{ "id": 8525416, "name": "G. WALLACE NEWTON and NEWTON INSTRUMENT COMPANY, INC. v. UNITED STATES FIRE INSURANCE COMPANY, a corporation and NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION", "name_abbreviation": "Newton v. United States Fire Insurance", "decision_date": "1990-06-05", "docket_number": "No. 8914SC959", "first_page": "619", "last_page": "628", "citations": [ { "type": "official", "cite": "98 N.C. App. 619" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "362 S.E.2d 559", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1987, "pin_cites": [ { "page": "562" } ], "opinion_index": 0 }, { "cite": "321 N.C. 236", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2569579 ], "year": 1987, "opinion_index": 0, "case_paths": [ "/nc/321/0236-01" ] }, { "cite": "325 S.E.2d 244", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1985, "pin_cites": [ { "page": "249" }, { "page": "247" } ], "opinion_index": 0 }, { "cite": "312 N.C. 710", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4749409 ], "year": 1985, "pin_cites": [ { "page": "716" } ], "opinion_index": 0, "case_paths": [ "/nc/312/0710-01" ] }, { "cite": "574 F.2d 1176", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 926621 ], "weight": 2, "year": 1978, "pin_cites": [ { "page": "1178" } ], "opinion_index": 0, "case_paths": [ "/f2d/574/1176-01" ] }, { "cite": "348 S.E.2d 794", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1986, "pin_cites": [ { "page": "796" } ], "opinion_index": 0 }, { "cite": "318 N.C. 378", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4736888 ], "year": 1986, "pin_cites": [ { "page": "380" } ], "opinion_index": 0, "case_paths": [ "/nc/318/0378-01" ] } ], "analysis": { "cardinality": 653, "char_count": 19088, "ocr_confidence": 0.741, "pagerank": { "raw": 2.2521854316157112e-07, "percentile": 0.7816724063835382 }, "sha256": "dd20b2f6880d40dd48bdb09c6ad9f7d3007581e7c7fe2398347cd2cbff4a896f", "simhash": "1:147dc5580e9f9f3a", "word_count": 3040 }, "last_updated": "2023-07-14T19:26:07.401162+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges WELLS and GREENE concur." ], "parties": [ "G. WALLACE NEWTON and NEWTON INSTRUMENT COMPANY, INC. v. UNITED STATES FIRE INSURANCE COMPANY, a corporation and NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION" ], "opinions": [ { "text": "EAGLES, Judge.\nThis case involves appeals by three different parties. For the reasons stated below, we reverse the entry of summary judgment against U.S. Fire on NCIGA\u2019s cross-claim and remand for entry of summary judgment in favor of U.S. Fire. Therefore, NCIGA is the primary insurer for Riley\u2019s claims against NIC and Newton. Regarding plaintiffs\u2019 appeals, we affirm the entry of summary judgment in favor of NCIGA on the claims of NIC based on the exclusivity of the workers\u2019 compensation remedy but reverse the entry of summary judgment in favor of NCIGA on the claims of Newton.\nU.S. Fire Insurance Company\u2019s Appeal\nThe question raised by U.S. Fire\u2019s appeal is whether the trial court erred in granting summary judgment in favor of NCIGA on its cross-claim against U.S. Fire. The trial court determined that the provisions of the U.S. Fire policy were ambiguous and that the contract must be construed in favor of the insured. Therefore, the trial court concluded that the U.S. Fire policy \u201cdropped down\u201d to become the primary insurer and, as between U.S Fire and NCIGA, U.S. Fire was the carrier primarily liable for the claims in the Riley litigation. Our review of the U.S. Fire policy leads us to the conclusion that U.S. Fire\u2019s coverage does not \u201cdrop down\u201d and become primary coverage. Therefore, summary judgment in favor of NCIGA on the cross-claim was improper.\nIn North Carolina, it is well settled that when construing an insurance policy a court must enforce the policy as written, \u201cwithout rewriting the contract or disregarding the express language used.\u201d Fidelity Bankers Life Ins. Co. v. Dortch, 318 N.C. 378, 380, 348 S.E.2d 794, 796 (1986). The U.S. Fire insurance policy provides that:\nThe Company agrees to pay on behalf of the insured the ultimate net loss in excess of the retained limit hereinafter stated, which the insured may sustain by reason of the liability imposed upon the insured by law, or assumed by the insured under contract, for:\n(a) Bodily Injury Liability,\n* * *\narising out of an occurrence.