Liability Coverage

The insurer obligates itself to pay damages for bodily injury and property damage for which any insured becomes legally responsible because of an automobile accident.  The compensation to innocent victims who have been injured by financially irresponsible motorists is the main purpose of compulsory motor vehicle liability insurance.

All self-propelled motor vehicles registered in North Carolina must have financial responsibility continuously throughout the period of registration.  Such financial responsibility may be a liability insurance policy, a financial security bond, a financial security deposit, or by qualification as a self-insurer.  The liability insurance policy must insure the person named therein and any other person using the vehicles insured with the expressed or implied permission of such named insured or individuals in lawful possession against loss from liability imposed for damage as a result of the ownership, maintenance, or use of such vehicle.  Coverage is provided for use within the United States or Canada.  Minimum limits of coverage are $25,000 because of bodily injury to or death of one person in any one accident and, subject to said limit for one person, $50,000 because of bodily injury to or death of two or more persons in any one accident, and $10,000 because of injury to or destruction of property of others in any one accident.

The insurer is not liable for any greater sum than that provided by operation of law or in the policy. Our constitution guarantees the freedom to contract, unless contrary to public policy or prohibited by statute. Accordingly, an insurer may enter into whatever insuring agreements it wishes to limit its voluntary coverages as opposed to those required statutorily.  If a policy providing coverage in excess of that required statutorily contains substantive coverages less than those statutorily required, the insurer's liability for an accident for which the statute requires but the policy does not provide coverage is limited to the minimum amount of coverage required by statute. In such instance the statute determines not only the fact but also the extent of the insurer's liability.

Persons Insured

For the purposes of liability coverage, the "insured" is the named insured shown in the declarations and the insured's spouse if a resident of the same household; any family member of the named insured, which term includes a person related to the named insured by blood, marriage, or adoption who is a resident of the named insured's household (including a ward or foster child);any person using the named insured's covered automobile; for the named insured's covered automobile, any individual or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded; and for any automobile or trailer other than the covered automobile, any person or organization but only with respect to the legal responsibility for acts or omissions of the named insured or any family members for whom coverage is afforded, but only if the person or organization does not own or hire the automobile or trailer.  The following sections will provide a more detailed discussion of these individuals.

Under the "omnibus clause," the persons insured with respect to the maintenance or use of the automobile listed in the policy include the person named on the declarations page of the policy, the named insured's spouse if a resident of the same household, any resident of the named insured's household, any other person using the insured automobile with the express or implied permission of the named insured or spouse, and any other person or organization with respect to liability arising from acts or omissions of insured persons using the insured automobile.

Generally, omnibus clauses are construed liberally in favor of the insured and in accord with the policy of the clause to protect the public.  Permission which will give coverage under the omnibus clause may be either expressed or implied.

Each policy contains an identical provision extending coverage to any person "required by law" to be an insured.

Jurisdictions differ as to rules governing permission required to effectuate coverage under omnibus clauses in liability insurance policies.  North Carolina has adopted the liberal rule as to the scope of permission once granted, which is as follows: "[I]f the permittee has permission to use the automobile in the first instance, any subsequent use while it remains in his possession, though not within the contemplation of the parties … is permissive use within the terms of the clause."

It has been held that a third party given possession by an automobile permittee, who had the good faith belief that granting such possession would not be in violation of any law or contractual obligation, resulted in lawful possession in said third party under an omnibus clause.

It follows that the omnibus clause in the medical payment provision of insurance policies also protects persons other than the named insured. The essential permission required under such medical payments coverage is permission for the driving of the insured vehicle by the person to whom that permission is given.  Since ultimate control over the automobile remains with the named insured, a mistake as to the identity of the permitted person which is not caused by that person's representations will not negate the consent given.

Other persons

The insurer, in the Standard Automobile Policy, agrees to pay reasonable expenses incurred for necessary medical and funeral services because of bodily injury caused by accident and sustained by an insured.

The term "insured" is defined in said policy to include more than the named insured or any family member. Such term includes any other person while occupying the covered automobile or any other motor vehicle operated by the named insured or by a family member if said vehicle is a private passenger automobile or trailer.

