NC Supreme Court Says “No” to Claimants Stacking UIM Policies to Obtain Coverage
The North Carolina Supreme Court recently held that claimants can no longer “stack” multiple underinsured motorist (UIM) policies together to qualify for UIM coverage in North Carolina.
In N.C. Farm Bureau Mutual Ins. Co., Inc. v. Hebert, Matthew Hebert was a passenger in his own vehicle when it was involved in a collision with another vehicle. Two individuals in Hebert’s vehicle, including the driver, were killed, and all other parties to the accident, including Hebert, were injured.
Hebert was an insured on multiple policies issued by North Carolina Farm Bureau Mutual Insurance Company, Inc. Farm Bureau insured Hebert through a personal automobile policy covering his vehicle, with limits of $50,000 per person and $100,000 per accident as well as UIM coverage in the same amounts. Hebert was also a named insured on his parents’ personal automobile policy with Farm Bureau. That policy did not insure Hebert’s vehicle, but he nevertheless qualified for its UIM coverage of $100,000 per person and $300,000 per accident.
Farm Bureau tendered Hebert’s $100,000 per accident limit of liability coverage and its UIM coverage under his parents’ policy, but it refused to pay out under the UIM coverage under his own policy. Farm Bureau filed a declaratory judgment action seeking a judgment that Hebert’s personal UIM coverage was not triggered.
The stacking issue arises out of North Carolina’s UIM statutory scheme under § 20-279.21(b)(4) of the Motor Vehicle Safety and Financial Responsibility Act (the FRA). In short, under the statutory scheme, a claimant is only eligible for UIM coverage if the tortfeasor’s liability coverage limits are less than the claimant’s applicable limits of UIM coverage. That begs the question that was before the Court: what are the applicable limits of UIM coverage? Are all UIM coverages applicable? Or are UIM coverages only applicable if they pertain directly to the vehicle involved in the subject accident?
The Court emphatically held that only the coverages which pertain to the vehicle at issue are applicable. So, Hebert could not “stack his parents’ policy’s UIM limits with his own policy’s UIM limits.” This holding favored Farm Bureau because if Hebert could “stack” his parents’ UIM limits with his own UIM limits, the aggregate UIM limits would exceed his personal auto coverage, thus allowing him to access the UIM limits on his policy. But without “stacking” his parents’ coverage, his UIM limits did not exceed his personal coverage, thus denying the UIM limits. The Court held that under the relevant plain language of the FRA, only UIM coverage for the at-fault vehicle could be considered and that other UIM coverages which did not pertain to the at-fault vehicle could not be stacked on top of it.
The decision overturned 30 years of appellate precedent, and, in a victory for insurers, may limit the frequency with which insurers must pay out UIM claims. This victory could be short-lived, however, because on Jan. 1, 2025, an amendment to the FRA will take effect that appears to allow the “stacking” of UIM limits. Phelps will monitor the implementation and court interpretation of the amendment and provide updates.
Please contact Nick Heintzman or any member of Phelps’ Insurance team if you have questions or need advice or guidance.
