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<p>Insurance Law Update 2013 2014</p> <p>Select State and Federal Case law</p> <p>C. Douglas Maynard, Jr. 2014Maynard &amp; Harris Attorneys At Law, PLLCThis not legal advice. It is an overview of recent North Carolina insurance related case law. The information is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No attorney / client relationship is created. No recipients of content from this site should act on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts, issues and circumstances from an attorney licensed in North Carolina.</p> <p>I. North Carolina Supreme Court</p> <p>N.C. Farm Bureau Mut. Ins. Co. v. Cullys Motorcross Park1</p> <p>II. North Carolina Court of Appeals</p> <p>A.NC Court of Appeals Published Opinions</p> <p>Davis v. Urquiza4Grich v. Mantelco, LLC 6Hinson v. City of Greensboro7Holmes v. N.C. Farm Bureau Mut. Ins. Co.9Integon Nat'l Ins. v. Helping Hands Specialized Transport11Integon Natl Ins. Co. v. Villafranco13James v. Integon Nat'l Ins. Co..15Kahihu v. Brunson 18Lawyers Mut. Liab. Ins. Co. v. Mako21Lunsford v. Mills23Nationwide Mut. Ins. v. Integon Nat'l Ins.26N.C. Farm Bureau Mut. Ins. Co. v. Paschal29</p> <p>B.NC Court of Appeals Unpublished Opinions</p> <p>Cinoman v. Univ. of North Carolina32Etheridge v. Levitsky34Haugh v. Nationwide Mut. Fire Ins. Co.36Lloyd v. Coffee37Mintz v. Kelley38Robinson v. Discovery Ins. Co.40Wood v. Nunnery44III. United States Court of Appeals (4th Circuit)</p> <p>Kamp v. Empire fire &amp; Marine Ins. Co.46IV. United States District Court</p> <p>A.Eastern District of North CarolinaBurch v. Lititz Mutual Ins. Co..47City Grill Hospitality Group, Inc. v. Nationwide Mut. Ins. Co.50Insurance Law Update 2013 2014Select State and Federal Case law</p> <p>C. Douglas Maynard, Jr. 2014Maynard &amp; Harris Attorneys At Law, PLLC</p> <p>Winston-Salem, NC</p> <p>V. North Carolina Supreme Court</p> <p>N.C. Farm Bureau Mut. Ins. Co. v. Cullys Motorcross Park, 366 N.C. 505, 742 S.E.2d 781 (June 13, 2013).</p> <p>Judge Edmunds. Justices Beasley and Hudson concur in part and dissent in part. </p> <p>Malicious Prosecution by Insurer. In 2012, the Court of Appeals affirmed the trial courts finding of malicious prosecution by Farm Bureau against its insured, the Volpes, as owners/operators of Cullys Motorcross Park. </p> <p>In September 2008, a fire erupted on defendant Cullys property. Defendant filed a claim, and after conducting a thorough investigation, Farm Bureau and its investigators suspected arson. When Farm Bureau requested that the Volpes each submit to an examination under oath, as allowed for in the policy, Mrs. Volpe complied but Mr. Volpe refused to submit to an examination under oath. The facts also indicate that the Farm Bureau investigator met with Sergeant Lucas from the Wilson Police Department on a few occasions to discuss the possible arson. In November 2008, the Volpes sold the property via quit-claim deed to another party and, while they did disclose the fire damage to the buyer, it appears they failed to disclose that it was encumbered by a deed of trust. </p> <p>Farm Bureau ultimately denied the claim in February 2009, citing among other factors Mr. Volpes failure to provide a sworn statement the Volpes failure to disclose the deed of trust, and Farm Bureaus suspicion that the fire had been intentionally set by one of the Volpes. The next day, Farm Bureau filed a declaratory judgment action against Cullys and the Volpes, seeking a declaration that it had no obligation to provide coverage under the insurance policy. </p> <p>In March 2009, defendants filed a combined answer and counterclaim, denying Farm Bureaus right to decline coverage, and asserting counterclaims that Farm Bureau had: (1) breached the insurance contract; (2) violated the Unfair Claims Settlement Practices provision of the NC Insurance Law; (3) committed unfair and deceptive acts; and (4) acted in bad faith. </p> <p>About three weeks later, in April 2009, Farm Bureaus investigator contacted and met with the Wilson Police Department sergeant who had investigated the arson. Farm Bureaus investigator informed and provided documentation to the Sergeant Lucas that Farm Bureau had denied the Volpes claim and that the Volpes had sold the property without first paying off the debt encumbering it. Based on the information provided by the Farm Bureau investigator, the WPD sergeant opened a separate fraud investigation against Mr. Volpe. Mr. Volpe was later arrested and charged with obtaining property under false pretenses, but the district attorney dismissed the charge against him.