N.C. Supreme Court Reverses Court of Appeals in NC Farm Bureau v. Dana

Calculation of UIM Limits Makes Sense Again

21 December 2021

Joe Fulton

Adam Wood

Back in September 2019, the NC Court of Appeals decided N.C. Farm Bureau v. Dana. You can find that post here. It was a significant decision about UIM limits that we thought the Court of Appeals got wrong. Although it was a unanimous decision at the Court of Appeals (not normally subject to further appeal), the NC Supreme Court granted a petition for discretionary review in September 2020. Last week, just over three years after the original decision in the trial court, the NC Supreme Court has now given the final word. It reversed the decision at the Court of Appeals and, in our view, came to the correct result.

The issue was how to determine the applicable UIM limit. In most cases, this is fairly straightforward; but somewhat complicated where there are multiple UIM claimants. It is complicated further where the UIM claimants end up getting less than the per person limits of the liability policy because multiple claimants trigger application of the per accident cap.

There were two UIM claimants in Dana. Their policy provided UIM benefits with coverage of $100,000 per person and $300,000 per accident. The at-fault driver had liability limits of $50,000 per person and $100,000 per accident. Mr. Dana received $32,000 in liability payments while Mrs. Dana’s estate received $43,750; for a collectively total of $75,750 from the at-fault driver’s insurance.

They submitted their UIM claims and were offered the per person policy limit less the payments they received from the underinsured policy. This would result in a UIM payment of $68,000 for Mr. Dana and $56,250 for Mrs. Dana’s estate. Mr. Dana argued that he and his wife’s estate were entitled to the full per accident UIM coverage amount – which would result in them receiving an additional $75,750.

	Per Person Limit (Farm Bureau’s proposal)	Per Accident Limit (The Danas’ proposal)
Underinsured policy limit	50,000	100,000
UIM limit	100,000	300,000
Result	68,000 + 56,250 = 124,250	300,000 – 100,000 = 200,000
	Difference	75,750

 

The Court of Appeal agreed. This was remarkable because it meant ignoring the UIM per person limit. UIM coverage is meant to make up the difference between the UIM limits and the available liability coverage. Whatever the UIM limits are, the claimant should be put in the position they would have been in had the at-fault driver had liability coverage with limits equal to the UIM limits. Here, the two claimants’ total recovery (liability payments plus UIM payments) should have been capped at two times the $100,000 per person UIM limit or $200,000. Under the Court of Appeals decision, the claimants were getting an extra $75,750.00.

The NC Supreme Court reversed the decision of the Court of Appeals. The Court clarified that, in cases involving multiple claimants, each person’s claim is limited to the per person liability limit, all of which (total claims) are limited by the per accident policy. A person may not receive more than the per person limit, and all claimants may not recover beyond the per accident limit. So when the number of claimants reflects these limits (e.g., two claimants to a 100/200 policy) then the analysis starts and ends with the per person limit. Only once these numbers don’t add up (e.g. three claimants to the same 100/200 policy) does the per-occurrence cap become the limiting factor. So the “/” in a policy between the per person and per-occurrence figures is not to be treated as a disjunctive “x or y” but rather as a conjunctive “both x and y.”

The bottom line here is that we are back where we thought we were before the Court of Appeals’ decision in Dana. Both the per person and per accident limit apply. The applicable UIM limit is generally the difference between the per person limit and the liability proceeds paid. If the combination of these limits would subject the UIM insurer to liability above the per accident limits, this total per accident limit has to be allocated among the claimants.

About the Authors:

Joe Fulton is a partner with Martineau King PLLC and focuses much of his practice on representing insurance companies in coverage disputes.  Comments and feedback are welcome.  Joe can be contacted by email at [email protected].

Adam Wood is an associate attorney at Martineau King PLLC and uses his economics and finance background to assist with insurance coverage disputes. Adam can be contacted by email at [email protected].

Important Disclaimer: The above is not legal advice and is made available for educational purposes only.  You should not act upon this information without seeking advice from a lawyer licensed in your own state or jurisdiction.  This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction.  The presentation of this information does not form a lawyer/client relationship.