N.C. Farm Bureau Mut. Ins. Co. v. Hull

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-522
Filed: 30 December 2016
Davidson County, No. 15 CVS 1120
NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY,
Plaintiff,
v.
LILLIAN DIANNE HULL and ANNITTA B. CROOK, Defendants.
Appeal by plaintiff from order entered 23 February 2016 by Judge Mark E.
Klass in Davidson County Superior Court. Heard in the Court of Appeals 17 October
2016.
Caudle & Spears, P.A., by Harold C. Spears and Christopher P. Raab, for
plaintiff-appellant.
Doran, Shelby, Pethel and Hudson, P.A., by Michael Doran, for defendants-
appellees.
ENOCHS, Judge.
The North Carolina Farm Bureau Mutual Insurance Company (“Farm
Bureau”) appeals from the trial court’s order dismissing its complaint pursuant to
Lillian Dianne Hull’s and Annitta B. Crook’s (“Defendants”) Rule 12(b)(6) motion to
dismiss. After careful review, we affirm.
Factual Background
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
Farm Bureau is an insurer authorized and licensed to issue insurance policies
in North Carolina. Hull was insured under a business automobile policy issued by
Farm Bureau (“Farm Bureau Policy”). The Farm Bureau Policy, provided a single
limit of $100,000.00 in uninsured motorist (“UM”) and underinsured motorist (“UIM”)
coverage, through the North Carolina Uninsured Motorist Coverage Endorsement
(“Endorsement”). Crook was listed as a driver under the policy.
In May 2011, Hull was a passenger inside a vehicle, owned and operated by
Crook, when another vehicle, owned and operated by Deborah Branham
(“Branham”), crossed the center line and collided with Crook’s vehicle. Shortly after
this initial collision, a third vehicle, operated by Brandon Robinson (“Robinson”), also
struck Defendants’ vehicle.
Both Hull and Crook were injured during the collision and underwent medical
treatment. Hull asserted medical expenses in excess of $58,000.00, and Crook
asserted medical expenses in excess of $104,000.00. Five other individuals were
injured in the accident, but none of them are parties to this action.
At the time of the accident, Branham was insured under an automobile
liability insurance policy issued by Integon/GMAC (“GMAC”) with policy limits of
$30,000.00 per person and $60,000.00 per accident. Robinson was insured under
automobile liability insurance policies by Allstate Insurance Company (“Allstate”)
with policy limits of $100,000.00 per person and $300,000.00 per accident, and by
-2-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
Mercury Insurance Company (“Mercury”) with a policy limit of at least $250,000.00
per person.
As a result of the multiple claims asserted against Branham, GMAC tendered
the limits of its liability coverage for Branham to Defendants and the five other
individuals injured in the accident. Of those funds, Hull received $10,420.00 and
Crook received $16,127.52, for a combined total of $26,547.52. Farm Bureau was
given notice of GMAC’s tender of Branham’s policy limits.
Defendants claimed Branham qualified as an underinsured motorist under the
Farm Bureau Policy and asserted a UIM claim. Farm Bureau did not advance, but
offered to pay the Defendants’ UIM claims for $73,452.48, the $100,000.00 UIM policy
limit minus the liability settlements Defendants received from GMAC, Branham’s
carrier. The letter proposing this particular settlement to Defendants offered to
waive Farm Bureau’s “subrogation rights to the above referenced claim.” The
“referenced claim” in this letter addressed only GMAC’s tender of Branham’s policy
limits to Defendants and none others. This offer by Farm Bureau to tender the
balance of its UIM limits was also subject to the express condition that Defendants
execute and return a Release and Trust Agreement for Underinsured Motorist
Coverage (“Settlement Agreement”) before the funds accompanying the agreement
were disbursed.
-3-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
Consistent with the Farm Bureau Policy and Endorsement, this Settlement
Agreement included a paragraph that expressly preserved Farm Bureau’s
subrogation rights against any other party from which Defendants might recover
damages. This paragraph required Defendants to hold any such money in trust for
payment to Farm Bureau pursuant to its subrogation rights. However, both
Defendants struck through and initialed this paragraph, signed the altered
Settlement Agreements, and returned them to Farm Bureau without the tendered
proceeds on 14 March 2012.
Defendants subsequently asserted claims against Robinson, the driver of the
third vehicle, for their damages suffered due to his negligence in the accident. When
Farm Bureau learned of this additional potential recovery, it claimed subrogation
rights against any recovery from Robinson or his insurance companies.
Farm Bureau subsequently filed the present Complaint for Declaratory
Judgment to determine and establish those rights on 1 May 2015. On 9 July 2015,
Defendants notified Farm Bureau their claims against Robinson and his insurance
companies had settled. Crook settled her claim against Robinson for a payment of
$140,000.00. Hull settled her claim for $75,000.00.
On 4 February 2016, the trial court heard Defendants’ Rule 12(b)(6) motion to
dismiss. Prior to the hearing Farm Bureau amended its complaint to add a second
claim for relief seeking monetary damages. Farm Bureau filed this amendment with
-4-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
both Defendants’ and the court’s consent. At the hearing, Defendants informed the
court that their pending Rule 12(b)(6) motion was also being asserted against the
amendment to the complaint filed that day.
On 23 February 2016, the trial court entered an order granting Defendants’
Rule 12(b)(6) motion to dismiss for failure to state a claim. It is from this order that
Farm Bureau appeals.
Analysis
On appeal, Farm Bureau contends that the trial court erred in granting
Defendants’ motion to dismiss. We disagree.
The standard of review of an order granting a
12(b)(6) motion is whether the complaint states a claim for
which relief can be granted under some legal theory when
the complaint is liberally construed and all the allegations
included therein are taken as true. On a motion to dismiss,
the complaint’s material factual allegations are taken as
true. Dismissal is proper when one of the following three
conditions is satisfied: (1) the complaint on its face reveals
that no law supports the plaintiff’s claim; (2) the complaint
on its face reveals the absence of facts sufficient to make a
good claim; or (3) the complaint discloses some fact that
necessarily defeats the plaintiff’s claim. On appeal of a
12(b)(6) motion to dismiss, this Court conducts a de novo
review of the pleadings to determine their legal sufficiency
and to determine whether the trial court’s ruling on the
motion to dismiss was correct.
Podrebarac v. Horack, Talley, Pharr, & Lowndes, P.A., 231 N.C. App. 70, 74, 752
S.E.2d 661, 663-64 (2013) (quoting Burgin v. Owen, 181 N.C. App. 511, 512, 640
S.E.2d 427, 428-29 (2007)).