</p> <p>Ultimately the trial court found that Farm Bureau was liable to Volpe for malicious prosecution. The trial court also found that Farm Bureau withheld information from the WPD until after defendants filed their counterclaim for the purpose of achieving leverage in this action, and that Farm Bureau initiated criminal proceedings against Mr. Volpe. The trial court awarded the Volpes attorneys fees, damages for malicious prosecution, and damages for the unfair and deceptive trade practice of malicious prosecution. Id. at 12. The court of appeals affirmed, finding that almost all the information used by the WPD sergeant in making his decision to prosecute Mr. Volpe had been supplied by Farm Bureaus investigator. Farm Bureau appealed. </p> <p>The NC Supreme Court observed:</p> <p>[a]ll of Volpes surviving claims are based upon a contention that Farm Bureau maliciously instigated a criminal prosecution against her and that the malicious prosecution was an unfair and deceptive practice, which the trial court found was instituted for the purpose of gaining leverage in the current action.</p> <p>Id. at 13. Thus, if the Farm Bureau investigators report to the WPD was proper, then Farm Bureau neither instituted a malicious prosecution not committed an unfair or deceptive trade practice. </p> <p>Although no party challenged the trial courts findings of fact, the court here stated that because it involved a mixed question of law and fact, the trial courts conclusion that Farm Bureaus actions constituted initiation of a criminal action as a matter of law that the court reviews de novo. The court noted: </p> <p>To prove that Farm Bureau is guilty of malicious prosecution, Volpe must establish that: "(1) [Farm Bureau] initiated the earlier proceeding; (2) malice on the part of [Farm Bureau] in doing so; (3) lack of probable cause for the initiation of the earlier proceeding; and (4) termination of the earlier proceeding in favor of [Volpe]." Best v. Duke Univ., 337 N.C. 742, 749, 448 S.E.2d 506, 510 (1994) (citing Jones v. Gwynne, 312 N.C. 393, 397, 323 S.E.2d 9, 11 (1984)). The dispositive issue in this case is whether the trial court erred when it found as a matter of law that Farm Bureau, through its [investigator], initiated the prosecution of Volpe.</p> <p>Id. at 14-15. The court challenged the Court of Appeals interpretation of the element of initiation of malicious prosecution, stating that it did not adequately account for the roles played by police and prosecutorial discretion. Id. at 16. Rather, a more comprehensive analysis for malicious prosecution deserves an examination of the requirements of malicious prosecution set out by the Restatement (Second) of Torts 653 Comment (g)(1977): </p> <p>Influencing a public prosecutor. A private person who gives to a public official information of another's supposed criminal misconduct, of which the official is ignorant, obviously causes the institution of such subsequent proceedings as the official may begin on his own initiative, but giving the information or even making an accusation of criminal misconduct does not constitute a procurement of the proceedings initiated by the officer if it is left entirely to his discretion to initiate the proceedings or not. When a private person gives to a prosecuting officer information that he believes to be true, and the officer in the exercise of his uncontrolled discretion initiates criminal proceedings based upon that information, the informer is not liable under the rule stated in this Section even though the information proves to be false and his belief was one that a reasonable man would not entertain. The exercise of the officer's discretion makes the initiation of the prosecution his own and protects from liability the person whose information or accusation has led the officer to initiate the proceedings.</p> <p>Cullys, 2013 N.C. LEXIS 491 at 17. Discarding the but-for test used by the trial court and the Court of Appeals, the N.C. Supreme Court implemented a new analysis according to Comment G to be used in future cases. Accordingly, the court rendered the Court of Appeals but-for analysis, which states that Sergeant Lucas would never have pursued a criminal prosecution but-for the Farm Bureau investigators report, inappropriate. Id. at 20.</p> <p>The court concluded that because the Farm Bureau investigator only presented evidence to Sergeant Lucas, but did not actually ask Sergeant Lucas to arrest or initiate prosecution against Volpe, Sergeant Lucas independently exercised his own discretion to make the prosecution. Thus, Farm Bureau did not institute a malicious prosecution and its actions did not constitute an unfair and deceptive practice. </p> <p>Judge Beasleys Dissent. </p> <p>Judge Beasley concurred with the majority that Comment (g) in the Restatement Second of Torts 653 (1977) is the proper standard to determine whether a party initiated the earlier proceeding in a malicious prosecution claim. However, Judge Beasley would remand the case to the trial court to make findings of fact and conclusions of law applying the standard announced by the majority. Judge Beasley noted: </p> <p>North Carolina law requires a plaintiff to prove four elements to prevail on a malicious prosecution claim: "(1) defendant initiated the earlier proceeding; (2) malice on the part of defendant in doing so; (3) lack of probable cause for the initiation of the earlier proceeding; and (4) termination of the earlier proceeding in favor of the plaintiff." Best v. Duke Univ., 337 N.C. 742, 749, 448 S.E.2d 506, 510 (1994) (citation omitted).