GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

S	1 

SENATE BILL 808*

Short Title:  Uninsured/Underinsured Motorist Coverage.    	(Public)
─────────────────────────────────────── 
Sponsors: Senator Soles.
─────────────────────────────────────── 
Referred to:  Insurance.
─────────────────────────────────────── 

April 6, 1989

A BILL TO BE ENTITLED
AN ACT TO AMEND THE LAWS ON UNINSURED MOTORIST AND UNDERINSURED MOTORIST INSURANCE COVERAGE IN LIGHT OF RECENT APPELLATE COURT DECISIONS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 20-279.21(b)(3) reads as rewritten:
"(3)	No policy of bodily injury liability insurance, covering liability arising out of the ownership, maintenance, or use of any motor vehicle, shall be delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in subsection (c) of G.S. 20-279.5, under provisions filed with and approved by the Commissioner of Insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, an insured is entitled to secure additional coverage up to the limits of bodily injury liability in the owner's policy of liability insurance that he carries for the protection of third persons. Such provisions shall include coverage for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of injury to or destruction of the property of such insured, with a limit in the aggregate for all insureds in any one accident of up to the limits of property damage liability in the owner's policy of liability insurance, and subject, for each insured, to an exclusion of the first one hundred dollars ($100.00) of such damages. Such provision shall further provide that a written statement by the liability insurer, whose name appears on the certification of financial responsibility made by the owner of any vehicle involved in an accident with the insured, that such other motor vehicle was not covered by insurance at the time of the accident with the insured shall operate as a prima facie presumption that the operator of such other motor vehicle was uninsured at the time of the accident with the insured for the purposes of recovery under this provision of the insured's liability insurance policy. The coverage required under this subdivision shall not be applicable where any insured named in the policy shall reject the coverage. If the named insured rejects the coverage required under this subdivision, the insurer shall not be required to offer the coverage in any renewal, reinstatement, substitute, amended, altered, modified, transfer or replacement policy unless the named insured makes a written request for the coverage. Rejection of this coverage for policies issued after October 1, 1986, shall be made in writing by the named insured on a form promulgated by the North Carolina Rate Bureau and approved by the Commissioner of Insurance.
	In addition to the above requirements relating to uninsured motorist insurance, every policy of bodily injury liability insurance covering liability arising out of the ownership, maintenance or use of any motor vehicle, which policy is delivered or issued for delivery in this State, shall be subject to the following provisions which need not be contained therein.
a.	A provision that the insurer shall be bound by a final judgment taken by the insured against an uninsured motorist if the insurer has been served with copy of summons, complaint or other process in the action against the uninsured motorist by registered or certified mail, return receipt requested, or in any manner provided by law; provided however, that the determination of whether a motorist is uninsured may be decided only by an action against the insurer alone. The insurer, upon being served as herein provided, shall be a party to the action between the insured and the uninsured motorist though not named in the caption of the pleadings and may defend the suit in the name of the uninsured motorist or in its own name. The insurer, upon being served with copy of summons, complaint or other pleading, shall have the time allowed by statute in which to answer, demur or otherwise plead (whether such pleading is verified or not) to the summons, complaint or other process served upon it. The consent of the insurer shall not be required for the initiation of suit by the insured against the uninsured motorist: Provided, however, no action shall be initiated by the insured until 60 days following the posting of notice to the insurer at the address shown on the policy or after personal delivery of such notice to the insurer or its agent setting forth the belief of the insured that the prospective defendant or defendants are uninsured motorists. No default judgment shall be entered when the insurer has timely filed an answer or other pleading as required by law. The failure to post notice to the insurer 60 days in advance of the initiation of suit shall not be grounds for dismissal of the action, but shall automatically extend the time for the filing of an answer or other pleadings to 60 days after the time of service of the summons, complaint, or other process on the insurer.
b.	Where the insured, under the uninsured motorist coverage, claims that he has sustained bodily injury as the result of collision between motor vehicles and asserts that the identity of the operator or owner of a vehicle (other than a vehicle in which the insured is a passenger) cannot be ascertained, the insured may institute an action directly against the insurer: Provided, in such event, the insured, or someone in his behalf, shall report the accident within 24 hours or as soon thereafter as may be practicable, to a police officer, peace officer, other judicial officer, or to the Commissioner of Motor Vehicles. The insured shall also within a reasonable time give notice to the insurer of his injury, the extent thereof, and shall set forth in such notice the time, date and place of such injury. Thereafter, on forms to be mailed by the insurer within 15 days following receipt of the notice of the accident to the insurer, the insured shall furnish to insurer such further reasonable information concerning the accident and the injury as the insurer shall request. If such forms are not so furnished within 15 days, the insured shall be deemed to have complied with the requirements for furnishing information to the insurer. Suit may not be instituted against the insurer in less than 60 days from the posting of the first notice of such injury or accident to the insurer at the address shown on the policy or after personal delivery of such notice to the insurer or its agent.