-5-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
In the present case, Farm Bureau argues that its subrogation claims are not
barred by the applicable statute of limitations. It contends that the breach of its
insurance policies with Defendants occurred when Defendants reached a settlement
with Robinson’s insurance carrier and Defendants refused to pay Farm Bureau under
the subrogation clause of Hull’s policy.
Defendants, conversely, contend that the breach of Hull’s policy occurred when
they marked out the subrogation clause of the policy, initialed it, and remitted it to
Farm Bureau along with a letter stating that they no longer intended to honor Farm
Bureau’s subrogation rights. If Farm Bureau is correct as to the time of breach, its
claim is timely. However, if Defendants are correct, Farm Bureau’s claim is time-
barred.
“ ‘The statute of limitations for a breach of contract action is three years. The
claim accrues at the time of notice of the breach.’ ” Ludlum v. State, 227 N.C. App.
92, 94, 742 S.E.2d 580, 582 (2013) (quoting Henlajon, Inc. v. Branch Highways, Inc.,
149 N.C. App. 329, 335, 560 S.E.2d 598, 603 (2002)).
In the present case, Farm Bureau’s complaint reveals on its face that it alleged
Defendants breached their contract on 14 March 2012 when Defendants expressly
manifested their intent not to honor Farm Bureau’s subrogation rights. The
complaint plainly states the following:
11. By letter date March 9, 2012, Farm Bureau
offered to settle Hull and Crook’s UIM claims for the total
-6-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
sum of $73,452.48 (representing the difference between the
UIM policy limits of $100,000.00 and the liability
settlements in the sum of $26,547.52 that Hull and Crook
received from Integon/GMAC) on the condition that Hull
and Crook execute and return a Release and Trust
Agreement for Underinsured Motorist Coverage. True,
genuine and authentic copies of Farm Bureau’s March 9,
2012, letter and the Release and Trust Agreement are
attached hereto as Exhibit B and incorporated herein by
reference.
12. Contrary to the express condition of settlement,
Hull and Crook materially altered the Release and Trust
Agreement by marking through its second paragraph,
signed the altered Release and Trust Agreements,
returned it to Farm Bureau by letter date March 14, 2012,
and negotiated Farm Bureau’s check. Copies of the March
14, 2012, letter and the altered Release and Trust
Agreements are attached hereto as Exhibit C and
incorporated herein by reference.
13. Hull and Crook had no authority or right to
negotiate the settlement checks on any terms other than
those offered by Farm Bureau.
14. Farm Bureau demanded that Hull and Crook
return the settlement funds, but Hull and Crook refused to
do so.
It is readily apparent from Farm Bureau’s own complaint that it alleged breach of the
subject insurance policy occurred on 14 March 2012 when Defendants (1) expressly
stated to Farm Bureau that they were not honoring their subrogation rights; (2)
marked out and initialed the paragraph on the Release and Trust Agreements for
Underinsured Motorist Coverage concerning subrogation; and (3) refused to return
the settlement funds despite Farm Bureau’s express demand that they do so.
-7-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
In the present case, there existed more than the mere apprehension or the
mere threat of an action – indeed, Farm Bureau alleged two claims in its amended
complaint and did not “relinquish” the first claim of Defendants’ obligation to return
the $73,452.48 until it did so in its briefs and at oral argument. The claim for that
money accrued when Defendants affirmatively declared the funds would not be
returned – a clear disagreement and, necessarily, more than a threat or apprehension
of a lawsuit.
Even assuming arguendo that Defendants’ actions were not a direct breach of
contract, Defendants actions would alternatively, at the very least, constitute an
anticipatory breach of contract which would begin to toll the three-year statute of
limitations.
The doctrine of anticipatory breach is well known: when a
party to a contract gives notice that he will not honor the
contract, the other party to the contract is no longer
required to make a tender or otherwise perform under the
contract because of the anticipatory breach of the first
party. Because by their words and conduct, defendants
indicated that they would no longer honor the contract,
plaintiff was excused from its obligation to tender the
purchase price and had an action for breach of contract.
Phoenix Ltd. P’ship of Raleigh v. Simpson, 201 N.C. App. 493, 505, 688 S.E.2d 717,
725 (2009) (internal citation and quotation marks omitted and emphasis added). Our
Supreme Court has long held that “[i]t is established by the decisions in this
jurisdiction . . . [t]hat the cause of action [for breach of contract] accrues at the time
-8-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
of default, which may arise from abandonment or anticipatory breach[.]” Lipe v.
Citizens Bank & Trust Co., 207 N.C. 794, 795-96, 178 S.E. 665, 666 (1935) (emphasis
added).
“Breach may also occur by repudiation. Repudiation is a positive statement by
one party to the other party indicating that he will not or cannot substantially
perform his contractual duties. When a party repudiates his obligations under the
contract before the time for performance under the terms of the contract, the issue of
anticipatory breach or breach by anticipatory repudiation arises.” Millis Const. Co.
v. Fairfield Sapphire Valley, Inc., 86 N.C. App. 506, 510, 358 S.E.2d 566, 569 (1987)
(internal citations omitted). “[F]or a breach of contract action, the claim accrues upon
breach.” Miller v. Randolph, 124 N.C. App. 779, 781, 478 S.E.2d 668, 670 (1996).
In the present case, the tortfeasors were known to the parties at the time of
Defendants’ clear and unambiguous repudiation of Farm Bureau’s subrogation
rights. Despite this fact, Farm Bureau did not initiate its cause of action based upon
these subrogation rights until 1 May 2015 — over three years after Defendants’
express anticipatory breach of them on 14 March 2012.
Consequently, the trial court did not err in dismissing Farm Bureau’s
complaint for failing to bring its lawsuit based upon its subrogation rights within the
applicable three year statute of limitations. “Having resolved this case on that issue,
we need not consider the remaining issues presented by the parties to this Court, and
-9-
N.C. FARM BUREAU MUT. INS. CO. V. HULL
Opinion of the Court
any discussion of them would be obiter dictum.” Stark ex rel. Jacobsen v. Ford Motor
Co., 365 N.C. 468, 481, 723 S.E.2d 753, 761-62 (2012).
Conclusion
For the reasons stated above, the trial court’s order granting Defendants’
motion to dismiss is affirmed.
AFFIRMED.
Chief Judge McGEE concurs.
Judge TYSON concurring in part, dissenting in part in a separate opinion.
