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An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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.

NO. COA06-1289


Filed: 3 July 2007


v .                         Mecklenburg County
                            No. 05 CVS 17245
MOREHEAD, Individually,

    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 defendant-appellees.

    BRYANT, Judge.

    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 against CCIC.
Procedural History

    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.
Statutory Discussion
    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 (2005).
    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.

Id. (citations omitted). 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).

Footnote: 1
    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 negligence was 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. 10(c)(1).

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