Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerLaws Regarding Using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For Stolen VehiclesPayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSlower Traffic Keep RightSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Total Loss Threshold (75%).
Cost for vehicle repair is 75% or more of its fair market value prior to being damaged. Any vehicle totaled by insurance company must have title and registration card marked, “Total Loss Claim.” N.C.G.S.A. § 20-71.3(d).
Automobile and Property: There is no applicable statute, administrative code provision, or court decision providing a rule outlining specifically whether deductibles must be reimbursed pro-rata or first dollar, however, in the event an insurance company does not pay for the full damages sustained by the insured, including when the payments are made “less” the deductible, the insured is the necessary party to bring the lawsuit against the tortfeasor, and the insurance company cannot bring an action against the tortfeasor for its own damages plus the insured’s, unless the insured specifically assigns the insurer the right to do so. The court in St. Paul Fire & Marine v. W.P. Rose Supply Co., 198 S.E.2d 482 (N.C. 1973) found that an insured may bring a suit to recover the entire loss, including the portion paid by the insurer, and that he holds the recovery first to make good his own loss, and the remainder in trust for the insurer. If the insured only brings an action to recover his own losses, the insurer must join in that action to claim damages paid by them. This indicates that first dollar reimbursement of the deductible is probably the right approach to reimbursement in North Carolina. The carrier is not allowed to include the deductible without suit being brought in the insured’s name.
Diminution of Value
First Party: North Carolina courts have essentially found that the measure of damages is the fair market value of the car immediately before the collision and the fair market value after the accident: “where the insurer elects to repair the damaged automobile and represents, at least tacitly, that it will place the vehicle in the condition that it was in previously, the insured has no choice but to acquiesce, and the original contract of the parties is converted into a new one, under which the insurer is bound to repair the automobile and restore it to its former condition.” Pierce v. American Fidelity Fire Ins. Co., 83 S.E.2d 493 (N.C. 1954).
North Carolina uses a variety of methods to determine diminished value, including the ClaimCoach.com system and the Classic Car Appraisal Service (Don Peterson) methodology, in addition the 17(c) formula mentioned in the introduction to this chart above. North Carolina has actually passed a statute which outlines the procedure for a policyholder to make a first-party diminished value claim. N.C. Gen. Stat. Ann. § 20-279.21(d)(1) provides that, if an insurer’s and policyholder’s estimate of diminished value differs by more than $2,000 or 25% of the vehicle’s fair market retail value, then each party selects an independent appraiser to appraise the loss. If they cannot agree on a number, then a third-party umpire is called to determine the diminished value, whose report is binding on the parties. Though time-consuming, this method avoids the criticism of the 17(c) formula and keeps the parties out of court.
Third Party: The measure of damage for injury to personal property is the difference between the market value of the property immediately before the injury and the market value immediately after the injury. DeLaney v. Henderson-Gilmer Co., 135 S.E. 791 (N.C. 1926). Evidence of the reasonable value of repairs to a damaged vehicle, and the reasonable market value of the vehicle as repaired, are admissible to show the difference in its value before and after it was injured. U. S. Fid. & Guar. Co. v. P. & F. Motor Express, 18 S.E.2d 116 (1942). North Carolina Jury Pattern Instructions provide that, “The plaintiff’s actual property damages are equal to the difference between the fair market value of the property immediately before it was damaged and its fair market value immediately after it was damaged.” If evidence of repair is introduced: “Evidence of [estimates of the cost to repair] (and) [the actual cost of repairing] the damage to the plaintiff’s property may be considered by you in determining the difference in fair market value immediately before and immediately after the damage occurred.” Property Damages–Diminution in Market Value., N.C. Pattern Jury Inst. – Motor Veh. § 106.62.
11 N.C. Admin. Code 4.0421(5) also discusses claims handling and claims settlement practices which constitute unfair claim settlement practices and provides as follows:
(5) If a release or full payment of claim is executed by a third-party claimant, involving a repair to a motor vehicle, it shall not bar the right of the third-party claimant to promptly assert a claim for diminished value, which diminished value was directly caused by the accident and which diminished value could not be determined or known until after the repair or attempted repair of the motor vehicle. Claims asserted within 30 days after repair for diminished value shall be considered promptly asserted.
MWL takes the position that, regardless of the insurance code, the Statute of Limitations for property damage is three (3) years. As of the publication of this chart, there have been no cases on point wherein the court has reduced the three (3) year statute based on the (conflicting) insurance code. However, to be safe, the claim should be made immediately so as to ensure a timely response.
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
A liability insurer may settle part of multiple claims arising from negligence of its insured, even though such settlements result in preferences by exhausting the fund to which the injured party whose claim has not been settled might otherwise look for payment, and a court may not require the insurer to pay the fund into its register for ratable distribution among claimants. Alford v. Textile Ins. Co., 103 S.E.2d 8 (N.C. 1958).
Funeral Procession Traffic Laws
When the lead vehicle has entered an intersection lawfully, the other vehicles may proceed without regard to the traffic signal. Funeral processions have the right-of-way, but they must yield to emergency vehicles or when directed by a police officer. The lead vehicle must be marked with a flashing light, flag or other insignia indicating a funeral procession. Each vehicle in the procession must have its headlights lit and hazard warning lights on. Other vehicles may not attempt to pass or knowingly drive between vehicles in a funeral procession. N.C. Gen. Stat. § 20-157.1.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Negligence of driver is not imputable to passenger having no control. Williams v. Seaboard Air Line Ry. Co., 121 S.E. 608 (N.C. 1924).
