United States District Court,S.D. Alabama,Southern Division.

CANAL INSURANCE COMPANY, Plaintiff,

v.

Robert Shane MORGAN, et al., Defendants.

 

Jan. 19, 2007.

 

 

 

ORDER

WILLIAM H. STEELE, United States District Judge.

This matter comes before the Court on the Motion to Dismiss or, in the Alternative, to Stay (doc. 7) and the Amendment to Motion to Dismiss or, in the Alternative, to Stay (doc. 10) filed by defendants Tina Huckabee and Phillip Huckabee. The other defendant in this action, Robert Shane Morgan d/b/a Tallahatta Springs Trucking, filed a Joinder in the Motion (doc. 9); therefore, the instant Motion to Dismiss is effectively brought by all defendants. The Motion has been briefed and is ripe for disposition at this time.

 

 

I. Background.

 

On the morning of September 21, 2004, defendant Tina Huckabee (“Ms.Huckabee”) was assisting defendant Robert Shane Morgan (“Morgan”) in delivering and selling ice to businesses in Jackson, Alabama, in the wake of Hurricane Ivan. When Ms. Huckabee disembarked from the tractor trailer driven by Morgan to move a shopping cart in the parking lot of a business, the tractor trailer allegedly ran over her, causing physical and emotional injuries. At the time of this incident, Morgan had automobile insurance coverage through plaintiff Canal Insurance Company (“Canal”).

 

Based on these events, Ms. Huckabee and her husband, Phillip Huckabee (“Mr.Huckabee”), filed suit against Morgan in the Circuit Court of Clarke County, Alabama, on April 27, 2006, alleging state law causes of action for negligence and wantonness. Canal was not initially named as a party in the Clarke County litigation.

 

Six months later, on October 31, 2006, Canal initiated the instant declaratory judgment action in federal court by filing the Complaint (doc. 1), naming Morgan and the Huckabees as defendants. The sole relief requested in the Complaint was a declaratory judgment as follows: (a) a declaration that the Basic Automobile Liability Policy (the “Policy”) issued by Canal to Morgan and in effect in September 2004 did not afford coverage for the accident because of various Policy exclusions and endorsements; (b) a declaration that Canal owes no duty to defend or indemnify Morgan in the Clarke County action; and (c) a declaration that, to the extent Canal is obligated to defend and/or indemnify Morgan, its liability cannot exceed the stated occurrence limit in the declarations section of the Policy.

 

In the meantime, however, the Clarke County litigation brought by the Huckabees against Morgan in April 2006 has gone forward. On November 15, 2006, approximately two weeks after this federal declaratory judgment action commenced, Morgan filed a third party complaint against Canal in the Clarke County action, requesting a declaration that Canal owes coverage to Morgan under the Policy for the September 2004 accident, and also seeking a declaration that Canal is obligated to defend and indemnify Morgan in that action. On December 8, 2006, the Clarke County Circuit Court granted Morgan leave to file that third party complaint and pursue such causes of action against Canal in that litigation.

 

At present, then, identical insurance coverage issues relating to the Policy are being litigated in both the Clarke County action and the instant declaratory judgment action. Defendants’ Motion to Dismiss raises the important question of whether the state and federal lawsuits should be permitted to proceed along parallel tracks, deciding the same insurance coverage issues, or whether the federal action should be dismissed or stayed pending the resolution of these identical issues in the Clarke County case. Defendants maintain that the same coverage issues are pending in both lawsuits, that those coverage issues are governed by Alabama law, that the coverage issues can be more effectively and efficiently resolved in the Clarke County action, and that the exercise of federal jurisdiction over this dispute would risk unnecessary commitment of scarce judicial resources, multiplicative expenditures by the parties, inconsistent rulings, and a lack of regard for the state court’s authority.

 

 

II. Legal Standard.

 

Canal’s claims in this action were brought pursuant to 28 U.S.C. § §  2201 et seq., seeking a declaration of the parties’ “rights, duties, status and legal relations … under the applicable policy of insurance.” (Complaint, at 18.) It is well-settled that the Declaratory Judgment Act is properly “understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). Indeed, the Supreme Court has “repeatedly characterized the Declaratory Judgment Act as an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.” Id. at 287 (citations omitted). As the Eleventh Circuit has observed, the Act “only gives the federal courts competence to make a declaration of rights; it does not impose a duty to do so.” Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir.2005). “The desire of insurance companies … to receive declarations in federal court on matters of purely state law has no special call on the federal forum .” State Auto Ins. Companies v. Summy, 234 F.3d 131, 136 (3rd Cir.2000); see also Prudential Ins. Co. of America v. Doe, 140 F.3d 785, 789 (8th Cir.1998) (“The Supreme Court’s decision in Wilton … vests the district courts with broad discretion in deciding whether to hear a declaratory judgment action.”).

