Haugh v. Nationwide Mut. Fire Ins. Co.

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NO. COA13-768
NORTH CAROLINA COURT OF APPEALS
Filed: 20 May 2014
SUSAN HAUGH,
Plaintiff,
v. Mecklenburg County
No. 10-CVS-19441
NATIONWIDE MUTUAL FIRE INSURANCE
COMPANY and NATIONWIDE PROPERTY
AND CASUALTY INSURANCE COMPANY,
Defendants.
Appeal by Plaintiff from judgment entered 13 December 2012
by Judge A. Robinson Hassell in Mecklenburg County Superior
Court. Heard in the Court of Appeals 9 January 2014.
Tin Fulton Walker & Owen, PLLC, by F. Lane Williamson and
Nancy E. Walker, for Plaintiff-Appellant.
Robinson, Elliott & Smith, by William C. Robinson and
Katherine Tenfelde Armstrong, for Defendant-Appellees.
DILLON, Judge.
Susan Haugh (“Plaintiff”), a South Carolina resident, was
insured under two insurance policies issued by Defendants and
delivered to her in South Carolina. She appeals the judgment of
the trial court filed on 13 December 2012 dismissing her claims
against Defendants for Underinsured Motorist (“UIM”) coverage
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under those policies for injuries she sustained in a motorcycle
accident, which occurred in North Carolina. For the following
reasons, we affirm in part and modify in part the trial court’s
judgment.
I. Factual & Procedural Background
Plaintiff has lived in South Carolina since the mid-1980’s
and worked for over 30 years in Charlotte, North Carolina.
Around 2005, Plaintiff renegotiated the terms of and renewed an
existing insurance policy (“Auto Policy”) issued by Defendant
Nationwide Property & Casualty Insurance Company to cover her
two automobiles. The Auto Policy provided, inter alia, UIM
coverage in the amount of $300,000.00. The Auto Policy was
issued and delivered to Plaintiff’s residence in South Carolina
and was renewed on a six-month cycle.
In early 2007, Plaintiff purchased a second insurance
policy (“Motorcycle Policy”) from Defendant Nationwide Property
& Casualty Insurance Company covering her motorcycle. However,
Plaintiff declined to purchase the UIM coverage under the
Motorcycle Policy – a decision she confirmed by signing a South
Carolina “selection-rejection” form.
On 17 September 2007, Plaintiff was injured in an accident
while operating her motorcycle in North Carolina (the
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“Motorcycle Accident”). The accident was caused by the
negligence of the driver of another vehicle. The negligent
driver was covered under an automobile insurance policy
providing a bodily injury liability limit of $50,000.00 per
person, which amount was tendered to Plaintiff following the
accident.
Plaintiff filed this action claiming she was entitled to
UIM coverage under both the Auto Policy and the Motorcycle
Policy. Defendants counterclaimed seeking a declaration that no
UIM coverage was available under either policy for her injuries
sustained in the Motorcycle Accident. A bench trial was
conducted on 10 September 2012, during which the parties
stipulated that Plaintiff’s rejection of UIM coverage under her
Motorcycle Policy was valid and binding. On 13 December 2012,
the trial court dismissed Plaintiff’s claims with prejudice and
entered judgment in favor of Defendants, from which Plaintiff
appeals.
II. Analysis
In its judgment, the trial court concluded that South
Carolina substantive law governed the interpretation of the Auto
Policy and that the “Other Insurance” provision contained
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therein is valid and enforceable under South Carolina
substantive law.
The Auto Policy contained the following UIM coverage
language (hereinafter referred to as the “Other Insurance”
provision):
If a vehicle owned by you or a relative is
involved in an accident where you or a
relative sustains bodily injury or property
damage, this policy shall:
(a) be primary if the involved vehicle is
your auto described on this policy; or
(b) be excess if the involved vehicle is
not your auto described on this policy.
