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The North Carolina Reinsurance Facility v. Causey

Court of Appeals of North Carolina

June 4, 2019

THE NORTH CAROLINA REINSURANCE FACILITY, Petitioner,
v.
MIKE CAUSEY, COMMISSIONER OF THE NORTH CAROLINA DEPARTMENT OF INSURANCE, and ALLSTATE INDEMNITY COMPANY, Respondents.

          Heard in the Court of Appeals 7 May 2019.

          Appeal by petitioner from order entered 6 September 2018 by Judge R. Allen Baddour, Jr. in Wake County Superior Court. No. 17 CVS 15538

          Young Moore and Henderson, P.A., by Walter E. Brock, Jr. and Angela Farag Craddock, for petitioner-appellant.

          Parker Poe Adams & Bernstein LLP, by Catharine Biggs Arrowood, for respondent-appellee.

          ARROWOOD, JUDGE.

         The North Carolina Reinsurance Facility ("petitioner" or "the Facility") appeals from the superior court's order denying petitioner's petition for review and affirming an order of the North Carolina Commissioner of Insurance ("the Commissioner") that reversed petitioner's denial of a reimbursement to Allstate Indemnity Company ("respondent" or "Allstate"). For the reasons that follow, we reverse and remand.

          I. Background

         On 25 October 2007, Allstate issued an automobile insurance policy to Mr. Jason T. Crouse ("Mr. Crouse") that was ceded to the Facility, "a nonprofit unincorporated legal entity . . . consisting of all insurers licensed to write and engaged in writing within this State motor vehicle insurance or any component thereof[, ]" N.C. Gen. Stat. § 58-37-5 (2017), "which insures drivers who the insurers determine they do not want to individually insure." Discovery Ins. Co. v. N.C. Dep't of Ins., __ N.C.App. __, __, 807 S.E.2d 582, 585 (2017) (citation and internal quotation marks omitted).

         Mr. Crouse purchased this policy through Allstate agent Ms. Jeannie Scott ("Ms. Scott") in North Carolina. Less than a month later, on 2 November 2007, Mr. Crouse was involved in an automobile accident in Clearwater, Florida. Mr. Crouse's vehicle collided with a bicycle operated by a minor, Mr. Matthew R. Hanna ("Mr. Hanna"). Mr. Hanna suffered traumatic brain damage and other serious injuries.

         Mr. Crouse reported the accident to Ms. Scott on 5 November 2007. She informed him that he had to call a 1-800-Allstate telephone number to report the loss. However, there is no indication in the record that Mr. Crouse ever called the 1-800-Allstate telephone number, nor that Allstate received any additional notice of the claim until after Mr. Hanna's parents had hired counsel. The Hannas filed a complaint against Mr. Crouse in Florida state court on 15 January 2008, seeking damages from the accident.

         On 18 January 2008, a paralegal in the law office representing the Hannas called the 1-800-Allstate telephone number to report the claim, but did not notify Allstate that legal action had commenced against Mr. Crouse. Allstate opened a claim file and began investigating the claim that same day. The adjuster assigned to the case interviewed Mr. Crouse, hired counsel to represent him, and created an accident reconstruction. Within five days, Allstate authorized the tender of the policy limit of $50, 000.00 to the Hannas on 23 January 2008. Allstate formally tendered this offer on 1 February 2008. The Hannas rejected this offer on 14 February 2008.

         Mr. Crouse entered into a stipulated settlement with the Hannas on 6 September 2012, whereby he consented to the entry of a $13, 800, 000.00 judgment against him and assigned his "claims, rights, and interests in the policy . . . as against Allstate . . . for any failure to settle or otherwise administer his automobile claims arising out of the Accident." As part of this settlement, the Hannas agreed not to take affirmative actions to record or execute the judgment against Mr. Crouse. The final judgment was entered on 7 September 2012.

         The Hannas filed a complaint against Allstate in the Middle District of Florida on 10 September 2012. The complaint alleged Allstate breached its duty of good faith to Mr. Crouse by failing to: (1) timely and reasonably affirmatively seek out a settlement of the claims in the Hanna matter; (2) communicate the exposure Mr. Crouse faced, and to offer advice on how to minimize this exposure; and (3) adopt and implement standards and procedures for timely and proactive investigation and resolutions of claims and/or failing to follow such standards Allstate had adopted. The matter went to trial, and the jury returned a verdict on 3 March 2014 that determined Allstate had acted in bad faith by failing to settle the claims arising out of the Hanna matter. The trial court entered a $13, 800, 000.00 judgment against Allstate on 4 February 2014. Allstate appealed the judgment, but eventually settled the matter on 29 September 2015 for $11, 000, 000.00.

         Allstate filed a petition for reimbursement with the Facility on 30 October 2015. The Facility's claims committee heard the matter on 1 February 2017. On 9 May 2017, the claims committee recommended the denial of Allstate's petition. Allstate objected to the claims committee's recommendation, and requested a hearing before the Facility's Board ("the Board"). The Board heard the matter, and denied the petition for reimbursement on 14 July 2017.

         Allstate appealed to the Commissioner pursuant to N.C. Gen. Stat. § 58-37-65(a) (2017). The matter came on for hearing before the Commissioner's designated hearing officer, Hearing Officer A. John Hoomani, Esq., on 30 October 2017. The Commissioner ordered the Board to reconsider its ruling because its denial of Allstate's petition was not in accordance with the Facility Act, the Facility's Plan of Operation, and the Facility's Standard Practice Manual.

         The Facility petitioned for judicial review of the Commissioner's order on 21 December 2017, and named both Allstate and the Commissioner as a respondent on appeal. The Commissioner moved to dismiss himself as a party.

         The matter came on for hearing before the Honorable R. Allen Baddour, Jr. on 31 July 2018 in Wake County Superior Court. The trial court granted the Commissioner's motion to dismiss, entered an order denying the Facility's petition for review, and affirmed the Commissioner's order.

         The Facility appeals.

         II. Discussion

         Petitioner argues the trial court erred by affirming the Commissioner's order because the Commissioner: (1) failed to apply paragraph C.2. of Section 5 of the Facility's Standard Practice Manual ("Rule 5.C.2.") according to its plain meaning; and (2) erroneously determined petitioner's grounds for the denial of Allstate's petition were not in accordance with the Facility Act, the Facility's Plan of Operation, and the Facility's Standard Practice Manual. We agree with petitioner that the superior court's affirming the Commissioner was error due to failure to apply Facility Rule 5.C.2. according to its plain meaning. Therefore, we reverse and remand, and do not reach the second issue on appeal.

          A. Stand ...


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