		The failure to post notice to the insurer 60 days in advance of the initiation of the suit shall not be grounds for dismissal of the action, but shall automatically extend the time for filing of an answer or other pleadings to 60 days after the time of service of the summons, complaint, or other process on the insurer.
		Provided under this section the term ‘uninsured motor vehicle' shall include, but not be limited to, an insured motor vehicle where the liability insurer thereof is unable to make payment with respect to the legal liability within the limits specified therein because of insolvency.
		An insurer's insolvency protection shall be applicable only to accidents occurring during a policy period in which its insured's uninsured motorist coverage is in effect where the liability insurer of the tort-feasor becomes insolvent within three years after such an accident. Nothing herein shall be construed to prevent any insurer from affording insolvency protection under terms and conditions more favorable to the insured than is provided herein.
		In the event of payment to any person under the coverage required by this subdivision, the insurer making the payment has the right of subrogation.
		For the purpose of this section, an ‘uninsured motor vehicle' shall be a motor vehicle as to which there is no bodily injury liability insurance and property damage liability insurance in at least the amounts specified in subsection (c) of G.S. 20-279.5, or there is such insurance but the insurance company writing the same denies coverage thereunder, or has become bankrupt, or there is no bond or deposit of money or securities as provided in G.S. 20-279.24 or 20-279.25 in lieu of such bodily injury and property damage liability insurance, or the owner of such motor vehicle has not qualified as a self-insurer under the provisions of G.S. 20-279.33, or a vehicle that is not subject to the provisions of the Motor Vehicle Safety and Financial Responsibility Act; but the term ‘uninsured motor vehicle' shall not include:
a.	A motor vehicle owned by the named insured;
b.	A motor vehicle which is owned or operated by a self-insurer within the meaning of any motor vehicle financial responsibility law, motor carrier law or any similar law;
c.	A motor vehicle which is owned by the United States of America, Canada, a state, or any agency of any of the foregoing (excluding, however, political subdivisions thereof);
d.	A land motor vehicle or trailer, if operated on rails or crawler-treads or while located for use as a residence or premises and not as a vehicle; or
e.	A farm-type tractor or equipment designed for use principally off public roads, except while actually upon public roads.
		For purposes of this section ‘persons insured' means the 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, and any person who uses with the consent, expressed or implied, of the named insured, the motor vehicle to which the policy applies and a guest in such motor vehicle to which the policy applies or the personal representative of any of the above or any other person or persons in lawful possession of such motor vehicle.
		The fact that a ‘person insured' did not personally pay all or part of a premium on a policy under which that person makes a claim or did not purchase similar coverage, which is the basis of a present claim, for another vehicle under his ownership, does not bar his right to insurance coverage if a policy provides for the same to him as a ‘person insured'.
		In the event there are multiple claimants, after a judgment or settlement, seeking payment under the coverage provided by this subdivision, and the claimants are unable to agree upon their respective shares of the payments, the insurer providing the coverage shall apportion payment to those claimants according to the proportion their damages bear to the total amount of coverage available to those claimants."
Sec. 2.  G.S. 20-279.21(b)(4) reads as rewritten:
"(4)	Shall, in addition to the coverages set forth in subdivisions (2) and (3) of this subsection, provide underinsured motorist coverage, to be used only with policies that are written at limits that exceed those prescribed by subdivision (2) of this section and that afford uninsured motorist coverage as provided by subdivision (3) of this subsection, in an amount equal to the policy limits for automobile bodily injury liability as specified in each owner's policy under which a claimant claims underinsured motorist coverage. An ‘uninsured motor vehicle,' as described in subdivision (3) of this subsection, includes an ‘underinsured highway vehicle,' which means 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 liability under the owner's policy. For the purposes of this subdivision, the term ‘highway vehicle' means a land motor vehicle or trailer other than (i) a farm-type tractor or other vehicle designed for use principally off public roads and while not upon public roads, (ii) a vehicle operated on rails or crawler-treads, or (iii) a vehicle while located for use as a residence or premises. The provisions of subdivision (3) of this subsection shall apply to the coverage required by this subdivision. Underinsured motorist coverage shall be deemed to apply when, by reason of payment of judgment or settlement, all liability bonds or insurance policies providing coverage for bodily injury caused by the ownership, maintenance, or use of the underinsured highway vehicle have been exhausted. Exhaustion of such liability coverage for purpose of any single liability claim presented for underinsured motorist coverage shall be deemed to occur when either (a) the limits of liability per claim have been paid upon such claim, or (b) by reason of multiple claims, the aggregate per occurrence limit of liability has been paid. Underinsured motorist coverage shall be deemed to apply to the first dollar of an underinsured motorist coverage claim beyond amounts paid to the claimant pursuant to the exhausted liability policy.