Where husband and wife were joint owners of vehicle being driven by husband with wife’s consent for a common purpose, they were engaged in a joint enterprise and the husband’s contributory negligence was properly imputed to the wife’s third-party claim. Husband present in vehicle with right to control details of its use. Etheridge v. Norfolk Southern Ry. Co., 7 N.C. App. 140, 171 S.E.2d 459 (1970).
To avoid imputed contributory negligence of driver, the owner must show a bailment by which owner relinquished control of vehicle and the right to control the details of its use. Id.
Owner-occupier doctrine holds that when owner is also occupant of vehicle, owner is presumed to have right to control and direct its operation, and negligence of driver is imputed to owner. Monk v. Cowan Transp., 468 S.E.2d 407 (N.C. 1996).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
The Family Purpose Doctrine prevails in North Carolina. The Family Purpose Doctrine imposes liability upon the owner or person in ultimate control of a motor vehicle for its negligent operation by another when (1) the operator was a member of his family or household and was living in his home; (2) the vehicle was owned, provided, and [or] maintained for the general use, pleasure, and convenience of his family; and (3) at the vehicle was being so used by a member of his family at the time of the accident with his express or implied consent. Williams v. Wachovia Bank & Trust Co., 233 S.E.2d 589 (N.C. 1977).
Sponsor Liability for Minor’s Driving: No Sponsorship Liability Statute.
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: Any driver under the age of 18 or anyone with a learner’s permit cannot use a cell phone in any capacity. N.C.G.S.A. § 20-137.3.
No driver may operate a motor vehicle and use a hand-held device to read, send, or type a text message. N.C.G.S.A. § 20-137.4a.
Other Prohibitions: No Applicable Laws.
Loss Of Use
Loss of Use: Yes. If vehicle can be economically repaired, then plaintiff is entitled to recovery for the loss of use during the time he was necessarily deprived of it. Roberts v. Pilot Freight Carriers, Inc., 160 S.E.2d 712 (N.C. 1968). If vehicle is destroyed or repairs not feasible, the owner is entitled to damages for loss of use for a period reasonably necessary to acquire a new vehicle. Damages limited to a reasonable time necessary to acquire a new vehicle. Id. Measure of damages for loss of use is not loss profits during time deprived of vehicle, rather the cost of renting a similar vehicle during a reasonable period for repairs. Id.
Lost Profits: Yes. If reasonably certain. Where the profits lost are the direct and necessary result of defendant’s tortious conduct, and are reasonably definite and certain, they are recoverable; those which are speculative and contingent, are not. Kitchen Lumber Co. v. Tallassee Power Co., 174 S.E. 427 (N.C. 1934).
Comments: If owner trades vehicle in for new equipment instead of economically repairing, he will not be precluded from recovering damages for loss of use during time reasonably required to purchase new equipment or to make the repairs, whichever is shorter. Roberts v. Pilot Freight Carriers, Inc., supra. Owner need not actually rent replacement vehicle in order to recover loss of use damages. Id.
Med Pay/PIP Subrogation
Med Pay: No. Med Pay subrogation clauses in auto policies are not allowed. 11 N.C.A.C. § 12.0319. Therefore, contractual subrogation/reimbursement is not allowed. Equitable subrogation is probably allowed but the law is not entirely clear on this.
PIP: Coverage not applicable.
Made Whole: Mentioned in one case only. Not applied. St. Paul Fire & Marine Ins. Co. v. W.P. Rose Supply Co., 19 N.C. App. 302 (N.C. 1973).
Statute of Limitations: The three (3) year personal injury statute of limitations runs from the date of the insured’s accident. N.C.G.S.A. § 1-52(1)-(5).
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: N.C.G.S.A. ֻ§ 20-163.
Common Law Rule: The owner may not be held liable for the negligent operation of a vehicle by a thief, merely because the owner left the keys in the car after parking it in a lawful manner. Williams v. Mickens, 100 S.E.2d 511 (N.C. 1957); Spurlock v. Alexander, 468 S.E.2d 499 (N.C. Ct. App. 1996) (additionally holding that violation of N.C.G.S.A. § 20-163 did not establish negligence per se).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: No applicable statute, case law, or regulation governing recovery of sales tax.
Third-Party Claims: No applicable statute, case law, or regulation governing recovery of sales tax.
Pedestrian and Crosswalk Laws
N.C.G.S.A. § 20-173: Where there are no traffic signals, vehicle must yield to pedestrian. Vehicle emerging from or entering an alley, building entrance, private road, or driveway shall yield the right-of-way to any pedestrian.
N.C.G.S.A. § 20-174: Pedestrians must yield to vehicles when crossing outside crosswalk. Pedestrians must use crosswalk at intersections with traffic control devices. Vehicles must exercise due care for pedestrians.
Summary: Pedestrian with right-of-way at crosswalk cannot be held contributorily negligent for failure to see approaching vehicle or to use ordinary care for her safety. McCoy v. Dowdy, 192 S.E.2d 81, 16 N.C. App. 242 (1972). Failure of pedestrian crossing at other than crosswalk to yield right-of-way is not negligence per se but is evidence of negligence. Blake v. Mallard, 136 S.E.2d 214, 262 N.C. 62 (1964).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated.