\nThe policy also provides that the \u201cretained limit\u201d is the greater of:\n(a) the total of the applicable limits of the underlying policies listed in Schedule A hereof, and the applicable limits of any other insurance collectible by the insured; or\n(b) the self-insured retention stated in Item 4(c) of the declarations as the result of all occurrences not covered by said underlying insurance, and which shall be borne by the insured, separately as respects each annual period of this policy.\nThe policy provisions recited above are almost identical to the provisions involved in Molina v. United States Fire Ins. Co., 574 F.2d 1176 (4th Cir. 1978). In Molina the court stated that\n[u]nder its policies U. S. Fire agreed to pay on [the insured\u2019s] behalf \u201cthe ultimate net loss in excess of the retained limit which the insured shall become legally obligated to pay,\u201d and the \u201cretained limit\u201d is defined as \u201cthe total of the applicable limits of the underlying policies listed in Schedule A.\u201d .... Clearly the obligation of U. S. Fire was to pay only the ultimate net loss in excess of the policy limits of the primary coverage of [the insolvent underlying carrier\u2019s] policies.\nId. at 1178.\nNCIGA argues that because the word \u201ccollectible\u201d is used in the definition of \u201cretained limit,\u201d U.S. Fire\u2019s coverage should drop down to become primary coverage. We disagree. The word \u201ccollectible,\u201d as used in this policy, clearly modifies only the second part of subsection (a) in the definition of retained limit and applies only to insurance policies that are not listed in Schedule A of the policy. Plaintiffs\u2019 policy with Iowa National was listed in Schedule A and the applicable limit of that policy was $500,000. Under the terms of the contract, U.S. Fire was not obligated to cover any claim against plaintiffs unless the claim was greater than $500,000 regardless of whether that $500,000 was \u201ccollectible.\u201d We note the possibility of a \u201cgap\u201d in coverage that may occur when a primary carrier becomes insolvent since the statutory cap on NCIGA\u2019s liability here is $300,000. However, there is no \u201cgap\u201d here since Riley\u2019s claims amounted to $185,000.\nNCIGA also argues there is significance in an amendatory endorsement in U.S. Fire\u2019s policy with plaintiffs. The endorsement replaced a provision that expressly addressed the liability of U.S. Fire in the event of the insolvency of an underlying insurer. The deleted provision stated that \u201c[i]n the event there is no recovery available to the insured as a result of the bankruptcy or insolvency of the underlying Insurer, the coverage hereunder shall apply in excess of the applicable limit of liability specified in Schedule A.\u201d This particular provision was not a part of U.S. Fire\u2019s policy with plaintiffs. The provision was replaced with language that does not expressly address U.S. Fire\u2019s obligations when an underlying insurer becomes insolvent.. NCIGA argues that the change in this provision renders the the policy ambiguous on the \u201cdrop down\u201d issue. We disagree. The record discloses that when the policy here was originally issued, it already included the amendatory endorsement. Therefore, the \u201coriginal provision\u201d that expressly addressed the liability of U.S. Fire on the insolvency of an underlying insurer was never part of plaintiffs\u2019 contract with U.S. Fire. Since there was no \u201cchange\u201d in plaintiffs\u2019 policy with U.S. Fire, there is no ambiguity.\nBased on the clear language of the contract U.S. Fire is not liable for claims against plaintiffs that are less than $500,000. The claim involved in this case was for $185,000. If either carrier is liable for the claims arising out of the Riley litigation, the carrier liable is NCIGA. Therefore, the trial court erred in granting summary judgment in favor of NCIGA on its cross-claim against U.S. Fire; U.S. Fire was entitled to summary judgment.\nPlaintiffs\u2019 Appeal\nBecause of our determination of the \u201cdrop down\u201d issue, the remaining issue is whether the Riley litigation claims are covered by plaintiffs\u2019 policy with Iowa National and by the Insurance Guaranty Association Act. We find that the claims against NIC were not covered since Riley\u2019s exclusive remedy against NIC was under the Workers\u2019 Compensation Act. We also agree with the trial court that there are outstanding issues regarding Newton\u2019s personal liability. Newton would be personally liable to Riley only if Newton\u2019s conduct is found to be willful, wanton and reckless negligence. Additionally, we find there is an issue of fact whether the potential claims are excluded from coverage by the Iowa National policy. Therefore, we conclude that summary judgment in favor of NCIGA on Newton\u2019s claims was improperly granted.