 

Consistent with the foregoing, it has long been recognized in this Circuit that a district court has discretion to “decline to entertain a declaratory judgment action on the merits when a pending proceeding in another court will fully resolve the controversy between the parties.” Ven-Fuel, Inc. v. Department of the Treasury, 673 F.2d 1194, 1195 (11th Cir.1982). In Ameritas, the Eleventh Circuit reinforced Ven-Fuel and furnished district courts with guidance in how to wield their discretion under the Declaratory Judgment Act where there are parallel state proceedings. The Ameritas court emphasized that district courts must balance the interests of federalism, comity, and efficiency in determining whether to hear a declaratory judgment action when confronted with a parallel state action. 411 F.3d at 1330-31.  To assist district courts in this endeavor, the Ameritas court promulgated a non-exhaustive set of “guideposts” to be considered, including: (i) the state’s interest in deciding the matter; (ii) whether a judgment in the federal action would completely resolve the controversy; (iii) whether the declaratory judgment action would clarify the parties’ legal relations; (iv) whether the federal action is a form of “procedural fencing” being utilized “to provide an arena for a race for res judicata or to achieve a federal hearing in a case not otherwise removable”; (v) whether a ruling in the federal action would increase friction between federal and state courts or otherwise encroach on state proceedings; (vi) whether a superior alternative remedy exists; (vii) whether underlying facts are important to informed resolution of the matter; (viii) whether the state court is better situated than the federal court to evaluate those facts; and (ix) the nexus (if any) between the underlying issues and state law/policy, and whether federal common or statutory law requires resolution of the declaratory action. See id. at 1331; see also Lexington Ins. Co. v. Rolison, 434 F.Supp.2d 1228, 1238-44 (S.D.Ala.2006) (applying Ameritas guideposts in context of declaratory judgment action filed by insurer after entry of state court judgment against putative insured).

 

 

Ven-Fuel is in line with extant Supreme Court jurisprudence. More than 60 years ago, the Supreme Court opined that it would be both “uneconomical” and “vexatious” for a federal district court to proceed with a declaratory judgment action, concurrently with ongoing proceedings involving the same parties and same legal issues (not arising under federal law) in state court. Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). The Brillhart Court admonished lower courts scrupulously to avoid what it termed “[g]ratuitous interference with the orderly and comprehensive disposition of a state court litigation.” Id.

 

These considerations have been echoed by other appellate courts. See, e.g., Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.1998) (federal court “should discourage litigants from filing declaratory actions as a means of forum shopping; and it should avoid duplicative litigation”); Mitcheson v. Harris, 955 F.2d 235, 237-39 (4th Cir.1992) (citing as reasons to dismiss declaratory actions the philosophy of judicial federalism, as well as pragmatic concerns of efficiency and comity).

 

In Manuel v. Convergys Corp., 430 F.3d 1132 (11th Cir.2005), the Eleventh Circuit reiterated that the decision to hear a declaratory judgment action is discretionary, that there can be no rigid or mechanical application of the Declaratory Judgment Act, and that a vast spectrum of considerations is available to district courts deciding whether to hear such an action. See id. at 1135, 1137-38.

 

III. Analysis.

 

A. The Ameritas Guideposts.

 

 

Somewhat surprisingly, given their obvious importance to the Motion to Dismiss, neither side offers a comprehensive, factor-by-factor discussion of the Ameritas guideposts. Nonetheless, independent scrutiny reveals that those guideposts militate strongly in favor of declining to exercise jurisdiction here. The first Ameritas factor concerns “the strength of the state’s interest in having the issues raised in the federal declaratory action decided in the state courts.” 411 F.3d at 1331. The legal issues presented in this case are exclusively Alabama state law issues concerning interpretation of an insurance policy issued to an Alabama citizen with respect to an automobile accident that occurred in Alabama and that allegedly injured an Alabama citizen. Alabama clearly has a significant interest in having its state courts resolve these matters. Second, Ameritas looks to “whether the judgment in the federal declaratory action would settle the controversy.”  Id. It plainly would not. Irrespective of how the insurance coverage issues are decided, the Clarke County litigation will need to proceed as to the Huckabees’ claims against Morgan for negligence and wantonness, which are not joined in this declaratory judgment action and cannot be decided herein. Thus, exercising federal jurisdiction here would virtually guarantee that the issues in dispute would be resolved piecemeal in two different fora.

