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Case Summary: Underinsured Motorist Coverage in North Carolina


Underinsured Motorist (UIM) Coverage in North Carolina Car Accidents

Lunsford v. Mills, 367 N.C. 618 (2014)
Supreme Court of North Carolina


Defendant, Thomas Mills (Mills) lost control of his tractor-trailer while traveling eastbound on Interstate 40 in McDowell County, struck the median barrier, and flipped over. The plaintiff, Douglas Lunsford (Lunsford), a volunteer firefighter, was first on the scene and while attempting to rescue Mills, he was struck by a vehicle driven by defendant Shawn Buchanan (Buchanan). Lunsford suffered severe injuries as a result of being struck.

The main issue the court faced was determining when UIM coverage is triggered in a situation involving multiple potentially at-fault drivers with varying insurance policy coverage limits.

Procedural History

At the trial court, settlements were reached between Lunsford and Mills for $850,000.00, and also between Lunsford and Buchanan, for $50,000.00. Lunsford then moved for summary judgment in the amount of $350,000.00, which included both amounts from his own Farm Bureau insurance policies. Lunsford sought $300,000.00 from his business policy and $100,000.00 from his personal policy, minus the $50,000.00 that was paid by Buchanan’s insurance company. The trial court granted Lunsford’s motion against North Carolina Farm Bureau Mutual Insurance Company (Farm Bureau), and found that he had UIM coverage up to $350,000.00 from Farm Bureau.

The Court of Appeals upheld the trial court’s decision to grant the plaintiff’s motion for summary judgment and ordered payment of the $350,000.00 with pre- and post-judgment costs as well. It is from this order that Farm Bureau appealed to the Supreme Court of North Carolina.


While plaintiff Lunsford was attempting to rescue defendant Mills from his overturned tractor-trailer, he was struck on the roadway by defendant Buchanan’s vehicle. Mills was working for James W. Crowder at the time of accident. Lunsford was dragged beneath Buchanan’s car, suffering severe injuries, including several broken bones, cuts, and internal bleeding.

Lunsford filed a negligence action against Mills, Crowder, and Buchanan as a result of the injuries he sustained, claiming that the trio were jointly and severally liable. Lunsford had two separate insurance policies with the unnamed defendant Farm Bureau, one which provided UIM coverage of $300,000.00 through a business policy, and another providing UIM coverage of $100,000.00 through a personal policy. Mills and Crowder were insured through United States Fire Insurance Company (U.S. Fire) providing one million dollars in liability coverage. Buchanan was insured by Allstate Insurance Company (Allstate) for $50,000.00 in liability coverage.

Shortly after the filing, Allstate tendered the $50,000.00 limit for Buchanan’s policy, and U.S. Fire tendered $850,000.00 from Crowder’s policy. After settling these amounts, Lunsford moved for summary judgment against Farm Bureau for $350,000.00 UIM coverage on his two policies. The trial court granted Lunsford’s motion, and Farm Bureau petitioned the Supreme Court for discretionary review of the Court of Appeal’s decision to uphold the trial court’s decision.

Governing Law

The main dispute was related to the triggering provision of North Carolina’s statute concerning UIM coverage. The relevant provision states that “underinsured motorist coverage is deemed to apply when, by reason of payment of judgment or settlement, all liability bonds or insurance policies providing coverage for bodily injury caused by the ownership, maintenance, or use of the underinsured highway vehicle have been exhausted.” N.C. Gen. Stat. § 20-279.21(b)(4).

Farm Bureau’s argument was essentially that Lunsford would be required to exhaust all parties’ (Mills, Crowder, and Buchanan’s) insurance policies before the UIM coverage would be triggered. The Supreme Court found this argument unpersuasive, and upheld the prior decision, finding that UIM coverage is triggered when the policy limits of a single at-fault motorist are exhausted. In this case, when Allstate tendered the limit of its policy for Buchanan of $50,000.00, the UIM coverage was triggered in accordance with N.C.G.S. § 20-279.21(b)(4).

However, the Supreme Court did rule in Farm Bureau’s favor that Lunsford was not entitled to pre- and post-judgment interest and costs. The Supreme Court found that because Farm Bureau had contractually limited its obligation to pay damages at its UIM coverage limit, it was not required to pay interest and costs above the $350,000.00 limit of the UIM coverage.


The Supreme Court ruled that once a single at-fault motorist has reached his limit, the UIM coverage is triggered by § 20-279.21(b)(4). However, the Court also found that Farm Bureau was not required to pay interest and costs above any limit that the contract provided.

Strong Dissent

Justice Newby penned a long dissent in this case. He argued that because Lunsford settled with Crowder’s insurance before its limit was reached, he received a windfall. Lunsford was able to obtain $1.2 million as a result of the decision. Without the UIM coverage, Lunsford would only have been able to recover $900,000.00, which is what was negotiated for on his behalf. Essentially, Justice Newby’s dissent points out that future situations could arise in which this decision will be problematic for the Court.

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