N.C. Supreme Court Rules Negligent Drivers May Not “Credit” Victim’s Uninsured Motorist Benefits Against Personal Injury Award
In North Carolina personal injury law, there is a principle known as the “collateral source rule.”
This rule basically states that a court cannot reduce a personal injury award to account for payments the plaintiff received from third-party sources. For example, if an insurance company pays a car accident victim’s medical bills; the payment is not used as evidence to reduce the negligent driver’s damages.
On December 7, 2018, the North Carolina Supreme Court held the collateral source rule also applies to uninsured/underinsured motorist (UM) benefits received by an accident victim.
North Carolina law requires all insurers to offer UM coverage as part of their auto insurance policies. UM coverage designed to compensate policyholders while injured in an accident involving another driver. When they lacks sufficient insurance or assets to pay 100 percent of the damages.
In the case before the Supreme Court, Hairston v. Harward, the plaintiff and the defendant collided at an intersection in Lexington, N.C. The defendant had an auto insurance policy with a $100,000 liability limit. The plaintiff had his own policy through Erie Insurance Exchange that included $250,000 in UM coverage.
The plaintiff later sued the defendant, alleging the latter’s negligence caused the car accident.
A jury agreed with the plaintiff and awarded $263,000 in damages. The judge reduced the award by $30,000 to account for other payments received by the plaintiff in connection with his injuries. But the plaintiff also received $145,000 from Erie under his UM policy. The defendant argued the judge remove this amount off the damage award. In December 2015, the judge ruled the defendants entitlement to a “credit”; for the UM payment.
The North Carolina Court of Appeals affirmed the trial court’s ruling, but the state Supreme Court reversed.
Writing for the Supreme Court, Justice Sam J. Ervin IV said that the public policy reasons underlying the collateral source rule supported the plaintiff’s position: “A decision that a plaintiff must credit the payment that he or she receives as a result of the decision to purchase [UM] coverage against the judgment entered against the defendant whose negligence caused the plaintiff’s injuries strikes us as likely to discourage North Carolina citizens from purchasing uninsured motorist coverage, a result that would have obvious deleterious consequences.”
North Carolina personal injury attorney Bryant T. Aldridge Jr., said the Supreme Court’s ruling was a common-sense victory for accident victims.
“Other state Supreme Courts have reached the same conclusion as North Carolina when confronted with the question of how to treat UM benefits under the collateral source rule. Although there is some risk of ‘double recovery’ by a plaintiff in personal injury cases, that is preferable to allowing negligent defendants to avoid paying their full share of damages.”
Aldridge added that UM carriers still have the the right of subrogation under North Carolina law.
This means the insurance company can seek reimbursement of any amounts it paid to the insured victim out of any subsequent personal injury award. But in the Hairston case, the plaintiff’s UM insurer decided to waive its subrogation rights.