		In any event, the limit of underinsured motorist coverage applicable to any claim is determined to be the difference between the total amount paid to the claimant pursuant to the exhausted liability policy or policies and the total limits of underinsured motorist coverages provided in the policies of insurance under which the claimant is claiming underinsured motorist coverage; it being the intent of this paragraph to provide to the claimant, in instances where more than one policy may apply, the benefit of all limits of liability of underinsured motorist coverage under all such policies: Provided that this paragraph shall apply only to nonfleet private passenger motor vehicle insurance as defined in G.S. 58-131.36(9) and (10).  If more than one underinsured motorist coverage is liable to make payments to a claimant, only the underinsured motorist coverage, which by contractual language in the policy has the primary duty to make payment to a claimant prior to other underinsured motorist coverages that may apply, has the right to deduct from its policy limits and subsequent payment the total amount paid to a claimant by liability policies involving the accident and claim in question.  Other underinsured motorist coverages that may apply shall be liable to the full extent of their policy limits.
		An underinsured motorist insurer may at its option, upon a claim pursuant to underinsured motorist coverage, pay moneys without there having first been an exhaustion of the liability insurance policy covering the ownership, use, and maintenance of the underinsured highway vehicle. In the event of such payment, the underinsured motorist insurer shall be either: (a) entitled to receive by assignment from the claimant any right or (b) subrogated to the claimant's right regarding any claim the claimant has or had against the owner, operator, or maintainer of the underinsured highway vehicle, provided that the amount of the insurer's right by subrogation or assignment shall not exceed payments made to the claimant by the insurer. No insurer shall exercise any right of subrogation or any right to approve settlement with the original owner, operator, or maintainer of the underinsured highway vehicle under a policy providing coverage against an underinsured motorist where the insurer has been provided with written notice in advance of a settlement between its insured and the underinsured motorist and the insurer fails to advance a payment to the insured in an amount equal to the tentative settlement within 30 days following receipt of such notice. Further, the insurer shall have the right, at its election, to pursue its claim by assignment or subrogation in the name of the claimant, and the insurer shall not be denominated as a party in its own name except upon its own election. Assignment or subrogation as provided in this subdivision shall not, absent contrary agreement, operate to defeat the claimant's right to pursue recovery against the owner, operator, or maintainer of the underinsured highway vehicle for damages beyond those paid by the underinsured motorist insurer. The claimant and the underinsured motorist insurer may join their claims in a single suit without requiring that such insurer be named as a party. Any claimant who intends to pursue recovery against the owner, operator, or maintainer of the underinsured highway vehicle for moneys beyond those paid by the underinsured motorist insurer shall prior to doing so give notice to such insurer and give such insurer, at its expense, the opportunity to participate in the prosecution of such claim. Upon the entry of judgment in a suit upon any such claim in which the underinsured motorist insurer and claimant are joined, payment upon such judgment, unless otherwise agreed to, shall be applied pro rata to the claimant's claim beyond payment by the insurer of the owner, operator or maintainer of the underinsured highway vehicle and the claim of the underinsured motorist insurer.
		A party injured by the operation of an underinsured highway vehicle who institutes a suit for the recovery of moneys for such injuries and in such an amount that, if recovered, would support a claim under underinsured motorist coverage shall give notice of the initiation of the suit to the underinsured motorist insurer as well as to the insurer providing primary liability coverage upon the underinsured highway vehicle. Upon receipt of such notice, the underinsured motorist insurer shall have the right to appear in defense of such claim without being named as a party therein, and without being named as a party may participate in such suit as fully as if it were a party. The underinsured motorist insurer may elect, but may not be compelled, to appear in such action in its own name and present therein a claim against other parties; provided that application is made to and approved by a presiding superior court judge. However, prior to approving any such application, the court shall be persuaded that the owner, operator, or maintainer of the underinsured highway vehicle against whom a claim has been made has been apprised of the nature of the proceeding and given his right to select counsel of his own choice to appear in such action on his separate behalf. In the event that an underinsured motorist insurer, following the approval of such application, pays in settlement or partial or total satisfaction of judgment moneys to the claimant, such insurer shall be subrogated to or entitled to an assignment of the claimant's rights against the owner, operator, or maintainer of the underinsured highway vehicle and, provided that adequate notice of right of independent representation was given to such owner, operator, or maintainer, a finding of liability or the award of damages shall be res judicata between the underinsured motorist insurer and the owner, operator, or maintainer of underinsured highway vehicle.  A full and total release from liability of a tortfeasor by a claimant under underinsured motorist coverage does not bar the claimant, in either a court action against the tortfeasor or direct settlement with an underinsured motorist coverage carrier, from making a claim against one or more policies offering underinsured motorist coverage to the claimant, where the liability coverages afforded the tortfeasor have been exhausted by full payments of liability limits.
