Insurance_commercial automobile policy_UM endorsement_inapplicable to property
damage
The uninsured motorist endorsement to a commercial automobile insurance policy did not
provide underinsured motorist coverage for property damage to one of the insured's vehicles.
Hedrick, Blackwell & Morton, L.L.P., by B. Danforth Morton,
for plaintiff-appellant.
No brief filed on behalf of defendant-appellee.
EAGLES, Chief Judge.
This appeal arises from an action for declaratory judgment to
construe the terms of an insurance policy.
The record tends to establish the following facts: On 18
December 1996, Southern Fire & Casualty Company (“Southern”) issued
a commercial auto insurance policy to Kirby's Garage, Inc.
(“Kirby's”), covering seven tow trucks. On 23 June 1997, during
the coverage period of the policy, one of Kirby's tow trucks was
damaged when it was hit from behind by a truck negligently driven
by Anthony J. Padgett. Padgett's truck was insured by Travelers
Insurance Co. (“Travelers”). Although Kirby's damages totaled
$33,759.84 ($13,759.84 for property damage and $20,000.00 for loss
of use), Padgett's policy limited coverage to $25,000.00. Padgett
subsequently admitted liability and Travelers tendered payment toKirby's in the full amount of Padgett's policy. Kirby's sought to
recover the balance ($8,759.84) from Southern by filing a claim
against the underinsured motorist provisions of its policy with
Southern.
The schedule of coverages on the “Business Auto Coverage Form”
included in Kirby's policy indicates a policy limit, i.e., the most
Southern will pay for any one loss or accident involving a covered
auto, in the amount of $1 million. The schedule further indicates
that coverage in this amount extends to (1) liability, (2)
uninsured motorists and (3) underinsured motorists. Kirby's policy
also included an endorsement entitled “North Carolina Uninsured
Motorist Form.” This endorsement, which expressly states that it
“modifies” the insurance provided under the “Business Auto Coverage
Form” provides:
A. Coverage
1. We will pay all sums the “insured” is legally
entitled to recover as compensatory damages
from the owner or driver of:
a. An “uninsured motor vehicle” because of
“bodily injury” sustained by the
“insured” and caused by an “accident,”
and
b. An “uninsured motor vehicle” as defined
in Paragraphs a. and c. of the definition
of “uninsured motor vehicle” because of
“property damage” caused by an
“accident.”
. . . .
F. Additional Definitions
As used in this endorsement:
. . . .
4. “Uninsured motor vehicle” means a land motor
vehicle or trailer:
a. For which neither a bond or policy nor
cash or securities on file with the North
Carolina Commissioner of Motor Vehicles
provides at least the amounts required by
the North Carolina Motor Vehicle Safety
and Responsibility Act;
b. That is an underinsured motor vehicle. An
underinsured motor vehicle is a motor
vehicle or trailer for which the sum of
all bodily injury liability bonds or
policies at the time of an “accident”
provides at least the amounts required by
the North Carolina Motor Vehicle Safety
and Responsibility Act but their limits
are either:
(1) Less than the limits of underinsured
motorists coverage applicable to a
covered “auto” that you own involved
in the “accident”; or
(2) Less than the limits of this
coverage, if a covered “auto” that
you own is not involved in the
“accident”; or
c. For which the insuring or bonding company
denies coverage or is or becomes
insolvent; or
d. That is a hit-and-run vehicle causing
“bodily injury” to an “insured” and
neither the driver nor owner can be
identified. The vehicle must hit an
“insured,” a covered “auto” or a vehicle
an “insured” is “occupying.”
(Emphasis in original).
Southern denied coverage. Citing paragraph A.1.b. of the
uninsured motorist endorsement, Southern contended that Kirby's
policy did not cover property damage caused by underinsured
motorists. On 31 May 2001, Southern filed this action in New
Hanover County Superior Court, seeking a declaration that Kirby's
policy with Southern did not cover property damage caused byunderinsured motorists. The trial court concluded that the policy
language relating to underinsured motorist coverage was ambiguous
and that this ambiguity was compounded by the schedule of coverage,
which purported to cover losses caused by underinsured motorists,
without limitation, up to the $1 million policy limit.
Consequently, the trial court construed the policy against Southern
and in favor of coverage. Southern appeals.
Southern contends that the trial court erred by concluding
that the policy was ambiguous and by construing the policy to cover
property damage caused by underinsured motorists. We agree.
“In interpreting insurance policies, our appellate courts have
established several rules of construction. Of these, the most
fundamental rule is that the language of the policy controls.”
Nationwide Mut. Ins. Co. v. Mabe, 115 N.C. App. 193, 198, 444
S.E.2d 664, 667 (1994), aff'd, 342 N.C. 482, 467 S.E.2d 34 (1996).
[W]hen an insurance policy contains ambiguous provisions,
this Court will resolve the ambiguity against the
insurance company-drafter, and in favor of coverage. On
the other hand, if a contract of insurance is not
ambiguous, “the court must enforce the policy as written
and may not reconstruct it under the guise of
interpreting an ambiguous provision.”
Ledford v. Nationwide Mut. Ins. Co., 118 N.C. App. 44, 51, 453
S.E.2d 866, 869 (1995)(citations omitted).