It should be noted that the Financial Responsibility Act does not require the insurer to extend medical payment coverage beyond the terms of the policy to those who receive liability coverage solely by virtue of the Act.

The court has further held that the filing of a claim under the medical payments clause of a policy does not amount to seeking protection under the mandatory liability provisions thereof.

The omnibus clause in the medical liability provision of insurance policies protects persons other than the named insured. Passengers injured while occupying the insured car can recover medical expenses if the driver thereof had permission from the named insured to operate such vehicle.

If permission is not defined by the policy, analogy to contract and tort principles is beneficial. Under North Carolina contract law, unilateral mistake without fraud, undue influence, or other oppression is insufficient to avoid a contract.

Accordingly, the North Carolina Court of Appeals has held that permission given by an insured mistakenly thinking such permission was given to a different individual, in the event of no misrepresentation, constitutes permission effective to bind the insurer for medical liability purposes. The court so held notwithstanding that the driver was unlicensed.

Exclusions

The insurer, pursuant to the Standard Automobile Policy, provides no medical payments coverage to any person for bodily injury: 

(a) Sustained while occupying the covered automobile when it is being used as a public or livery conveyance. (This exclusion does not apply to a share-the-expense carpool.)

(b) Sustained while occupying any vehicle located for use as a residence or premises.

(c) Occurring while employed or otherwise engaged in the business of selling, repairing, servicing, storing, or parking vehicles designed for use mainly on public highways, including road testing and delivery, provided such exclusion applies only if workers' compensation benefits are available for the bodily injury.

(d) Sustained while occupying, or when struck by, any vehicle other than the covered vehicle which is owned by the named insured or furnished for his regular use. This exclusion has been sustained where an individual was driving a dump truck used in his family's farming operations and titled in the name of one of his parents. The court rejected the plaintiff's argument that the truck in question was not furnished for his regular use, as the policy specifies, but, rather, for use by the farm. The court declined to construe the phrase "your use" to mean "your personal use," as the plaintiff urged.

(e) Sustained while occupying, or when struck by, any vehicle (other than the covered vehicle) which is owned by any family member or furnished for the regular use of any family member, provided such exclusion does not apply to the named insured.  The North Carolina Court of Appeals has held that such exclusion has no applicability when a family member's stationary, disabled car is propelled into him after being struck by a vehicle not belonging to a family member.

(f) Sustained while occupying a vehicle without a reasonable belief that that person is entitled to do so. This exclusion does not apply to a family member using "your covered auto which is owned by you."

(g) Sustained while occupying any automobile not owned by, or furnished for the regular use of, the named insured or any family member while used to carry persons or property for a fee, provided this exclusion does not apply to a share-the-expense carpool or to the named insured or any family member.

(h) Resulting from the maintenance or use of any automobile not owned by, or furnished for the regular use of, the named insured or any family member while that person is engaged in the business of selling, repairing, servicing, storing, or parking vehicles designed for use mainly on public highways, including road testing and delivery, provided this exclusion does not apply to the named insured or any family member.

(i) Resulting from the maintenance or use of any automobile not owned by, or furnished for the regular use of, the named insured or any family member while that person is employed or otherwise engaged in any business not described in the aforementioned exclusion, provided this exclusion does not apply to the named insured or any family member or in the event the bodily injury results from the operation of a private passenger automobile or trailer by the named insured.

(j) Caused by or as a consequence of war (declared or undeclared), civil war, insurrection or rebellion, or revolution.

(k) Sustained while occupying any motorized vehicle having fewer than four wheels.

The Court of Appeals has sustained coverage where the plaintiff was not struck directly by an automobile; instead, the automobile hit a rope barrier which broke and struck the plaintiff.  The court reasoned that an insured may be injured when the vehicle in which he is riding is struck by an automobile and another insured may be injured when the parked vehicle next to which he is standing is struck by an automobile and is propelled against the insured's body.  The common and ordinary meaning of the phrase "struck by an automobile" compels the conclusion that the insured has indeed "been struck by an automobile" in both of these situations. 

