Insurance--automobile--UIM coverage--family coverage--designated insured
The trial court properly granted summary judgment for plaintiff in a declaratory judgment
action to ascertain entitlement to underinsured motorist insurance where decedent, the son of Mr.
and Mrs. Stockton, was killed in a motor vehicle collision; his estate received liability coverage
from the insurer of the other vehicle and then sought UIM coverage from the Stockton's personal
auto policy with defendant; and defendant denied UIM coverage because the named insured was
“Oak Farm” and the family members of the insured would not include any person. Although it
has been held that a corporation is a legal entity distinct from its employees which cannot have a
spouse or relatives, the designated insured here is not a commercial entity with a defined legal
existence, but the name of a parcel of land belonging to Mr. Stockton's mother which was used to
obtain vehicle registration in another county and a more favorable tax valuation. A genuine
ambiguity was created because there was no existing entity which could bring an action on the
policy and the matter should be resolved in favor of the policy holder, Mr. Stockton, who paid the
premiums.
Feagan and Foster, by Phillip R. Feagan and Cynthia C. Harbin,
for plaintiff-appellee.
Willardson & Lipscomb, L.L.P., by William F. Lipscomb, for
defendant-appellant.
LEWIS, Judge.
This action for declaratory judgment was instituted by Charles
Stockton, administrator of the estate of Timothy Taylor, seeking to
ascertain entitlement to underinsured motorist (UIM) coverage under
an insurance policy issued by North Carolina Farm Bureau Mutual
Insurance Company, Inc. ("Farm Bureau").
The substance underlying this UIM claim is as follows: On 27
October 1995, Timothy Taylor, the son of Charles and DianeStockton, was killed in a motor vehicle collision between an
automobile owned and operated by Nicholas Ranta and another
automobile. Timothy's estate received liability coverage from
Ranta's insurance policy in the amount of $33,334. His estate then
sought UIM coverage from the Stocktons' "Personal Auto Policy" with
Farm Bureau, providing UIM coverage limits of $100,000 per person
and $300,000 per accident.
On 13 February 1996, Farm Bureau denied Timothy's estate UIM
coverage under the Stocktons' personal policy, on the basis that
the named insured was listed as "Oak Farm" and the family-oriented
policy provisions extending coverage to the "spouse" and "family
member[s]" of the named insured did not cover Timothy Taylor or any
other person. On 8 February 1999, the trial court entered an order
granting summary judgment in favor of the plaintiff Charles
Stockton, concluding that Timothy Taylor was entitled to UIM
coverage under the Stocktons' policy and allowing his estate to
recover. From this order, defendant appeals.
The standard for summary judgment has been often recited by
this Court. Pursuant to Rule 56 of the North Carolina Rules of
Civil Procedure, a party is entitled to summary judgment if "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.R. Civ. P. 56(c). On appeal, Farm Bureau maintains that Timoth
y Taylor could not
receive coverage because the named insured was designated as Oak
Farm, and not as either Mr. or Mrs. Stockton. Farm Bureau thus
disputes the legal effect of listing Oak Farm as the named insured
on the Stocktons' insurance policy. Potential issues of fact
surrounding the listing of Oak Farm as the named insured on the
policy would necessarily involve the identity of Oak Farm, namely,whether it exists as a commercial or other type of entity.
However, Farm Bureau does not argue on appeal that there remains an
issue regarding Oak Farm's identity. While Farm Bureau suggests on
appeal that Oak Farm is a "legal entity," this interpretation is
contrary to the forecast of evidence presented at the summary
judgment hearing.
The forecast of evidence indicates that no questions of fact
remain on the issue of Oak Farm's identity. The evidence reveals
that Oak Farm has no legally independent existence -- it has no tax
identification number, does not exist as a corporation,
partnership, or any other commercial or legal entity and may be
classified as neither a commercial nor any other type of existing
entity. Oak Farm is the name of a parcel of land operated as a
farm in Cleveland County and belonging to Mr. Stockton's mother.
The Stocktons testified they titled their vehicle in the name of
Oak Farm in order to obtain a more favorable tax value on the
insured vehicle. Specifically, Cleveland County would accept the
purchase price stated in the bill of sale as the vehicle's taxable
value, which in this case was lower than the value the car would
have been assessed in Rutherford County, where the Stocktons
resided. The Stocktons titled the vehicle under the Oak Farm name,
since Oak Farm is located in Cleveland County. Farm Bureau's
company manual provides that the named insured of a personal auto
policy must be the same as the name in which the vehicle is titled,
and accordingly, Farm Bureau listed the named insured as Oak Farm.
No discussion took place between the Stocktons and Farm Bureau asto the identity of Oak Farm in reference to this insurance policy.
Mr. Stockton used the name "Oak Farm" in his personal and
farm-related business dealings prior to 1983. However, after 1983,
he used it only as the named insured in the Farm Bureau policy in
1995. At no time was Oak Farm anything but a bucolic designation
for rural property.
The issue for our review, then, is purely a legal one, see,
e.g., G.E. Capital Mortgage Servs., Inc. v. Neely, 135 N.C. App.
187, 519 S.E.2d 553 (1999), namely, the legal effect of listing a
named insured incapable of being classified as an individual or as
an entity, commercial or otherwise, on a personal auto policy
containing family-oriented language.