The amount of coverage applicable under
this policy shall be the lesser of the
coverage limits under this policy or
the coverage limits on the vehicle
involved in the accident.
(emphasis added.) If the “Other Insurance” provision is
determinative as to the amount of UIM coverage available under
the Auto Policy for Plaintiff’s injuries sustained in the
Motorcycle Accident, then the amount of coverage available would
be $0.00. Specifically, since her motorcycle is not an “auto
described” on the Auto Policy, the amount of UIM coverage
available is subject to the language contained in subsection
(b). The language in subsection (b) provides that the amount of
UIM coverage available under the Auto Policy for injuries
arising from the Motorcycle Accident can be no more than “the
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coverage limits” applicable under the Motorcycle Policy. Since
Plaintiff had elected UIM coverage limits of $0.00 under her
Motorcycle Policy, the amount of UIM coverage under the Auto
Policy in this case is, likewise, $0.00. We agree with the
trial court and affirm the judgment, subject to certain
modifications striking findings of fact 2 and 5, for the reasons
set forth below.
A. South Carolina Substantive Law Applies
We agree with the trial court that the substantive law of
South Carolina governs the interpretation of the Auto Policy.
For cases filed in North Carolina, “the general rule is that an
automobile insurance contract should be interpreted and the
rights and liabilities of the parties thereto determined in
accordance with the laws of the state where the contract was
entered even if the liability of the insured arose out of an
accident in North Carolina.” Fortune Ins. Co. v. Owens, 351
N.C. 424, 428, 526 S.E.2d 463, 465-66 (2000). Further, “[w]ith
insurance contracts the principle of lex loci contractus
mandates that the substantive law of the state where the last
act to make a binding contract occurred, usually delivery of the
policy, controls the interpretation of the contract.” Id. at
428, 526 S.E.2d at 466 (emphasis added). In the present case,
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as reflected in the judgment, the parties stipulated that the
Auto Policy was delivered to Plaintiff at her South Carolina
residence. Accordingly, under the “general rule” announced in
Fortune, South Carolina substantive law would apply to its
interpretation.
Our Supreme Court recognizes an exception to the “general
rule” in N.C. Gen. Stat. § 58-3-1 (2013), which provides, in
relevant part, as follows:
All contracts of insurance on property,
lives, or interests in this State shall be
deemed to be made therein[.]1
Id. Our Supreme Court has construed N.C. Gen. Stat. § 58-3-1 to
provide that North Carolina substantive law applies to insurance
contracts--even where the contract was entered into in another
state--so long as “a close connection exists between [North
Carolina] and the interests insured by an insurance policy.”
Fortune, 351 N.C. at 428, 526 S.E.2d at 466. In the present
case, the parties have stipulated that Plaintiff is a South
Carolina resident, that the Auto Policy was written under South
1
The remainder of this statute provides that a contract of
insurance shall be deemed to have been made in North Carolina
where the “application” of insurance was taken in North
Carolina. However, in the present case the trial court found
that the application for the Auto Policy was not taken in North
Carolina; and, therefore, this portion of the statute is not
relevant to our analysis.
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Carolina law to conform with South Carolina law and that all of
her vehicles identified in the Auto Policy were titled and
registered in South Carolina. Based on these facts, we do not
believe that there exists a “close connection” between North
Carolina and the interests insured by the Auto Policy sufficient
to trigger N.C. Gen. Stat. § 58-3-1, notwithstanding that the
Motorcycle Accident occurred in North Carolina.
We find the present case to be analogous to Johns v.