 

The third Ameritas guidepost is “whether the federal declaratory action would serve a useful purpose in clarifying the legal relations at issue.”  Id. Certainly, disposition of this federal action would effect a clarification of the insurance coverage questions as between Canal and Morgan; however, this benefit is mitigated by the fact that the Clarke County Circuit Court is fully equipped to resolve these questions and provide this clarification as well. The ability to clarify the legal relationships involved is in no way unique to this federal declaratory action. Fourth, Ameritas provides that courts should consider “whether the declaratory remedy is being used merely for the purpose of ‘procedural fencing’-that is, to provide an arena for a race for res judicata or to achieve a federal hearing in a case otherwise not removable.” Id. There are some indications that this is occurring here. After all, the Clarke County action could not be properly removed to federal court given the lack of diversity as between the Huckabees and Morgan. Accordingly, the only way that Canal could achieve a federal hearing would be to bring a declaratory judgment action, which it did. This appearance of procedural fencing favors the non-exercise of jurisdiction here.

 

Next, Ameritas inquires “whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction.” Id. It absolutely would, given the tension inherent in having near-identical litigation pending in both federal and state courts, such that the first court’s ruling on a particular issue may have res judicata effect on the second court’s ability to hear and decide the same issue, even if the second court disagrees with the first court’s determinations. The sixth Ameritas guidepost is “whether there is an alternative remedy that is better or more effective.” Id. There is. In the posture of this case, litigating the coverage issue in the Clarke County action exclusively is a vastly superior remedy to conducting double-tracked litigation in two courts. Canal can fully litigate its coverage questions against Morgan and the Huckabees in the existing Clarke County proceedings, with both coverage and liability issues to be decided by the same court in an integrated manner without federal interference. Simply put, the Clarke County action can more effectively and efficiently decide the overlapping issues in these cases because that action encompasses the parties’ entire dispute, including both coverage and liability, as opposed to the narrow slice presented in this declaratory judgment action.

 

Combining the seventh and eighth Ameritas factors, the Court examines “whether the underlying factual issues are important to an informed resolution of the case” and, if so, “whether the state trial court is in a better position to evaluate those factual issues than is the federal court.”  Id. Both of these questions are answered in the affirmative. Application of the Policy exclusions and endorsements to the Huckabees’ claims cannot be evaluated without an in-depth study of what actually transpired on September 21, 2004. The Clarke County Circuit Court will already be examining those events in connection with the Huckabees’ claims against Morgan, so that court would not need to review them anew to resolve the insurance coverage issues. Rather than having two courts duplicate effort in scrutinizing and assessing the underlying facts, a far more sensible and efficient approach is for the state court that is already tasked with examining those facts in the underlying case to apply those same facts to the pending claims for declaratory relief.

 

Ninth and finally, Ameritas directs district courts to consider “whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common or statutory law dictates a resolution of the declaratory judgment action.” Id. This factor unambiguously weighs in favor of abstention. Canal’s Complaint raises exclusively state law issues and implicates exclusively state law public policies, with no reference whatsoever to federal common or statutory law.

 

Considered collectively, then, the Ameritas guideposts weigh heavily in favor of declining to exercise jurisdiction. Taking to heart Wilton’s concerns of “practicality and wise judicial administration,” the Court finds that those virtues would be poorly served by retaining jurisdiction here, inasmuch as the same exclusively state law issues presented in this case are presently being litigated by the same parties in a parallel state court proceeding, this action includes only a subset of the matters being litigated in the state court, and it appears that all parties to this action will have full and adequate recourse to litigate all legal issues presented herein in the Clarke County proceedings. See Wilton, 515 U.S. at 283 (suggesting that abstention determination ought to consider whether claims of all parties in interest can satisfactorily be adjudicated in state court proceeding). Accordingly, the Court will decline to exercise jurisdiction here.

 

 

B. Canal’s Argument.

 

In opposing defendants’ Motion to Dismiss, Canal’s sole contention is that Morgan’s third party complaint in the Clarke County litigation was improperly filed in derogation of the requirement of Rule 14, Ala.R.Civ.P., that leave of court be obtained before the filing of a third party complaint more than 10 days after service of the third party plaintiff’s original answer. Because the third party complaint was improper, Canal argues, dismissal of that filing would be appropriate, which in turn would exclude Canal from the state court litigation and eliminate the overlap between the state and federal suits.

 

Whatever merit it might have had, Canal’s argument has been mooted by intervening events. To the extent that Morgan’s third party complaint in the state court action was procedurally flawed, this defect has been corrected or otherwise excused by the state court. Indeed, the Clarke County Circuit Court entered an order on December 8, 2006 expressly authorizing Morgan to proceed with his third party complaint in the state court action. Accordingly, it is clear that Canal is a party in the Clarke County action and that the insurance coverage issues presented in this federal action are also pending before the state court. Canal’s contention that procedural impropriety in the filing of Morgan’s third party complaint in state court dictates that federal jurisdiction be exercised here is unavailing.