A provision of the policy is ambiguous if the writing itself
leaves the agreement uncertain. International Paper Co. v.
Corporex Constructors, Inc., 96 N.C. App. 312, 317, 385 S.E.2d 553,
556 (1989). 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."
West American Insurance Co. v. Tufco Flooring East, 104 N.C. App.
312, 320, 409 S.E.2d 692, 697 (1991), overruled on other grounds by
Gaston County Dyeing Machine Co. v. Northfield Ins. Co., No. 10PA99
(N.C. Sup. Ct. Feb. 4, 2000). We have but to look at the language
of the policy to illustrate the interpretive difficulties arising
here. The Stocktons' "Personal Auto Policy" contains terms and
definitions relevant to persons and families. The UIM coverage provisions of the Farm Bureau policy allow
insureds to recover for personal injuries, defining "insured" as:
"1. You or any family member.
2. Any other person occupying:
a. your covered auto; or
b. any other auto operated by you.
3. Any person for damages that person is entitled to recover
because of bodily injury to which this coverage applies sustained
by a person listed in 1. or 2. above."
Under the "Definitions" section, the terms "you" and "your"
are defined as "[t]he 'named insured' shown in the Declarations"
and "[t]he spouse if a resident of the same household." "Family
member" means "a person related to you by blood, marriage or
adoption who is a resident of your household. This includes a ward
or foster child."
The policy thus provides two groups with uninsured motorist
coverage. The "named insured" and any family members of the named
insured are covered wherever they may be; all others are only
covered while occupying an insured vehicle. The two groups set
forth under the policy are nearly identical to those set forth by
our statutes in N.C. Gen. Stat. § 20-279.21(b)(3). Smith v.
Nationwide Mutual Ins. Co., 328 N.C. 139, 143, 400 S.E.2d 44, 47,
reh'g denied, 328 N.C. 577, 403 S.E.2d 514 (1991).
Plaintiff argues that the language in the UIM endorsement
defining "insured" to include family of the named insured mandates
a finding that the Stocktons are also named insureds under thepolicy. Farm Bureau, on the other hand, maintains that the
language of the policy is clear and unambiguous and is subject to
only one interpretation: the Stocktons are not named insureds
under the policy, they do not fall into the category of family
members of Oak Farm, and the vehicle involved in the accident is
not an automobile covered under the policy.
In support of its argument, Farm Bureau has cited Sproles v.
Greene, 329 N.C. 603, 407 S.E.2d 497 (1991), wherein our Supreme
Court analyzed the effect of family-oriented language where the
named insured was a corporation. In Sproles, employees sued to
collect under their corporate-employer's UIM coverage provisions.
The Sproles court refused to extend coverage, noting that a
corporation is a legal entity distinct from its employees and thus,
cannot have a spouse or relatives. Id. at 609, 407 S.E.2d at 500;
see also Busby v. Simmons, 103 N.C. App. 592, 406 S.E.2d 628 (1991)
(despite family-oriented language in policy where corporation was
named insured, court refused to expand the term "named insured" to
employees of corporation).
The most important difference between Sproles and Busby and
this case is that the designation of the named insured here is not
a commercial entity with a defined legal existence, but rather, has
no legal existence complete in itself. This distinction is of
critical significance. All parties in Busby and Sproles had
knowledge of the entity insured, while the named insured in this
case becomes meaningful only in reference to the person who bought
the policy and gave the listing "Oak Farm." Thus, we decline toextend the analysis employed in either Sproles or Busby
to the
facts of this case.
While our courts have never addressed these precise facts, at
least one other jurisdiction has addressed this question. In
Patrevito v. Country Mutual Insurance Co., 455 N.E.2d 289 (Ill.
App. Ct. 1983), an insurance policy using family-oriented language
was issued to "Patrevito's Florist & Greenhouse," an unincorporated
business. The plaintiff, James Patrevito's wife, sought UIM
coverage under the policy. The court determined the designation
was "merely the name and style under which James Patrevito did
business" and that no entity could bring an action on the policy.
Id. at 291. In determining the legal effect of this designation,
the Patrevito court construed the policy in favor of coverage. Id.
Other jurisdictions have reached the same conclusion where the
named insured was designated as a trade name. See, e.g., O'Hanlon
v. Hartford Accident & Indem. Co., 639 F.2d 1019 (3d Cir 1981);
Samples v. Georgia Mut. Ins. Co., 138 S.E.2d 463 (Ga. Ct. App.
1964); Gabrelcik v. National Indem. Co., 131 N.W.2d 534 (Minn.
1964).
Here, there was also no existing entity which could bring an
action on the policy. We believe there is a genuine ambiguity
created here so that the matter should be resolved in favor of the
policy holder, and thus the person who paid the premiums. Without
significant explanation, indeed proof and association shown, no
person, firm or commercial entity could have brought a declaratory
judgment on behalf of Oak Farm. Oak Farm was designated by Mr.Stockton, who paid the premiums and obtained the family coverage
stated so clearly in the policy.
We conclude the trial court properly granted summary judgment
in favor of the plaintiff.
Affirmed.
Judges JOHN and EDMUNDS concur.
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