Smith v. King

277 S.E.2d 875 (1981)

James Lawrence SMITH
v.
R. R. KING, Jr., t/d/b/a King Leavitt Insurance Agency and Shelby Mutual Insurance Company.

No. 8028SC852.

Court of Appeals of North Carolina.

May 19, 1981.

J. Lawrence Smith by Stephen D. Kaylor, Asheville, for plaintiff-appellant.

Harrell & Leake by Larry Leake, Asheville, for defendant-appellees.

CLARK, Judge.

In North Carolina, "[i]t has long been established that a third party, for whose benefit a contract has been made, may maintain an action for breach of that contract." Equipment Co. v. Smith, 292 N.C. 592, 595, 234 S.E.2d 599, 601 (1977). Several cases have approved application of a third-party beneficiary analysis to allow action by a bailor against a bailee's insurance company. See Distributing Co. v. Insurance Co., 214 N.C. 596, 200 S.E. 411 (1939); Ingram v. Insurance Co., 258 N.C. 632, 129 S.E.2d 222 (1963); Annot., 64 A.L. R.3d 1207 (1975). The North Carolina cases uniformly hold that before a third-party beneficiary may recover directly under his bailee's liability insurance contract, he must first obtain a valid judgment against his bailee establishing the legal liability of the bailee. Distributing Co. v. Insurance Co., supra. Defendant argues that plaintiff's failure to plead a prior judgment against McRary Harley-Davidson precludes recovery against McRary's insurance company. While we agree that this would be the case under a liability insurance policy, Distributing Co. v. Insurance Co., supra; Hall v. Casualty Co., 233 N.C. 339, 64 S.E.2d 160 (1951); Ingram v. Insurance Co., supra, we fail to see how the judgment on the pleadings could properly have been granted on such basis, when nothing in the pleadings established the contract of insurance as one against liability.

The complaint alleges the existence of a policy and, further:

"7. That Bynum McRary d/b/a McRary Harley-Davidson procured said policy of insurance on the assurances of R. R. King t/d/b/a King-Leavitt Insurance Agency and Shelby Mutual Insurance Company, that said policy would cover the loss to any customer of the insured who suffered loss due to the theft of the customer's motorcycle from the insured's place of business."

This statement constitutes sufficient allegation that plaintiff's loss fell within the coverage of the policy. The allegation is to the effect that the policy covered any loss to McRary's customers, not just those for which McRary was liable. Since there was no basis upon which to assume that recovery for plaintiff's loss was contingent on the liability of his bailee, judgment on the pleadings was improper. When the policy is actually produced, we assume during discovery, summary judgment would be appropriate if the contract appears to be one based on the insured's liability. We see no reason, however, to dismiss this action until the actual language of the policy has been examined and construed.

Plaintiff's claim for treble damages is unwarranted, and judgment on the pleadings was proper to the extent it overruled plaintiff's claim for unfair trade practices. Plaintiff bases this claim on G.S. § 58-54.4(11) which designates as "unfair methods of competition and unfair and deceptive acts or practices in the business of insurance" the following:

"(11) In connection with first-party claims, committing or performing with such frequency as to indicate a general business practice any of the following:

....

f. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear ...."

Without extended discussion we note two obvious reasons plaintiff has failed to state an unfair practice under G.S. § 58-54.4(11) and therefore is not entitled to treble damages under G.S. § 75-16. First, plaintiff, by his own characterization, is a third-party beneficiary, whereas the statute applies only to "first-party claims"; and second, plaintiff alleges a single refusal by defendant to settle a claim, whereas the statute requires failure to settle "with such frequency as to indicate a general business practice." Neither of these conditions appearing, we believe plaintiff's claim for unfair trade practices was improper.

Judgment on the pleadings is reversed as to plaintiff's primary claim; judgment on the pleadings is affirmed as to plaintiff's claim for treble damages.

ARNOLD and HARRY C. MARTIN, JJ., concur.