 

 

C. Remedy.

 

Having determined that Wilton discretion is in play, and having applied the Ameritas guideposts to conclude that abstention will promote the interests of practicality, comity and efficient, wise administration of justice, the Court now must decide whether to dismiss or stay this action. The undersigned has previously opined that dismissal, rather than a stay, is appropriate where: (1) there is neither evidence nor suggestion that a time bar might thwart the insurer’s attempt to bring a declaratory judgment action if the state case, for any reason, fails to resolve the matter in controversy; and (2) granting a stay might create incentives for forum-shopping and piecemeal litigation, as the insurer might seek to derail litigation of the coverage claims in the state court action in hopes of litigating those matters in federal court following the lifting of the stay. Rolison, 434 F.Supp.2d at 1246. Both considerations are present here. Accordingly, in the absence of countervailing argument by the parties, this action will be dismissed, rather than stayed.

 

 

IV. Conclusion.

 

For all of the foregoing reasons, defendants’ Motion to Dismiss (doc. 7) is granted. This action is hereby dismissed without prejudice pursuant to Wilton/Brillhart abstention, to enable the parties to litigate all issues pertaining to this dispute in the parallel lawsuit currently pending in Clarke County Circuit Court. A separate judgment will enter.

 

DONE and ORDERED.

Court of Appeals of North Carolina.

NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Plaintiff

v.

Terry Davis ARMWOOD, Jr., Terry Davis Armwood, Sr., Individually and As Parent and Guardian for Terry Davis Armwood, Jr., Ramona Armwood, Individually and As Parent and Guardian for Terry Davis Armwood, Jr., Jimmy Lee Best, and Stella H. Bostic, Defendants.

 

Jan. 16, 2007.

 

CALABRIA, Judge.

North Carolina Farm Bureau Mutual Insurance Company, Inc. (“Farm Bureau”) appeals from an order granting summary judgment entered in favor of defendants on the issue of the minimum amount of liability coverage required in an insurance policy for a not-for-hire commercial vehicle. We affirm.

 

On 7 October 2001, eight-year-old Terry Davis Armwood, Jr. (“T.J”) was injured when he was struck by a vehicle after exiting a 1974, 30-passenger bus owned and operated by Jimmy Lee Best (“Best”) and insured by a policy issued by Farm Bureau. Best purchased the policy on 4 June 2001 from Stella Bostic (“Bostic”). When Bostic sold the policy to Best, she offered liability amounts providing $750,000.00 in coverage per accident with $5,000.00 for medical payments per accident and Uninsured/Underinsured Motorist Coverage of $750,000.00. When Best refused the amounts offered, Bostic crossed through the original liability amounts and changed the policy limits to $50,000/$100,000/$25,000 per accident, $1,000 for medical payments, and Uninsured/Underinsured Motorist Coverage of $50,000/$100,000/$25,000, per Best’s request.

 

After the accident, Terry Davis Armwood, Sr. and Ramona Armwood (collectively “the Armwoods”) filed a claim with Farm Bureau on behalf of their son, T.J. Farm Bureau offered to settle the claim for $50,000.00, the limit of Best’s insurance policy. The Armwoods rejected Farm Bureau’s settlement offer and demanded damages in excess of the $50,000.00 policy limit. On 30 October 2003, Farm Bureau filed a declaratory relief action requesting the Wake County Superior Court to determine the scope and amount of coverage provided by Farm Bureau under the policy for any damages caused by the 7 October 2001 accident. Farm Bureau, the Armwoods, and Bostic filed motions for summary judgment. The court granted Bostic’s summary judgment motion dismissing all claims against her. The court also granted the Armwoods’ summary judgment motion to the extent that the insurance policy was “reformed” to reflect a minimum coverage of $750,000.00 and denied Farm Bureau’s motion for summary judgment. Farm Bureau appeals the order granting summary judgment in favor of the Armwoods and denying Farm Bureau’s summary judgment motion. We affirm.

 

Our standard of review for an order granting summary judgment is de novo.  Stafford v. County of Bladen, 163 N.C.App. 149, 151, 592 S.E.2d 711, 713 (2004), appeal dismissed by, 358 N.C. 545, 599 S.E.2d 409 (2004). Summary judgment is appropriate when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Leake v. Sunbelt, Ltd. of Raleigh, 93 N.C.App. 199, 201, 377 S.E.2d 285, 287 (1989). “[I]n considering summary judgment motions, we review the record in the light most favorable to the nonmovant.” Id. “When the facts of a case are undisputed, construction and application of an insurance policy’s provisions to those facts is a question of law.” McGuire v. Draughon, 170 N.C.App. 422, 424, 612 S.E.2d 428, 430 (2005).