Automobile Club Ins. Co., 118 N.C. App. 424, 455 S.E.2d 466,
disc. review denied, 340 N.C. 568, 460 S.E.2d 318 (1995). In
Johns the plaintiff, who resided in Tennessee with her husband
and her adult son, was injured in an automobile accident while
riding in her son’s car in North Carolina. Id. at 425, 455
S.E.2d at 467. The plaintiff sought UM/UIM coverage under her
own automobile policy, a policy that did not provide coverage
for her son’s vehicle. Id. Her insurance company denied UIM
coverage, citing the “family member exclusion” provision
therein, which stated that UM/UIM coverage did not apply if the
insured sustained injuries while occupying a vehicle owned by a
“relative resident in the same household.” Id. The insurance
company argued that the policy was governed by Tennessee
substantive law and that the “family member exclusion” contained
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therein was enforceable under Tennessee substantive law. Id. at
426, 455 S.E.2d at 468. The plaintiff, on the other hand,
argued that the policy should be interpreted under North
Carolina substantive law and that the “family member exclusion”
was contrary to our Financial Responsibility Act, N.C. Gen.
Stat. § 20-279.21(b) (1993), and, therefore, not enforceable.
Id. at 427, 455 S.E.2d at 468-69. The trial court concluded
that North Carolina substantive law applied and granted summary
judgment for the plaintiff-insured. Id. at 426, 455 S.E.2d at
468. However, we reversed the trial court, concluding that
Tennessee substantive law applied. Id. at 428-29, 455 S.E.2d at
469. In reaching this conclusion, we stated as follows:
There are no significant contacts with North
Carolina in this insurance contract action
other than the fact that the injuries
occurred in North Carolina. All of the
significant connections occurred in
Tennessee. The contract was made in
Tennessee, the parties intended to be
obligated by the Tennessee policy, and the
parties involved resided in Tennessee; thus,
the accident is the only contact the parties
had with North Carolina. Thus, Tennessee law
governs coverage of the insurance policy
herein.
Id. at 427, 455 S.E.2d at 468.
Plaintiff makes a number of arguments to support her
position that North Carolina substantive law, rather than South
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Carolina law, governs the interpretation of the Auto Policy.
However, we do not find these arguments persuasive.
First, Plaintiff argues that our Supreme Court’s decision
in Collins & Aikman Corp. v. Hartford Acc. & Indem. Co., 335
N.C. 91, 436 S.E.2d 243 (1993), and our decision in Martin v.
Continental Ins. Co., 123 N.C. App. 650, 474 S.E.2d 146 (1996)
support her contention that a “close connection,” sufficient to
trigger N.C. Gen. Stat. § 58-3-1, is present with respect to her
Auto Policy. However, Collins and Martin are both
distinguishable from the present case because the policies in
those cases covered a fleet of company vehicles, many of which
were titled and maintained in North Carolina, whereas the Auto
Policy in the present case covered two private automobiles of a
South Carolina resident that were titled and registered in South
Carolina. See Collins, 355 N.C. at 93, 436 S.E.2d at 244;
Martin, 123 N.C. App. at 651, 474 S.E.2d at 146. In Collins,
the Supreme Court found a “close connection” between North
Carolina and an insurance policy delivered in another state
because most of the trucks that the policy covered, including
the truck involved in the accident, were titled and garaged in
North Carolina. 355 N.C. at 95, 436 S.E.2d at 246. The Supreme
Court, though, specifically distinguished this holding from its
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decisions in Connor v. Insurance Co., 265 N.C. 188, 143 S.E.2d
98 (1965), and Roomy v. Insurance Co., 256 N.C. 318, 123 S.E.2d
817 (1962), in which the Court concluded that North Carolina
substantive law did not apply in those cases, recognizing that
“Connor and Roomy involved automobile liability policies on
vehicles owned by residents of other states . . . [and where
the] vehicle in each case was titled in another state and the
insurance policy was purchased in another state.” Collins, 335
N.C. at 94, 436 S.E.2d at 245.