“[A]mbiguity in the terms of an insurance policy is not
established by the mere fact that the plaintiff makes a claim based
upon a construction of its language which the company asserts is
not its meaning.” Wachovia Bank & Trust Co. v. Westchester Fire
Ins. Co., 276 N.C. 348, 354, 172 S.E.2d 518, 522 (1970).
“'[L]anguage in an insurance contract is ambiguous only if thelanguage is 'fairly and reasonably susceptible to either of the
constructions for which the parties contend.''” Ledford, 118 N.C.
App. at 51, 453 S.E.2d at 869 (quoting Watlington v. North Carolina
Farm Bureau, 116 N.C. App. 110, 112, 446 S.E.2d 614, 616
(1994))(citation omitted)(emphasis added).
After careful review of the policy at issue, we conclude there
is but one fair and reasonable construction of the language
relating to underinsured motorists. Accordingly, we hold that the
trial court erred by concluding the terms of the policy were
ambiguous.
We begin our analysis by noting that “exclusions from,
conditions upon and limitations of undertakings by the company,
otherwise contained in the policy, are to be construed strictly so
as to provide the coverage, which would otherwise be afforded by
the policy.” Wachovia, 276 N.C. at 355, 172 S.E.2d at 522-23.
Here, the schedule of coverages in the Business Auto Coverage Form
purports to provide uninsured motorist coverage, without
limitation, in the full amount of the policy. However, the
uninsured motorist endorsement expressly states that it “modifies”
the insurance provided by the “Business Auto Coverage Form.”
Therefore, in determining what insurance is provided by the policy,
the terms of the uninsured motorist endorsement must be construed
strictly.
We further note that “[w]hen the policy contains a definition
of a term used in it, this is the meaning which must be given to
that term wherever it appears in the policy, unless the context
clearly requires otherwise.” Wachovia, 276 N.C. at 354, 172 S.E.2dat 522. Here, the policy specifically defines the term “uninsured
motor vehicle.” Therefore, by virtue of paragraph F.4.b., the term
“uninsured motor vehicle” must include an “underinsured motor
vehicle,” wherever the term is used in the policy, unless the
context provides otherwise. With these principles in mind, we now
consider whether the language of the policy is ambiguous.
Paragraph A.1.a. of the uninsured motorist endorsement states
that Southern will pay all sums that Kirby's would be legally
entitled to recover as compensatory damages, for “bodily injury”
caused by an accident with an “uninsured motor vehicle.” Since
nothing in the context of this provision requires that a different
meaning be given to the term “uninsured motor vehicle,” we must
give the term the meaning provided in the policy. Applying the
relevant definition, we conclude this portion of the policy
(paragraph A.1.a.) unambiguously provides coverage for any
compensatory damages Kirby's would be entitled to recover for
“bodily injury,” up to the $1 million policy limit, caused by
either an uninsured or underinsured motor vehicle. Since this
portion of the policy is not ambiguous, it must be enforced as
written.
Much like the preceding paragraph, paragraph A.1.b. of the
endorsement states that Southern will pay all sums that Kirby's
would be legally entitled to recover as compensatory damages for
“property damage” caused by an accident with an “uninsured motor
vehicle.” However, this paragraph further specifies that the
definition of “uninsured motor vehicle” includes only paragraphs
“a.” and “c.” of the definition provided in the policy. Unlikeparagraph A.1.a., the context in which the term “uninsured motor
vehicle” is used here indicates clearly that another definition
applies to this provision. We conclude that for purposes of
construing this provision, the term “uninsured motor vehicle” means
only a vehicle (1) for which there is no insurance on file with the
Commissioner of Motor Vehicles, or (2) for which the insuring
company becomes insolvent. Neither “underinsured” motor vehicles
defined by paragraph “b.” nor “hit-and-run” vehicles defined by
paragraph “d.” of the definition provided in the policy are
included within this definition of “uninsured motor vehicle.”
Applying this definition, we conclude this portion of the policy
(paragraph A.l.b.) provides coverage for any compensatory damages
Kirby's would be entitled to recover for “property damage,” up to
the $1 million policy limit, but only when caused by an accident
with an uninsured motorist as defined in paragraphs F.4.a. and
F.4.c.
In the instant case, the damage to Kirby's truck falls under
paragraph A.1.b. of the uninsured motorist endorsement.
Furthermore, Padgett's car may only be considered an “uninsured
motor vehicle” under the policy if paragraph F.4.b. remains in the
definition. Since paragraph A.1.b. specifically exempts paragraph
F.4.b. from the definition of “uninsured motor vehicle,” Kirby's
may not recover the balance of its damages from Southern.
Nothing in the schedule of coverages changes this outcome. The
schedule of coverage states only “the most [Southern] will pay for
any one accident or loss.” The uninsured motorist endorsement
provides all the pertinent policy language with respect to thecoverage of uninsured motor vehicles. Furthermore, both the
schedule of coverages and the uninsured motorist endorsement
expressly provide that the insurance declarations in the schedule
are modified by the endorsement.
Accordingly, the decision of the trial court is hereby
reversed and this matter is remanded to the New Hanover County
Superior Court for entry of judgment not inconsistent with this
opinion.
Reversed and remanded.
Judges HUNTER and GEER concur.
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