NC Farm Bureau Mut Ins Co, Inc. v. Lunsford

NCAJ filed an amicus brief in the North Carolina Supreme Court in support of the Defendant-Insured in a declaratory judgment action instituted by the Defendant’s automobile insurance company. The Defendant-Insured was severely injured in a motor vehicle collision caused by the driver of the vehicle in which she was a passenger. This at-fault driver was insured by a Tennessee liability policy with $50,000 in liability coverage and $50,000 in Underinsured Motorist (UIM) coverage. The Defendant-Insured had $50,000 in UIM coverage under her own auto policy issued by NCFB.

The trial court ruled in favor of NCFB’s request for Declaratory Judgment, and held that the at-fault vehicle in which the Defendant-Insured was a passenger was not an “underinsured vehicle.” As such, the trial court ruled that no benefits were available under the Defendant-Insured’s NCFB policy since the limits of NCFB’s UIM coverage equaled the liability coverage under the Tennessee insurance policy. In a 2-1 Opinion authored by Judge Chris Brook (in which Judge Donna Stroud “concurred in the result”), the Court of Appeals affirmed the trial court’s ruling. The Opinion stated that North Carolina law controlled the analysis, and because the Defendant-Insured was a “Class II insured” (e.g., occupant of the vehicle) of the at-fault vehicle, she was not allowed to stack UIM benefits under the at-fault vehicle’s policy in order to access her own UIM benefits under the NCFB policy. The Opinion indicated that had the Defendant-Insured been a “Class I insured” (e.g., named insured or resident relative of the named insured), she would have been allowed to stack UIM benefits under the at-fault vehicle’s policy, and thus receive UIM benefits under her NCFB policy. In support of its position, NCFB contended Tennessee law controlled the interpretation of the Tennessee policy; however, the Opinion contained no discussion of this choice-of-law contention, and appeared to hold that North Carolina law controlled.

NCAJ filed an amicus brief arguing that the Opinion wrongly created a distinction between “Class I” and “Class II” insureds that is at odds with established North Carolina Supreme Court precedent, and directly conflicts with prior decisions of the Court of Appeals. Namely, in 2009, the Court of Appeals in the case of Benton v. Hanford, held that a “Class II” insured (e.g., occupant of the vehicle) was allowed to stack UIM benefits under an at-fault vehicle’s policy when the insured was an occupant of that vehicle. Benton was a significant victory for NCAJ members, in that it beat back repeated efforts by insurers to limit available insurance coverage to innocent victims. The logic of the Court of Appeals’ decision in Lunsford directly conflicts with the Benton decision, and is already being used by automobile insurers to deny UIM coverage to “Class II” insureds injured while a passenger in the at-fault vehicle. While pointing out this conflict with prior Court of Appeals’ authority, as well as Supreme Court authority, NCAJ’s amicus brief argued that the North Carolina Supreme Court should affirm the rights of “Class II” insureds to stack UIM coverage on the vehicle in which they were injured.