Second, Plaintiff argues that two of the findings contained
in the judgment are inconsistent with the trial court’s
conclusion that North Carolina substantive law does not govern
the interpretation of the Auto Policy. Defendants argue that
these findings should be stricken from the judgment. First,
Plaintiff cites the trial court’s finding of fact 2, that
“Plaintiff had more than casual, substantial and close contacts
with the State of North Carolina[,]” arguing that this finding
can only support a conclusion that Plaintiff has a “close
connection” with North Carolina, and, therefore, North Carolina
substantive law should govern the interpretation of the Auto
Policy. To the extent that the phrase “more than casual,
substantial and close contacts” is synonymous with the phrase
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“close connection,” we agree with Defendants that this finding
is, in fact, a conclusion of law to be reviewed by this Court de
novo. Though there is evidence that Plaintiff had connections
with North Carolina--e.g., that she worked in Charlotte for over
30 years, driving to work from her South Carolina residence;
that she lived in North Carolina in the mid-1980s; and that she
inherited land in North Carolina--we do not believe that under
our case law such connections are sufficient to trigger the
application of N.C. Gen. Stat. § 58-3-1 for a personal auto
policy issued to a South Carolina resident covering her personal
vehicles, all of which are titled, registered, and garaged in
South Carolina. Accordingly, we modify the judgment by striking
the trial court’s statement that “Plaintiff had more than
casual, substantial and close contacts with the State of North
Carolina.”
The second finding in the judgment cited by Plaintiff is
finding of fact 5, which states that “[t]he 2005 insurance
transaction for the purchase of the Auto Policy occurred within
the State of North Carolina.” We believe that the trial court
intended to state that the transaction occurred in “South
Carolina,” and that its reference to “North Carolina” was made
in error. We note that the trial court’s statement is
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immediately preceded by a finding that the “Auto Policy was not
issued in North Carolina[,]” and immediately followed by a
finding that “[t]he final act taken for the application with
respect to the Auto Policy in 2005 occurred in South Carolina.”
In any event, even if the trial court intended to state that the
transaction occurred in “North Carolina,” we find no evidence to
support such a finding. Defendants have requested that the
finding be stricken from the judgment. Because the evidence
does not support this finding, we agree and modify the judgment,
striking finding of fact 5 from the judgment.
B. The “Other Insurance” Provision Is Valid Under South
Carolina Substantive Law
We agree with the trial court that under South Carolina
substantive law, the “Other Insurance” provision in Plaintiff’s
Auto Policy, limiting the amount of UIM coverage available to
Plaintiff thereunder for her injuries sustained in the
Motorcycle Accident to $0.00, is valid and enforceable.
Specifically, our interpretation of the “Other Insurance”
provision is controlled by the South Carolina Supreme Court’s
decision in Burgess v. Nationwide Mut. Ins. Co., 373 S.C. 37,
644 S.E.2d 40 (2007). Like the present case, Burgess involved
an insured who purchased two policies, one covering his three
autos for which he elected UIM coverage, and the other insuring
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his motorcycle for which he declined UIM coverage. Id. at 39,
644 S.E.2d at 41. When he was injured on his motorcycle, he
sought UIM coverage under his policy insuring his cars. Id.This auto policy contained a provision identical to the Other
Insurance Provision in the Auto Policy. Id. at 39, 644 S.E.2d
at 41-42. The South Carolina Court of Appeals held that the
provision was invalid and unenforceable under South Carolina
substantive law. See Burgess v. Nationwide Mut. Ins. Co., 361
S.C. 196, 603 S.E.2d 861 (2004). The South Carolina Supreme
Court, however, reversed the Court of Appeals, concluding that
the provision was valid, and, therefore, the amount of UIM
coverage available to the insured for his motorcycle accident
under his auto policy was $0.00:
We hold that public policy is not offended
by an automobile insurance policy provision
which limits the portability of basic “at-
home” UIM coverage when the insured has a
vehicle involved in the accident. . . .
Upholding this limit on portability
encourages persons to purchase UIM insurance
on all their vehicles. To hold, as did the
[South Carolina] Court of Appeals, that
basic UIM is portable even in this situation
permits an individual who owns multiple
vehicles to purchase UIM insurance on only
one vehicle, yet have basic UIM coverage on
all. We find this result undesirable.