Recovery From Third-Party: Case law allows for owner of commercial vehicle (tractor-trailer). Nothing specifically for rental cars. When a vehicle is negligently damaged, whether it is totally destroyed or it can be economically repaired, the plaintiff will be entitled to recover for the loss of its use during the time he was necessarily deprived of it. Roberts v. Pilot Freight Carriers, Inc., 160 S.E.2d 712 (N.C. 1968). Where loss of business profits is direct and necessary result of wrongful conduct, and such profits are capable of being shown with reasonable degree of certainty, lost profits constitute proper element of damage. Reliable Trucking Co. v. Payne, 233 N.C. 637 (N.C. 1951) (tractor-trailer).
Rental Car Company’s Liability Insurance Primary or Excess
Summary: Two North Carolina statutes require a car rental company to provide liability coverage for the renters of its vehicles. The first obligates vehicle owners to secure liability insurance that insures permissive users. N.C. Stat. § 20-279.21(b)(2). The second requires car rental companies to obtain liability insurance that insures the owner and renters of vehicles from any liability imposed by law. N.C. Stat. § 20-281. The minimum limits of insurance required by these statutes are identical. An insurance policy complies with § 20-281 if it provides the coverage described in § 20-281, subject to the condition that no coverage is provided if other liability insurance, in the amount required by statute, is provided by a different policy. It then becomes a process of comparing other insurance clauses. When both policies contain clauses stating that each will cover minimum financial limits and a pro rata share of any excess damages, both insurers will share the loss on a pro rata basis. Jeffreys v. Snappy Car Rental, Inc., 493 S.E.2d 767 (N.C. App.1997). Where self-insured car rental company’s liability coverage is subject to condition that no coverage is provided if other insurance is provided by different policy, this complies with the statute requiring lessors in business of renting vehicles to provide liability coverage for lessee. Hertz Corp. v. New South Ins. Co., 497 S.E.2d 448 (N.C. App. 1998).
Slower Traffic Keep Right
Statute: N.C.G.S.A. § 20-146 (a), (b).
Summary: Drivers must drive in the right lane, except when overtaking and passing another vehicle; when an obstruction exists in the right lane; upon a roadway with three marked traffic lanes; upon a highway designated for one-way traffic. On all highways, vehicles proceeding below the speed limit must be in the right lane.
Sudden Medical Emergencies While Driving
Sudden Incapacitation Defense. By the great weight of authority the operator of a motor vehicle who becomes suddenly stricken by a fainting spell or other sudden and unforeseeable incapacitation, and is, by reason of such unforeseen disability, unable to control the vehicle is not chargeable with negligence. Wallace v. Johnson, 182 S.E.2d 193 (N.C. 1971).
Unconsciousness is not an element of the sudden incapacitation defense in an auto accident case. For example, such extreme pain as to be incapable of controlling the operation of a motor vehicle falls within the sudden incapacitation defense. Word v. Jones ex rel. Moore, 516 S.E.2d 144 (N.C. 1999).
Suspension of Drivers’ Licenses
Administrative Suspension: Within 60 days after receiving the report, the Commissioner will suspend the license of each operator and owner for failure to deposit security. N.C.G.S.A. § 20-279.5. Suspension will remain for one (1) year, provided no action for damages is filed. N.C.G.S.A. § 20-279.7.
Judgment: Upon receipt of a judgment which has remained unpaid for 60 days, the Commissioner will suspend the license of the judgment debtor. N.C.G.S.A. § 20-279.13. License suspension will continue until the judgment is stayed, satisfied, made subject to an installment agreement, is barred from enforcement by the statute of limitations, or is discharged in bankruptcy. N.C.G.S.A. § 20-279.14.
Contact Information: State of North Carolina, Division of Motor Vehicles, Driver License Services, 3114 Mail Service Center, Raleigh, NC 27699-3114, (919) 861-3099, https://www.ncdot.gov/dmv/.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: 11 N.C.A.C. § 4.0425 to 4.0427; N.C.G.S.A. § 58-36-95.
Summary: Only those non-OEM parts that are identical in quality and functionality with their OEM counterpart may be required to be used by an insurer. If an insurer is going to require the use of non-OEM parts, the insured’s policy must contain this information in a format and size in line with the statute. Lastly, the written estimate must include a statement disclosing the use of non-OEM parts and their likeness to the equivalent OEM parts.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Legal Authority: Local government immune from governmental acts in scope of employment, but not proprietary acts. Data Gen. Corp. v. City of Durham, 545 S.E.2d 243 (N.C. App. 2001).
Public Duty Doctrine: When government protecting public at large – automatically immune. No special relationship.
Notice Deadlines: None. Cities may adopt their own notice requirements. Miller v. City of Charlotte, 219 S.E.2d 62 (N.C. 1975).
Claims/Actions Allowed: Immunity waived if liability insurance purchased, up to limits of policy.
County: N.C.G.S.A. § 153A-435.
Cities: N.C.G.S.A. § 160A-485.
Risk pool considered insurance. If local government has immunity, but settles some claims but not others, may be liable under 42 U.S.C. § 1983 (Dobrowolska Claim).
