Martini v. Companion Property & Casualty Insurance

ELMORE, Judge.

Both Douglas J. Martini, M.D. (plaintiff), and Companion Property & Casualty Insurance Company (defendant) appeal from a 12 May 2008 order granting partial summary judgment to both parties. For the reasons stated below, we affirm that part of the order granting summary judgment to plaintiff and reverse that part of the order granting summary judgment to defendant.

Background

On 9 January 2005, plaintiff’s wife informed plaintiff that the brake warning light of their 2001 Toyota Sequoia was on. Mrs. Martini testified that because the brakes in the Sequoia had recently been serviced due to premature wear, she planned to take the Sequoia to be repaired the next morning. Plaintiff normally drove the Sequoia, which was insured in the name of his professional association, Douglas J. Martini, M.D., P.A. However, because his wife planned to take the Sequoia to be repaired, plaintiff drove the couple’s other car, a 2001 Mitsubishi Montero, to the airport early on the morning of 10 January 2005. Plaintiff was planning to attend a medical conference.

At approximately 4:54 a.m., as plaintiff was driving to the airport, the Montero was struck by a vehicle driven by Nicholas Marquez. *41Marquez had tried to drive his car from the left lane to the center lane between two vehicles that were already driving in the center lane. Marquez failed, colliding with the back of plaintiffs Montero, which caused plaintiff to lose control of his car. The Montero flipped over on the roadway several times, then flipped over the median barrier, eventually coming to rest on the median on the other side of the highway.

Plaintiff was extracted from his car and taken to the trauma center at a local hospital. He had a fracture to his C-7 vertebra, left and right rotator cuff contusions, a puncture wound in his left chest, as well as various lacerations and abrasions on his body. He returned to work about three weeks later, for two hours at a time. However, after six weeks, the fracture had slipped out of place and there was severe nerve compression. Plaintiff underwent surgical fusion surgery on 8 March 2005 to repair his broken neck. He was not able to return to work for nearly six months following the collision.

Plaintiffs wife drove the Sequoia to and from the hospital on 10 January 2005. Plaintiff next took the Sequoia to be serviced on or about 24 March 2005.

Marquez carried minimum liability insurance coverage of $30,000.00. Plaintiff made a claim against Marquez’s insurance policy as well as the underinsured and medical payments provisions of his insurance policies for the Montero and Sequoia. Marquez’s insurance carrier paid plaintiff $30,000.00, the limit of Marquez’s policy. Plaintiff notified his insurers, including defendant. Plaintiff’s primary carrier, Southern Guarantee Insurance Company (Southern Guarantee), paid plaintiff $250,000.00, the limit of that policy’s coverage. The coverage limit of plaintiff’s underinsured and medical payments insurance policy (the UIM policy) with defendant was $1,000,000.00. Defendant denied plaintiff’s underinsured and medical payments claims.

Plaintiff then filed a complaint, asking the court to “declare the coverage, and the rights, responsibilities, duties and obligations of the parties under the Defendant’s policy of insurance and that the vehicle which Plaintiff was operating be declared a covered vehicle under Defendant’s policy of insurance and that Defendant’s policy be declared to cover plaintiff’s injuries and damages.” Plaintiff also alleged that defendant had engaged in unfair claims practices and/or unfair and deceptive trade practices, entitling him to treble damages. Defendant counterclaimed, asking for a declaratory judgment “declaring the relative rights and obligations of the parties under” the *42UIM policy and declaring that the UIM policy “does not provide coverage for the uninsured/underinsured benefits” sought by plaintiff. Defendant also sought to dismiss plaintiffs complaint.

Defendant moved for summary judgment as to the insurance coverage question and plaintiff’s unfair and deceptive trade practices claim. Defendant moved, in the alternative, for summary judgment that the policy’s potentially applicable limit of $1,000,000.00 had been legally reduced by the $250,000.00 payments tendered by Southern Guarantee. Plaintiff also moved for summary judgment on the insurance coverage question and his unfair and deceptive trade practices claim.

On 12 May 2008, the trial court entered an order of summary judgment. The order granted plaintiff’s motion in part and defendant’s motion in part. The trial court concluded that the UIM policy did provide uninsured motorist coverage and medical payments coverage to plaintiff for the collision. It also concluded that the uninsured motorist insurance limit was $1,000,000.00 upon satisfactory proof of damages; no credit was due defendant for prior liability insurance payment or prior underinsured motorist payment. Finally, the trial court concluded that defendant had not committed any unfair settlement practices or unfair and deceptive trade practices; the trial court dismissed those claims with prejudice.

Both parties now appeal. We address defendant’s arguments first and then reach plaintiff’s.

Defendant’s Appeal

Defendant first, argues that the trial court erred by granting summary judgment to plaintiff because the UIM policy does not provide insurance coverage to plaintiff as a matter of law. We disagree.

