NATIONWIDE MUTUAL INSURANCE COMPANY,
Plaintiff,
v
.
SONDRA A. HAIGHT and JIMMIE F. MILLS, Administrator of the Estate
of James Robert Scott Haight,
Defendants.
Baucom, Claytor, Benton, Morgan & Wood, P.A., by Rex C. Morgan
and Jason James, for plaintiff-appellant.
Weaver, Bennett & Bland, P.A., by Michael David Bland,
Benjamin L. Worley, and Roderick Ventura, for defendant-
appellees.
HUDSON, Judge.
Nationwide Mutual Insurance Company (“Nationwide”) appeals
from a declaratory judgment ordering it to pay defendants $300,000
in underinsured motorist (“UIM”) coverage. For the reasons given
below, we reverse and remand to the superior court for entry of a
new order consistent with this opinion.
On 7 July 1996, a vehicle driven by Charles Weston Holleman
failed to yield the right of way to a vehicle driven by Sondra A.
Haight (“defendant Haight”), resulting in a collision. The vehicle
driven by defendant Haight contained three passengers: Michael
David Grant Haight, James Robert Scott Haight, and Ian McPherson.
All of the occupants of defendant Haight's vehicle were injured,and James Robert Scott Haight died as a result of his injuries.
Jimmie F. Mills is the Administrator of the Estate of James Robert
Scott Haight (the “Estate”).
At the time of the collision, Holleman's vehicle was insured
by Aetna Casualty and Surety Company (“Aetna”), under a policy
providing liability coverage with limits of $100,000 per person and
$300,000 per accident. Defendant Haight's vehicle was insured by
Nationwide, under a policy providing UIM coverage with a “combined
single limit” of $500,000.
All of the occupants of defendant Haight's vehicle filed
complaints seeking damages for personal injuries resulting from
Holleman's negligence. Aetna paid $100,000 each from its liability
coverage to settle the claims by defendant Haight and the Estate
(collectively, “defendants”), and it paid $74,476.64 to settle the
claim by Ian McPherson. Michael David Grant Haight's claim has not
been settled by Aetna.
After accepting $100,000 each from Aetna, defendants made
claims for UIM coverage pursuant to the Nationwide policy. The
parties submitted their claims to an arbitrator, who awarded
damages in the amount of $225,000 to the Estate and in the amount
of $525,000 to defendant Haight. A dispute then arose between the
parties regarding the amount of UIM coverage available to
defendants under the policy.
On 13 September 2000, Nationwide tendered $200,000 to
defendants pursuant to the UIM coverage. On 19 September 2000,
Nationwide filed a declaratory judgment action, asking the trialcourt to declare that the total amount of UIM coverage available to
defendants was the $200,000 Nationwide had already tendered, and
that Nationwide had fulfilled all of its obligations under the
policy.
The trial court concluded the following:
1. That the total amount of Under-
insured Motorist Coverage available under
Nationwide's policy to all claimants is
$500,000 per accident.
2. That the total amount of under-
insured coverage available to Sondra Haight
under the Nationwide Policy, after giving
credit for the $100,000 payment she received
from Aetna's liability policy, is $400,000.
3. That the total amount of under-
insured coverage available to the Estate of
James Robert Scott Haight under the Nationwide
Policy, after giving a credit for the $100,000
payment it received from Aetna's liability
policy is $400,000.
The court found that Nationwide was “obligated to pay to the
Defendants the unpaid balance of the $500,000 Under-Insured
Motorist Coverage under its policy.” Taking into account the
$200,000 Nationwide had already tendered, the court then ordered
that “[t]he amount of $300,000 should be paid to Defendants and
pro-rated between the Defendants based on the amount of each
Defendant's UIM claim and the total amount of UIM coverage
available under Nationwide's Policy.” Nationwide appeals.
Nationwide argues that the trial court incorrectly calculated
the amount of coverage available under the UIM policy. First,
Nationwide argues that the trial court should have deducted the
amount constituting the per-accident limit of the tortfeasor'sliability policy ($300,000) from the UIM limit of $500,000,
contending that this amount will be paid once all the claims are
settled. Thus, Nationwide asserts, it is liable only for an amount
of $200,000, the amount it has already tendered to defendants.