Comments/Exceptions: Cities with population over 500,000 (only Charlotte) can waive immunity and become subject to the NCTCA.
Proprietary Function: Not traditionally done by government; also performed by private sector; don’t benefit public as whole, charge fee (e.g., golf course, sewer backup due to poor maintenance).
Governmental Function: Performed for public at large; discretionary (e.g., decision to construct sewer).
Damage Caps: Per Person: No Cap. Per Occurrence: $1 Million. Punitive damages not allowed unless authorized by statute. Jackson v. Hous. Auth. of City of High Point, 341 S.E.2d 523 (N.C. 1986)
State Sovereign Immunity And Tort Liability
Tort Claims Act: North Carolina Tort Claims Act. N.C.G.S.A. § 143-291 (1951).
Notice Deadlines: Claims against the State must be filed within three years of the accident. If death results, claim must be filed within two years by personal representative of the deceased. N.C.G.S.A. § 143-299.
Claims/Actions Allowed: The Tort Claims Act covers all claims arising as a result of the negligence of any officer, employee, involuntary servant, or agent of the State while acting within the scope of his office, employment, service, agency or authority. N.C.G.S.A. § 143-291.
Comments/Exceptions: Contributory negligence by the claimant bars recovery under the State Tort Claims Act. N.C.G.S.A. § 143-299.1; Oates v. N. Carolina Dep’t of Motor Vehicles, 24 N.C. App. 690, 212 S.E.2d 33 (1975). Intentional acts are not compensable. White v. Trew, 366 N.C. 360, 736 S.E.2d 166 (2013). Claims are brought before the Industrial Commission, reviewable by Superior Court. N.C.G.S.A. § 143-291.
Damage Caps: Claim for Injury and damage to any one person capped at $1,000,000 less any commercial liability insurance purchased by the State that is applicable to the claim. N.C.G.S.A. § 143-299.2.
General Tort Laws/Statutes
Prohibits Intermediate Indemnity. Applies to Construction Contracts or Agreements. N.C. Gen. Stat. § 22B-1.
Not applicable to a public utility as an indemnitee, or to contracts entered into by the DOT.
Pure Joint and Several Liability. Joint and Several Liability. N.C.G.S.A. § 1B-2.
Contribution plaintiff for years was entitled to recover from joint tortfeasor the amount of a reasonable settlement which is in excess of his pro-rata share of liability in a third-party action or as a separate action. N.C.G.S.A. § 1B-2; Chamock v. Taylor, 26 S.E.2d 911 (N.C. 1943). There was a common law right to contribution, or equitable contribution, pursuant to which one person can obtain reimbursement for a portion of the judgment or liability against him. The extent to which common law contribution is still available is not entirely clear following the passage of the Uniform Right to Contribution Among Joint Tortfeasors Act (“UJTA”). One case argues that there is no longer any common law contribution. Holland v. Edgerton, 355 S.E.2d 514 (N.C. App. 1987) (“The right to contribution is statutory; therefore, it must be enforced according to the terms of the statute.”). North Carolina has passed the Uniform Contribution Among Joint Tortfeasors Act. N.C.G.S.A. § 1B-1(a). It contains several specific statutory provisions regarding the right to contribution, including the recognition of the right. G.S. § 1B-1(a). However, a general contractor usually does not have a contribution claim against a sub-contractor, because they are not tortfeasors toward the owner. A settling tortfeasor has a right of contribution only if he extinguishes the liability of the other tortfeasor. A tortfeasor which settles with a claimant is not entitled to recover contribution from another tortfeasor whose liability for the injury or wrongful death has not been extinguished nor in respect to any amount paid in a settlement which is in excess of what was reasonable. G.S. § 1B-1(d). One (1) year statute of limitation after judgment or payment. Three (3) years statute of limitations after voluntary dismissal of pending contribution claim. Safety Mut. Cas. Corp. v. Spears, Barnes, Baker, Wainio, Brown & Whaley, 409 S.E.2d 736 (N.C. App. 1991).
Contributory Negligence/Comparative Fault
Pure Contributory Negligence: Damaged parties cannot recover any damages if even 1% at fault. Plaintiff may not recover if his negligence proximately caused his injury. Smith v. Fiber Controls Corp., 268 S.E.2d 504 (N.C. 1980); N.C.G.S.A. § 99B-4(3) (Product Liability).
Dog Bite Laws
Dog owner will only be liable if they intentionally, knowingly, and willfully let their dog violate the “running at large” statute at the time of the incident. N.C. Gen. Stat. Ann. § 67-12, 67-4.4, 67-4.1. It is unlawful for an owner to leave a “dangerous dog” unattended on the owner’s real property. A dangerous dog is defined as a dog who has, without provocation, killed or inflicted severe injury on a person; or is determined by the person or Board designated by the county or municipal authority responsible for animal control to be potentially dangerous because the dog has engaged in one or more of the behaviors listed in subdivision (2) of this subsection. N.C. Gen. Stat. Ann. § 67-4-2. The owner of a dangerous dog shall be strictly liable in civil damages for any injuries or property damage the dog inflicts upon a person, his property, or another animal. N.C. Gen. Stat. Ann. § 67-4.4.