		In any civil action where a claim is brought alleging negligence in the ownership, operation, maintenance, or use of an underinsured highway vehicle, any company providing a liability bond or liability insurance coverage for the claim may, upon tendering its remaining coverage applicable to the claim, plus prejudgment interest on the amount tendered from the date of commencement of the action and the claimant's court costs accrued to the date of the tender, be released by the court from any further liability for the claim under its bond or policy to any person insured, and further liability for the claim to the claimant, and any further liability for the claim to any person claiming through any of them; including, without limitation, a release of the company from any duty on its part to provide a defense for the claim to any person insured or any person claiming through a person insured, of any duty on its part otherwise to participate in the action.  Each applying company shall file the original application and a request for a hearing with the court, and shall mail a copy of the application and request for a hearing to each person insured for the action (or the other party's attorney of record) and to every underinsured motorist carrier to which the claimant gave notice of the action. This mailing shall be by certified mail, return receipt requested, to each addressee's last known address, and shall be sent at least 30 days prior to the date that a trial of the case begins.  Each return receipt shall be filed with the court as proof of the required mailing.  Unless mailed with the application, the company making application to the court shall also mail, by first class mail, to each person entitled to receive the application, a notice of the hearing on the application, which shall be mailed to each addressee's last known address at least 10 days prior to the hearing date, with a certification of the mailing to be filed with the court.  Any mailing to a person insured under the bond or policy shall be sufficient if mailed to the last address for the person that appears in the company's records for the bond or policy in question unless the company has actual knowledge that the address is incorrect and has actual knowledge of a correct address; and the validity of the address used shall be verified in a sworn affidavit from an authorized representative of the company, which shall be filed with the court.  The notice of hearing shall expressly inform each person insured of his right to attend the hearing and be informed by the court of the reason for the hearing, the consequences to the person insured of the entry of the order, and the right of the person insured to employ counsel of his choice, at his expense, to represent him in defense of the action.  Upon the hearing on the application, if the record establishes compliance with the procedure provided in this paragraph and that the applying company is ready, willing, and able to pay into court the amounts required by this paragraph, the court shall enter the order applied for and shall further order that the company at the same time pay the required amount to the clerk of court to be disbursed to the claimant, and any subrogated underinsured motorist insurance carriers, as the court determines their respective interests to be.  The court shall advise each person insured who appears at the hearing of the reason for the hearing, the consequences to the person insured of the entry of the order, and the right to the person insured to employ counsel of his choice, at his expense, to represent him in defense of the action; provided, however, the failure of any one or more of the persons insured either to have received any mailing required by this paragraph or to attend the hearing shall not be grounds to deny the application or to deny entry of the order.  Upon entry of the order the underinsured motorist carrier or carriers that were properly given notice of the action shall be liable to the claimant for all subsequent court costs taxed against the underinsured tortfeasor; and each underinsured motorist carrier or carriers that were properly given notice of the action shall further be liable to the claimant for interest on the damages payable by it from the date of commencement of the action until payment is made.  The filing of the application and any other act required of the applying company may be performed on its behalf by the attorney of record for the claimant if the company and the claimant so agree.
		The coverage required under this subdivision shall not be applicable where any insured named in the policy rejects the coverage.
If the named insured rejects the coverage required under this subdivision, the insurer shall not be required to offer the coverage in any renewal, reinstatement, substitute, amended, altered, modified, transfer or replacement policy unless the named insured makes a written request for the coverage. Rejection of this coverage for policies issued after October 1, 1986, shall be made in writing by the named insured on a form promulgated by the North Carolina Rate Bureau and approved by the Commissioner of Insurance.
In the event there are multiple claimants, after a judgment or settlement, seeking payment under the coverage provided by this subdivision, and the claimants are unable to agree upon their respective shares of the payments, the insurer providing the coverage shall apportion payment to those claimants according to the proportion their damages bear to the total amount of coverage available to those claimants."
Sec. 3.  This act shall become effective October 1, 1989.