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An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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.
NORTH CAROLINA COURT OF APPEALS
Filed: 3 July 2007
MONTGOMERY INSURANCE COMPANIES,
No. 05 CVS 17245
THERMADOR CORPORATION, MOREHEAD
APPLIANCE SERVICE and HAROLD
Appeal by plaintiff from an order entered 29 June 2006 by
Judge Jesse B. Caldwell, III in Mecklenburg County Superior Court.
Heard in the Court of Appeals 12 April 2007.
Gregory C. York and Dean P. Loven, for plaintiff-appellant.
Samuel H. Poole, Jr., Jaye E. Bingham, and Todd A. King, for
Montgomery Insurance Companies (plaintiff) appeals from an
order entered 29 June 2006 granting summary judgment in favor of
Thermador Corporation, Morehead Appliance Service, and Harold
Morehead, individually, (collectively defendants). For the reasons
below, we affirm the order of the trial court.
In 2000, Jeff and Lisa Cernuto built a new home and purchased
a Thermador Professional Range. On 28 July 2003, Ms. Cernuto began
baking a chicken in the range. She set the range temperature to
300 degrees Fahrenheit and then left the residence at approximately
2:30 p.m. Around 3:00 p.m., the Cernutos' neighbor contacted theMooresville Fire Department to report a fire in the Cernutos' home.
The Fire Department found the bottom baking element of the
range was glowing red and continuously heating to a point well
past the setting on the range's controls. The hot wire relay in
the range continued to energize regardless of the thermostat
setting. Thus, the hot wire relay failed, causing the fire.
Harold Morehead repairs and services Thermador ranges as the
owner of Morehead Appliance Service. Mr. Morehead has decades of
experience working with Thermador ranges. On 11 July 2003, two
weeks before the fire, Mr. Morehead installed a new element because
the original element had short circuited. Mr. Morehead claims he
did not touch the relay or directly work on it in any way.
At the time of the fire, Morehead Appliance Service was
insured by Commercial Casualty Insurance Company of North Carolina
(CCIC). CCIC was declared insolvent on 2 April 2004 by an Order of
Liquidation pursuant to Article 30 of the North Carolina Insurance
Code. Due to the Order of Liquidation, the North Carolina
Insurance Guarantee Association (NCIGA) took over claims brought
Plaintiff filed a complaint on 21 September 2005 seeking
subrogation recovery from defendants for money paid to homeowners
Jeff and Lisa Cernuto pursuant to an insurance policy following the
fire in their home. On 9 June 2006, defendants filed their Motion
for Summary Judgment claiming there was no evidence of negligence
and that plaintiff's claims were barred by N.C. Gen. Stat. § 58-48-55(c). Judge Caldwell heard the Motion on 21 June 2006 and entered
an Order granting defendant's motion for Summary Judgment on 29
June 2006. Plaintiff appeals.
Plaintiff raises one issue on appeal: whether the trial court
erred in granting defendant's motion for summary judgment. For the
reasons below, we affirm the judgment of the trial court.
Standard of Review
Summary judgment is appropriate 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 [a] party is entitled
to a judgment as a matter of law. On appeal of
a trial court's allowance of a motion for
summary judgment, we consider whether, on the
basis of materials supplied to the trial
court, there was a genuine issue of material
fact and whether the moving party is entitled
to judgment as a matter of law. Evidence
presented by the parties is viewed in the
light most favorable to the non-movant.
Summey v. Barker
, 357 N.C. 492, 496, 586 S.E.2d 247, 249 (2003)
(internal quotations and citation omitted).
At trial, defendants pursued two arguments for summary
judgment. First, defendants argued that the facts alleged in
plaintiff's complaint were insufficient to establish negligence.
Second, defendants argued that N.C. Gen. Stat. § 58-48-55(c) of the
N.C. Insurance Guaranty Association Act (Guaranty Act) statutorily
bars recovery by plaintiff. Because plaintiff's sole assignment of
error on appeal regarded whether summary judgment was properly
granted based upon N.C. Stat. § 58-48-55, plaintiff's negligenceargument is not properly before this Court.
(See footnote 1)
Therefore, we only
address plaintiff's second argument as to whether N.C.G.S. § 58-48-
55(c) is a bar to plaintiff's recovery.