Defendants dispute the contention that the liability policy's per-
accident limit will be exhausted.
In the alternative, Nationwide argues that $274,476.64, the
amount paid to all claimants so far by the tortfeasor's liability
policy, should be deducted from the $500,000 UIM limit. Thus,
Nationwide asserts, it is liable for the amount of $225,523.36.
Since Nationwide has already tendered $200,000 to defendants, it
contends under this approach that it should be ordered to pay only
$25,523.36.
And finally, Nationwide contends that the minimum amount that
should be deducted from the $500,000 UIM limit is $200,000, the
amount paid by the liability policy to the two defendants. Thus,
Nationwide argues that under no circumstances should it be required
to pay a total of more than $300,000 in UIM proceeds. Defendants,
on the other hand, maintain that the trial court's method of
calculation was correct.
UIM insurance is governed by N.C. Gen. Stat. § 20-279.21(b)(4)
(2001), which provides in relevant part that “the limit of
underinsured motorist coverage applicable to any claim is
determined to be the difference between the amount paid to the
claimant under the exhausted liability policy or policies and the
limit of underinsured motorist coverage applicable to the motorvehicle involved in the accident.” We agree with defendants'
contention that use of the singular “claimant” suggests that a
separate calculation should be performed for each claimant.
Therefore, we reject Nationwide's contention that the amount of UIM
coverage should have been offset by either $300,000 (the per-
accident limit of the tortfeasor's liability insurance, which
Nationwide speculates will be exhausted once all four claimants
have settled) or $274,476.64 (the total amount paid out so far by
the tortfeasor's liability insurer to three claimants).
However, we disagree with defendants that the trial court's
calculation was correct. It appears that the trial court performed
a separate calculation for each defendant, subtracting $100,000
(the amount each defendant received from the liability policy) each
time from $500,000, the “combined single limit” of UIM coverage in
the policy. Because the Nationwide policy sets only one “combined
single limit” of $500,000 on its UIM coverage, rather than a per-
person limit, we do not believe this method of computing the offset
is consistent with the statute as applied to this policy.
The policy defines an “uninsured motor vehicle” to include an
“underinsured motor vehicle.” The policy contains the following
endorsement pertaining to uninsured motorists coverage:
D. LIMIT OF INSURANCE
1. Regardless of the number of covered
“autos,” “insureds,” premium paid, claims made
or vehicles involved in the “accident,” the
most we will pay for all damages resulting
from any one “accident” is the limit of
UNINSURED MOTORISTS COVERAGE shown in the
declarations.
The policy provides for an “uninsured motorists coverage combined
single limit” of $500,000 and an “underinsured motorists coverage
combined single limit” of $500,000. Thus, it is clear that under
this policy there is only one limit on UIM coverage, in the amount
of $500,000, and that this is the maximum amount of UIM coverage
for any one accident.
Emphasizing the use in the statute of the singular “claim” and
“claimant,” defendants argue that a separate calculation must be
performed for each claimant, and that $500,000 is the correct
amount to be used as “the limit of underinsured motorist coverage
applicable to the motor vehicle involved in the accident.”
N.C.G.S. § 20-279.21(b)(4). Defendants contend that North Carolina
Farm Bureau Mutual Insurance Co. v. Gurley, 139 N.C. App. 178, 532
S.E.2d 846, disc. review denied, 352 N.C. 675, 545 S.E.2d 427
(2000), is dispositive of the issue, and that under Gurley, the
superior court's calculation was correct. However, Gurley does not
address the issue we face here. The UIM policy in Gurley contained
both a per-person and a per-accident limit. At issue was whether
the per-person or the per-accident limit in the UIM policy should
be used in determining the amount of UIM coverage “applicable to
the motor vehicle involved in the accident.” See id. at 179, 532
S.E.2d at 847 (“Specifically, we address whether the applicable
limit of coverage under [the UIM statute] is the UIM carrier's per-
person or per-accident limit.”). We held:
when the negligent driver's liability policy
was exhausted pursuant to the per-person cap,
the UIM policy's per-person cap will be the
applicable limit. However, when the liabilitypolicy was exhausted pursuant to the per-
accident cap, the applicable UIM limit will be
the UIM policy's per-accident limit.