- 10 -
No. COA16-522 – N.C. Farm Bureau Mut. Ins. Co. v. Hull
TYSON, Judge, concurring in part, dissenting in part.
The majority’s opinion concludes Farm Bureau’s claim was barred by the
applicable statute of limitations, and as such does not address the merits of this case.
I concur with the majority that Farm Bureau’s breach of contract claim is time-
barred, but only to the extent Farm Bureau’s claim asserted Defendants were
obligated to return the sum of $73,452.48 paid to them pursuant to their UIM claims.
Farm Bureau waived this claim in its briefs and again at oral argument.
Rather, Farm Bureau has requested (1) a declaration that it is subrogated to
the proceeds of the Robinson recovery to the extent of its prior payment of UIM
benefits to Defendants; and, (2) a recovery from Defendants out of the proceeds from
the Robinson recovery offsetting the amount Farm Bureau previously paid
Defendants under Defendant Hull’s policy. The majority does not attempt to
distinguish Farm Bureau’s breach of contract claim from its declaratory judgment
action, and argues all claims are time-barred. Farm Bureau’s declaratory judgment
action and request for recovery from the Robinson proceeds are timely filed and are
not time-barred under the statute. I respectfully dissent.
I. Statute of Limitations
Defendants argue the complaint demonstrates Farm Bureau’s claim is barred
by the applicable three year statute of limitations. They assert Farm Bureau’s
subrogation claim arose when Farm Bureau made payments to Defendants. They
point out the record demonstrates Farm Bureau forwarded funds on 9 March 2012,
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
which Defendants received on 12 March 2012, and Farm Bureau was made aware
that Defendants altered the Settlement Agreement by 15 March 2012. Farm
Bureau’s complaint was filed 1 May 2015.
Farm Bureau responds its subrogation claim could not and did not accrue until
settlement proceeds from Robinson were tendered to Defendants, as Farm Bureau
had not suffered any subrogation damages prior to that point.
The majority holds Farm Bureau’s complaint was time-barred because a
breach of contract occurred when the Defendants struck through the subrogation
language in the Settlement Agreements, and Farm Bureau brought its action more
than three years after that point. Farm Bureau’s initial complaint, which asserted
“Defendants are obligated to return the sum of $73,452.48” received pursuant to their
initial UIM claim, would be barred by the statute of limitations. Farm Bureau
tendered those funds over three years prior to bringing its claims.
However, Farm Bureau explicitly relinquished this contract claim in its briefs
and at oral argument, stating, “Farm Bureau waives any claim for the return of the
specific funds paid to the Defendants under the UM/UIM provisions of the Farm
Bureau Policy, to the extent that such a claim was asserted in its Complaint.” Rather,
Farm Bureau is timely seeking (1) a declaration that it is subrogated to the proceeds
of the Robinson recovery to the extent of its prior payment of UIM benefits to
Defendants; and, (2) a recovery from Defendants out of those proceeds from Robinson
2
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
offsetting UIM benefits Farm Bureau had previously paid. These claims were timely
filed and are not barred by the statute of limitations.
A. Standard of Review
“‘Dismissal of a complaint is proper under the provisions of Rule 12(b)(6) of the
North Carolina Rules of Civil Procedure . . . when some fact disclosed in the complaint
necessarily defeats the plaintiff’s claim.’” Carlisle v. Keith, 169 N.C. App. 674, 681,
614 S.E.2d 542, 547 (2005) (quoting Hooper v. Liberty Mut. Ins. Co., 84 N.C. App. 549,
551, 353 S.E.2d 248, 250 (1987)). Therefore, “[an affirmative] statute of limitations
defense may properly be asserted in a Rule 12(b)(6) motion to dismiss if it appears on
the face of the complaint that such a statute bars the claim.” Horton v. Carolina
Medicorp, Inc., 344 N.C. 133, 136, 472 S.E.2d 778, 780 (1996).
B. Analysis
Neither party disputes and we agree the applicable statute of limitations in
this case is three years. See N.C. Gen. Stat. § 1-52(1) (2015) (three-year statute of
limitations for breach of contract claims); N.C. Gen. Stat. § 1-52(2) (2015)
(establishing three-year statute of limitations for statutorily-based claims for which
no other statute of limitation is provided); Jamestown Mut. Ins. Co. v. Nationwide
Mut. Ins. Co., 277 N.C. 216, 222, 176 S.E.2d 751, 756 (1970) (applying the three-year
statute of limitations from N.C. Gen. Stat. § 1-52(1) to a claim for equitable
3
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
subrogation). Rather, this issue concerns when Farm Bureau’s right of action to file
a claim accrued, and commenced the running of the statute of limitations.
“In general a cause or right of action accrues, so as to start the running of the
statute of limitations, as soon as the right to institute and maintain a suit arises[.]”
Thurston Motor Lines, Inc. v. General Motors Corp., 258 N.C. 323, 325, 128 S.E.2d
413, 415 (1962) (citations and quotation marks omitted). The statute of limitations
“cannot begin to run against an aggrieved party who under no circumstances could
have maintained an action at the time the wrongful act was committed until that
aggrieved party becomes entitled to maintain an action.” Williams v. General Motors
Corp., 393 F. Supp. 387, 392 (M.D.N.C. 1975), aff’d, 538 F.2d 327 (4th Cir. 1976)
(emphasis in original); see Penley v. Penley, 314 N.C. 1, 20, 332 S.E.2d 51, 62 (1985)
(“In no event can a statute of limitation begin to run until plaintiff is entitled to
institute action.”). For example, in breach of contract actions, [t]he claim accrues at
the time of notice of the breach.” Henlajon, Inc. v. Branch Highways, Inc., 149 N.C.
App. 329, 335, 560 S.E.2d 598, 603 (2002).
In contrast, courts only exercise jurisdiction in declaratory judgment actions
where an “actual controversy” exists between the parties. Gaston Bd. of Realtors, Inc.
v. Harrison, 311 N.C. 230, 234, 316 S.E.2d 59, 61 (1984). Our Supreme Court has
acknowledged, while the “actual controversy” rule is difficult to apply in some cases,
“[a] mere difference of opinion between parties does not constitute a controversy
4
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
within the meaning of the Declaratory Judgment Act.” Id. (citation and quotation
marks omitted).
“Mere apprehension or the mere threat of an action or a suit is not enough.”