Economic Loss Doctrine
Majority Rule. North Carolina’s ELD provides that a breach of contract does not ordinarily “give rise to a tort action by the promisee against the promisor.” Ellis v. La.–Pac. Corp., 699 F.3d 778 (4th Cir. 2012) (quoting N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 240 S.E.2d 345 (N.C. 1978)). More specifically, it “prohibits recovery for purely economic loss in tort when a contract, a warranty, or the UCC operates to allocate risk.” Kelly v. Ga.–Pac. LLC, 671 F.Supp.2d 785 (E.D.N.C. 2009). In cases arising out of the sale of failed goods, the ELD bars “recovery for purely economic loss in tort, as such claims are instead governed by contract law.” Lord v. Customized Consulting Specialty, Inc., 643 S.E.2d 28 (N.C. App. 2007). Damage to the product itself may not be recovered in tort based on a defect of the product. Moore v. Coachmen Indus., Inc., 499 S.E.2d 722 (N.C. 1998). However, where “other property” is damaged, the damage to product can be recovered. Lord v. Customized Consulting Specialty, Inc., 643 S.E.2d 28 (N.C. App. 2007). Damage to the underlayment of flooring is not recoverable due to the ELD because the underlayment is not considered to be “other property”, but the vinyl flooring over the underlayment is considered “other property.” Terry’s Floor Fashions, Inc. v. Georgia-Pac. Corp., 1998 WL 1107771 (E.D. N.C. 1998). However, the entire house is not considered “other property” with regard to damage done by synthetic stucco covering the house. Land v. Tall House Building Co., 602 S.E.2d 1 (N.C. App. 2004).
Willful Misconduct. Liability imposed on parents when child willfully or maliciously injures person or property. N.C.G.S.A. § 1-538.1.
The limit of liability is $2,000.00. Child must be between 10 and 18.
Adverse Presumption/Inference: The North Carolina Supreme Court recognizes a permissive, rather than mandatory adverse inference may be drawn against a spoliator of evidence. McLain v. Taco Bell Corp., 137 N.C. App. 179, 182-192, 527 S.E.2d 712, 715 – 721 (N.C. App. 2000). “[T]o qualify for the adverse inference, the party requesting it must ordinarily show that the spoliator was on notice of the claim or potential claim at the time of the destruction.“ McLain, 137 N.C. App. at 187, 527 S.E.2d at 718 (quotation omitted). The obligation to preserve evidence may arise prior to the filing of a complaint where the opposing party is on notice that litigation is likely to be commenced. Id. The evidence lost must be “pertinent” and “potentially supportive of plaintiff’s allegations.” Id. at 188, 527 S.E.2d at 718. Finally, “[t]he proponent of a missing document inference need not offer direct evidence of a cover-up to set the stage for the adverse inference. Circumstantial evidence will suffice.” Id. at 186, 527 S.E.2d at 718; Arndt v. First Union Nat. Bank, 613 S.E.2d 274, 281-283 (N.C. App. 2005).
Statute of Limitations
Personal Property3 YearsN.C.G.S.A. § 1-52(1)-(5)
Personal Injury/Death3 YearsN.C.G.S.A. § 1-52(1)-(5); Nelson v. Patrick, 293 S.E.2d 829 (N.C. 1982)
Personal Injury/Wrongful Death2 YearsN.C.G.S.A. § 1-53(4)
Breach of Contract/Written3 YearsN.C.G.S.A. § 1-52(1)
Breach of Contract/Oral3 YearsN.C.G.S.A. § 1-52(1)
Breach of Contract/Sale of Goods4 YearsN.C.G.S.A. § 25-2-725
Statute of Repose/Products12 YearsN.C.G.S.A. § 1-46.1(1)*
Statute of Repose/Real Property6 YearsN.C.G.S.A. § 1-50**
Breach of Warranty/U.C.C.4 YearsN.C.G.S.A. § 25-2-725(1)***
Breach of Warranty/Personal Injury3 YearsN.C.G.S.A. § 1-52(1)-(5)
Breach of Warranty/Property Damage3 YearsN.C.G.S.A. § 1-52(1)-(5)
Workers’ Comp Third Party Case3 YearsN.C.G.S.A. § 97-10.2
Strict Product Liability3 YearsN.C.G.S.A. § 1-52(16)
Statute of Limitations Exceptions
*This means that you must bring suit within twelve (12) years after the date of “initial purchase or use for consumption.” This act became effective October 1, 2009, and applies to causes of action that accrue on or after that date.
**6 years after “last act of defendant” or “substantial completion” by the improvement. N.C.G.S.A. § 1-50.
***N.C.G.S.A. § 25-2-725(1) but 3 years when personal injury or property damage other than to product itself. N.C.G.S.A. § 1-52(1)-(5).
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 3 Years. N.C.G.S.A. § 1-52(1)-(5); Nelson v. Patrick, 293 S.E.2d 829 (N.C. 1982). Wrongful Death – 2 Years. N.C.G.S.A. § 1-53(4).
Subrogation of Medical Benefits not allowed. Exception for the State Health Plan. N.C.G.S.A. § 135-48.37. Barnard v. Johnston Health Servs. Corp., 839 S.E.2d 869, 873 (N.C. Ct. App. 2020). Also, does not apply to policies issued and delivered outside of North Carolina. Bush v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 124 F. Supp.3d 642, 657 (E.D. N.C. 2015); 11 N.C.A.C. § 12.0319.
