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Insurance_not-for-hire commercial vehicle_minimum amounts_read into policy
The provisions N.C.G.S. § 20-309(a1) are inserted into every insurance policy issued for
not-for-hire commercial vehicles. The trial court here did not err by granting summary judgment
against the insurer in an action involving an injury suffered by a child as he left a church bus, so
that the policy was reformed to include that statutory minimum coverage of $750,000.00..
Judge HUNTER dissenting.
Young, Moore & Henderson P.A., by R. Michael Strickland and
Glenn C. Raynor, for plaintiff-appellant.
Law Offices of Frank A. Cassiano, by John K. Bramble and Frank
A. Cassiano, for defendants-appellees.
CALABRIA, Judge.
North Carolina Farm Bureau Mutual Insurance Company, Inc.
(“Farm Bureau”) appeals from an order granting summary judgment
entered in favor of defendants on the issue of the minimum amount
of liability coverage required in an insurance policy for a not-
for-hire commercial vehicle. We affirm.
On 7 October 2001, eight-year-old Terry Davis Armwood, Jr.
(“T.J”) was injured when he was struck by a vehicle after exiting
a 1974, 30-passenger bus owned and operated by Jimmy Lee Best(“Best”) and insured by a policy issued by Farm Bureau. Best
purchased the policy on 4 June 2001 from Stella Bostic (“Bostic”).
When Bostic sold the policy to Best, she offered liability amounts
providing $750,000.00 in coverage per accident with $5,000.00 for
medical payments per accident and Uninsured/Underinsured Motorist
Coverage of $750,000.00. When Best refused the amounts offered,
Bostic crossed through the original liability amounts and changed
the policy limits to $50,000/$100,000/$25,000 per accident, $1,000
for medical payments, and Uninsured/Underinsured Motorist Coverage
of $50,000/$100,000/$25,000, per Best's request.
After the accident, Terry Davis Armwood, Sr. and Ramona
Armwood (collectively “the Armwoods”) filed a claim with Farm
Bureau on behalf of their son, T.J. Farm Bureau offered to settle
the claim for $50,000.00, the limit of Best's insurance policy.
The Armwoods rejected Farm Bureau's settlement offer and demanded
damages in excess of the $50,000.00 policy limit. On 30 October
2003, Farm Bureau filed a declaratory relief action requesting the
Wake County Superior Court to determine the scope and amount of
coverage provided by Farm Bureau under the policy for any damages
caused by the 7 October 2001 accident. Farm Bureau, the Armwoods,
and Bostic filed motions for summary judgment. The court granted
Bostic's summary judgment motion dismissing all claims against her.
The court also granted the Armwoods' summary judgment motion to the
extent that the insurance policy was “reformed” to reflect a
minimum coverage of $750,000.00 and denied Farm Bureau's motion for
summary judgment. Farm Bureau appeals the order granting summaryjudgment in favor of the Armwoods and denying Farm Bureau's summary
judgment motion. We affirm.
Our standard of review for an order granting summary judgment
is de novo. Stafford v. County of Bladen, 163 N.C. App. 149, 151,
592 S.E.2d 711, 713 (2004), appeal dismissed by, 358 N.C. 545, 599
S.E.2d 409 (2004). Summary judgment is appropriate when there is
no genuine issue of material fact and the movant is entitled to
judgment as a matter of law. Leake v. Sunbelt, Ltd. of Raleigh, 93
N.C. App. 199, 201, 377 S.E.2d 285, 287 (1989). “[I]n considering
summary judgment motions, we review the record in the light most
favorable to the nonmovant.” Id. “When the facts of a case are
undisputed, construction and application of an insurance policy's
provisions to those facts is a question of law.” McGuire v.
Draughon, 170 N.C. App. 422, 424, 612 S.E.2d 428, 430 (2005).
This case presents an issue of first impression: When a
passenger bus transports passengers without requiring payment for
services, should the insured or the insurer bear the responsibility
of including the minimum statutory requirements of N.C. Gen. Stat.
§ 20-309(a1) in the liability policy if the bus is classified as a
not-for-hire commercial vehicle?
Farm Bureau contends the owner is responsible for ensuring
that liability coverage meets the minimum statutory requirements.
(See footnote 1)
Farm Bureau argues that because N.C. Gen. Stat. § 20-309(a1)specifically states that the owner shall have financial
responsibility, it is on the owner of a vehicle to obtain the
appropriate level of liability insurance. The Armwoods contend
that Best charged money to transport children in addition to the
use of the bus for church purposes and therefore, the mandatory
coverage for the bus was the coverage required for a passenger bus
for-hire and should have exceeded $750,000.00.
