in the Court of Appeals 7 May 2019.
by plaintiffs from judgment entered 31 August 2018 by Judge
Rebecca W. Holt in Wake County Superior Court, No. 17 CVS 955
M. Kirby for plaintiff-appellants.
& Dixon, LLP, by David S. Wisz, for defendant-appellee.
Ha ("Ms. Ha") and Nhiem Tran ("Mr. Tran")
(collectively, "plaintiffs") appeal from a judgment
dismissing their complaint in part, and declaring Nationwide
General Insurance Company ("defendant" or
"Nationwide") properly cancelled the
homeowner's insurance policy it issued to plaintiffs. For
the reasons stated herein, we reverse and remand.
Tran contacted Nationwide on or about 1 April 2015 to secure
a homeowner's insurance policy for plaintiffs' home.
Nationwide issued the policy that same day.
about 14 April 2015, Nationwide's underwriting department
sent an inspector to plaintiffs' home. The inspector
issued a report on 25 April 2015, identifying several hazards
he discovered at the home: (1) rotten siding, (2) an
unsecured trampoline, and (3) an unfenced inground pool.
Based on this report, Nationwide decided to cancel
plaintiffs' policy. The underwriter who made this
decision contacted Ms. Brenda Elkerson, a Nationwide employee
whose job responsibilities include drafting written notices
of policy cancellations, and asked her to prepare a notice
cancelling plaintiffs' policy. Ms. Elkerson drafted the
letter and sent a memo to the agent on plaintiffs' policy
regarding the cancellation. The letter of cancellation listed
the hazards identified by the inspector as the reason for the
policy's cancellation, and explained the specific steps
plaintiffs could take to ameliorate the hazards to reinstate
coverage. The letter, dated 22 May 2015, gave plaintiffs
until 6 June 2015 to address the hazards. If they did not,
Nationwide would cancel the policy at 12:01 a.m. on 6 June
Elkerson instructed Nationwide's processing department to
print the cancellation letter for mailing. The certificate of
mail report maintained by Nationwide shows that the
cancellation letter was presented for mailing on 22 May 2015.
Although the letter was not returned to Nationwide,
plaintiffs never received it.
July 2015, a fire destroyed plaintiffs' home. When
plaintiffs contacted Nationwide to file a claim, they were
informed they were not insured, as the policy had been
cancelled. Thereafter, plaintiffs retained legal counsel to
pursue a claim for reimbursement, which Nationwide denied by
letter on 1 October 2015.
initiated an action against defendant by filing a complaint
in Wake County Superior Court on 24 January 2017, seeking
damages for breach of contract and a declaratory judgment
that Nationwide did not timely and properly cancel the
policy. Nationwide answered and asserted a counterclaim
requesting a declaratory judgment that it properly cancelled
matter came on for hearing before the Honorable Rebecca W.
Holt in Wake County Superior Court on 27 August 2018. On 31
August 2018, the trial court entered a judgment dismissing
plaintiffs' breach of contract claim, and declaring:
"Nationwide has no duty or obligation under the Policy
to make payment to the Plaintiffs for the damage to the
Residence and its contents which resulted from the loss on
the grounds that the Policy was timely and properly
cancelled." The trial court taxed the costs of the
action to plaintiffs.
argue the trial court erred by concluding Nationwide complied
with: (1) N.C. Gen. Stat. § 58-41-15(c) (2017), and (2)
the insurance policy's termination requirements. Because
we agree with plaintiffs that the trial court erred by
concluding Nationwide complied with N.C. Gen. Stat. §
58-41-15(c), we reverse and do not reach the second issue on
reviewing a trial judge's findings of fact, we are
strictly limited to determining whether the trial judge's
underlying findings of fact are supported by competent
evidence, in which event they are conclusively binding on
appeal, and whether those factual findings in turn support
the . . . ultimate conclusions of law." State v.
Navarro, __ N.C.App. __, __, 787 S.E.2d 57, 62 (2016)
(citations and internal quotation marks omitted).
"Conclusions of law are reviewed de novo and are subject
to full review." State v. Biber, 365 N.C. 162,
168, 712 S.E.2d 874, 878 (2011).
Gen. Stat. § 58-41-15 governs the cancellation of
homeowners' insurance policies. Pursuant to this section,
an insurer may only cancel an insurance policy, or renewal
thereof "prior to the expiration of the term or
anniversary date stated in the policy and without the prior
written consent of the insured" if the insurer cancels
for one of the reasons listed in N.C. Gen. Stat. §
58-41-15(a), which are:
(1) Nonpayment of premium in accordance with the policy
(2) An act or omission by the insured or his representative
that constitutes material misrepresentation or nondisclosure
of a material fact in obtaining the policy, continuing the
policy, or presenting a claim under the policy;
(3) Increased hazard or material change in the risk assumed
that could not have been reasonably contemplated by the
parties at the time of assumption of the risk;
(4) Substantial breach of contractual duties, conditions, or
warranties that materially affects the insurability of the
(5) A fraudulent act against the company by the insured or
his representative that materially affects the insurability
of the risk;
(6) Willful failure by the insured or his representative to
institute reasonable loss control measures that materially
affect the insurability of the risk after written notice by
(7) Loss of facultative reinsurance, or loss of or
substantial changes in applicable reinsurance as provided in
(8) Conviction of the insured of a crime arising out of acts
that materially affect the insurability of the risk; or
(9) A determination by the Commissioner that the continuation
of the policy would place the insurer in violation of ...