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  "name": "NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY v. MILDRED J. HILLIARD and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY",
  "name_abbreviation": "North Carolina Farm Bureau Mutual Insurance v. Hilliard",
  "decision_date": "1988-06-21",
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  "casebody": {
    "judges": [
      "Chief Judge Hedrick and Judge Phillips concur."
    ],
    "parties": [
      "NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY v. MILDRED J. HILLIARD and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY"
    ],
    "opinions": [
      {
        "text": "EAGLES, Judge.\nIn this declaratory judgment action between two insurance companies to determine the order of payment to an individual insured under two separate underinsurance policies, the trial court ordered Hilliard\u2019s \u201cown insurer,\u201d Farm Bureau, to pay first. We reverse and remand.\nSince this accident occurred on 8 July 1985, the 1983 version of G.S. 20-279.21 applies. The General Assembly has amended the statute twice since. The only issues before us are the order of payment between the two insurers and the amount of each insurer\u2019s share of the settlement figure.\n\u201cUnderinsurance\u201d provides a type of insurance coverage that allows an insured to be indemnified by his own insurer, in whole or in part, for damages caused by a negligent motorist who is insured inadequately. 2 A. Widiss, Uninsured and Underinsured Motorist Insurance Section 32.1. G.S. 20-279.21(b)(4) defines an underinsured highway vehicle as\na highway vehicle with respect to the ownership, maintenance, or use of which, the sum of the limits of liability under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the applicable limits of liability under the owner\u2019s policy.\nBoth insurance companies agree that Hilliard is an insured under their respective policies and that she is entitled to underin-surance coverage from both. State Farm argues, however, that there is a fundamental difference between the two policies which makes the State Farm policy excess to the Farm Bureau policy. State Farm points out that Hilliard had an explicit contractual relationship with Farm Bureau since she directly paid and contracted for her policy with Farm Bureau. Hilliard was a State Farm insured only as a third-party beneficiary based on her sister\u2019s purchase of an automobile liability policy with State Farm. State Farm argues that since Hilliard made no premium payments on the State Farm policy, she must look first to Farm Bureau for indemnification of her damages. We disagree.\nState Farm\u2019s underinsurance provision provides that any family member is a covered person. In addition, our Supreme Court has ruled that the Motor Vehicle Safety-Responsibility Act (Act), G.S. 20-279.1 et seq., becomes a part of every insurance liability policy written. Insurance Co. v. Chantos, 293 N.C. 431, 238 S.E. 2d 597 (1977).\nFor uninsurance and underinsurance coverage G.S. 20-279.21 (b)(3) establishes two separate classes of insureds. Crowder v. N.C. Farm Bureau Mut. Ins. Co., 79 N.C. App. 551, 554, 340 S.E. 2d 127, 129, disc. rev. denied, 316 N.C. 731, 345 S.E. 2d 387 (1986). The statute\u2019s first class of \u201cpersons insured\u201d are \u201cthe named insured and, while resident of the same household, the spouse of any such named insured and relatives of either, while in a motor vehicle or otherwise.\u201d G.S. 20-279.21(b)(3). Hilliard and her sister, State Farm\u2019s named insured, lived in the same household. Accordingly, Hilliard was a \u201cperson insured\u201d under the State Farm policy. Further, she was in this first class of insureds under both policies.\nIn Crowder this Court explicitly \u201callow[ed] underinsured motorist coverage for insureds operating, or riding in, a nonowned vehicle.\u201d [Emphasis in original.] Crowder at 555, 340 S.E. 2d at 130. The insured there was the named insured\u2019s minor son. Implicit in the Crowder holding was the idea that who actually paid the premiums for insurance coverage was irrelevant to the issue of whether or not coverage applied. See also Hunt v. State Farm Mut. Ins. Co., 349 So. 2d 642 (Fla. Dist. Ct. App. 1977). Similarly here, we reject the argument that these two policies should be treated differently as a matter of law. We decline to discriminate between these two insurance policies based upon the fact that the insured actually paid the premiums on one policy, and a third party paid the premiums on the other. So long as an insured falls within the same class of insureds established by G.S. 20-279.21 (b)(3) under both policies, we see no merit in making that distinction.\nWe have found no provision of the Act which expressly establishes a statutory priority of payment among different insurance policies. We note that G.S. 20-279.21\u00dc) does allow an insurance liability policy to \u201cprovide for the prorating of the insurance thereunder with other valid and collectible insurance.