The basic rule of statutory interpretation is that the intent
of the Legislature controls. Campbell v. First Baptist Church, 298
N.C. 476, 484, 259 S.E.2d 558, 564 (1979). This intent may be
determined by considering the language of the statute, the spirit
of the act, and what the act seeks to accomplish. Taylor v.
Taylor, 343 N.C. 50, 56, 468 S.E.2d 33, 37 (1996). “The purpose of
[The Financial Responsibility Act of 1957] is to assure the
protection of liability insurance, or other type[s] of established
financial responsibility, up to the minimum amount specified in the
act, to persons injured by the negligent operation of a motor
vehicle upon the highways of this State.” Pearson v. Nationwide
Mutual Ins. Co., 325 N.C. 246, 253, 382 S.E.2d 745, 748 (1989). In
order to effectuate the purpose of the Financial Responsibility Act
of 1957, “the provisions [of the Act] must be read into insurance
policies and [must be] construed liberally.” Id.
Section 20-309 of the North Carolina General Statutes
addresses the financial responsibility required for registration of
vehicles. It reads in pertinent part:
(a) No motor vehicle shall be registered in
this State unless the owner at the time ofregistration has financial responsibility for
the operation of such motor vehicle, as
provided in this Article. The owner of each
motor vehicle registered in this State shall
maintain financial responsibility continuously
throughout the period of registration.
(a1) An owner of a commercial motor vehicle,
as defined in G.S. 20-4.01(3d), shall have
financial responsibility for the operation of
the motor vehicle in an amount equal to that
required for for-hire carriers transporting
nonhazardous property in interstate or foreign
commerce in 49 C.F.R. § 387.9.
N.C. Gen. Stat. § 20-309 (a) and (a1)(2005). Under § 20-309(a), an
owner of a vehicle may not register the vehicle unless the owner
has an insurance policy or another type of financial responsibility
in place that meets the minimum liability coverage as required by
§ 20-279.1. Our Courts have consistently held that the minimum
liability coverage required by § 20-279.1 is “written into every
insurance policy as a matter of law.” Integon Indemnity Corp. v.
Universal Underwriters Ins. Co., 342 N.C. 166, 168, 463 S.E.2d 389,
390-91 (1995); McCleod v. Nationwide Mutual Ins. Co., 115 N.C. App.
283, 287, 444 S.E.2d 487, 490 (1994). Thus, even though § 20-
309(a) requires the owner to obtain financial responsibility in
order to register a vehicle, the owner is not responsible for
ensuring that the insurance policy contains the minimum liability
coverage imposed by statute. The minimum liability coverage is
written into each insurance policy as a matter of law. Similarly,
§ 20-309(a1) requires the owner of a not-for-hire commercial
vehicle to obtain an insurance policy or other financial
responsibility in order to register the vehicle. It follows that
just as the minimum liability coverage requirements for vehiclesregistered under § 20-309(a) are written into insurance policies as
a matter of law, so too are the minimum liability coverage
requirements for not-for-hire commercial vehicles registered under
§ 20-309(a1). In effect, this does not place a burden on either
party to ensure that liability coverage meets the minimum statutory
requirements, but it inserts the provisions of § 20-309(a1), as a
matter of law, into every insurance policy issued for not-for-hire
commercial vehicles. See Integon, 342 N.C. at 168, 463 S.E.2d at
390-91; McCleod, 115 N.C. App. at 287, 444 S.E.2d at 490. Further,
writing the minimum liability coverage into insurance policies for
vehicles registered under § 20-309(a1) as a matter of law promotes
the main purpose of the Financial Responsibility Act - protecting
innocent motorists. See Pearson, 325 N.C. at 253, 382 S.E.2d at
748.
Farm Bureau argues that N.C. Gen. Stat. § 62-268, which
pertains to for-hire commercial vehicles, specifically provides
that liability coverage may be obtained through multiple insurance
policies. Farm Bureau further argues that because § 62-268 and §
20-309(a1) pertain to commercial vehicles and the only factor that
determines which statute applies is whether the commercial vehicle
is used for hire, the two statutes should be construed together.
