In Farm Bureau v. Dana, the North Carolina Supreme Court held that the Financial Responsibility Act requires a claimant to treat the per accident limit of coverage as the total sum that is available to all claimants entitled to a share of available UIM coverage, provided that the amount of UIM coverage available to any individual claimant is limited to the per person amount. The decision is a shift from how the Court of Appeals applied the statute in similar past cases, most recently Farm Bureau v. Gurley.

Factual Background

On February 3, 2016, Matthew Bronson operated his vehicle while intoxicated and struck a vehicle being driven by Pamela Dana. Mrs. Dana was killed as a result of the accident, and her passenger, William Dana, was seriously injured. Jessica Jones, a passenger in Bronson’s vehicle, was also killed in the accident, and a third vehicle operated by Joshua Ryan Jeffries was damaged in the accident. Bronson had automobile insurance coverage through Integon National Insurance Company with liability limits of $50,000.00 per person and $100,000.00 per accident. Mrs. Dana was insured under a policy issued by Farm Bureau that included underinsured motorist (UIM) coverage with limits of $100,000 per person and $300,000 per accident.

Integon paid its $100,000 per accident limit and apportioned that amount as follows:

Farm Bureau tendered the full per person limit of $100,000 to Mr. Dana and Mrs. Dana’s estate, less the amount received from Integon’s policy, resulting in the following distribution:

The Danas argued that since the limits of the Integon policy were exhausted on a per-accident basis, they were entitled to UIM coverage calculated as follows: $300,000 per-accident limit minus $100,000 liability coverage paid by Integon = $200,000. As a result, the Danas claimed Farm Bureau owed a total of $75,750 in addition to the amount it had already tendered to the Danas ($200,000 – $124,250= $75,750).

Farm Bureau filed a complaint seeking a declaratory judgment that its $100,000 per person UIM applied. The trial court entered summary judgment in favor of the Danas, holding that the Danas were entitled to the per accident UIM limit of $300,000. The Court of Appeals affirmed and the Supreme Court granted Farm Bureau’s petition for discretionary review of the Court of Appeals’ decision.

UIM Precedent

The Court of Appeals relied on Farm Bureau v. Gurley in affirming the trial court’s decision to apply the per accident UIM limit under the Farm Bureau policy. In Gurley, the Court of Appeals held that when more than one claimant is seeking UIM coverage and the tortfeasor’s liability limit was exhausted on a per person basis, the per person UIM limit applies. However, when the tortfeasor’s liability limit was exhausted on a per accident basis, the per accident UIM limit applies. The Court of Appeals, in Dana, held that Gurley mandated that the Danas receive UIM coverage pursuant to the per accident limit under the Farm Bureau policy.

The Supreme Court’s Decision

The Supreme Court reversed the Court of Appeals’ decision and held that the Financial Responsibility Act requires a claimant to treat the per accident limit of coverage as the total sum that is available to all claimants entitled to a share of the available UIM coverage – subject to the notion that the amount of UIM coverage is limited to the per person amount. In other words, in cases involving multiple claimants, the total amount of UIM coverage available to those claimants is limited by the per accident limit, while the total amount of UIM coverage available to any individual claimant is limited by the per person limit. In reaching this result, the court noted that the rule adopted by the Court of Appeals in Gurley had the stated effect of avoiding an “interpretation of the statute that . . . would result in defendants receiving more compensation than if [the tortfeasor] had been either fully insured or uninsured altogether.” According to the Supreme Court, applying the rule adopted in Gurley to the facts before it “would have exactly the effect that the rule in question was explicitly intended to avoid.”

The case was remanded to the trial court for entry of a judgment declaring that the total amount of UIM coverage made available to the Danas collectively was to be set at the per accident limit of $300,000, with no individual claimant to receive more than the per person limit of $100,000.

Dana’s Impact on Future UIM Claims

The Supreme Court’s decision in Dana effectively overrules the “one size fits all” approach adopted in Gurley and makes it clear that both the per-person and per-accident limits for UIM coverage must be enforced, such that neither limit may be exceeded. Accordingly, when multiple claimants are involved, no individual claimant will be entitled to recover more than the per person UIM limit. This outcome tracks with the plain language of the Financial Responsibility Act and the standard personal auto policy in North Carolina and furthers the intent of UIM coverage.