</p> <p>. . . . </p> <p>Whether plaintiff initiated the earlier proceeding is a conclusion of law, but this conclusion of law, like any other conclusion of law, is dependent upon factual support. See, e.g., Scarborough v. Dillard's, Inc., 363 N.C. 715, 722, 693 S.E.2d 640, 644 (2009), cert. denied, U.S. , 131 S. Ct. 2456 (2011). When a party has failed to challenge the findings of fact, the findings are binding on the appellate court. Id. (citations omitted). The trial court's conclusions of law are reviewed de novo. Id. (citations omitted).</p> <p>Here, plaintiff did not challenge the trial court's findings of fact as findings of fact; rather, plaintiff challenged what the trial court labeled "findings of fact," but argued such "findings" were actually conclusions of law. In essence, plaintiff challenged the trial court's conclusions of law and allowed the court's findings of fact to go unchallenged. Thus, the trial court's correctly labeled findings of fact are binding on this Court, though conclusions of law are reviewed de novo.Cullys, 2013 N.C. LEXIS 491 at 22-25. Judge Beasley explained that although the on remand the trial court might find that Sergeant Lucas exercised uncontrolled discretionin charging Volpe based on the evidence presented, we are not a fact-finding court. We lack material findings of fact necessary to answer the legal question in this case, and this Court should not engage in the fact-finding process. Id. at 25, 26. </p> <p>VI. North Carolina Court of AppealsA.N.C. Court of Appeals Published Opinions</p> <p>Davis v. Urquiza, 2014 N.C. App. LEXIS 356 (April 15, 2014)</p> <p>Judge Steelman. Judges McGee and Ervin concur.</p> <p>Service of Process on Uninsured Motorist Carrier. Plaintiff Davis was a passenger in a vehicle struck by another vehicle operated by defendant, an uninsured motorist. Plaintiff and her parents filed this action against defendant seeking monetary damages for personal injuries resulting from the collision. Plaintiffs contended that Farm Bureau provided UM coverage for the collision in accordance with N.C. Gen. Stat. 20-279.21(b)(3), and also contend that National Grange provided applicable UM coverage. </p> <p>Defendant was served with a copy of the summons and complaint. Plaintiff's counsel mailed a copy of the summons and complaint to the Farm Bureau claims adjuster via certified mail at his office in Wilkesboro on June 5, 2012, and which were received two days later. Farm Bureau filed an answer as an unnamed party, specifically asserting the defenses of: insufficiency of process, insufficiency of service of process, and statute of limitations. Farm Bureau produced an affidavit stating that the adjuster served "was not now, nor has he ever been an officer, director or managing agent" of Farm Bureau, nor "has he ever been a designated process agent for that company..." On January 2, 2013, Plaintiffs mailed a copy of the summons and complaint to Wayne Goodwin, the Commissioner of Insurance, by certified mail, in order to serve Farm Bureau in accordance with N.C. Gen Stat. 58-16-30.Farm Bureau filed a motion to dismiss on January 7, 2013, and the trial court granted Farm Bureau's motion on March 11, 2013, dismissing plaintiff's complaint against Farm Bureau as an unnamed defendant, with prejudice. </p> <p>Plaintiffs appealed, contending that the trial court erred in dismissing the complaint against Farm Bureau for insufficient process and/or insufficient service of process. The Court cited Rule 4 of the N.C. Rules of Civil Procedure and N.C. Gen. Stat. 58-16-30 (which provides that an insurance company can be served by serving the N.C. Commissioner of Insurance. The Court explained: We have previously held that statutes concerning service of process must be strictly complied with, and that even actual notice, if it does not comply with statutory requirements, does not give the court jurisdiction over a party. Fulton v. Mickle, 134 N.C. App. 620, 623-24, 518 S.E.2d 518, 520-21 (1999). In Fulton, we held that service upon a party was defective for two reasons: first, because it was delivered by regular mail instead of certified mail; second, because the recipient was not one of those listed in Rule 4(j)(6) as authorized to receive service. We hold that this latter basis, the lack of an authorized recipient, is controlling in the instant case.</p> <p>. . . .</p> <p>The affidavit of H. Julian Philpott, Jr., states that Wagoner was neither an officer nor director, nor a designated agent for service of process, for Farm Bureau. This affidavit rebutted the presumption that service upon Wagoner was effective. Plaintiff failed to present evidence to demonstrate effective service within the limitations period. We therefore hold that plaintiffs' purported service of process upon [the adjuster] was defective.</p>...