 

This case presents an issue of first impression: When a passenger bus transports passengers without requiring payment for services, should the insured or the insurer bear the responsibility of including the minimum statutory requirements of N.C. Gen.Stat. §  20-309(a1) in the liability policy if the bus is classified as a not-for-hire commercial vehicle?

 

Farm Bureau contends the owner is responsible for ensuring that liability coverage meets the minimum statutory requirements. Farm Bureau argues that because N.C. Gen.Stat. §  20-309(a1) specifically states that the owner shall have financial responsibility, it is on the owner of a vehicle to obtain the appropriate level of liability insurance. The Armwoods contend that Best charged money to transport children in addition to the use of the bus for church purposes and therefore, the mandatory coverage for the bus was the coverage required for a passenger bus for-hire and should have exceeded $750,000.00.

 

The basic rule of statutory interpretation is that the intent of the Legislature controls. Campbell v. First Baptist Church, 298 N.C. 476, 484, 259 S.E.2d 558, 564 (1979). This intent may be determined by considering the language of the statute, the spirit of the act, and what the act seeks to accomplish. Taylor v. Taylor, 343 N.C. 50, 56, 468 S.E.2d 33, 37 (1996).  “The purpose of [The Financial Responsibility Act of 1957] is to assure the protection of liability insurance, or other type[s] of established financial responsibility, up to the minimum amount specified in the act, to persons injured by the negligent operation of a motor vehicle upon the highways of this State.” Pearson v. Nationwide Mutual Ins. Co., 325 N.C. 246, 253, 382 S.E.2d 745, 748 (1989). In order to effectuate the purpose of the Financial Responsibility Act of 1957, “the provisions [of the Act] must be read into insurance policies and [must be] construed liberally.” Id.

 

Section 20-309 of the North Carolina General Statutes addresses the financial responsibility required for registration of vehicles. It reads in pertinent part:

(a) No motor vehicle shall be registered in this State unless the owner at the time of registration has financial responsibility for the operation of such motor vehicle, as provided in this Article. The owner of each motor vehicle registered in this State shall maintain financial responsibility continuously throughout the period of registration.

(a1) An owner of a commercial motor vehicle, as defined in G.S. 20-4.01(3d), shall have financial responsibility for the operation of the motor vehicle in an amount equal to that required for for-hire carriers transporting nonhazardous property in interstate or foreign commerce in 49 C.F.R. §  387.9.

 

N.C. Gen.Stat. §  20-309(a) and (a1)(2005). Under §  20-309(a), an owner of a vehicle may not register the vehicle unless the owner has an insurance policy or another type of financial responsibility in place that meets the minimum liability coverage as required by §  20-279.1. Our Courts have consistently held that the minimum liability coverage required by §  20-279.1 is “written into every insurance policy as a matter of law.” Integon Indemnity Corp. v. Universal Underwriters Ins. Co., 342 N.C. 166, 168, 463 S.E.2d 389, 390-91 (1995); McLeod v. Nationwide Mutual Ins. Co., 115 N.C.App. 283, 287, 444 S.E.2d 487, 490 (1994). Thus, even though §  20-309(a) requires the owner to obtain financial responsibility in order to register a vehicle, the owner is not responsible for ensuring that the insurance policy contains the minimum liability coverage imposed by statute. The minimum liability coverage is written into each insurance policy as a matter of law. Similarly, §  20-309(a1) requires the owner of a not-for-hire commercial vehicle to obtain an insurance policy or other financial responsibility in order to register the vehicle. It follows that just as the minimum liability coverage requirements for vehicles registered under §  20-309(a) are written into insurance policies as a matter of law, so too are the minimum liability coverage requirements for not-for-hire commercial vehicles registered under §  20-309(a1). In effect, this does not place a burden on either party to ensure that liability coverage meets the minimum statutory requirements, but it inserts the provisions of §  20-309(a1), as a matter of law, into every insurance policy issued for not-for-hire commercial vehicles. See Integon, 342 N.C. at 168, 463 S.E.2d at 390-91; McLeod, 115 N.C.App. at 287, 444 S.E.2d at 490. Further, writing the minimum liability coverage into insurance policies for vehicles registered under §  20-309(a1) as a matter of law promotes the main purpose of the Financial Responsibility Act-protecting innocent motorists. See Pearson, 325 N.C. at 253, 382 S.E.2d at 748.