\n(A) Claims against Newton.\nThe issues involved here are whether the actions alleged in the Riley litigation subject Newton to common law liability and, if so, is that liability covered by the Iowa National policy and the Insurance Guaranty Association Act. The trial court concluded that \u201ca disputed issue of material fact exists with respect to whether the claims against Newton were excluded from the coverages of the policies issued to [NIC].\u201d We agree.\n\u201c[T]he Workers\u2019 Compensation Act does not shield a co-employee from common law liability for willful, wanton and reckless negligence.\u201d Pleasant v. Johnson, 312 N.C. 710, 716, 325 S.E.2d 244, 249 (1985). However, the Act is the exclusive remedy for an employee who is injured by the ordinary negligence of a co-employee. Id. at 713, 325 S.E.2d at 247. G.S. 97-2(2) defines \u201cemployee\u201d as \u201cevery person engaged in an employment under any appointment or contract of hire .... [and e]very executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation shall be considered as an employee of such corporation under this Article.\u201d Riley and Newton were co-employees under the Act.\nThere is an issue of fact whether the allegations contained in the Riley litigation amount to willful, wanton and reckless negligence. Additionally, whether the Iowa National policy and the Insurance Guaranty Association Act cover Riley\u2019s claims against Newton is in issue.\nNCIGA argues that because two exclusions from the policy apply, Riley\u2019s claims are not covered. The policy provides that:\nThis insurance does not apply:\n* * *\n(i) to any obligation for which the insured or any carrier as his insurer may be held liable under any workmen\u2019s compensation, unemployment compensation or disability benefits law, or under any similar law;\n(j) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury; but this exclusion does not apply to liability assumed by the insured under an incidental contract^]\nNCIGA argues that paragraph (i) excludes Riley\u2019s claims against Newton from the policy\u2019s coverage. We disagree. Because they were co-employees Newton was not individually liable to Riley under the Workers\u2019 Compensation Act for the injuries Riley sustained.\nNCIGA also asserts that paragraph (j) excludes Riley\u2019s claims against Newton from the policy\u2019s coverage. Newton argues that NIC assumed liability for Riley\u2019s injuries in its contract with Manpower. After careful review of the record, we have determined there is an issue whether NIC assumed liability for Riley\u2019s injury in its contract with Manpower. Although the parties have asserted different arguments in regard to this contract, the contract is not in the record before us. Therefore, we cannot determine whether Newton\u2019s individual liability is insured by the Iowa National policy.\n(B) Claims against NIC.\nRiley\u2019s claim against NIC was based solely on vicarious liability. NIC argues that this cause of action was recently suggested by our Supreme Court in Abernathy v. Consolidated Freightways Corp., 321 N.C. 236, 362 S.E.2d 559 (1987). We disagree and affirm the entry of summary judgment in favor of defendants on the claims of NIC.\nPlaintiff relies on language from Abernathy where the Court stated that \u201cwe find it unnecessary to decide, or even consider, whether an employer may be held vicariously liable in a civil action by one of its employees for the willful, wanton or reckless conduct of its other employees, arising out of and in the course of their employment.\u201d Id. at 241, 362 S.E.2d at 562. NIC asserts that the Supreme Court\u2019s use of this language suggests that the Court will consider an additional exception to the exclusivity of the Workers\u2019 Compensation Act with respect to vicarious liability of employers for the willful, wanton and reckless negligence of their employees. We disagree.