NC Supreme Court Affirms UIM Stacking For Passengers In At-fault Vehicle

October 13, 2021   |   Jon Moore

NC Farm Bureau Mut Ins. Co, Inc. v. Lunsford
Opinion Filed: Aug. 13, 2021
Attorney for the Case: Jason Burton
NCAJ Amicus Brief Writers:  Jon Moore, Doug Maynard
Supreme Court
of North Carolina No. 242A20

Judy Lunsford, a North Carolina resident, was a passenger in her sister’s vehicle, a Chevy Silverado, while the two were traveling through Alabama. Lunsford’s sister was a resident of Tennessee, and the Silverado was insured pursuant to an automobile liability policy issued in Tennessee. Lunsford’s sister lost control of the Silverado, traveled over the median and into oncoming traffic where the Silverado was struck by a tractor-trailer. As a result of the collision, Lunsford was seriously injured and her sister fatally injured.

The Silverado was insured by a Tennessee auto policy providing liability coverage of $50,000/$100,000. The same policy also provided Underinsured Motorist (UIM) coverage in the same amounts. This Tennessee policy paid its $50,000 per person liability limits to Lunsford for bodily injuries sustained in the wreck. Subsequently, Lunsford sought UIM benefits under her own North Carolina auto policy issued by North Carolina Farm Bureau (NCFB), which afforded benefits in the amount of $50,000 per person. NCFB denied Lunsford’s claim for benefits on the grounds that the Silverado could not be considered an underinsured motor vehicle pursuant to Tennessee law, and its Tennessee insurance policy, and therefore the Silverado’s UIM benefits could not be stacked in order for Lunsford to recover UIM benefits under her policy with NCFB. In other words, NCFB claimed that the only UIM coverage Lunsford could claim was its $50,000 of benefits, which was offset by the $50,000 Lunsford received from the Silverado’s auto liability policy.

NCFB filed a declaratory judgment action, and the trial court agreed that Lunsford was not entitled to UIM benefits under her auto policy with NCFB because the Silverado could not be considered an “underinsured vehicle” under the Tennessee policy which incorporated Tennessee law. Lunsford appealed this decision, and the Court of Appeals affirmed in a 2-1 decision. Curiously, however, the Court of Appeals affirmed the trial court’s decision by eschewing any analysis as to whether North Carolina or Tennessee law applied, but rather simply stated that Lunsford was not entitled to “stack” the Silverado’s UIM coverage with her own UIM coverage because she and her sister were not residents of the same household.

Lunsford appealed the COA’s decision, and NCAJ joined as amicus. In support of NCFB, the North Carolina Association of Defense Attorneys (NCADA) filed an amicus brief. In perhaps a first of its kind, both parties and both amicus were all in agreement that the reasoning of the COA majority was completely wrong. NCFB and NCADA nonetheless argued that the result was correct because Tennessee law prohibited the Silverado from being considered an “underinsured vehicle,” and therefore its UIM benefits were unavailable to be stacked.

In its amicus brief, NCAJ argued that North Carolina law applied to the stacking analysis, and urged the Supreme Court to formally adopt the Court of Appeals’ 2009 holding in Benton v. Hanford which permitted a passenger in an at-fault vehicles to use that vehicle’s UIM coverage for stacking purposes so as to access all other UIM policies under which the passenger could be considered an “insured.”

In a 4-3 decision, the Supreme Court reversed the Court of Appeals and held that Lunsford was entitled to recover UIM benefits under her policy with NCFB. In so holding, the Supreme Court stated that North Carolina law applied, and it was unnecessary to look at Tennessee law, or interpret the Silverado’s insurance policy which incorporated Tennessee law. The Court held it would be improper to look at the tortfeasor’s insurance contract to determine the rights of the injured party under the injured party’s own automobile insurance contract. The Court instead interpreted the General Assembly’s intent in writing North Carolina’s Financial Responsibility Act to conclude that since the FRA is remedial in nature, the limits of UIM coverage under the tortfeasor’s policy should be considered and incorporated under North Carolina law for the protection of North Carolina residents who purchase auto policies issued in North Carolina. The Court stated: “[t]he availability of UIM coverage Lunsford obtained should not be contingent on the tortfeasor fortuitously residing in a state whose elected officials share the North Carolina General Assembly’s concern for protecting injured insureds to the same extent.” In so holding, the Court effectively affirmed the prior UIM stacking decisions of the COA, including Benton. This outcome benefiting all NC insureds was made possible by the persistence of NCAJ member Jason Burton who represented Judy Lunsford. Special thanks go to Doug Maynard who partnered with me to write the amicus brief as well as to Mike Adkins, Hunt Willis and Mike Doran, all of whom provided invaluable guidance.