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Morgan v. State Farm Mutual Automobile Insurance Co.

April 07, 1998

BRADLEY R. MORGAN AND WIFE, TONJA D. MORGAN, AND BRADLEY DALE MORGAN, PLAINTIFFS
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, DEFENDANT



Appeal by plaintiffs from order entered 29 April 1997 by Judge Herbert O. Phillips, III in Carteret County Superior Court. Heard in the Court of Appeals 17 February 1998.

The opinion of the court was delivered by: Timmons-goodson, Judge.

Plaintiffs Bradley R. Morgan, his wife, Tonja D. Morgan, and their son, Bradley Dale Morgan, instituted this declaratory judgment action against defendant State Farm Mutual Automobile Insurance Company (hereinafter "State Farm") in order to resolve the following issues: (1) whether State Farm properly informed them with regards to underinsured (hereinafter "UIM") coverage; (2) whether they had properly rejected UIM coverage; and (3) whether plaintiffs have UIM coverage in the same policy limits as their uninsured (hereinafter "UM") coverage. State Farm subsequently answered, requesting declaratory judgment be entered finding and concluding that it had acted in accordance with the law when it did not add UIM coverage to a policy containing minimum bodily injury limits. Thereafter, State Farm filed a motion for summary judgment, and this motion was heard by Judge Herbert O. Phillips, III during the 11 December 1995 civil session of Carteret County Superior Court. The evidence adduced during hearing tended to show as follows: Plaintiffs transferred their insurance policy to North Carolina State Farm when they moved to North Carolina in January 1990. In June 1991, plaintiffs reduced their automobile insurance coverage. On 14 June 1991, Mrs. Morgan signed an Acknowledgment of Coverage Selection or Rejection, rejecting UM/UIM coverage and selecting UM coverage at limits of $25,000/$50,000 for bodily injury, and $25,000 for property damage. This change would be effective at the next renewal date of 15 July 1991, and would apply to the three vehicles insured by State Farm at that time.

Effective 5 November 1991, North Carolina General Statutes section 20-279.21(b)(4) was amended to allow insureds to select UM or UM/UIM coverage of up to one million dollars, provided that in the case of UIM coverage, the insured carried in excess of a minimum prescribed by law ($25,000/$50,000) for bodily injury. See N.C. Gen. Stat. § 20-279.1, et seq. (1993)(also known as the Motor Vehicle Safety and Financial Responsibility Act of 1953). Accordingly, new Selection/Rejection Forms NCO185 and NCO186 were promulgated and approved by the appropriate authorities. The amendment to the statute applied to new and renewal policies written on or after the effective date of Sections 1 and 2 of the Financial Responsibility Act.

In January 1992, State Farm mailed to plaintiffs a form entitled "URGENT NOTICE State Farm Mutual Automobile Insurance Company Selection/Rejection Form Uninsured Motorists Coverage Combined Uninsured/Underinsured Motorists Coverage" (hereinafter "the Notice"). Therein, it was stated:

IT IS ABSOLUTELY NECESSARY THAT YOU COMPLETE, SIGN AND RETURN THE SELECTION/REJECTION FORM IF YOU WANT TO KEEP YOUR CURRENT COVERAGE. OTHERWISE, COVERAGE U OR U1 WILL BE PROVIDED WITH BODILY INJURY LIMITS OF $1,000,000 PER PERSON/$1,000,000 PER ACCIDENT. THIS WOULD RESULT IN A SUBSTANTIAL PREMIUM INCREASE.

The Notice also indicated that plaintiffs' current bodily injury limits were $25,000/$50,000 and explained that coverage U1 could be carried only if their liability limits for bodily injury were greater that the $25,000/$50,000 required by law. Plaintiffs failed to return this Notice. Plaintiffs renewed their policy, with the appropriate coverage, for at least six semi-annual periods after the 15 July 1991 renewal.

On 23 April 1994, Bradley Dale Morgan was involved in a serious automobile accident with an underinsured motorist. At the time of this accident, plaintiffs had in effect State Farm automobile liability policy number 262 9432-A15-33G. By letter dated 26 May 1994, State Farm advised plaintiff that they did not have UIM coverage, but provided a "CERTIFICATE OF COVERAGE," indicating that plaintiffs' policy afforded UM coverage limits of $1,000,000. Enclosed in this letter was a copy of the Acknowledgment of Coverage Selection or Rejection executed by Mrs. Morgan on 14 June 1991.

After reviewing all of the evidence before him, Judge Phillips entered an order, out of term and out of session with the consent of the parties, granting summary judgment for defendant. Plaintiffs appeal.

Plaintiffs bring forth two arguments on appeal, contending that the trial court erred in granting State Farm's motion for summary judgment. For the reasons set forth herein, we disagree, and therefore, affirm the order of the trial court.

Plaintiffs first argue that summary judgment was inappropriate in the instant case because there was genuine issue of fact as to whether plaintiffs had UIM coverage under their State Farm insurance policy. This argument is unpersuasive.

Summary judgment is a device by which an expeditious end may be brought to unfounded claims or defenses before trial. Pierce Concrete, Inc. v. Cannon Realty & Construction Co., 77 N.C. App. 411, 335 S.E.2d 30 (1985). Summary judgment is appropriately granted 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 any party is entitled to judgment as a matter of law." N.C.R. Civ. P. 56. In a declaratory judgment action where there is no substantial controversy as to the facts disclosed by the evidence, either party may be entitled to summary judgment, since the only matter in controversy is the legal significance of those facts. Blades v. City of Raleigh, 280 N.C. 531, 187 S.E.2d 35 (1972). The moving party bears the burden of establishing the lack of triable issue of fact. Pierce Concrete, 77 N.C. App. 411, 335 S.E.2d 30.

This Court has stated on previous occasions that "`when examining cases to determine whether insurance coverage is provided by a particular automobile liability insurance policy, careful attention must be given to the type of coverage, the relevant statutory provisions, and the terms of the policy.'" Hendrickson v. Lee, 119 N.C. App. 444, 449, 459 S.E.2d 275, 278 (1995)(alteration in original)(quoting Smith v. Nationwide Mutual Ins. Co., 328 N.C. 139, 142, 400 S.E.2d 44, 47, reh'g denied, 328 N.C. 577, 403 S.E.2d 514 (1991)). In the case presently before us, the type of coverage in question is UIM, which is governed by section 20-279.21(b)(4) of the North Carolina General Statutes. See N.C. Gen. Stat. § 20-279.21(b)(4)(1993).

Section 20-279.21(b)(4) of our General Statutes provides as follows:

[Automobile liability insurance policies] [s]hall . . . provide underinsured motorist coverage, to be used only with a policy that is written at limits that exceed those prescribed by subdivision (2) of this section and that afford uninsured motorist coverage as provided by subdivision (3) of this subsection, in an amount not to be less than the financial responsibility amounts for bodily injury liability as set ...


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