\nOur reading of Abernathy draws us to the conclusion that when the Supreme Court employed the language quoted above, the Court was simply disposing of all of the parties\u2019 arguments. The Court had determined that the employee\u2019s actions were merely negligent, as a matter of law, and that there was no basis for finding the employee had acted in a willful, wanton or recklessly negligent manner. Therefore, the Court was merely stating that since there was no basis for liability of the co-employee there was no reason to discuss the possibility of the employer\u2019s vicarious liability. We find no merit in NIC\u2019s argument and decline further to extend the established exceptions to the exclusivity of workers\u2019 compensation benefits.\nFor the reasons stated, we reverse the entry of summary judgment in favor of NCIGA on its cross-claim and remand for entry of summary judgment in favor of U.S. Fire. Additionally, we affirm the entry of summary judgment in favor of NCIGA against NIC. We reverse summary judgment in favor of NCIGA against Newton and remand for trial.\nAffirmed in part, reversed in part and remanded.\nJudges WELLS and GREENE concur.", "type": "majority", "author": "EAGLES, Judge." } ], "attorneys": [ "Yates, Fleishman, McLamb & Weyher, by Joseph W. Yates, III and Bruce W. Berger, for plaintiff-appellants.", "Nichols, Caffrey, Hill, Evans & Murrelle, by William L. Stocks, for defendant-appellee/appellant United States Fire Insurance Company.", "Moore & Van Allen, by Joseph W. Eason, Christopher J. Blake and Kelley Dixon Moye, for defendant-appellee North Carolina Insurance Guaranty Association." ], "corrections": "", "head_matter": "G. WALLACE NEWTON and NEWTON INSTRUMENT COMPANY, INC. v. UNITED STATES FIRE INSURANCE COMPANY, a corporation and NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION\nNo. 8914SC959\n(Filed 5 June 1990)\n1. Insurance \u00a7 149 |NCI3d)\u2014 liability insurance \u2014 primary insurer bankrupt \u2014 Insurance Guaranty Association \u2014 umbrella insurer not primary insurer\nWhere plaintiffs\u2019 primary liability insurer in an amount of $500,000.00 was declared bankrupt after an injury to a third party, the N.C. Insurance Guaranty Association became plaintiffs\u2019 insurer in the amount of $300,000.00, and plaintiffs also had an umbrella policy with a second insurer at the time of the injury, the umbrella policy did not \u201cdrop down\u201d and become the primary liability coverage for a $185,000.00 claim by the injured third party because, under the terms of the umbrella policy, the second insurer was not obligated to cover any claim against plaintiffs unless the claim was greater than $500,000.00 regardless of whether that $500,000.00 was \u201ccollectible.\u201d\nAm Jur 2d, Insurance \u00a7 103.\n2. Master and Servant \u00a7 89.1 (NCI3d) \u2014 injury to worker \u2014willful negligence by co-employee \u2014common law liability \u2014genuine issue of fact\nA genuine issue of material fact existed as to whether alleged actions by an injured worker\u2019s co-employee amounted to willful, wanton and reckless negligence so as to subject the co-employee to common law liability to the injured worker.\nAm Jur 2d, Master and Servant \u00a7\u00a7 398, 399; Workmen\u2019s Compensation \u00a7\u00a7 67, 330, 331.\n3. Insurance \u00a7 149 (NCI3d) \u2014 employee\u2019s claim against co-employee \u2014 employer\u2019s liability insurance \u2014 policy exclusions\nAn injured worker\u2019s claim against a co-employee individually was not excluded from coverage under the employer\u2019s liability policy by a provision excluding coverage for an obligation for which the insured may be held liable under the workers\u2019 compensation law since the co-employee was not individually liable to the injured worker under the Workers\u2019 Compensation Act. However, there was an issue of fact as to whether the employer assumed liability for the employee\u2019s injuries in a contract with a temporary employment service so that a policy exclusion for bodily injury to an employee arising out of and in the course of the employment would not apply.\nAm Jur 2d, Master and Servant \u00a7\u00a7 398, 399; Workmen\u2019s Compensation \u00a7\u00a7 67, 330, 331.\n4. Master and Servant \u00a7 89.1 (NCI3d)\u2014 willful negligence by co-employee \u2014 vicarious liability of employer \u2014Workers\u2019 Compensation Act as exclusive remedy\nThe Workers\u2019 Compensation Act was an employee\u2019s exclusive remedy against the employer based on vicarious liability for the willful, wanton and reckless negligence of a co-employee.\nAm Jur 2d, Master and Servant \u00a7\u00a7 398, 399; Workmen\u2019s Compensation \u00a7\u00a7 67, 330, 331.