Id. Litigation must appear unavoidable for an actual controversy to exist. Id. “Thus
the Declaratory Judgment Act does not ‘require the court to give a purely advisory
opinion which the parties might, so to speak, put on ice to be used if and when
occasion might arise.’” Id. (quoting Town of Tryon v. Duke Power Co., 222 N.C. 200,
204, 22 S.E.2d 450, 453 (1942)).
Here, Farm Bureau did not waive its subrogation rights. As noted, the waiver
contained in Farm Bureau’s initial settlement offerto Defendants only waived
subrogation rights to the “above referenced claim,” specifically GMAC’s tender of
Branham’s policy limits to Defendants, and did not waive its future subrogation
rights against other recoveries.
The majority holds the statute of limitations began to run when Defendants
altered the Settlement Agreements and retained the proceeds tendered therewith, as
this constituted an anticipatory breach and repudiation of the contract. The majority,
quoting Millis Const. Co. v. Fairfield Sapphire Valley, Inc., 86 N.C. App. 506, 510,
358 S.E.2d 566, 569 (1987), states:
Repudiation is a positive statement by one party to the
other party indicating that he will not or cannot
substantially perform his contractual duties. When a party
repudiates his obligation under the contract before the
5
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
time for performance under the terms of the contract, the
issues of anticipatory breach or breach by anticipatory
repudiation arises. (emphasis and citations omitted).
However, this Court has further explained:
For repudiation to result in a breach of contract, “the
refusal to perform must be of the whole contract or of a
covenant going to the whole consideration, and must be
distinct, unequivocal, and absolute[.]” Edwards v. Proctor,
173 N.C. 41, 44, 91 S.E. 584, 585 (1917) (citation and
quotation marks omitted). Furthermore, even a “distinct,
unequivocal, and absolute” “refusal to perform” is not a
breach “unless it is treated as such by the adverse party.”
Id. (citation and quotation marks omitted). Upon
repudiation, the non-repudiating party “may at once treat
it as a breach of the entire contract and bring his action
accordingly.” Id. (citation and quotation marks omitted).
Thus, breach by repudiation depends not only upon the
statements and actions of the allegedly repudiating party
but also upon the response of the non-repudiating party.
See id.
D.G. II, LLC. v. Nix, 211 N.C. App. 332, 338-339, 712 S.E.2d 335, 340-41 (2011)
(emphases supplied) (quoting Profile Invs. No. 25, LLC v. Ammons East Corp., 207
N.C. App. 232, 237, 700 S.E.2d. 232, 235-36 (2010))
Here, Farm Bureau did not treat Defendants’ action of altering the Settlement
Agreements as a “breach of the entire contract.” See id. Rather, Farm Bureau allowed
Defendants to retain the tender of the UIM benefits, which Farm Bureau
acknowledges Defendants were rightfully owed under the policy. As stated in
Defendants’ answer, Farm Bureau “agreed to allow Defendants to have full use and
control of said UIM funds, with the parties agreeing to disagree as to each other’s
6
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
position regarding subrogation rights as against future recoveries.” As such, an
anticipatory breach did not occur.
At the time of Farm Bureau’s tender of the UIM policy limits, no other recovery
existed from which Farm Bureau could seek to be subrogated. As addressed below,
the purpose of UIM coverage is “to place a policy holder in the same position that the
policy holder would have been in if the tortfeasor had had liability coverage equal to
the amount of the UM/UIM coverage.” Nationwide Mut. Ins. Co. v. Haight, 152 N.C.
App. 137, 142, 566 S.E.2d 835, 838 (2002) (emphasis supplied) (citations and
quotation marks omitted), disc. rev. denied, 356 N.C. 675, 577 S.E.2d 627 (2003). If
Defendants had never received any additional recovery from Robinson, who was fully
insured, Farm Bureau could not have asserted any subrogation rights.
Similarly, had Defendants recovered an amount from Robinson less than the
$73,452.48 UIM benefits paid by Farm Bureau, Farm Bureau would have only been
entitled to subrogation rights against the additional recovery in the amount actually
received by Defendants, and not the full amount it had previously paid to Defendants.
Here, Defendants received an amount in excess of the $73,452.48 Farm Bureau had
previously paid, which allowed Farm Bureau to assert subrogation rights against the
additional recovery for the entire amount previously paid under the UIM policy.
Under the Farm Bureau Policy and Endorsement, Farm Bureau’s subrogation
rights are directly dependent upon an additional recovery by Defendants. Until
7
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
Defendants received the additional recovery from the fully insured Robinson and then
denied Farm Bureau subrogation, Farm Bureau had no actionable claim for
subrogation. As such, no actionable claim for a declaration of its subrogation rights
could or did arise until Defendants’ recovery and denial. See Gaston Bd. of Realtors,
311 N.C. at 234, 316 S.E.2d at 61.
If Farm Bureau had brought a declaratory judgment action for subrogation at
any time between its tender of the UIM limits and notice of Robinson’s settlement,
no actual controversy would have supported its claim. See id. The declaratory
judgment action in this case did not accrue until after Farm Bureau was notified of
Defendants’ settlement proceedings with Robinson, Defendants denied Farm
Bureau’s subrogation rights to those accessible funds, and “litigation appear[ed]
unavoidable.” Id. Farm Bureau timely filed its action for declaratory judgment
within three years after receiving notice of Defendants’ negotiations with Robinson,
ultimate payment by Robinson, and Defendants’ refusal to subrogate. See N.C. Gen.
Stat. § 1-52.
Farm Bureau’s declaratory judgment action and claim for recovery from the
proceeds received by Defendants from fully insured tortfeasor Robinson is properly
filed and is not barred by the statute of limitations applicable to the Defendants’
original breach of contract. Because I would hold these remaining claims are not
time-barred, I address the other issues raised by Farm Bureau in this case.
8
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
II. Preservation of Farm Bureau’s Arguments for Subrogation Rights Under the
Endorsement and N.C. Gen. Stat. § 20-279.21(b)(3)-(4)
Farm Bureau asserts it properly preserved its claims for appeal based upon
the Endorsement and N.C. Gen. Stat. § 20-279.21(b)(3)-(4). I agree.
A. Standard of Review
This Court has repeatedly held “the law does not permit parties to swap horses
between courts in order to get a better mount, meaning, of course, that a contention
not raised and argued in the trial court may not be raised and argued for the first
time in the appellate court.” Wood v. Weldon, 160 N.C. App. 697, 699, 586 S.E.2d 801,
803 (2003) (citations and quotation marks omitted).