To create a distinction with legal significance between a collision situation where an automobile collides with a car occupied by the insured and a collision situation where an automobile collides with some other object which strikes the insured is "to engage in metaphysical hairsplitting."

The Court of Appeals has further held that an individual who was walking toward the rear of her car to open the trunk thereof (the car being over a car pit) and who had her hand on the car feeling her way around to the trunk when she fell into the pit had failed to demonstrate that her fall occurred while she was "in or upon or entering into or alighting from" the automobile. Recovery was therefore denied.

The Court of Appeals has affirmed recovery where a family member's stationary, disabled car was propelled into him after being struck by a car not belonging to a family member.

Insured Motor Vehicle

The Standard Automobile Policy provides medical payments coverage because of bodily injury to the named insured or any family member while occupying or as a pedestrian when struck by "a motor vehicle designed for use mainly on public roads or a trailer of any type."

"Any other persons" have medical payments coverage while such persons are occupying the covered automobile or any other motor vehicle operated by the named insured or by a family member thereof in the event such vehicle is a private passenger automobile or trailer.

The "Exclusions" portion of the Medical Payments Coverage section of the Standard Automobile Policy should be referred to for specific instances in which the aforementioned vehicles do not qualify for medical payments coverage.

It should be specifically noted that motorcycles are excluded from such coverage in that the Standard Policy excludes any motorized vehicle having fewer than four wheels.

Operation, maintenance, and use

The insuring agreement of the medical payments coverage portion of the Standard Automobile Policy does not contain the term "operation, maintenance and use."  The named insured or any family member is, however, covered while occupying or as a pedestrian when struck by a motor vehicle.

"Any other person" is insured while "occupying" the covered automobile or any other motor vehicle operated by the named insured or a family member.

In a Court of Appeals case, in which the policy defined "occupying" to mean "in or upon or entering into or alighting from," the court denied coverage.  The plaintiff had presented her car to a service station for tire recapping purposes. While the car was over a grease pit, the plaintiff walked toward the car to open the trunk, put her hand on the car, and fell into the pit.  The court held that such individual simply failed to demonstrate that her fall occurred while "in or upon or entering into or alighting from" the vehicle.

-edit- Stacking Med Pay Coverage

Policy provisions and case law must be carefully studied to determine whether an individual is allowed to stack medical payments coverage. Factual situations are usually complex, as is demonstrated in Woods v. Nationwide Mutual Insurance Co. Mr. Woods' daughter, Cynthia, was injured driving an automobile belonging to Mr. Spenser.  Mr. Spenser's automobile was one of three owned by him and covered by a policy issued to him by the defendant.  Mr. Woods was the named insured in a policy issued to him by the defendant, which policy covered two automobiles owned by him.  Mr. Woods incurred medical expenses for his daughter.  Mr. Woods sued to recover sums allegedly due him under the medical payment provisions of two separate family policies.

Under the Spenser policy, Cynthia was neither the "named insured" nor his relative.  She was, however, operating the Spenser car with his permission.  Furthermore, said Spenser vehicle was an "owned automobile" within the meaning of the Spenser policy.  The insurer agreed in the policy to extend medical payments coverage to non-relatives of the "named insured" for bodily injury "caused by accident, while occupying the owned automobile" with permission of the "named insured."  The court held that the coverage extended by this provision is explicitly limited to that purchased for the "owned automobile" occupied at the time of collision.  This language cannot be construed to mean that non-relatives receive protection by virtue of the premiums paid for the other vehicles mentioned in the policy which are not occupied by the insured party. The plaintiff, therefore, was not entitled to collect additional payments under the Spenser policy.