Thus, Farm Bureau argues, § 20-309(a1) allows the owner of a not-
for-hire commercial vehicle to obtain the required financial
responsibility through multiple insurance policies thereby placing
the responsibility to ensure that the minimum coverage has been
obtained upon the owner. We disagree. Basic canons of statutory interpretation provide that
“[s]tatutes in pari materia are to be construed together, and it is
a general rule that the courts must harmonize such statutes, if
possible, and give effect to each . . . .” Faizan v. Insurance
Co., 254 N.C. 47, 53, 118 S.E.2d 303, 307 (1961). “[A]ll
applicable laws on the same subject matter should be construed
together so as to produce a harmonious body of legislation, if
possible.” Id.
Section 20-279.21 is part of the Financial Responsibility Act
of 1953, and § 20-309(a1) is part of the Financial Responsibility
Act of 1957. Both acts pertain to the same subject matter - the
financial responsibility of motorists. Thus, “[t]he two acts are
to be construed together so as to harmonize their provisions and to
effectuate the purpose of the Legislature.” Harrelson v. Insurance
Co., 272 N.C. 603, 610, 158 S.E.2d 812, 818 (1968). See also, Odum
v. Nationwide Mutual Ins. Co., 101 N.C. App. 627, 631, 401 S.E.2d
87, 90 (1991) (“The two Acts are complementary and are to be
construed in pari materia so as to harmonize them and give effect
to both.”).
In sharp contrast to Farm Bureau's argument, § 62-268 is found
under chapter 62 - a chapter devoted to an entirely different body
of law. Chapter 62 regulates public utilities and contains
specific provisions for motor carriers. If the Legislature
intended for statutes concerning not-for-hire commercial vehicles
to be interpreted in conjunction with statutes concerning for-hirevehicles, it could have included the statutes in the same chapter
or referenced the provisions of § 62-268.
Therefore, because § 20-279.21 and § 20-309 have an identical
purpose - protecting the innocent from irresponsible drivers - it
is proper that these statutes are interpreted in a consistent
manner in order to give effect to the intent and purpose of the
Legislature. Construing these statutes in pari materia, we hold
that just as provisions of N.C. Gen. Stat. § 20-279.21 are read
into every insurance policy as a matter of law, provisions of N.C.
Gen. Stat. § 20-309(a1) are also read into every insurance policy
as a matter of law. This is to effectuate the purpose of the
Financial Responsibility Act - protecting the innocent from
irresponsible motorists. See Pearson, 325 N.C. at 253, 382 S.E.2d
at 748.
We have considered Farm Bureau's remaining arguments and
determined they are without merit. The trial court properly
granted the Armwoods' summary judgment motion to the extent that it
reformed the insurance policy to include the amount of minimum
coverage required by § 20-309(a1), and it properly denied Farm
Bureau's summary judgment motion. For the reasons stated herein,
we affirm the order of the trial court.
Affirmed.
Judges HUDSON concurs.
Judge HUNTER dissents in a separate opinion.
The Judges participated in this decision and submitted it for
filing prior to 1 January 2007.
HUNTER, Judge, dissenting.
Because I disagree with the majority's holding that provisions
of N.C. Gen. Stat. . 20-309(a1) should be read into every liability
insurance policy on commercial vehicles as a matter of law, I
respectfully dissent.
Best purchased a thirty-passenger bus for use in transporting
members of his church. In June 2001, he went to plaintiff, an
insurer, for liability insurance on the vehicle and was offered an
application for a policy containing $750,000.000 in coverage, which
he declined. Best then selected the amount of coverage himself --
$50,000.00 per person and $100,000.00 per accident -- and plaintiff
issued a policy in those amounts. Best paid the premiums for the
policy and was covered by it in October 2001, when he was involved
in the accident at the root of this case in which Terry Armwood,
Jr., was injured. Plaintiff sought a declaratory injunction from
the trial court that the policy provided coverage of $50,000.00 per
person and $100,000.00 per accident, as the policy stated on its
face. The Armwoods sought a declaration that the policy provided
coverage of $750,000.00. Based on its interpretation of the
relevant statutes, the trial court denied plaintiff's motion and
concluded that the policy should be reformed to provide coverage of
$750,000.00.
“The primary goal of statutory construction is to effectuate
the purpose of the legislature in enacting the statute[,]” and that
purpose “'is first ascertained by examining the statute's plainlanguage.'” Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571,
574, 573 S.E.2d 118, 121 (2002) (citation omitted). When that
language is “'“clear and unambiguous,”'” the court is “'“without
power to interpolate, or superimpose, provisions and limitations
not contained therein.”'” Id. at 575, 573 S.E.2d at 121 (citations
omitted).
In general, insurance policies must be reformed when an
applicable statute conflicts with the terms of the insurance
policy; at that point, “the provisions of that statute become terms
of the policy to the same extent as if they were written in it[.]”