\u201d\nInsurance policies are contracts. \u201c[T]he parties\u2019 intent must be examined in order to properly construe each policy.\u201d Reliance Ins. Co. v. Lexington Ins. Co., 87 N.C. App. 428, 434, 361 S.E. 2d 403, 407 (1987). Where there are two policies, they must be .construed separately, each according to its individual terms. Allstate Insurance Co. v. Shelby Mutual Insurance Co., 269 N.C. 341, 152 S.E. 2d 436 (1967). The only evidence of the contracting parties\u2019 intent is the policies.\nHere each policy\u2019s uninsured motorist provision contains the following identical \u201cother insurance\u201d paragraph.\nIf this policy and any other auto insurance policy issued to you apply to the same accident, the maximum limit of liability for your injuries under all the policies shall not exceed the highest applicable limit of liability under any one policy. In addition, if there is other applicable similar insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance.\nBy making its policy \u201cexcess\u201d each company attempted to limit the amount it must indemnify its insured when he is injured in a nonowned vehicle. See Carrier Ins. Co. v. Policyholders\u2019 Ins. Co., 404 A. 2d 216 (Me. 1979). Excess insurance clauses generally provide \u201cthat if other valid and collectible insurance covers the occurrence in question, the \u2018excess\u2019 policy will provide coverage only for liability above the maximum coverage of the primary policy.\u201d Horace Mann Insurance Co. v. Continental Casualty Co., 54 N.C. App. 551, 555, 284 S.E. 2d 211, 213 (1981). When \u201cexcess\u201d clauses in several policies are identical and determination of which policy is primary is impossible, the clauses are deemed mutually repugnant and neither excess clause will be given effect. Alliance Mutual Ins. Co. v. Central Ins. Co., 70 N.C. App. 140, 318 S.E. 2d 524 (1984).\nWhen excess clauses are mutually repugnant, the majority rule in other jurisdictions requires the insured\u2019s claim to be prorated between the two insurers according to their respective policy limits. E.g., Buckeye U. Ins. Co. v. State Auto. Mut. Ins. Co., 49 Ohio St. 2d 213, 361 N.E. 2d 1052 (1977). This rule \u201cassures indemnification for the insured up to the maximum amount of coverage afforded by each policy.\u201d Id. at 1054.\nOn the other hand, a minority of jurisdictions have ruled that the two insurers should pay the damages equally up to the maximum limits of the smaller policy. E.g., Carrier Ins. Co., 404 A. 2d at 221. The rationale for this rule is that the majority rule discriminates against larger policies and amounts to a subsidy from the large coverage policies in favor of small coverage policies. Furthermore, proponents of this rule argue that the majority rule does society a disservice by discouraging large coverage policies. Id. at 222.\nHere, the language of the respective insurance policies compels us to conclude that the two insurers must share the Hilliard settlement on a pro rata basis. Because the nonowned vehicle clauses are mutually repugnant, we read the policies as if those clauses were not present. Each policy also has language that \u201cif there is other applicable similar insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits.\u201d\nWithin their respective uninsured motorist provisions each policy specifically defines \u201climit of liability.\u201d The definition, in each policy provides, in part:\nAny amounts otherwise payable for damages under this coverage shall be reduced by all sums:\n1. Paid because of the bodily injury or property damage by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A; and\n2. Paid or payable because of the bodily injury under any of the following or similar law:\na. workers\u2019 compensation law; or\nb. disability benefits law.\nNo payment will be made for loss paid or payable to the covered person under Part D or any policy of property insurance.\nAny payment to any person under this coverage will reduce any amount that person is entitled to recover for the same damages under Part A.\nEach policy limits coverage to the damages not paid by the tortfeasor or his insurer. Here Hilliard received $21,571.22 from Allstate and waived payment of an additional $3,428.78 for a total of $25,000. The two insurance companies together have indemnified Hilliard for her remaining damages, $50,000. Based on the plain language of each insurer\u2019s respective \u201climit of liability\u201d clause, Farm Bureau was liable for a maximum of $25,000 and State Farm was liable for a maximum of $75,000. The maximum or \u201ctotal of all applicable limits\u201d that Hilliard could have collected from both underinsurance carriers was $100,000, one-fourth from Farm Bureau and three-fourths from State Farm. Accordingly, we hold that Farm Bureau must pay one-fourth ($12,500) and State Farm must pay three-fourths ($37,500) of Ms. Hilliard\u2019s damages. We reverse the judgment below and remand for entry of a judgment consistent with this opinion.\nReversed and remanded.\nChief Judge Hedrick and Judge Phillips concur.",
        "type": "majority",
        "author": "EAGLES, Judge."