The only vehicle that is listed on the UIM policy’s “Schedule of Autos You Own” is the Sequoia, which is owned by plaintiff’s business entity, Douglas J. Martini, M.D., RA. The UIM policy includes the following relevant language:

B. Who Is An Insured

If the Named Insured is designated in the Declarations as:

* * *
2. A partnership, limited liability company, corporation or any other form of organization, then the following are “insureds”:
*43a. Anyone “occupying” a covered “auto” or a temporary substitute for a covered “auto”. The covered “auto” must be out of service because of its breakdown, repair, servicing, “loss” or destruction.
b. Anyone for damages he or she is entitled to recover because of “bodily injury” sustained by another “insured”.

Defendant argues that the Montero was not a temporary substitute for the covered auto, the Sequoia, because the Sequoia was not out of service because of its breakdown, repair, servicing, loss, or destruction. Defendant points to Mrs. Martini’s use of the Sequoia to drive to the hospital on the morning of the accident as evidence that the Sequoia was not out of service. To support this position, defendant relies on the Supreme Court’s opinion in Ransom v. Fidelity and Casualty Co., 250 N.C. 60, 108 S.E.2d 22 (1959), and on our opinion in Maryland Casualty Co. v. State Farm Mutual Automobile Insurance Company, 83 N.C. App. 140, 349 S.E.2d 307 (1986).

In Ransom, Francis Lee drove his brother’s car because his own car, a Buick, was “low on gas.” Ransom, 250 N.C. at 60, 108 S.E.2d at 22. Lee collided with a man on a bicycle, who was killed. Id., 250 N.C. at 61, 108 S.E.2d at 23. The man’s estate sued Lee for wrongful death and sought payment from the Buick’s insurer, arguing that the brother’s car was a temporary substitute vehicle for the Buick. Id. at 62, 108 S.E.2d at 23. The brother’s car was not insured. Id. at 61, 108 S.E.2d at 23. The trial court dismissed the case, and the Supreme Court affirmed because the policy required that the covered vehicle be “withdrawn from normal use” and being “low on gas” did not mean that the Buick had been withdrawn from normal use. Id. at 64, 108 S.E.2d at 25. The Supreme Court did note, however, that “[i]t would seem there could be circumstances under which one might be justified in substituting another car, if the one insured was so defective mechanically that the owner was afraid to drive it on an extended trip.” Id. (citation omitted).

Maryland Casualty also involved a collision, this time between Kell Thomas and Max Sherrill. Maryland Casualty, 83 N.C. App. at 141, 349 S.E.2d at 308. Sherrill was injured in the collision and his insurer sought payment from Thomas’s insurer. Id. However, the truck that Thomas was driving that day was not insured; Thomas’s only vehicle insurance policy was on a car. Id. Sherrill’s insurer argued that the truck was a temporary substitute vehicle for the car and, thus, was covered by the insurance policy. The policy defined a *44temporary substitute vehicle as one driven because the covered vehicle was “out of normal use because of its: a. breakdown; b. repair; c. servicing; d. loss; or e. destruction.” Id. at 142, 349 S.E.2d at 308. This Court concluded that Thomas’s truck was not a temporary substitute vehicle because the car was only “rusted out” and “in bad condition,” which did not remove the car from normal use. Id.

The case at hand is easily distinguished from both Ransom and Maryland Casualty and instead better falls in line with Nationwide Mutual Insurance Company v. Fireman’s Fund Insurance Company, 279 N.C. 240, 182 S.E.2d 571 (1971). In Fireman’s Fund, our Supreme Court affirmed coverage when the covered vehicle was at a paint and body shop to be repainted and the insured wrecked the car he had borrowed while his was being repainted. Id. at 250-51,182 S.E.2d at 578. Here, plaintiff and his wife were concerned with the safe operation of the Sequoia. The car’s brakes had been recently repaired, and the brake light on the dash indicated that something was amiss again with the brakes. Without question, the car was operational, but plaintiff asked his wife to have it serviced because the brake light was on. Had plaintiff not been injured while driving to the airport, it is reasonable to assume that Mrs. Martini would have taken the car to the mechanic on the morning of 10 January 2005, and the car would have been completely unusable, as in Fireman’s Fund. It is also reasonable to assume that Mrs. Martini did not immediately have the Sequoia serviced because her husband had broken his neck in a car accident that morning. When plaintiff drove the Montero to the airport, it was because the Sequoia was out of service; he had asked his wife, an officer of his professional association, to take the car to be repaired.

Defendant next argues that plaintiff was not an “insured” under the UIM policy because he is an individual and the policy lists plaintiff’s professional association as the insured. Again, we disagree. The policy clearly states that anyone occupying a temporary substitute for a covered auto, the Montero in this case, is insured. Plaintiff was occupying the Montero and is therefore covered by the policy.

Defendant next argues that, even if plaintiff is covered by the UIM policy, defendant is entitled to a credit for the $250,000.00 payment made by plaintiff’s primary insurance carriers, thereby reducing the maximum available coverage to $750,000.00. Again, we disagree.