Subrogation of Disability Benefits is not allowed. Does not apply to policies issued and delivered outside of North Carolina. Bush v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 124 F. Supp.3d 642, 657 (E.D. N.C. 2015); 11 N.C.A.C. § 12.0319.
Made Whole Doctrine may apply. St. Paul Fire & Marine Ins. Co. v. W.P. Rose Supply Co., 198 S.E.2d 482 N.C. App. 1973). Common Fund Doctrine does apply. Farm Bureau Ins. Co. of N.C. v. Blong, 159 N.C. App. 365, 375, 583 S.E.2d 307, 313 (2003).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: State v. McGrady, COA13-330, 2014 WL 211962 (N.C. Ct. App. Jan. 21, 2014); State v. Goode, 461 S.E.2d 631 (N.C. 1995).
Comments: Daubert rejected until 2014. In Goode, court held that the standard depends on reliability, qualifications of expert, and relevancy. However, in McGrady, the Supreme Court finally adopted Daubert.
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: Yes. N.C. Stat. § 58-3-33. Insurer conditionally required to provide information.
Comments: Applies to persons injured by another “where such injury or damage is subject to a policy of nonfleet private passenger automobile insurance.” Written request by certified mail, directed to insurance adjuster. Carrier has 30 days to respond and must provide limits pre-suit ONLY if (1) injured party’s written consent included, (2) must agree to mediation of the claim under § 7A-38-3A, and (3) must include copy of accident report and description of events.
One-Party Consent: It is not unlawful for an individual who is a party to or has consent from a party of an in-person or electronic communication to record and or disclose the content of said communication. N.C. Gen. Stat. Ann. § 15A-287(a).
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 3 years for personal injury. N.C.G.S.A. § 1-52(1). Wrongful death is 2 years. N.C.G.S.A. § 1-53(4). It is 4 years for Uniform Commercial Code and Unfair and Deceptive Trade Practices. N.C.G.S.A. § 25-2-725(1). Statute of Repose is 12 years. N.C.G.S.A. § 1-46.1(1).
Liability Standards: Negligence, Warranty
Fault Allocations: Pure Contributory. N.D.C.C. § 32-03.2-02.
Non-Economic Caps/Limits On Actual Damages: Yes (Paid/Incurred Medical Expenses).
Punitive Y/N and Limits: Yes (Limits).
Heeding Presumption?: No. Never adopted strict liability or Restatement (Second) of Torts § 402A (1965).
Innocent Seller Statute: Yes. N.C.G.S.A. § 99B-2(a).
Joint and Several Liability: Yes. N.C.G.S.A§ 1B-2.
Available Defenses: Assumption of Risk; Misuse; Alteration; Learned Intermediary; Presumption; Sophisticated User.
Restatement 2nd or 3rd?: Restatement 3rd
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Condominium/Co-Op Waiver of Subrogation Laws
Associations shall maintain property insurance and liability insurance on the common elements. The insurance policy must waive subrogation rights against any unit owner and member of their household. N.C.G.S.A. § 47C-3-113.
Damage to Property Without Market Value
Service Value: “The cost of repairs furnishes the more satisfactory test by which to determine the plaintiff’s damages…” Carolina Power & Light Co. v. Paul, 136 S.E.2d 103 (N.C. 1964).
Intrinsic Value: “…where damage to personal property which has no market value, including documents and drawings,…if plaintiff is entitled to recover at all, it is…actual value of that property immediately before it was damaged less any salvage value…[.] The actual value of any property is the property’s intrinsic value, that is, its value to its owner.” William F. Freeman, Inc. v. Alderman Photo Co., 365 S.E.2d 183 (N.C. Ct. App. 1988) (Court affirmed the trial court’s instruction on actual value).
Sentimental Value: “…the fact finder must not consider any fanciful, irrational or purely emotional value that the specific property may have had.” Shara v. N.C. State University Veterinary Teaching Hosp., 723 S.E.2d 352 (N.C. Ct. App. 2012) (citing N.C.P.I. Civil 810.66 (2015)).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment Of Depreciation Of GCOP/Sales Tax: No applicable case law, statutes, administrative rules, or other guidance with regard to the calculation and/or depreciation of GCOP.
North Carolina has rejected the implied co-insured rationale set forth in the “Sutton Rule” that allows the landlord’s insurer to bring a subrogation claim against the tenant, absent an express agreement to the contrary contained in the lease. Winkler v. Appalachian Amusement Co., 238 N.C. 589, 79 S.E.2d 185, 190 (N.C. 1953). Upon paying a loss by fire, the insurer is entitled to subrogation to the rights of insured against the third-party tortfeasor causing the loss, to the extent of the amount paid. In William F. Freeman, Inc. v. Alderman Photo Co., 365 S.E.2d 183 (N.C. App. 1988), the court held that a lease that only addresses insurance coverage and subrogation rights will not extend to exempt the parties from liability for negligence. There, the lease required the parties to insure their own property, and the court concluded the parties included the subrogation clause to ensure each party would only be required to pay for damages to his own property. The court reasoned because the lease contained “no clear, explicit words waiving liability for negligence[,]” it would not infer the parties intended to do so. In Morrell v. Hardin Creek, Inc., 2017 WL 3480543 (N.C. App. 2017), even though the lease stated the parties “agree and discharge each other from all claims and liabilities arising from or caused by any hazard covered by insurance,” the court ruled the lease did not explicitly state the parties contemplated waiving claims stemming from negligence.