Baxley v. Nationwide Mutual Ins. Co., 334 N.C. 1, 6, 430 S.E.2d
895, 898 (1993). However, our Supreme Court has only reformed
policies in cases where an insurer failed to comply with a
requirement of the 1953 Act that places a direct burden on the
insurer and policy, not the owner. See, e.g., Bray v. N.C. Farm
Bureau Mut. Ins. Co., 341 N.C. 678, 685-86, 462 S.E.2d 650, 654
(1995) (invalidating family-owned vehicle exclusion to uninsured
motorist coverage because section 20-279.21(b) mandated a minimum
amount of coverage). “In the absence of any provision in the
Financial Responsibility Act broadening the liability of the
insurer, such liability must be measured by the terms of the policy
as written.” Younts v. Insurance Co., 281 N.C. 582, 585, 189
S.E.2d 137, 139 (1972).
As discussed below, in this case the terms of the policy do
not conflict with the statute, because it is not the individual
policy that must comply with the minimum requirements but ratherthe insured's overall coverage. As such, this Court should measure
plaintiff's liability by the terms of the policy as written.
Although such a result might not result in the complete protection
of individuals from the risks associated with commercial vehicles,
that issue is properly addressed by the legislature, not by this
Court.
Two statutes are at issue in this case: the Vehicle Financial
Responsibility Act of 1957 (“1957 Act”) and the Financial
Responsibility Act of 1953 (“1953 Act”). N.C. Gen Stat. . 20-
309(a1) (2005), part of the 1957 Act, by its plain language puts
the onus on owners to maintain required liability insurance on
their vehicles: “An owner of a commercial motor vehicle, as
defined in G.S. 20-4.01(3d), shall have financial responsibility
for the operation of the motor vehicle in an amount equal to that
required for for-hire carriers transporting nonhazardous property
in interstate or foreign commerce in 49 C.F.R. § 387.9.” Id.
(emphasis added).
The 1953 Act specifically addresses individual policies rather
than individual owners. It states that every owner's policy of
liability insurance shall provide the following minimum coverage
against loss from liability “for damages arising out of the
ownership, maintenance or use” for the covered vehicle: $30,000.00
for injury or death to one person, $60,000.00 to two or more
persons in one accident, and $25,000.00 for injury or destruction
of property in one accident ($30/$60/$25). N.C. Gen. Stat. . 20-
279.21(b)(2) (2005). The plain language of the statute itselfactually inserts these specific amounts into every policy as a
matter of law.
Because both acts have the same general purpose -- namely,
protecting the innocent from irresponsible drivers -- the two
should be read in conjunction, as the majority notes. “Statutes in
pari materia are to be construed together, and it is a general rule
that the courts must harmonize such statutes, if possible, and give
effect to each[.]” Blowing Rock v. Gregorie, 243 N.C. 364, 371, 90
S.E.2d 898, 904 (1956).
However, the majority's holding reads the Acts together to
create a mandate by the 1953 Act (which explicitly sets out the
$30/$60/$25 minimums) that plaintiff's policy provide coverage in
the amount specified by the 1957 Act ($750,000.00). This
controverts the plain language of the two provisions of the 1957
Act at issue. Again, the plain language of N.C. Gen. Stat. . 20-
309(a) and (a1) both put the onus on the owner. (N.C. Gen. Stat.
. 20-309(a) states: “No motor vehicle shall be registered in this
State unless the owner at the time of registration has financial
responsibility for the operation of such motor vehicle, as provided
in this Article.”) Reading the two Acts in conjunction cannot mean
eliminating this plain language by “superimpos[ing]” in the 1957
Act the language of the 1953 Act placing the onus on the insurer.
The trial court itself stated that:
Best, as the owner of the 1974 30 passenger
bus, a commercial motor vehicle, had the duty
and responsibility to obtain the applicable
minimum liability coverage for the vehicle.
G.S. 20-309(a1) places the duty to obtain and
maintain the appropriate coverage, consistentwith the use of the commercial vehicle, on the
owner.
This conclusion of law explicitly looks to the 1957 Act and places
the duty and responsibility for obtaining the correct minimum
liability coverage on Best. Despite its own conclusion, however,
the trial court then found that plaintiff had a duty to issue the
policy for $750,000.00 and reformed the existing policy to reflect
that level of liability. This finding incorrectly holds plaintiff
responsible for the duty and responsibility the trial court had
laid at Best's door.