 

Farm Bureau argues that N.C. Gen.Stat. §  62-268, which pertains to for-hire commercial vehicles, specifically provides that liability coverage may be obtained through multiple insurance policies. Farm Bureau further argues that because §  62-268 and §  20-309(a1) pertain to commercial vehicles and the only factor that determines which statute applies is whether the commercial vehicle is used for hire, the two statutes should be construed together. Thus, Farm Bureau argues, §  20-309(a1) allows the owner of a not-for-hire commercial vehicle to obtain the required financial responsibility through multiple insurance policies thereby placing the responsibility to ensure that the minimum coverage has been obtained upon the owner. We disagree.

 

Basic canons of statutory interpretation provide that “[s]tatutes in pari materia are to be construed together, and it is a general rule that the courts must harmonize such statutes, if possible, and give effect to each….” Faizan v. Insurance Co., 254 N.C. 47, 53, 118 S.E.2d 303, 307 (1961). “[A]ll applicable laws on the same subject matter should be construed together so as to produce a harmonious body of legislation, if possible.” Id.

 

Section 20-279.21 is part of the Financial Responsibility Act of 1953, and §  20-309(a1) is part of the Financial Responsibility Act of 1957. Both acts pertain to the same subject matter-the financial responsibility of motorists. Thus, “[t]he two acts are to be construed together so as to harmonize their provisions and to effectuate the purpose of the Legislature.”  Harrelson v. Insurance Co., 272 N.C. 603, 610, 158 S.E.2d 812, 818 (1968). See also, Odum v. Nationwide Mutual Ins. Co., 101 N.C.App. 627, 631, 401 S.E.2d 87, 90 (1991) (“The two Acts are complementary and are to be construed in pari materia so as to harmonize them and give effect to both.”).

 

In sharp contrast to Farm Bureau’s argument, §  62-268 is found under chapter 62-a chapter devoted to an entirely different body of law. Chapter 62 regulates public utilities and contains specific provisions for motor carriers. If the Legislature intended for statutes concerning not-for-hire commercial vehicles to be interpreted in conjunction with statutes concerning for-hire vehicles, it could have included the statutes in the same chapter or referenced the provisions of §  62-268.

 

Therefore, because §  20-279.21 and §  20-309 have an identical purpose-protecting the innocent from irresponsible drivers-it is proper that these statutes are interpreted in a consistent manner in order to give effect to the intent and purpose of the Legislature. Construing these statutes in pari materia, we hold that just as provisions of N.C. Gen.Stat. §  20-279.21 are read into every insurance policy as a matter of law, provisions of N.C. Gen.Stat. §  20-309(a1) are also read into every insurance policy as a matter of law. This is to effectuate the purpose of the Financial Responsibility Act-protecting the innocent from irresponsible motorists. See Pearson, 325 N.C. at 253, 382 S.E.2d at 748.

 

We have considered Farm Bureau’s remaining arguments and determined they are without merit. The trial court properly granted the Armwoods’ summary judgment motion to the extent that it reformed the insurance policy to include the amount of minimum coverage required by §  20-309(a1), and it properly denied Farm Bureau’s summary judgment motion. For the reasons stated herein, we affirm the order of the trial court.

 

Affirmed.

 

Judges HUDSON concurs.

Judge HUNTER dissents in a separate opinion.

The Judges participated in this decision and submitted it for filing prior to 1 January 2007.

 

HUNTER, Judge, dissenting.

Because I disagree with the majority’s holding that provisions of N.C. Gen.Stat. §  20-309(a1) should be read into every liability insurance policy on commercial vehicles as a matter of law, I respectfully dissent.

 

Best purchased a thirty-passenger bus for use in transporting members of his church. In June 2001, he went to plaintiff, an insurer, for liability insurance on the vehicle and was offered an application for a policy containing $750,000.000 in coverage, which he declined. Best then selected the amount of coverage himself-$50,000.00 per person and $100,000.00 per accident-and plaintiff issued a policy in those amounts. Best paid the premiums for the policy and was covered by it in October 2001, when he was involved in the accident at the root of this case in which Terry Armwood, Jr., was injured. Plaintiff sought a declaratory injunction from the trial court that the policy provided coverage of $50,000.00 per person and $100,000.00 per accident, as the policy stated on its face. The Armwoods sought a declaration that the policy provided coverage of $750,000.00. Based on its interpretation of the relevant statutes, the trial court denied plaintiff’s motion and concluded that the policy should be reformed to provide coverage of $750,000.00.

 

“The primary goal of statutory construction is to effectuate the purpose of the legislature in enacting the statute[,]” and that purpose “ ‘is first ascertained by examining the statute’s plain language.’ ” Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571, 574, 573 S.E.2d 118, 121 (2002) (citation omitted). When that language is “ ‘ “clear and unambiguous,” ’ ” the court is “ ‘ “without power to interpolate, or superimpose, provisions and limitations not contained therein.” ’ ” Id. at 575, 573 S.E.2d at 121 (citations omitted).