Id. at 181, 532 S.E.2d at 849.
The UIM policy at issue here does not set two limits, and so
the holding of Gurley does not necessarily compel the result
defendants seek. In fact, the analysis in Gurley supports our
result here. As we explained in Gurley, when the liability policy
is exhausted pursuant to the per-accident limit, then the proper
calculation of UIM coverage available is obtained by subtracting
the per-accident limit of the tortfeasor's liability policy from
the per-accident limit of the UIM policy. See id. at 182, 532
S.E.2d at 849. Thus, in such a case, despite the language of the
statute, only one calculation is performed for all claimants
combined. Here, the liability policy was exhausted pursuant to the
per-person limit for these defendants, and we must decide how to
offset those payments from the UIM “combined single limit,” which
more nearly resembles a per-accident limit.
Although the statutory language may be susceptible to the
interpretation adopted by the trial court, we do not believe that
interpretation reflects the purpose of the statute. “'UIM coverage
is intended 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.'”
Id. at 183, 532 S.E.2d at 849-50 (quoting Mutual of Enumclaw Ins.
Co. v. Key, 883 P.2d 875, 877 (Or. Ct. App. 1994)). If we agreed
to apply the $500,000 UIM limit to each claimant individually, asthe trial court did, these claimants would receive more in total
insurance coverage than if the same claimants had been injured by
an uninsured motorist. This is inconsistent with the statutory
provisions. We note that where the UM and UIM limits are the same,
the insurer will pay less on an underinsured claim, because of the
offset from the tortfeasor's liability policy, than it will pay on
an uninsured claim, where there are no proceeds to deduct.
For example, in this case, the superior court, using this
method of calculation, applied a limit of $400,000 of UIM coverage
to each defendant separately (the $500,000 limit on the UIM
coverage less the $100,000 paid by the tortfeasor's policy). Thus,
the court determined that defendant Haight should receive $400,000
of UIM coverage, since the damages left uncompensated by exhaustion
of the tortfeasor's liability policy were in the amount of $425,000
(capped by the $400,000 limit); and the court determined that the
Estate should receive $125,000, the amount of damages left
uncompensated by exhaustion of the tortfeasor's liability policy.
However, because the “combined single limit” of the UIM policy is
$500,000, the court concluded that defendants should share $500,000
pro rata. Having already received a total of $200,000 from the
tortfeasor's liability policy, under the superior court's analysis,
the defendants would receive a total of $700,000 in insurance
benefits.
On the other hand, if defendants had been injured by an
uninsured motorist, they would have received no payment from a
liability policy, and thus, there would have been no reason toperform two calculations. Each defendant would simply receive a
pro rata share of $500,000. Hence, under the superior court's
reasoning, defendants would receive an additional $200,000 of
insurance coverage because of the collision with the underinsured
motorist (Holleman), beyond what they would have received if
Holleman had not been insured at all. Since we have stated that
“the purpose of [uninsured motorist] and UIM insurance is the
same,” we do not believe the legislature intended such a result.
Id. at 182-83, 532 S.E.2d at 849 (characterizing such a discrepancy
as a “windfall” unintended by the legislature).
We believe that the statute and policy here require that we
calculate the difference between the “combined single limit” of
$500,000 under the UIM policy and the combined total actually paid
to these two defendants by the liability carrier. Thus, the amount
of UIM coverage available to defendants is $500,000 less $200,000,
resulting in $300,000 to be shared on a pro rata basis.
Under this reasoning, the trial court should have concluded
that Nationwide was liable for a payment of $300,000. Because
Nationwide has already tendered $200,000, the trial court should
have ordered Nationwide to pay an additional $100,000 to
defendants, with the $300,000 total to be shared on a pro rata
basis. Accordingly, we reverse the trial court's order and remand
for entry of a new order in accordance with this opinion.
Reversed and remanded.
Judges GREENE and BIGGS concur.
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