The Anti-Subrogation Rule has yet to be determined.
Under the North Carolina statute, a criminal defendant will be liable for restitution to the “victim” of their criminal conduct. N.C.G.S.A. § 15A‐834. Additional statutory language qualifies that no third party will be allowed to benefit through restitution—and case law shows that courts have interpreted this to mean that an insurer cannot recover restitution payments. N.C.G.S.A. § 15A‐1343(d); State v. Stanley, 339 S.E.2d 668 (N.C. Ct. App. 1986).
Made Whole Doctrine
North Carolina has discussed the Made Whole Doctrine once, in the case of St. Paul Fire & Marine Ins. Co. v. W.P. Rose Supply Co., 198 S.E.2d 482 N.C. App. 1973). In that case, the Court held that:
“The great weight of authority is … that, when the loss exceeds the insurance, as the cause of action is indivisible and the right of the insurer is not because of any interest in the property destroyed or damaged, and is enforced upon the equitable principle of subrogation, the action must be brought by and in the name of the owner of the property, and that he is entitled to recover the entire damages, without diminution on account of the insurance, and that he holds the recovery first to make good his own loss, and then in trust for the insurer …” Id. at 485 (citing Powell & Powell v. Wake Water Co., 88 S.E.2d 426 (N.C. 1916)).
Ironically, North Carolina does not mention the subject again or give us any guidance as to how it is to be applied, if at all. W.P. Rose Supply Co. is a purely equitable subrogation case with no contractual analysis in its opinion. When the sum recovered by the insured is less than the total loss, the loss should be borne by the insurer. W. P. Rose Supply Co., supra; 11 N.C.A.C. § 12.0319 (prohibiting subrogation clause in life, accident and health insurance policies).
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Common law CSR prohibits evidence of collateral sources including workers’ compensation, health insurance, sick leave, etc. Only applied in tort cases. White v. Lowery, 352 S.E.2d 866 (N.C. App. 1987).
Recovery Of Medical Expenses Rule: Until recently, North Carolina had not addressed the treatment of write-downs. For actions arising after 10/1/11, Rule of Evidence 414 limits evidence of medical bills to “the amounts actually paid to satisfy the bills” and “the amounts actually necessary to satisfy the bills that have been incurred, but not yet satisfied.” For cases filed before 10/1/11, the Common law CSR prevents such evidence. Rule 414 does require a party to seek a reduction in billed charges to which the party is not contractually entitled. Applies to private insurance and Medicare/Medicaid.
Related Law/Comments: N.C.G.S.A. § 8-58.1 limits plaintiff’s testimony about reasonable medical expenses to the amount “paid or required to be paid in full satisfaction” of the charges. Rule 414 appears to put responsible persons who pay health insurance premiums at a disadvantage, because the rule does not prevent recovery of billed medical expenses if plaintiff does not have insurance to cover the bills.
Employee Leasing Laws
Neither North Carolina Workers’ Compensation Act nor case law directly addresses the Exclusive Remedy Rule as applied to employee leasing situations. However, a court has held that a temporary employee could not pursue a third-party action against the employer to whom the worker was assigned. Brown v. Friday Services, Inc., 460 S.E.2d 356 (N.C. App. 1995).
Hospital Lien Laws
Statute: N.C.G.S. §§ 44-49 to 44-51. Liens Upon Recoveries for Personal Injuries to Secure Sums Due for Medical Attention, etc.
(1) Provider must provide written notice to the patient’s attorney of the lien claimed. § 44-49.
(2) Provider must provide to attorney, upon request, itemized statement of lien and written notice of the lien. § 44-49(b).
(3) An assignment of benefits contract stands on equal footing with a medical lien, and the provider cannot recover more under the contract than it could under the medical lien statutes.
Comments: Creates lien on personal injury recovery in favor of any person, corporation, State entity, municipal corporation or county to whom the person so recovering, or the person in whose behalf the recovery has been made, may be indebted for any drugs, medical supplies, ambulance services, services rendered by any physician, dentist, nurse, or hospital, or hospital attention or services. § 44-49. Lien attaches to all funds paid to [patient] in compensation for or settlement of the injuries, whether in litigation or otherwise. § 44-50. Lien capped at 50% of recovery after attorney’s fees are deducted. § 44-50. Provider/lienholder entitled to settlement distribution sheet (“a certification with sufficient information to demonstrate that the distribution was pro rata and consistent with this Article”). Is subject to being bound by any confidentiality. § 44-50.1. If lien contested, claim must be fully established and determined. § 44-51. When third-party carrier settles with unrepresented patient and does not have valid notice of a claim for medical services creating a medical lien on settlement, unless there is valid assignment of rights, carrier does not have valid notice of a lien. Smith v. State Farm Mut. Auto. Ins. Co., 358 N.C. 725 (N.C. 2004).
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP. OCIP authorized for the construction of state public works projects over $50 million and may include workers’ compensation insurance. N.C.S.A. § 58-31-65(a).