B. Analysis
Farm Bureau’s complaint requests the trial court to “enter a Declaratory
Judgment . . . construing the BAP policy.” (emphasis supplied). Defendants contend
this language limits Farm Bureau’s arguments to the main policy and does not
include the Endorsement. I disagree.
The Farm Bureau Policy provides additional coverage to Defendants through
the North Carolina Uninsured Motorist Coverage Endorsement (the “Endorsement”).
This additional coverage includes both UM and UIM coverage for bodily injury, as
the term “underinsured motor vehicle” is included within the definition of “uninsured
motor vehicle” in the Endorsement. The Endorsement is an essential part and
9
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
extension of Farm Bureau’s Policy. As such, Farm Bureau properly preserved its
arguments regarding the Endorsement’s UM and UIM coverage.
Farm Bureau also properly preserved its arguments under N.C. Gen. Stat. §
20-279.21(b)(3)-(4). North Carolina law clearly states the provisions of N.C. Gen.
Stat. § 20-279.21 are read into the Farm Bureau Policy to the same extent as if they
were actually incorporated therein: “Where a statute is applicable to a policy of
insurance, the provisions of the statute enter into and form a part of the policy to the
same extent as if they were actually written into it.” Lichtenberger v. American
Motorists Ins. Co., 7 N.C. App. 269, 272, 172 S.E.2d 284, 286-87 (1970) (emphasis,
citations, and quotation marks omitted). When Farm Bureau sought a declaration of
its subrogation rights by “construing the BAP policy,” the Endorsement and
applicable statutory provisions were also properly incorporated therein and were
before the trial court to consider.
III. Farm Bureau’s Subrogation Rights Under the Endorsement and N.C. Gen. Stat.
§ 20-279.21(b)(3)-(4)
Neither party disputes Branham, the initial tortfeasor, was an underinsured
motorist or that upon GMAC’s tender of Branham’s policy limits, Defendant Hull was
able to access her UIM coverage under the Farm Bureau Policy and Endorsement.
Rather, Farm Bureau argues the Farm Bureau Policy, Endorsement, and N.C. Gen.
Stat. § 20-279.21(b)(3)-(4), expressly provide subrogation rights to Farm Bureau with
10
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
respect to Defendants’ recovery from Robinson. Farm Bureau also asserts that
neither the statute nor the Farm Bureau Policy and Endorsement require that Farm
Bureau advance its policy limits in regards to the GMAC tender to preserve its
subrogation rights against any future recovery by Defendants.
A. Standard of Review
When considering a motion to dismiss under Rule 12(b)(6) of the Rules of Civil
Procedure, “[t]he question for the court is whether, as a matter of law, the allegations
of the complaint, treated as true, are sufficient to state a claim upon which relief may
be granted under some legal theory, whether properly labeled or not.” Harris v.
NCNB Nat. Bank of N.C., 85 N.C. App. 669, 670-71, 355 S.E.2d 838, 840 (1987).
In order to overcome such a motion, a plaintiff is not
required to “conclusively establish” any factual issue in the
case. Rather, the only question properly before a court
reviewing a Rule 12(b)(6) motion is whether “the complaint
states a claim for which relief can be granted under some
legal theory when the complaint is liberally construed and
all the allegations included therein are taken as true.”
Feltman v. City of Wilson, 238 N.C. App. 246, 256, 767 S.E.2d 615, 622 (2014)
(emphasis, citation, and quotation marks omitted). The allegations in the complaint,
taken as true, must be reviewed in the light most favorable to the nonmoving party.
Donovan v. Fiumara, 114 N.C. App. 524, 526, 442 S.E.2d 572, 574 (1994).
B. Analysis
11
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
The Motor Vehicle Safety and Financial Responsibility Act of 1953 (the “Act”)
“is a remedial statute and the underlying purpose is the protection of innocent victims
who have been injured by financially irresponsible motorists.” Haight v.
Travelers/Aetna Property Casualty Corp., 132 N.C. App. 673, 678, 514 S.E.2d 102,
106, disc. review denied, 350 N.C. 831, 537 S.E.2d 824 (1999); N.C. Gen. Stat. § 20-
271.1-.39 (2015). “The terms of the Act are written into every North Carolina
automobile liability policy, and where the terms of a policy conflict with those of the
Act, the Act will prevail.” Farm Bureau Ins. Co. of N.C., Inc. v. Blong, 159 N.C. App.
365, 369, 583 S.E.2d 307, 310, disc. review denied, 357 N.C. 578, 589 S.E.2d 125
(2003).
The Act includes provisions outlining the requirements for both UM and UIM
coverage. N.C. Gen. Stat. § 20-279.21(b)(3)-(4) (2015). UM coverage “fill[s] the gap”
in situations where a tortfeasor has no liability insurance. James E. Snyder, Jr.,
North Carolina Automobile Insurance Law § 30-1 (3d ed.1999).
Whereas, UIM coverage is a secondary source of recovery, which “allows the
insured to recover when the tortfeasor has insurance, but his coverage is in an
amount insufficient to compensate fully the injured party.” Nationwide Mut. Ins. Co.
v. Mabe, 342 N.C. 482, 494, 467 S.E.2d 34, 41 (1996) (citation and quotation marks
omitted); see Snyder, North Carolina Automobile Insurance Law § 30-1. “UIM
coverage is intended to place a policy holder in the same position that the policy holder
12
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
would have been in if the tortfeasor had had liability coverage equal to the amount of
the UM/UIM coverage.” Nationwide Mut. Ins. Co. v. Haight, 152 N.C. App. at 142,
566 S.E.2d at 838 (emphasis supplied). An injured party is not entitled to and may
not obtain UIM proceeds, if the tortfeasor’s insurance is sufficient to compensate his
damages or if it is greater than his UIM coverage. N.C. Gen. Stat. § 20-279.21(b)(4).
In support of this interpretation of the statute, both the UM and UIM
provisions of the Act provide an insurer with subrogation rights against additional
recovery received by the injured party. For subrogation rights under UM coverage,
N.C. Gen. Stat. § 20-279-21(b)(3) provides:
In the event of payment to any person under the coverage
required by this section and subject to the terms and
conditions of coverage, the insurer making payment shall,
to the extent thereof, be entitled to the proceeds of any
settlement for judgment resulting from the exercise of any
limits of recovery of that person against any person or
organization legally responsible for the bodily injury for
which the payment is made, including the proceeds
recoverable from the assets of the insolvent insurer.
N.C. Gen. Stat. § 20-279.21(b)(3) (emphasis supplied).