The Motor Vehicle Safety and Financial Responsibility Act (the Act) exists to protect “innocent victims who may be injured by finan*45cially irresponsible motorists.” Hendrickson v. Lee, 119 N.C. App. 444, 449, 459 S.E.2d 275, 278 (1995) (quotations and citation omitted). “[T]he provisions of the Act ‘are written into every automobile liability policy as a matter of law, and, when the terms of [a] policy conflict with the statute, the provisions of the statute will prevail.’ ” Id. (quoting Insurance Co. v. Chantos, 293 N.C. 431, 441, 238 S.E.2d 597, 604 (1977)) (internal quotations omitted; alteration in original). The Act includes N.C. Gen. Stat. § 20-279.21(b)(4), which states that a liability insurance policy “shall. . . provide underinsured motorist coverage.” N.C. Gen. Stat. § 20-279.21(b)(4) (2007).

[I]f a claimant is an insured under the underinsured motorist coverage on separate or additional policies, the limit of underinsured motorist coverage applicable to the claimant is the difference between the amount paid to the claimant under the exhausted liability policy or policies and the total limits of the claimant’s underinsured motorist coverages as determined by combining the highest limit available under each policy[.\

Id. (emphasis added). As this Court recently noted, § 20-279.21(b)(4) permits interpolicy “stacking” of coverage limits. Benton v. Hanford, 195 N.C. App. 88, 93, 671 S.E.2d 31, 34 (2009). In this case, the highest limits available under each of plaintiff’s underinsured motorist coverages were $250,000.00 (Southern Guarantee) and $1,000,000.00 (defendant). Plaintiff had received $30,000.00 from Marquez’s exhausted liability policy, which was credited against plaintiff’s under-insured motorist coverage under his Southern Guarantee policy, the primary policy. In other words, Marquez’s policy paid $30,000.00 and Southern Guarantee paid $220,000.00, exhausting both of those policies. Plaintiff still had $1,000,000.00 underinsured motorist coverage remaining under his UIM policy with defendant. Accordingly, the trial court properly granted summary judgment to plaintiff as to his under-insured motorist coverage limit.

Plaintiff’s Appeal

We next address plaintiff’s argument on appeal. He argues that the trial court erred by granting defendant’s motion for summary judgment as to plaintiff’s unfair claims settlement practices and unfair and deceptive trade practices claims. After careful review, we agree.

In his amended complaint, plaintiff alleged that defendant engaged in an unfair or deceptive trade practice under N.C. Gen. Stat. *46§§ 58-63-15 and 75-1.1. Chapter 75 of our general statutes provides a private cause of action for consumers. Gray v. N.C. Insurance Underwriting Assoc., 352 N.C. 61, 68, 529 S.E.2d 676, 681 (2000). Chapter 58 of our general statutes prohibits unfair methods of competition and unfair and deceptive acts or practices in the business of insurance and grants the Commissioner of Insurance the authority to enforce its provisions. N.C. Gen. Stat. § 58-63-10 (2007); Gray, 552 N.C. at 69, 529 S.E.2d at 682. Unfair claim settlement practices are among the activities prohibited by Chapter 58. N.C. Gen. Stat. § 58-63-15(11) defines unfair claim settlement practices, in relevant part, as:

Committing or performing with such frequency as to indicate a general business practice of any of the following:
b. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
* * *
d. Refusing to pay claims without conducting a reasonable investigation based upon all available information;
g. Compelling [the] insured to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insured;
h. Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled;
m. Failing to promptly settle claims where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage[.]

N.C. Gen. Stat. § 58-63-15(11) (2007). Although § 58-63-15(11) itself does not create a private cause of action, any “conduct that violates subsection (f) of N.C.G.S. § 58-63-15(11) constitutes a violation of N.C.G.S. § 75-1.1, as a matter of law, without the necessity of an ad*47ditional showing of frequency indicating a ‘general business practice[.]’ ” Gray, 352 N.C. at 71, 529 S.E.2d at 683 (additional citation omitted). This Court extended Gray’s holding to “the other prohibited acts listed in N.C. Gen. Stat. § 58-63-15(11),” holding that they “are also acts which are unfair, unscrupulous, and injurious to consumers” and can support a § 75-1.1 claim. Country Club of Johnston County, Inc. v. United States Fid. & Guar. Co., 150 N.C. App. 231, 246, 563 S.E.2d 269, 279 (2002).

Plaintiff specifically alleges that defendant failed to conduct a reasonable and complete investigation before denying plaintiff’s claim — indeed, before speaking directly to plaintiff — and continuing to deny plaintiff’s claim after speaking with plaintiff and receiving an alternate explanation as to why the Montero was driven to the airport. Plaintiff also alleges that defendant failed to follow its claims handling guidelines. These allegations raise genuine issues of material fact, and thus it was improper for the trial court to resolve plaintiff’s Chapter 75 claim by summary judgment.

Accordingly, we hold that the trial court erred by granting partial summary judgment in favor of defendant as to plaintiff’s claim for unfair and deceptive trade practices pursuant to § 75-1.1. We remand this case to the trial court for a trial on the merits of plaintiff’s unfair and deceptive trade practices claim.

Affirmed in part; reversed and remanded in part.

Judge BRYANT concurs. Judge STEELMAN dissents in part and concurs in the result in part by separate opinion.