 

In general, insurance policies must be reformed when an applicable statute conflicts with the terms of the insurance policy; at that point, “the provisions of that statute become terms of the policy to the same extent as if they were written in it[.]” Baxley v. Nationwide Mutual Ins. Co., 334 N.C. 1, 6, 430 S.E.2d 895, 898 (1993). However, our Supreme Court has only reformed policies in cases where an insurer failed to comply with a requirement of the 1953 Act that places a direct burden on the insurer and policy, not the owner. See, e.g., Bray v. N.C. Farm Bureau Mut. Ins. Co., 341 N.C. 678, 685-86, 462 S.E.2d 650, 654 (1995) (invalidating family-owned vehicle exclusion to uninsured motorist coverage because section 20-279.21(b) mandated a minimum amount of coverage). “In the absence of any provision in the Financial Responsibility Act broadening the liability of the insurer, such liability must be measured by the terms of the policy as written.” Younts v. Insurance Co., 281 N.C. 582, 585, 189 S.E.2d 137, 139 (1972).

 

As discussed below, in this case the terms of the policy do not conflict with the statute, because it is not the individual policy that must comply with the minimum requirements but rather the insured’s overall coverage. As such, this Court should measure plaintiff’s liability by the terms of the policy as written. Although such a result might not result in the complete protection of individuals from the risks associated with commercial vehicles, that issue is properly addressed by the legislature, not by this Court.

 

Two statutes are at issue in this case: the Vehicle Financial Responsibility Act of 1957 (“1957 Act”) and the Financial Responsibility Act of 1953 (“1953 Act”). N.C. Gen Stat. §  20-309(a1) (2005), part of the 1957 Act, by its plain language puts the onus on owners to maintain required liability insurance on their vehicles: “An owner of a commercial motor vehicle, as defined in G.S. 20-4.01(3d), shall have financial responsibility for the operation of the motor vehicle in an amount equal to that required for for-hire carriers transporting nonhazardous property in interstate or foreign commerce in 49 C.F.R. §  387.9.” Id. (emphasis added).

 

The 1953 Act specifically addresses individual policies rather than individual owners. It states that every owner’s policy of liability insurance shall provide the following minimum coverage against loss from liability “for damages arising out of the ownership, maintenance or use” for the covered vehicle: $30,000.00 for injury or death to one person, $60,000.00 to two or more persons in one accident, and $25,000.00 for injury or destruction of property in one accident ($30/$60/$25). N.C. Gen.Stat. §  20-279.21(b)(2) (2005). The plain language of the statute itself actually inserts these specific amounts into every policy as a matter of law.

 

Because both acts have the same general purpose-namely, protecting the innocent from irresponsible drivers-the two should be read in conjunction, as the majority notes. “Statutes in pari materia are to be construed together, and it is a general rule that the courts must harmonize such statutes, if possible, and give effect to each[.]” Blowing Rock v. Gregorie, 243 N.C. 364, 371, 90 S.E.2d 898, 904 (1956).

 

However, the majority’s holding reads the Acts together to create a mandate by the 1953 Act (which explicitly sets out the $30/$60/$25 minimums) that plaintiff’s policy provide coverage in the amount specified by the 1957 Act ($750,000.00). This controverts the plain language of the two provisions of the 1957 Act at issue. Again, the plain language of N.C. Gen.Stat. §  20-309(a) and (a1) both put the onus on the owner. (N.C.Gen.Stat. §  20-309(a) states: “No motor vehicle shall be registered in this State unless the owner at the time of registration has financial responsibility for the operation of such motor vehicle, as provided in this Article.”) Reading the two Acts in conjunction cannot mean eliminating this plain language by “superimpos[ing]” in the 1957 Act the language of the 1953 Act placing the onus on the insurer.

 

The trial court itself stated that:

Best, as the owner of the 1974 30 passenger bus, a commercial motor vehicle, had the duty and responsibility to obtain the applicable minimum liability coverage for the vehicle. G.S. 20-309(a1) places the duty to obtain and maintain the appropriate coverage, consistent with the use of the commercial vehicle, on the owner.

 

This conclusion of law explicitly looks to the 1957 Act and places the duty and responsibility for obtaining the correct minimum liability coverage on Best. Despite its own conclusion, however, the trial court then found that plaintiff had a duty to issue the policy for $750,000.00 and reformed the existing policy to reflect that level of liability. This finding incorrectly holds plaintiff responsible for the duty and responsibility the trial court had laid at Best’s door.