However, Cynthia, as a member of the "named insured's family" within the meaning of the Woods' policy, was entitled to medical payments for bodily injury "caused by an accident while occupying or being struck by an automobile."  This provision did not tie coverage for her medical payments to a specific vehicle. Since the medical payments coverage purchased for the Woods' two vehicles also extended medical coverage to a family member accidentally injured while occupying a non-owned automobile, it would be impossible to attribute liability for medical payments coverage to either car to the exclusion of the other. Each premium that was paid for medical coverage bought the same protection.  Where coverages derived from two separate premiums overlap so completely and where the provisions of the policy are said to "apply separately" to each vehicle insured, the policy holder may reasonably conclude that his double payment of premiums provides double coverage. Otherwise, he would receive no consideration for the second premium.

Accordingly, the natural construction of the language of the Woods' policy is that when a member of the insured's family is injured in an automobile accident and the insured has paid medical bills in excess of the coverage provided for each insured automobile, he is entitled to stack or aggregate the medical payments coverage for which he qualifies up to the limit for each car on which he has paid a premium.

The case of Wachovia Bank and Trust Co. v. Westchester Fire Insurance Co. should be distinguished.  The language in the applicable policy differed markedly from that employed in the Woods' policy. The policy in theWachovia case tied coverage to the specific car that the injured family member was occupying at the time of the accident.  In the Woods' policy, no such limitation appears. In the Wachovia case, the North Carolina Supreme Court considered the case of an insured who owned two vehicles, both insured by the insurer.  The policy provided medical payments coverage for each vehicle, for which coverage the insured paid separate premiums. The insured sustained fatal injuries in a head-on collision.  Under the factual circumstances presented, the court held that it was unrealistic to hold that the inclusion of both vehicles upon the declarations page of the policy and payment of premiums on account thereof were for the purpose of doubling the amount of medical payments coverage afforded to the insured, members of his family, and others while occupying one of the vehicles.  The court considered the amount of medical payments set out in the declarations page as well as the limit of liability paragraph of the policy pertaining to medical payments.

Again, clearly the specific policy provisions and factual circumstances, which are usually complex, must be carefully examined. It should be noted that the Standard Automobile Policy provides that in the event there is other applicable automobile medical payments insurance, the insurer will pay only its share of the loss.  Such share is defined as the proportion that the insurer's limit of liability bears to the total of all applicable limits.  Such policy also provides that any insurance provided with respect to a vehicle not owned by the named insured shall be excess over any other collectible automobile insurance providing payments for medical or funeral expenses.  These policy provisions should preclude results akin to the Woods case discussed above.

Correlation of medical payments, uninsured motorists coverage, and underinsured motorists coverage

It has been held in other jurisdictions that medical payments coverage cannot be used as a set-off against uninsured motorists coverage and vice versa.

The North Carolina Court of Appeals has refused to reduce an insured's recovery pursuant to underinsured motorists coverage by the amount he had received in medical payments from his insurer. In such case, apparently conflicting policy provisions were construed in favor of the insured.

The Standard Automobile Policy provides that underinsured motorist coverage is excess over and shall not duplicate any amount paid or payable under the medical payments provisions of the Standard Automobile Policy.

Notice of Accident

The insured is required to notify the insurer promptly of how, when, and where the accident or loss occurred.

The clear purpose of the notice provision is to protect the ability of the insurer to prepare a viable defense by preserving its ability to fully investigate the accident.

The North Carolina courts have held that notice given eight months after the happening of an accident, without explanation for the delay, could not be said to be given "as soon as practical." 

However, whether such notice is given within a reasonable time depends upon the facts and circumstances of each case.  Generally speaking, if the delay in giving notice has not materially prejudiced the ability of the insurer, its obligations under the insurance contract should not be excused.

Time Limitation

The insurer obligates itself to pay only those expenses incurred for services rendered within three (3) years from the date of the accident.

Index of Relevant Terms: 

• Absolute Divorce
• Adoption 
• Contributory Negligence
• Imputed Negligence
• Insurance Law 
• Defamation 
• Defenses to a Negligence Lawsuit
• Driving and Texting in North Carolina
• Emotional Distress
• Pedestrians 
• Punitive Damages
• Res Ipsa Loquitur
• Short Sale
• Traumatic Brain Injury
• Truck Accidents 
• Wrongful Death
• Wrongful Discharge from Employment