation, in the light most
favorable to the non-moving party, the trial court’s entry of summary judgment
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Opinion of the Court
upholding Defendant’s non-waiver of governmental immunity, notwithstanding the
City’s purchase of liability insurance, is reversed. We remand this cause to the trial
court for further proceedings. It is so ordered.
REVERSED AND REMANDED.
Judges ELMORE and DIETZ concur.
Judge ELMORE concurred in this opinion prior to 31 December 2018.
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