Further, I see no statutory justification for the majority's
holding that we must read a minimum $750,000.00 clause into this
contract. As the majority states, our Courts have consistently
held that the minimum coverage required by N.C. Gen. Stat. . 20-
279.21(b) ($30/$60/$25) is written into every insurance policy as
a matter of law. But note the plain language of this statute:
(b) [Each] owner's policy of liability
insurance:
. . .
(2) Shall insure the person named
therein . . . against loss from the
liability imposed by law for damages
. . . with respect to each such
motor vehicle[] as follows: thirty
thousand dollars ($30,000) because
of bodily injury to or death of one
person in any one accident and,
subject to said limit for one
person, sixty thousand dollars
($60,000) because of bodily injury
to or death of two or more persons
in any one accident, and twenty-five
thousand dollars ($25,000) because
of injury to or destruction ofproperty of others in any one
accident[.]
N.C. Gen. Stat. § 20-279.21(b)(2). The statute, unlike N.C. Gen.
Stat. § 20-309(a1), specifically addresses an element that every
policy must contain. Clearly, legislative intent was that this
statute should act to reform any policy that was not in line with
these statutory minimums ($30/$60/$25). As mentioned, N.C. Gen.
Stat. § 20-309(a1) sets out the minimum liability insurance
responsibility of the owner of a commercial vehicle. Had the
legislature intended this particular provision to reform all
policies not in line with the minimums set out for commercial
vehicles ($750,000.00), it could easily have done so by adding to
section 20-309(a1) similar construction and language as that used
by section 20-279.21(b)(2) requiring all policies to have the
$30/$60/$25 minimum. Had the legislature intended this
reformation, it could also have simply amended section 20-279.21(b)
in the 1953 Act with such language, inserting in all commercial
vehicle policies the $750,000.00 minimum requirement. Since the
legislature did neither, this Court should not impose such a
requirement.
Defendants further argue that the language of N.C. Gen. Stat.
. 20-309(b) indicates that only one policy may be used to meet the
minimum coverage (“[f]inancial responsibility shall be a liability
insurance policy . . .” (emphasis added)), agreeing with the trial
court's conclusion that plaintiff's issuance of a policy below
statutory minimums ($750,000.00) was an “invalid and inappropriate
choice[.]” However, the 1953 Act, with which this statute must beread in conjunction, allows a commercial vehicle owner to meet the
requirements of liability coverage “by the policies of one or more
insurance carriers which policies together meet such requirements.”
N.C. Gen. Stat. . 20-279.21(j). Thus, again, the onus is placed on
Best, not plaintiff, to obtain the appropriate minimum coverage.
Defendants also argue that, because the Farm Bureau policy did
not meet the statutory minimums, Best would not have been able to
register his motor vehicle (“[n]o motor vehicle shall be registered
in this State unless the owner at the time of registration has
financial responsibility for the operation of such motor vehicle”).
N.C. Gen. Stat. . 20-309(a). This argument fails because, again,
Best could have obtained the statutory minimum of coverage from
multiple insurers. The record does not indicate that plaintiff
issued a policy that falsely stated the amount of Best's coverage
or inappropriately certified Best for registration purposes; any
error in registering the vehicle made by the State cannot be laid
at plaintiff's feet.
In sum, the majority's holding puts an onus on insurance
companies that I do not believe is warranted by the statutes. The
plain language of the 1957 Act places on the owner the onus for
ensuring that minimum statutory requirements for liability
insurance are met.
This Court should not disturb the contract between the parties
and the motion for summary judgment should have been granted. If
the legislature had intended for commercial vehicles to be coveredby only one liability insurance policy with a minimum coverage of
$750,000.00, it could easily have done so.
It is important to note that the legislature's purpose in
creating these Acts was clearly to protect the public by having
higher mandatory minimum liability insurance coverage for
commercial vehicles because the potential for damage to property
and individuals is higher. However, the legislature addressed that
concern by putting the onus for obtaining adequate coverage on the
owner. In this particular case, unfortunately, that purpose was
not effected, but it is the legislature's provenance to correct
this problem; it is not for the courts to impose a correction.
I would reverse the trial court's order partially granting the
Armwoods' motion for summary judgment because, based on the
applicable statutes comprising the 1953 and 1957 Acts, it was error
for the trial court to reform the insurance policy at issue to
reflect $750,000.00 in liability coverage. Further, since Best had
no obligation to purchase his entire minimum coverage from one
insurer, and plaintiff had no obligation to issue a policy for the
statutory minimum, I would reverse and remand the trial court's
denial of plaintiff's motion for summary judgment.
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