The subrogation rights of insurers under the UIM provision are more limited:
An underinsured motorist insurer may at its option, upon
a claim pursuant to underinsured motorist coverage, pay
moneys without there having first been an exhaustion of
the liability insurance policy covering the ownership, use,
and maintenance of the underinsured highway vehicle. In
the event of payment, the underinsured motorist insurer
shall be either: (a) entitled to receive by assignment from
the claimant any right or (b) subrogated to the claimant's
13
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
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. No insurer
shall exercise any right of subrogation or any right to
approve settlement with the original owner, operator, or
maintainer of the underinsured highway vehicle under a
policy providing coverage against an underinsured motorist
where the insurer has been provided with written notice
before a settlement between its insured and the
underinsured motorist and the insurer fails to advance a
payment to the insured in an amount equal to the tentative
settlement within 30 days following receipt of that notice.
N.C. Gen. Stat. § 20-279.21(b)(4) (emphasis supplied).
1. Subrogation Rights Against Recovery from Joint Tortfeasors
This Court has previously considered whether the plain language of N.C. Gen.
Stat. § 20-279.21(b)(3)-(4) extend and protect an insurer’s subrogation rights against
a joint tortfeasor, who is not underinsured. Blong, 159 N.C. App. at 371, 583 S.E.2d
at 310-11. In Blong, a drunk driver ran a red light and struck another vehicle
containing five teenagers. Id. at 366, 583 S.E.2d at 308. The drunk driver’s insurance
carrier tendered the limits of its policy to the victims and their families almost
immediately after the accident, but the amount was inadequate to compensate their
damages. Id.
The victims and their families filed two “dram shop” lawsuits, contending the
businesses were negligent in serving alcohol to a person who was already intoxicated.
Id. at 366-67, 583 S.E.2d at 308. At the same time, the victims and their families
14
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
sought further compensation under their own UIM coverage. Id. at 367, 583 S.E.2d
at 308. One of the victims was covered under a policy through Farm Bureau, which
tendered the full amount it owed under the policy: $250,000. Id. The policy had a
limit of $300,000 per accident, but the victims already received $50,000 from the
drunk driver’s insurance company and, like in the present case, Farm Bureau waived
its subrogation rights against that initial $50,000 recovery from the underinsured
tortfeasor. Id. at 366-67, 583 S.E.2d at 308-09.
Prior to tendering the limits of the policy, Farm Bureau informed the policy
holder it would seek an offset of its UIM payments from the amount recovered in the
dram shop actions. Id. at 367, 583 S.E.2d at 309. The parties “agreed to disagree”
about future subrogation rights. Id. Farm Bureau’s tender of payment was thus made
without prejudice to Farm Bureau’s right to seek a determination of its subrogation
rights, which was the ultimate question before this Court in Blong. Id.
Although Blong was a UIM case, this Court considered both the provisions of
N.C. Gen. Stat. § 20-279.21(b)(3) and (4) regarding UM and UIM coverage in making
this determination. Id. at 371, 583 S.E.2d at 310-11. This Court first held the broad
language stated in the UM provision allowing subrogation “against any person or
organization legally responsible” also applied to UIM coverage. Blong, 159 N.C. App.
at 371, 583 S.E.2d at 310-11. This Court then interpreted that subrogation language
15
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
to encompass the liability and coverage of the bars involved in the dram shop
lawsuits. Id. at 373, 583 S.E.2d at 312.
This Court in Blong noted the issue of how to interpret the language of N.C.
Gen. Stat. § 20-279.21(b)(3) had arisen, but was not addressed in a prior case because
the insurer had waived any rights to subrogation under its policy. Id. at 371, 583
S.E.2d at 311 (citing Silvers v. Horace Mann Ins. Co., 90 N.C. App. 1, 11-12, 367
S.E.2d 372, 378 (1988), modified and remanded, 324 N.C. 289, 378 S.E.2d 21 (1989)).
The policy in Blong did not present such an impediment. Id. As such, this Court held
Farm Bureau was entitled to subrogation for the recovery received as a result of the
dram shop lawsuits, and stated “[p]laintiff insurer, by the Act and present policy, is
subrogated to defendants’ right to recover from any legally responsible party.” Id. at
372, 583 S.E.2d at 311 (emphasis supplied).
Here, the facts and issues alleged by Farm Bureau in its amended complaint
parallel those before this Court in Blong. See id. at 366-67, 583 S.E.2d at 308-09. As
in Blong, Defendants received an initial settlement from the underinsured driver’s
insurer, GMAC. Farm Bureau waived subrogation to that amount and paid out the
balance of its UIM policy limits to Defendants. This tender of payment was
conditioned upon Defendants signing and returning the Settlement Agreement as
tendered, which included a provision providing Farm Bureau with subrogation rights
against any recovery received from “any other person or persons, organizations,
16
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
associations or corporations[.]” Also, as in Blong, controversy arose over the
subrogation rights of Farm Bureau against any future recovery Defendants received
from joint tortfeasors. In both cases, this controversy resulted in Farm Bureau
seeking a declaration of its rights once recovery was realized. See id.
When Defendants recovered from Robinson in this case, Farm Bureau properly
asserted subrogation rights against Defendants’ recovery from Robinson as a “legally
responsible party,” provided that Farm Bureau had not waived its subrogation rights
under the Farm Bureau Policy, Endorsement, and Act. See id. at 371, 583 S.E.2d at
311. Defendants’ answer specifically confirms Farm Bureau had not and did not
waive its subrogation rights to future recoveries against other tortfeasors. To do so,
as the majority allows here, allows Defendants a double recovery as a result of and
arising from their original wrongful conduct.
2. Waiver of Subrogation Rights by Failure to Advance
Relying upon the Farm Bureau Policy and Endorsement, N.C. Gen. Stat. § 20-
279.21(b)(4), and North Carolina Supreme Court precedent, Defendants argue when
Farm Bureau failed to advance the amount of tentative liability settlement offered
by GMAC within thirty days of being notified, this failure resulted in a waiver of
Farm Bureau’s subrogation rights to any future claims or recoveries from joint
tortfeasors. Farm Bureau’s complaint admits it was notified of the GMAC settlement
offer and that it did not advance. However, Farm Bureau argues its failure to
17
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
advance only waived its subrogation rights against future recovery from Branham
and GMAC; and not advancing did not result in a waiver of its rights against all
future claims from any other joint tortfeasors.