\nAPPEAL by plaintiffs and defendant United States Fire Insurance Company from order entered 14 April 1989 and by plaintiffs from order entered 7 July 1989 by Judge Howard E. Manning, Jr. in DURHAM County Superior Court. Heard in the Court of Appeals 13 March 1990.\nThis is a declaratory judgment action. At issue is which of the defendants, if either, is liable for a previously settled claim against plaintiffs. The previously settled claim arose out of litigation between plaintiffs here and David Riley. Riley sued plaintiffs, alleging that he was injured on 2 May 1984 while working with a press brake on the premises of plaintiff Newton Instrument Company, Inc. (NIC). Riley alleged that his injuries were caused by the negligence of NIC and G. Wallace Newton (Newton). Riley\u2019s employment with NIC was arranged through Manpower Temporary Services.\nOn the date of the injury plaintiffs were insured against liability for bodily injury by Iowa National Insurance Company (Iowa National) in the amount of $500,000. Iowa National was declared bankrupt on 10 October 1985. Upon Iowa National\u2019s insolvency, under G.S. 58-48-35(a) (formerly G.S. 58-155.48) the North Carolina Insurance Guaranty Association (NCIGA) became plaintiffs\u2019 insurer in the amount of $300,000. NCIGA undertook the defense in the Riley litigation under a reservation of rights. On the date of the injury plaintiffs also had an \u201cumbrella\u201d policy with defendant United States Fire Insurance Company (U.S. Fire).\nPlaintiffs demanded that NCIGA and U.S. Fire settle the Riley litigation. Defendants refused to settle on plaintiffs\u2019 behalf, each asserting that it did not provide liability insurance coverage to plaintiffs for the allegations contained in the Riley litigation. Additionally, NCIGA and U.S. Fire asserted that workers\u2019 compensation benefits were Riley\u2019s exclusive remedy. Notwithstanding the workers\u2019 compensation argument, plaintiffs, without the consent of NCIGA or U.S. Fire, settled the Riley litigation for $185,000.\nPlaintiffs brought this suit to collect its settlement expenses and to determine the relative liabilities of the two insurance carriers. NCIGA answered and cross-claimed against U.S. Fire. NCIGA denied that the Riley litigation was a \u201ccovered claim\u201d under the Insurance Guaranty Association Act, G.S. 58-48-1, et seq. (formerly G.S. 58-155.41, et seq.). Additionally, NCIGA cross-claimed against U.S. Fire, alleging that U.S. Fire had primary liability and that NCIGA was entitled to reimbursement of defense costs incurred in the Riley litigation. U.S. Fire answered and denied liability. All parties moved for summary judgment on all claims.\nIn an order filed 14 April 1989 the trial court denied plaintiffs\u2019 motions; granted both defendants\u2019 motions as to NIC, finding that Riley was an employee of NIC at the time of his injury and therefore his injuries were covered by workers\u2019 compensation and expressly excluded from coverage by defendants\u2019 policies; denied U.S. Fire\u2019s motion as to Newton, finding that there was a genuine issue whether the claims in the Riley litigation were covered by U.S. Fire\u2019s policy; granted NCIGA\u2019s motion as to Newton; and, regarding the cross-claim, found that U.S. Fire\u2019s coverage \u201cdropped down\u201d when Iowa National became insolvent and U.S. Fire became the primary insurer. Therefore, the trial court held that if at trial U.S. Fire is deemed liable for Riley\u2019s claim against Newton, U.S. Fire must also reimburse NCIGA for defense costs incurred in the Riley litigation.\nU.S. Fire appeals the disposition of the cross-claim summary judgment motions and the denial of its motion for summary judgment on the claims of Newton. Plaintiffs moved for alteration or amendment of the judgment under Rule 59(e), asking the court to strike the paragraph in the judgment that stated there was \u201cno just reason for delay.\u201d Plaintiffs\u2019 motion was denied in an order entered 7 July 1989. Plaintiffs appeal the denial of their Rule 59(e) motion and the entries of summary judgment against them.\nYates, Fleishman, McLamb & Weyher, by Joseph W. Yates, III and Bruce W. Berger, for plaintiff-appellants.\nNichols, Caffrey, Hill, Evans & Murrelle, by William L. Stocks, for defendant-appellee/appellant United States Fire Insurance Company.\nMoore & Van Allen, by Joseph W. Eason, Christopher J. Blake and Kelley Dixon Moye, for defendant-appellee North Carolina Insurance Guaranty Association." }, "file_name": "0619-01", "first_page_order": 647, "last_page_order": 656 }