 

Further, I see no statutory justification for the majority’s holding that we must read a minimum $750,000.00 clause into this contract. As the majority states, our Courts have consistently held that the minimum coverage required by N.C. Gen.Stat. §  20-279.21(b) ($30/$60/$25) is written into every insurance policy as a matter of law. But note the plain language of this statute:

(b) [Each] owner’s policy of liability insurance:

…

(2) Shall insure the person named therein … against loss from the liability imposed by law for damages … with respect to each such motor vehicle[] as follows: thirty thousand dollars ($30,000) because of bodily injury to or death of one person in any one accident and, subject to said limit for one person, sixty thousand dollars ($60,000) because of bodily injury to or death of two or more persons in any one accident, and twenty-five thousand dollars ($25,000) because of injury to or destruction of property of others in any one accident[.]

 

N.C. Gen.Stat. §  20-279.21(b)(2). The statute, unlike N.C. Gen.Stat. §  20-309(a1), specifically addresses an element that every policy must contain. Clearly, legislative intent was that this statute should act to reform any policy that was not in line with these statutory minimums ($30/$60/$25). As mentioned, N.C. Gen.Stat. §  20-309(a1) sets out the minimum liability insurance responsibility of the owner of a commercial vehicle. Had the legislature intended this particular provision to reform all policies not in line with the minimums set out for commercial vehicles ($750,000.00), it could easily have done so by adding to section 20-309(a1) similar construction and language as that used by section 20-279.21(b)(2) requiring all policies to have the $30/$60/$25 minimum. Had the legislature intended this reformation, it could also have simply amended section 20-279.21(b) in the 1953 Act with such language, inserting in all commercial vehicle policies the $750,000.00 minimum requirement. Since the legislature did neither, this Court should not impose such a requirement.

 

Defendants further argue that the language of N.C. Gen.Stat. §  20-309(b) indicates that only one policy may be used to meet the minimum coverage (“[f]inancial responsibility shall be a liability insurance policy …” (emphasis added)), agreeing with the trial court’s conclusion that plaintiff’s issuance of a policy below statutory minimums ($750,000.00) was an “invalid and inappropriate choice[.]” However, the 1953 Act, with which this statute must be read in conjunction, allows a commercial vehicle owner to meet the requirements of liability coverage “by the policies of one or more insurance carriers which policies together meet such requirements.” N.C. Gen.Stat. §  20-279.21(j). Thus, again, the onus is placed on Best, not plaintiff, to obtain the appropriate minimum coverage.

 

Defendants also argue that, because the Farm Bureau policy did not meet the statutory minimums, Best would not have been able to register his motor vehicle (“[n]o motor vehicle shall be registered in this State unless the owner at the time of registration has financial responsibility for the operation of such motor vehicle”). N.C. Gen.Stat. §  20-309(a). This argument fails because, again, Best could have obtained the statutory minimum of coverage from multiple insurers. The record does not indicate that plaintiff issued a policy that falsely stated the amount of Best’s coverage or inappropriately certified Best for registration purposes; any error in registering the vehicle made by the State cannot be laid at plaintiff’s feet.

 

In sum, the majority’s holding puts an onus on insurance companies that I do not believe is warranted by the statutes. The plain language of the 1957 Act places on the owner the onus for ensuring that minimum statutory requirements for liability insurance are met.

 

This Court should not disturb the contract between the parties and the motion for summary judgment should have been granted. If the legislature had intended for commercial vehicles to be covered by only one liability insurance policy with a minimum coverage of $750,000.00, it could easily have done so.

 

It is important to note that the legislature’s purpose in creating these Acts was clearly to protect the public by having higher mandatory minimum liability insurance coverage for commercial vehicles because the potential for damage to property and individuals is higher. However, the legislature addressed that concern by putting the onus for obtaining adequate coverage on the owner. In this particular case, unfortunately, that purpose was not effected, but it is the legislature’s provenance to correct this problem; it is not for the courts to impose a correction.

 

I would reverse the trial court’s order partially granting the Armwoods’ motion for summary judgment because, based on the applicable statutes comprising the 1953 and 1957 Acts, it was error for the trial court to reform the insurance policy at issue to reflect $750,000.00 in liability coverage. Further, since Best had no obligation to purchase his entire minimum coverage from one insurer, and plaintiff had no obligation to issue a policy for the statutory minimum, I would reverse and remand the trial court’s denial of plaintiff’s motion for summary judgment.

 

 

Defendants-appellees asserted during oral arguments that Farm Bureau had issued an MCS-90 Form along with Best’s insurance policy. However, this issue was not addressed in defendants-appellees’ brief and therefore, will not be considered.