      }
    ],
    "attorneys": [
      "Henson Henson Bayliss & Coates, by Paul D. Coates, for plaintiff-appe llant.",
      "DeBank, McDaniel, Heidgerd, Holbrook & Anderson, by Douglas F. DeBank, for defendant-appellee."
    ],
    "corrections": "",
    "head_matter": "NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY v. MILDRED J. HILLIARD and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY\nNo. 8710SC1147\n(Filed 21 June 1988)\nInsurance \u00a7 92\u2014 automobile insurance \u2014 underinsurance policies \u2014order of payment\nIn a declaratory judgment action between two insurance companies to determine the order of payment to an individual insured under two separate underinsurance policies, defendant Hilliard\u2019s insurer, Farm Bureau, must pay one-fourth of Hilliard\u2019s damages and State Farm must pay three-fourths of her damages even though Hilliard was a State Farm insured only as a third-party beneficiary based on her sister\u2019s policy. The court declined to discriminate between the two policies based upon the fact that the insured actually paid the premiums on one policy and a third party paid the premiums on the other because Hilliard fell within the same class of insureds, under both policies; the non-owned vehicle clauses were mutually repugnant and the policies were read as if those clauses were not present; the policies had identical other insurance clauses with language limiting payment to the proportion that the policy\u2019s limit of liability bears to the total of all applicable limits; and Farm Bureau was liable for a maximum of $25,000 and State Farm for a maximum of $75,000. N.C.G.S. \u00a7 20-279.21(b)(3).\nAppeal by plaintiff from Preston, Judge. Judgment entered 27 August 1987 in Superior Court, Wake County. Heard in the Court of Appeals 6 April 1988.\nThis is a declaratory judgment action in which North Carolina Farm Bureau Mutual Insurance Company (Farm Bureau) seeks a declaration of its obligations as well as the obligations of State Farm Mutual Automobile Insurance Company (State Farm) under their respective insurance policies arising from a settlement entered into by both companies with their insured, Mildred J. Hilliard.\nOn 8 July 1985, while a passenger in a car driven by Linda Skinner, Ms. Hilliard was injured when struck by a car driven by Debra Branch. Hilliard claimed damages of $75,000. Because Branch\u2019s negligence caused the accident, her insurance company, Allstate Insurance Company (Allstate), assumed responsibility for payment of damages to the injured.\nBranch\u2019s liability policy had limits of $25,000 per person and $50,000 maximum per accident. Integon Insurance Company insured the Skinner vehicle but the policy did not include underin-surance coverage. At the time of the accident Hilliard had an automobile insurance policy with Farm Bureau which included un-derinsurance coverage up to $50,000 per person. Because Hilliard lived with her sister, her sister\u2019s automobile insurance policy with State Farm also provided insurance coverage for her at the time of the accident. The State Farm policy provided underinsurance coverage up to a maximum of $100,000.\nAllstate paid the limits of its policy to those injured in the accident. Hilliard received $21,571.22 from Allstate in partial settlement of her claim. She then made demand for her remaining damages upon Farm Bureau and State Farm pursuant to their respective policies\u2019 underinsurance provisions. Hilliard subsequently waived recovery of $3,428.78 and accepted payment of $50,000 from Farm Bureau and State Farm in settlement of her claim.\nAt trial State Farm argued, and the trial court ordered, that \u201cMildred J. Hilliard should look first to her own insurer.\u201d The order obligated Farm Bureau and State Farm to pay $25,000 each toward the Hilliard settlement. Farm Bureau appeals.\nHenson Henson Bayliss & Coates, by Paul D. Coates, for plaintiff-appe llant.\nDeBank, McDaniel, Heidgerd, Holbrook & Anderson, by Douglas F. DeBank, for defendant-appellee."
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