Statutory Employer Law: Generally, an injured employee of a subcontractor may bring a tort action against a general contractor or against another subcontractor. Braxton v. Anco Elec., 397 S.E.2d 640 (N.C. App. 1990), aff’d, 409 S.E.2d 914 (N.C. 1991). However, § 97-19 provides that a “principal contractor” becomes liable for comp benefits to a subcontractor’s employee and has exclusive remedy protection when: (1) employee is working for subcontractor contracted with principal contractor, and (2) the subcontractor does not have comp insurance. Rich v. R.L. Casey, Inc., 454 S.E.2d 666 (N.C. App. 1995); N.C.G.S.A. § 97-19.
Comments: Principal contractor also enjoys the exclusive remedy immunity of an employer from third-party suit when the facts are such that he could be made liable for compensation. Rich v. R.L. Casey, Inc., 454 S.E.2d 666 (N.C. App. 1995). Any contractor who sublets any contract for the performance of any work without requiring from such contractor a certificate of insurance indicating that he has obtained workers’ compensation insurance for the subcontractor’s employee, will be liable for workers’ compensation benefits to the employees of the subcontractor. N.C.G.S.A. § 97-19 (1996); N.C.G.S.A. § 97-19.1 (2003) (same as § 97-19, except that it deals with individuals in interstate or intrastate trucking who operate a truck licensed by a governmental motor vehicle regulatory agency).
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? Not allowed where employee had already settled third-party personal injury action with tortfeasor. Otherwise undecided.
Statute/Case Law: M.B. Haynes Corp. v. Strand Electro Controls, Inc., 487 S.E.2d 819 (N.C. App. 1997).
Rule Summary: Employer was precluded as matter of law from maintaining cause of action against manufacturer to recover increases in premiums, due to employee’s settlement with manufacturer in employee’s third-party tort action and based on statutory scheme governing claims against third-party tortfeasors.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
In North Carolina, the workers’ compensation statute provides for reimbursement to the carrier of “all benefits by way of compensation or medical compensation expense paid or to be paid”. N.C.G.S.A. § 97-10.2. Further legal archaeology reveals the definition of compensation as follows:
“The term ‘compensation’ means the money allowance payable to an employee or to his dependents as provided for in this Article, and includes funeral benefits provided therein.” N.C.G.S.A. § 97-2.
North Carolina case law reveals no further clarification on exactly what “medical compensation expenses” refer to, but the door seems open wide enough to include some of the case management costs referenced above, yet not quite wide enough to include interest. Buckner v. City of Asheville, 438 S.E.2d 467 (N.C. App. 1994). In North Carolina, however, there is also the possible appeal to the Industrial Commission to have something declared as a “benefit” recoverable in subrogation. Before the Commission can declare that a carrier is entitled to a particular expense, it must make a factual determination that the services were rehabilitative in nature and reasonably “required to effect a cure of give relief” to the claimant. Walker v. Penn Nat’l Security Ins. Co., 608 S.E.2d 107 (N.C. App. 2005). This state has a higher burden to meet in order to recover something as a “benefit” in subrogation. A workers’ compensation carrier is not entitled to prejudgment interest on its lien.
Workers’ compensation case attorneys’ fees are deducted from an award of compensation. N.C.G.S.A. § 97-90(c). Such an award of attorney fees in worker’s compensation cases is within discretion of the Industrial Commission. N.C.G.S.A. §§ 97–88, 97–88.1.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: N.C.G.S.A. § 97-10.2
Waiver Allowed? Yes. Turner v. Ceco Corp., 390 S.E.2d (N.C. App. 1990).
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: The effect of a waiver of subrogation on the carrier’s rights, including its right to enforce its statutory lien, has not yet been decided.
Other Applicable Law: None.
Statute of Limitations: 3 Years. N.C.G.S.A. § 97-10.2.
Can Carrier Sue Third Party Directly: Yes, joint right after one year, ending 60 days before statute of limitations (written admission of liability must be filed by employer with Commission).
Right to Intervene: Yes.
Recovery from UM/UIM Benefits: Yes, for policies after 10/1/99.
Subrogation Against Medical Malpractice: Undecided.
Subrogation Against Legal Malpractice: No.
Recovery Allocation/Equitable Limitations: (1) Fees, Expenses; (2) Carrier Fully Reimbursed; and (3) Net to Plaintiff. (“Discretionary Reduction”) Consent of both employee and employer required in order to settle.
Employer Contribution/Negligence: Yes, N.C.G.S.A. § 97-10.2(e).
Attorney’s Fees/Costs: Pro-Rata. Plaintiff Must Apply.
Future Credit: No, must recover in third-party suit.
Auto No-Fault: No.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statute expressly includes illegal aliens. N.C. Gen. Stat. § 97-2-2.
Case Law: Rivera v. Trapp, 519 S.E.2d 777 (N.C. Ct. App. 1999); Ruiz v. Belk Masonry Co., 559 S.E.2d 249 (N.C. Ct. App. 2002); Gayton v. Gage Carolina Metals, Inc., 560 S.E.2d 870 (N.C. Ct. App. 2002).
Comments/Explanation/Other: Rivera held the statute included illegal aliens and the claimant is entitled to benefits. Ruiz held that the workers’ compensation statute did not exclude illegal aliens so he was entitled to benefits and that federal law does not prevent an illegal alien from falling under the workers’ compensation law.
*According to Gayton disability benefits are payable if the illegal alien cannot work due to his or her injuries. But, if the status of the illegal alien keeps them from working, then disability benefits are not payable.