Insurance and Subrogation Rights in North Carolina Car Accident Cases

carInsurance coverage can be a significant issue in car accident lawsuits. In a recent North Carolina appellate case, an insurer appealed from the trial court’s order dismissing its complaint. The insurer was authorized and licensed to issue insurance policies in North Carolina. Its insured was insured under a business auto policy. This policy had a limit of $100,000.00 in uninsured motorist (“UM”) and underinsured motorist (“UIM”) coverage through an endorsement. There was also another insured person listed.

The insured was riding as a passenger inside the car owned by the other insured when another driver’s vehicle crossed the center line and crashed into the car. After this, a third vehicle hit the car. Both of the insured people were hurt in the collision and sought medical care. The passenger asserted her medical expenses were more than $58,000, while the driver claimed medical expenses of more than $104,000.00. Five others were also hurt in the accident, but they weren’t involved in the lawsuit.

When the accident happened, the other car was insured under an auto liability insurance policy issued by Integon/GMAC. The policy limits for that policy were $30,000 per person and $60,000 per accident.

The third driver was insured by Allstate, and his policy limits were $100,000 per person and $300,000 per accident. He also had a Mercury policy with a limit of $250,000 per person. Since multiple claims were asserted against the second driver, its insurer tendered the limits of its coverage to the passenger and driver, as well as five other accident victims. The passenger got $10,420, and the driver got $16,127.52. Farm Bureau was told that the other insurer had tendered the policy limits.

The passenger and driver claimed that the other driver was an uninsured motorist under the Farm Bureau policy. Farm Bureau offered to pay the uninsured motorist claims for $73,452.48, which was the policy limit minus the liability settlements that the passenger and driver had gotten from the second driver’s insurer. The letter offered to waive Farm Bureau’s subrogation rights to a referenced claim. Subrogation is what happens when an insurer pays an insured for a loss that a third party has caused. Once payment is made, the insurer steps into the shoes of the insured so that it can sue the third party for the loss the insured suffered.

The referenced claim only addressed the second driver’s insurer’s tender of the policy limits to the passenger and driver. The offer was conditioned on the execution of a release and trust agreement for underinsured motorist coverage.

The Settlement Agreement also preserved Farm Bureau’s subrogation rights against anyone else from whom the passenger and driver recovered damages. It required them to hold any damages in trust to be paid to Farm Bureau, based on the subrogation rights. The defendants struck this paragraph and signed only the altered agreement. After that, they asserted claims against the driver of the third car for their damages based on his negligence. Farm Bureau claimed its subrogation rights against the possible recovery.

It also sued to determine and establish its rights in 2015. The driver and passenger told Farm Bureau their claims against the third driver, and his insurers settled for $140,000 and $75,000, respectively. They asked the trial court to dismiss the Farm Bureau complaint. Before the hearing, however, the insurer amended the complaint to ask for monetary damages. The trial court granted the motion to dismiss for failure to state a claim. Farm Bureau appealed.

It argued that the trial court shouldn’t have granted the motion to dismiss for failure to state a claim. It argued that its subrogation claims were prohibited by the statute of limitations and that the breach of its policies happened when the driver and passenger reached a settlement with the third driver’s insurer, and they refused to pay Farm Bureau under the subrogation clause of the driver’s policy.

The driver and passenger argued that the breach of the policy happened when they marked out the subrogation clause of the policy and sent a letter to Farm Bureau saying they wouldn’t honor the subrogation rights. The statute of limitations for a breach of contract lawsuit is three years, and a claim accrues when one party gets notice of the breach by the other.

The appellate court disagreed with the insurer about the timing of the breach. It explained that the Farm Bureau complaint on its face claimed that the driver and passenger breached their contract in 2012 when they expressly stated their intent not to honor the subrogation clause. Farm Bureau didn’t start its complaint based on subrogation rights until May 2015, which was more than three years after the driver and passenger expressed their intent to breach in March 2012. The dismissal was affirmed.

If you were hurt in a car accident, the attorneys at Maurer Law may be able to help you. Contact us at 919-229-8359 or via our online form for a consultation.

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