The Multiple Claimant Exception and UIM Coverage

The North Carolina Court of Appeals issued an opinion earlier this week which shed further light on the multiple claimant exception and the stacking of UIM policies. In Integon National Insurance Co. v. Maurizzio, the court held that “the multiple claimant exception is not triggered simply because there were two injuries in an accident” but instead “applies only when the amount paid to an individual claimant is less than the claimant’s limits of UIM coverage after liability payments to multiple claimants.”

In Maurizzio, Destany Maurizzio was driving a car owned by her grandmother when she was involved in a single car accident. At the time of the accident, Daijah Maurizzio and Desiree’ Maurizzio were passengers in the car driven by Destany, and they both suffered injuries as a result of the accident.

The grandmother’s car was insured under a policy issued by the plaintiff insurance company. The policy provided $50,000 per person and $100,000 per accident liability coverage and $50,000 per person and $100,000 per accident UIM coverage. The claim for Desiree’s injuries was settled within the liability limits of the policy.

However, Daijah suffered permanent injuries as a result of the accident and the expenses incurred for her treatment were alleged to be $200,000.  The plaintiff insurance company paid out $50,000 to Daijah under the liability coverage of the grandmother’s policy.

Although Daijah was not a named insured under the grandmother’s policy, she was insured under the UIM coverage of that policy. In addition, Daijah’s parents were insured under an insurance policy also issued by the plaintiff insurance company, and Daijah was insured under this policy for purposes of UIM coverage since she lived with her parents at the time of the accident. That policy also provided $50,000 per person and $100,000 per accident UIM coverage.

The plaintiff insurance company argued that the grandmother’s vehicle was not an “underinsured motor vehicle” for purposes of Daijah’s personal injury claim, and therefore, it was not obligated to pay under the UIM coverage. The trial court disagreed with the plaintiff’s argument, and the plaintiff appealed.

The court of appeals began its analysis by reviewing the applicable statute. G.S. 20-279.21(b)(4) defines an “underinsured motor vehicle” as follows:

a 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 underinsured motorist coverage for the vehicle involved in the accident and insured under the owner’s policy.

In 2004, this definition was provision was amended to add the following, which subsequently became known as the “multiple claimant exception”:

For purposes of an underinsured motorist claim asserted by a person injured in an accident where more than one person is injured, a highway vehicle will also be an “underinsured highway vehicle” if the total amount actually paid to that person under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the applicable limits of underinsured motorist coverage for the vehicle involved in the accident and insured under the owner’s policy. Notwithstanding the immediately preceding sentence, a highway vehicle shall not be an “underinsured motor vehicle” for purposes of an underinsured motorist claim under an owner’s policy insuring that vehicle unless the owner’s policy insuring that vehicle provides underinsured motorist coverage with limits that are greater than that policy’s bodily injury liability limits.

The purpose of the multiple claimant exception is to prevent “an increase in liability or UIM exposure of the carrier providing coverage for the tortfeasor’s vehicle.” The plaintiff insurance company in Maurizzio argued that because there were two injured claimants in that case, the multiple claimant exception applied, which should keep Daijah from being entitled to UIM coverage because the UIM limits are equal to the liability limits.

In considering the plaintiff’s argument, the court looked at the 2009 court of appeals case, Benton v. Hanford. Like Maurizzio, Benton involved a single car accident. The car was insured under a Nationwide policy which provided $50,000 per person and $100,000 per accident liability coverage and $50,000 per person and $100,000 per accident UIM coverage. The plaintiff  was also insured as a household resident under a Progressive policy which provided $100,000 per person UIM coverage.

Progressive argued that the plaintiff’s vehicle was not an “underinsured motor vehicle” because the UIM limits in the Nationwide policy were equal to the liability limits in that policy. The court noted that the North Carolina Supreme Court has stated that the purpose of the Financial Responsibility Act (which this provision is a part of)

is to compensate the innocent victims of financially irresponsible motorists. The Act is remedial in nature and is to be liberally construed so that the beneficial purpose intended by its enactment may be accomplished. The purpose of the Act . . . is best served when every provision of the Act is interpreted to provide the innocent victim with the fullest possible protection.

Keeping this purpose in mind, the court in Benton held that “applicable UIM coverage may be stacked interpolicy to calculate the applicable limits of underinsured motorist coverage for the vehicle involved in the accident for the purpose of determining if the tortfeasor’s vehicle is an underinsured highway vehicle.”

The Benton court also held that the multiple claimant exception applied “only to accidents with multiple claimants.” Because there was a single claimant in Benton, the court held that it was not applicable to that case.

The plaintiff insurance company tried to distinguish Benton from Maurizzio because there were two claimants in Maurizzio, not just one. The court, however, reasoned that amendment creating the multiple claimant exception and the Benton holding “clearly establish the multiple claimant exception is not triggered simply because there were two injuries in an accident” but instead “applies only when the amount paid to an individual claimant is less than the claimant’s limits of UIM coverage after liability payments to multiple claimants.”

Although there were two claimants in Maurizzio, the payment of Desiree’s claim did not reduce the amount of liability coverage available to Daijah. She still received the full $50,000 per person liability limit. Therefore, the court concluded that the multiple claimant exception did not apply to this case.

Because the multiple claimant exception did not apply, the court used the general definition of “underinsured motor vehicle” to determine the UIM coverage, and the UIM policies were stacked to calculate the UIM limits. The grandmother’s policy provided $50,000 per person UIM coverage and the parents’ policy provided $50,000 per person UIM coverage, for a total of $100,000 UIM coverage. The $100,000 total UIM coverage is more than the $50,000 in liability coverage under the grandmother’s policy, so the grandmother’s vehicle is an “underinsured motor vehicle” and Daijah is entitled to the UIM coverage.

If you have been injured in a car accident, contact an attorney at Rosensteel Fleishman, PLLC (704) 714-1450, to discuss your options.