Defendants rely on Lunsford v. Mills, to argue Farm Bureau was required to
advance the tentative liability settlement as a pre-condition to preserve and assert
subrogation rights under N.C. Gen. Stat. § 20-279.21(b)(4). Lunsford v. Mills, 367 N.C
618, 766 S.E.2d 297 (2014). Farm Bureau argues Lunsford does not hold that UIM
insurers cannot waive subrogation recovery from the underinsured tortfeasor, or that
UIM insurers must advance their UIM policy limits to preserve their subrogation
rights against some future unknown or unidentified recovery from other tortfeasors.
In Lunsford, Lunsford sued all the joint tortfeasors in one action claiming they
were jointly and severally liable for his injuries. Id. at 620, 766 S.E.2d at 299. While
one of the tortfeasors in that action was underinsured, the combined insurance of the
tortfeasors was over the limits of Lunsford’s UIM coverage with Farm Bureau. Id.
Pursuant to that action, the underinsured driver’s insurance company tendered the
limits of its policy to Lunsford. Id. Lunsford’s attorney notified Farm Bureau of the
underinsured driver’s tender and demanded Farm Bureau tender payment of
Lunsford’s UIM claims. Id.
Lunsford eventually settled its claims with the other tortfeasors for an amount
that exceeded his UIM coverage with Farm Bureau. Id. Unlike here, Farm Bureau
18
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
never tendered the UIM coverage to Lunsford, but filed a motion for summary
judgment on Lunsford’s UIM claims. Id. at 620-21, 766 S.E.2d at 299. Lunsford also
moved for summary judgment, maintaining that his UIM policy “stacked” and he was
entitled to receive $350,000—the amount of his aggregated UIM coverage minus the
$50,000 recovered from the underinsured driver. Id. at 621, 766 S.E.2d at 299-300.
The trial court granted Lunsford’s motion for summary judgment and ordered that
Farm Bureau pay Lunsford $350,000. Id. at 621, 766 S.E.2d at 300.
Our Supreme Court upheld the trial court’s order and held an insured is only
required to exhaust the liability insurance of a single at-fault driver in order to trigger
payment of UIM benefits. Id. at 627, 766 S.E.2d at 303. In support of its conclusion,
the Court briefly addressed subrogation and noted, “[i]f . . . insureds were required to
exhaust the liability policies of all at-fault motorists as a prerequisite to recovering
UIM coverage, there would be no need to provide UIM carriers subrogation or
reimbursement rights, and consequently, these provisions would be rendered
meaningless.” Id. at 628, 766 S.E.2d at 304.
The Court reiterated that the purpose of the UIM statute is “to place a policy
holder in the same position that the policy holder would have been in if the tortfeasor
had had liability coverage equal to the amount of the . . . UIM coverage.” Id. at 628
n.1, 766 S.E.2d at 304 (quoting Nationwide Mut. Ins. Co. v. Haight, 152 N.C. App. at
142, 566 S.E.2d at 838). In doing so, the Court noted the statute allows an insurer to
19
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
“seek recovery of any overpayment through the exercise of its rights to subrogation
or reimbursement. Through these mechanisms, insurers are able to recoup any
overpayment and insureds are divested of any so-called ‘windfall’” Id. The effect of
the majority’s conclusion here specifically allows Defendants a double recovery and
the prohibited “windfall.”
In Lunsford, the insurer, “could have preserved its subrogation rights by
advancing its UIM policy limits.” Id. at 628, 766 S.E.2d at 304. Contrary to the facts
here and before us, the insurer in Lunsford had not paid the insured any amounts
under the insured’s UIM policy or attempted to preserve its rights to subrogation in
any other way. Id.
While Farm Bureau admits it did not advance in this case, it expressly
reserved its subrogation rights through other means. First, unlike in Lunsford, this
case did not originate as a single action against multiple tortfeasors. Defendants,
here, first pursued a claim against the underinsured driver and his carrier, GMAC.
Upon notice of this settlement, Farm Bureau, in this case, tendered the policy limits
owed to Defendants under the UIM coverage in the Endorsement. Farm Bureau’s
offer to settle Defendants’ UIM claims for $73,452.48 represented the precise
difference between the UIM policy limits of $100,000 and the initial liability
settlements from GMAC in the sum of $26,547.52. Farm Bureau did not need to
preserve its subrogation rights against GMAC, because Farm Bureau’s tender of the
20
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
policy limits already accounted for and credited GMAC’s tender of proceeds against
the UIM policy limits.
Second, Farm Bureau expressly conditioned the tender upon Defendants’
signature and return of the Settlement Agreements accompanying the proffered
check. This Settlement Agreement expressly asserted Farm Bureau’s policy and
statutory subrogation rights against any future tortfeasor recovery received by
Defendants. Unilaterally and without authority, Defendants crossed through that
provision providing Farm Bureau subrogation rights to future recovery and failed to
return the proceeds check tendered with the Settlement Agreements. Defendants’
action was an express rejection of the Settlement Agreement and proceeds as
tendered. This action constituted a counter-offer to Farm Bureau, as a rejection of
terms as tendered becomes counteroffer. See Normile v. Miller, 313 N.C. 98, 103, 326
S.E.2d 11, 15 (1985) (“[I]f the seller purports to accept but changes or modifies the
terms of the offer, he makes what is generally referred to as a qualified or conditional
acceptance. . . . Such a reply from the seller is actually a counteroffer[.]” (citations
and quotation marks omitted)). Farm Bureau never agreed to release its subrogation
rights against recovery by Defendants from other joint tortfeasors.
Finally, Farm Bureau did not waive its rights to subrogation under the Farm
Bureau Policy and Endorsement. This Court has specifically looked at the coverage
provided under the UIM policy in determining whether an insurer has waived its
21
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
subrogation rights. See Blong, 159 N.C. App at 371, 583 S.E.2d at 311 (citing Silvers,
90 N.C. App. at 11-12, 367 S.E.2d at 378). As noted in Blong, the broad subrogation
language of N.C. Gen. Stat. § 20-279.21(b)(3) is “subject to the terms and conditions
of such coverage.” Id.
The Farm Bureau Policy initially addresses Farm Bureau’s subrogation rights
under “Transfer of Rights of Recovery Against Others to Us,” which states:
If any person or organization to or for whom we make
payment under this Coverage Form has rights to recover
damages from another, those rights are transferred to us.
That person or organization must do everything necessary
to secure our rights and must do nothing after “accident”
or “loss” to impair them.
Like the language in N.C. Gen. Stat. § 20-279.21(b)(3), this language provides Farm
Bureau with broad subrogation rights against “any person or organization” from
whom the insured has the right to recover damages.