Burgess, 373 S.C. at 42, 644 S.E.2d at 43.
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Plaintiff argues that even if South Carolina law applies,
she is, nonetheless, entitled to coverage. First, Plaintiff
contends that since her Auto Policy was issued in 2005 which was
prior to the South Carolina Supreme Court’s reversal of the
South Carolina Court of Appeals’ 2004 decision in Burgess, the
Auto Policy should be construed in accordance with that state’s
court of appeals decision, since that was the law in effect at
the time the Auto Policy was issued. We find this argument
unconvincing. We find nothing in the South Carolina Supreme
Court’s decision in Burgess to indicate that it was only to have
a prospective effect. Second, Plaintiff argues that under the
Auto Policy’s conformity clause (“Conformity Clause”), the
policy must adjust to provide coverage required by North
Carolina, citing our opinion in Cartner v. Nationwide Mut. Fire
Ins. Co., 123 N.C. App. 251, 472 S.E.2d 389 (1996). The
Conformity Clause in the Auto Policy provides as follows:
We will adjust this policy to comply:
1. With the financial responsibility law of
any state or province which requires
higher liability limits than those
provided by this policy.
2. With the kinds and limits of coverage
required of non-residents by any
compulsory motor vehicle insurance law, or
similar law.
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(Emphasis added). In Cartner, we held that a Florida automobile
policy which contained a provision identical to the Conformity
Clause in the Auto Policy “mandate[s] that [the insurer] provide
the ‘kinds of coverage’ required by North Carolina’s Financial
Responsibility Act[.]” Id. at 253, 473 S.E.2d at 390 (emphasis
added). In Cartner, a husband and wife from Florida purchased a
Florida auto policy. Id. at 252, 473 S.E.2d at 389. The wife
was subsequently killed in North Carolina while riding in a car
driven by her husband. Id. The wife’s estate sought coverage
under the liability section of the policy. Id. The policy
contained a “family member exclusion” which excluded from
coverage injuries to any insured or member of the insured’s
household. Id. at 252-53, 473 S.E.2d at 390. We held that
though Florida substantive law applied, the conformity provision
in the policy increased the coverage to that which was
“required” under North Carolina law. Id. at 254-55, 473 S.E.2d
at 390-91. We further held that “liability coverage for insured
persons injured through the negligence of a family member while
riding in the insured vehicle is a ‘kind of coverage’ required
by North Carolina’s Financial Responsibility Act.” Id. at 255,
473 S.E.2d at 391. Accordingly, we held that the conformity
clause in the Florida policy operated to adjust the limits of
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that policy to provide coverage to the wife’s estate, since such
coverage is required by North Carolina law. Id.
The present case is distinguishable from Cartner. Unlike
the “kind of insurance” involved in Cartner, which was
“required” by the Financial Responsibility Act, the present case
involves a kind of insurance that is not required under North
Carolina law. The purpose of the Conformity Clause is not to
require that the other clauses under the contract to be subject
to interpretation under North Carolina substantive law. Indeed,
like in Cartner, the policy is still governed by the substantive
law of the state where the policy was delivered. Rather, its
purpose is to provide additional coverage not otherwise provided
in the policy, which, in this case, would be the “kinds and
limits of coverage” that is required by North Carolina law.
Applying South Carolina substantive law, the amount of UIM
coverage applicable under the Other Insurance provision is
$0.00. North Carolina law does not require an insured to carry
more than $0.00 of UIM coverage. Therefore, we do not believe
that the Conformity Clause operates to create UIM coverage for
Plaintiff in this case.
III. CONCLUSION
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We modify the judgment by striking findings of fact 2 and
5. We affirm the judgment in all other respects.
AFFIRMED in part, MODIFIED in part.
Judge STROUD and Judge HUNTER, JR. concur.
Report per Rule 30(e).