All liability insurance companies licensed to do business in
North Carolina are members of the NCIGA. See
N.C. Gen. Stat. § 58-
48-25 (2005). When a member insurer becomes insolvent, the NCIGA
assumes responsibility for defending and paying covered claims
against the insolvent company. See
N.C. Gen. Stat. § 58-48-35
The Guaranty Act explicitly limits subrogation claims that a
solvent insurance carrier may assert against the insured of an
insolvent insurer. Specifically,
No claim held by an insurer, reinsurer,
insurance pool, or underwriting association,
whether the claim is: (1) based on an
assignment, or (2) based on rights of
subrogation or contribution, or (3) based on
any other grounds, nor any claim of lien, may
be asserted in any legal action against a
person insured under a policy issued by an
insolvent insurer except to the extent the
amount of such claim exceeds the obligation of
the Association under G.S. 58-48-35(a)(1).
N.C. Gen. Stat. § 58-48-55(c) (2005). Pursuant to the Guaranty Act, this Court has distinguished
between conventional and equitable subrogation claims. John Alden
Life Ins. Co. v. N.C. Ins. Guar. Ass'n
, 162 N.C. App. 167, 169, 589
S.E.2d 908, 910 (2004).
An insurer asserting a [conventional]
subrogation claim rightfully paid damages for
its insured, in the first instance, under its
policy, but contends that another party is
primarily liable for the damages. By contrast,
an insurer asserting an equitable subrogation
claim did not owe the claim, in the first
instance; it was owed by another insurer who
wrongfully refused to pay the claim.
The claim before the trial court squarely
falls into the conventional subrogation category. It is undisputed
that plaintiff is an insurer, that the claim is based on rights of
subrogation, that defendants were insured by an insolvent insurer,
and that plaintiff's subrogation claim was not in excess of NCIGA's
obligation under the Guaranty Act.
The foregoing notwithstanding, plaintiff alleges that three
genuine issues of fact still exist. First, plaintiff claims that
there is an issue of fact about whether the CCIC policy covered the
alleged negligent act. The declaration page of the CCIC policy
establishes that the CCIC provided general liability insurance
coverage with a limit of one million dollars during the relevant
period. The alleged negligence is precisely the type of liability
that such general liability insurance covers.
Second, plaintiff claims there is an issue of fact about
whether any deductible or self-insured retention existed in the
CCIC policy which would allow plaintiff to recover. Thedeclaration page of the CCIC policy (issued to Morehead Appliance
Service and Harold Morehead) mentions no deductible or self-insured
retention. There is no evidence in the record to suggest any
deductible or self-insured retention existed.
Finally, plaintiff claims there is an issue of fact about
whether a second or other insurance coverage existed which must
be exhausted before the claim is covered by the NCIGA. Here,
plaintiff misconstrues the Guaranty Act to mean the homeowners must
prove no second insurance covers their claim before plaintiff can
recover. N.C. Gen. Stat. § 58-48-55(a) reads:
Any person having a right to a defense or a
claim against an insurer under any provision
in an insurance policy other than a policy of
an insolvent insurer which is also a covered
claim, shall be required to exhaust first his
rights under such policy.
N.C. Gen. Stat. § 58-48-55(a) (2005). The statute requires the
homeowners to exhaust their rights under their homeowner insurance
policy. Here, the homeowners filed a claim with plaintiff, their
homeowner insurer. Once plaintiff's coverage of the homeowners was
exhausted by paying the homeowners' claim, pursuant to N.C.G.S. §
58-48-55(c), plaintiff was barred from pursuing a subrogation claim
against NCIGA. Summary judgment was properly granted in
defendant's favor. This assignment of error is overruled.
Judges STEELMAN and LEVINSON concur.
Report per Rule 30(e).
We note defendants filed a motion to amend the record to
include two affidavits. The affidavits are offered to show, in
response to plaintiff's negative assertion, that the issue of
presented to the trial court at the summary judgment
hearing. On motion of any party the appellate court may order any
portion of the record on appeal or transcript amended to correct
error shown as to form or content. N.C. R. App. P. 9(b)(5).
While we grant defendant's motion to amend the record, such
amendment does not allow us to review the negligence issue where
plaintiff has failed to assign the issue as error. N.C. R. App. P.
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