Under the Endorsement, UIM coverage is only triggered and payable if the
insured is damaged by an underinsured vehicle. The Endorsement’s “Transfer of
Rights of Recovery Against Others to Us” amends, but does not replace, Farm
Bureau’s subrogation rights concerning its UIM coverage:
a. If we make any payment on the Named Insured’s behalf,
we are entitled to recover what we paid from other parties.
The Named Insured must transfer rights of recovery
against others to us. The Named Insured must do
everything necessary to secure these rights and do nothing
to jeopardize them.
22
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
However, our rights under this paragraph do not apply
with respect to vehicles described in Paragraphs F.4.a., c.
and d. of the definition of “uninsured motor vehicle”. For
these vehicles, if we make any payment and the Named
Insured recovers from another party, that Named Insured
must hold the proceeds in trust for us and pay us back the
amounts we have paid.
b. Our rights do not apply under this provision with respect
to damages caused by an “accident” with [an underinsured]
vehicle described in Paragraph b. of the definition of
“uninsured motor vehicle” if we:
(1) Have been given prompt written notice of a tentative
settlement between an “insured” and the insurer of [an
underinsured] vehicle described in Paragraph b. of the
definition of “uninsured motor vehicle”; and
(2) Fail to advance payment to the “insured” in an amount
equal to the tentative settlement within 30 days after
receipt of notification.
Under the Endorsement, the language waiving subrogation rights by failing to
advance only and expressly applies to a recovery from the underinsured vehicle, and
not broadly to anyone from whom the insured has a right to recover. For subrogation
rights against damages recovered from any other vehicle, the main provision in the
Farm Bureau Policy applies and gives Farm Bureau subrogation rights against
anyone from whom the insured has the right to recover damages.
Farm Bureau did not need to preserve its subrogation rights against recovery
from GMAC under the Endorsement, because Farm Bureau took that recovery into
23
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
account as a credit when it tendered the balance of its UIM policy limits to
Defendants.
On the other hand, Robinson was not operating an underinsured vehicle. As
such, the damages caused by Robinson do not meet the definitional trigger required
in order for the limitation in the Endorsement to apply. Rather the broad language
of the Farm Bureau Policy is applicable, which preserves Farm Bureau’s subrogation
rights against the recovery from the fully insured Robinson.
UIM coverage “allows the insured to recover when the tortfeasor has
insurance, but his coverage is in an amount insufficient to compensate fully the
injured party.” Nationwide Mut. Ins. Co. v. Mabe, 342 N.C. at 494, 467 S.E.2d at 41.
Its purpose is not for injured parties to receive a “windfall” and net recovery in excess
of their actual damages. See Lunsford, 367 N.C. at 628 n.1, 766 S.E.2d at 304; Walker
v. Penn Nat. Sec. Ins. Co., 168 N.C. App. 555, 558-59, 608 N.C. App. 107, 110 (2005)
(holding the trial court erred in failing to credit defendant with the $30,000.00 paid
by the liability carrier); N.C. Farm Bureau Mut. Ins. Co. v. Gurley, 139 N.C. App. 178,
183, 532 S.E.2d 846, 849 (2000) (“While we realize that the insureds will never be
fully compensated for their loss, we see no evidence that the legislature intended to
award the insureds more than they would have received if the tortfeasor had been
insured or uninsured.” (citations and quotation marks omitted)).
24
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
Farm Bureau’s complaint, when viewed in light most favorable to Farm
Bureau, alleges a claim upon which relief can be granted. See Feltman, 238 N.C. App.
at 256, 767 S.E.2d at 622. While Farm Bureau admits it did not advance, this case is
distinguishable from Lunsford, as Farm Bureau tendered the limits of the amount
owed to Defendants under the Farm Bureau Policy and Endorsement. Furthermore,
as in Blong, Farm Bureau tendered this amount on the express condition that its
subrogation rights against future recoveries were preserved. See Blong, 159 N.C. App.
at 367, 583 S.E.2d at 309. The trial court erred by granting Defendants’ Rule 12(b)(6)
motion to dismiss.
3. Applicability to Defendant Crook
Defendants argue the subrogation provisions in the Farm Bureau Policy and
Endorsement do not apply to Defendant Crook, as she was not a named insured. I
disagree.
The Endorsement’s “Transfer of Rights of Recovery Against Others To Us,”
states, “[i]f we make any payment on the Named Insured’s behalf, we are entitled to
recover what we paid from other parties. The Named Insured must transfer rights of
recovery against others to us. The Named Insured must do everything necessary to
secure these rights[.]” (emphasis supplied). While this provision only requires the
“Named Insured” to transfer the rights of recovery against others to Farm Bureau,
this provision only changes, but does not replace, the Farm Bureau Policy “Transfer
25
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
of Rights” provision. The Farm Bureau Policy “Transfer of Rights” provision is much
broader, and requires “any person or organization to or for whom we make payment”
to transfer their rights of recovery against others to Farm Bureau. This includes any
recovery received by Defendant Crook. Defendants’ argument is without merit.
VIII. Conclusion
While I concur that Farm Bureau’s breach of contract claim seeking a return
of the UIM benefits paid to Defendants is time-barred, as Farm Bureau stipulates,
the remaining Farm Bureau declaratory judgment claims are not time-barred.
Farm Bureau declaratory judgment action and claim for recovery of proceeds
received by Defendants from Robinson could not and did not accrue until Farm
Bureau received notice of Defendants’ negotiations with and payment by Robinson,
and Defendants’ denied of Farm Bureau’s subrogation rights to that recovery. Farm
Bureau brought its declaratory judgment action within three years of Defendants’
denial of Farm Bureau’s subrogation rights to the Robinson recovery, Farm Bureau’s
claim is not barred by the statute of limitations.
Since the Endorsement and the Act are essential parts and an extension of the
Farm Bureau Policy, Farm Bureau properly preserved its arguments under the Farm
Bureau Policy, the Endorsement, and the Act. Finally, Farm Bureau’s complaint,
when viewed in light most favorable to Farm Bureau, alleges a claim upon which
relief can be granted.
26
N.C. FARM BUREAU MUT. INS. CO. V. HULL
TYSON, J., concurring in part, dissenting in part
As such, the trial court erred in granting Defendant’s motion to dismiss Farm
Bureau’s declaratory judgment action. I do not address Farm Bureau’s equitable
subrogation argument, as the trial court erred in granting Defendants’ motion to
dismiss. I concur in part and respectfully dissent in part.
27