§ 20-279.21. "Motor vehicle liability policy" defined.

Statutes > North Carolina Statutes > Chapter 20 - Motor Vehicles. > § 20-279.21. "Motor vehicle liability policy" defined.

§ 20‑279.21. "Motor vehicle liability policy" defined.

(a) A "motorvehicle liability policy" as said term is used in this Article shall meanan owner's or an operator's policy of liability insurance, certified asprovided in G.S. 20‑279.19 or 20‑279.20 as proof of financialresponsibility, and issued, except as otherwise provided in G.S. 20‑279.20,by an insurance carrier duly authorized to transact business in this State, toor for the benefit of the person named therein as insured.

(b) Such owner's policyof liability insurance:

(1) Shall designate byexplicit description or by appropriate reference all motor vehicles withrespect to which coverage is thereby to be granted;

(2) Shall insure theperson named therein and any other person, as insured, using any such motorvehicle or motor vehicles with the express or implied permission of such namedinsured, or any other persons in lawful possession, against loss from theliability imposed by law for damages arising out of the ownership, maintenanceor use of such motor vehicle or motor vehicles within the United States ofAmerica or the Dominion of Canada subject to limits exclusive of interest andcosts, with respect to each such motor vehicle, as follows: thirty thousanddollars ($30,000) because of bodily injury to or death of one person in any oneaccident and, subject to said limit for one person, sixty thousand dollars($60,000) because of bodily injury to or death of two or more persons in anyone accident, and twenty‑five thousand dollars ($25,000) because ofinjury to or destruction of property of others in any one accident; and

(3) (Effective untilFebruary 1, 2010) No policy of bodily injury liability insurance, coveringliability arising out of the ownership, maintenance, or use of any motor vehicle,shall be delivered or issued for delivery in this State with respect to anymotor vehicle registered or principally garaged in this State unless coverageis provided therein or supplemental thereto, under provisions filed with andapproved by the Commissioner of Insurance, for the protection of personsinsured thereunder who are legally entitled to recover damages from owners oroperators of uninsured motor vehicles and hit‑and‑run motorvehicles because of bodily injury, sickness or disease, including death,resulting therefrom, with limits equal to the highest limits of bodily injuryliability coverage for any one vehicle insured under the policy. The namedinsured may purchase uninsured motorist bodily injury coverage with greaterlimits, subject to the limitation that in no event shall uninsured motoristbodily injury coverage limits exceed one million dollars ($1,000,000) perperson and one million dollars ($1,000,000) per accident. The insurer shallnotify the named insured of his or her right to purchase uninsured motoristbodily injury coverage with greater limits, when the policy is issued andrenewed, as provided in subsection (m) of this section. The provisions shallinclude coverage for the protection of persons insured thereunder who are legallyentitled to recover damages from owners or operators of uninsured motorvehicles because of injury to or destruction of the property of such insured,with a limit in the aggregate for all insureds in any one accident equal to thehighest limits of property damage liability coverage for any one vehicleinsured in the owner's policy of liability insurance, and subject, for eachinsured, to an exclusion of the first one hundred dollars ($100.00) of suchdamages. The provision shall further provide that a written statement by theliability insurer, whose name appears on the certification of financialresponsibility made by the owner of any vehicle involved in an accident withthe insured, that the other motor vehicle was not covered by insurance at thetime of the accident with the insured shall operate as a prima faciepresumption that the operator of the other motor vehicle was uninsured at thetime of the accident with the insured for the purposes of recovery under thisprovision of the insured's liability insurance policy.

If aperson who is legally entitled to recover damages from the owner or operator ofan uninsured motor vehicle is an insured under the uninsured motorist coverageof a policy that insures more than one motor vehicle, that person shall not bepermitted to combine the uninsured motorist limit applicable to any one motorvehicle with the uninsured motorist limit applicable to any other motor vehicleto determine the total amount of uninsured motorist coverage available to thatperson. If a person who is legally entitled to recover damages from the owneror operator of an uninsured motor vehicle is an insured under the uninsuredmotorist coverage of more than one policy, that person may combine the highestapplicable uninsured motorist limit available under each policy to determinethe total amount of uninsured motorist coverage available to that person. Theprevious sentence shall apply only to insurance on nonfleet private passengermotor vehicles as described in G.S. 58‑40‑10(1) and (2).

In additionto the above requirements relating to uninsured motorist insurance, everypolicy of bodily injury liability insurance covering liability arising out ofthe ownership, maintenance or use of any motor vehicle, which policy isdelivered or issued for delivery in this State, shall be subject to thefollowing provisions which need not be contained therein.

a. A provision that theinsurer shall be bound by a final judgment taken by the insured against anuninsured motorist if the insurer has been served with copy of summons,complaint or other process in the action against the uninsured motorist byregistered or certified mail, return receipt requested, or in any mannerprovided by law; provided however, that the determination of whether a motoristis uninsured may be decided only by an action against the insurer alone. Theinsurer, upon being served as herein provided, shall be a party to the actionbetween the insured and the uninsured motorist though not named in the captionof the pleadings and may defend the suit in the name of the uninsured motoristor in its own name. The insurer, upon being served with copy of summons,complaint or other pleading, shall have the time allowed by statute in which toanswer, demur or otherwise plead (whether the pleading is verified or not) tothe summons, complaint or other process served upon it. The consent of theinsurer shall not be required for the initiation of suit by the insured againstthe uninsured motorist: Provided, however, no action shall be initiated by theinsured until 60 days following the posting of notice to the insurer at theaddress shown on the policy or after personal delivery of the notice to theinsurer or its agent setting forth the belief of the insured that theprospective defendant or defendants are uninsured motorists. No defaultjudgment shall be entered when the insurer has timely filed an answer or otherpleading as required by law. The failure to post notice to the insurer 60 daysin advance of the initiation of suit shall not be grounds for dismissal of theaction, but shall automatically extend the time for the filing of an answer orother pleadings to 60 days after the time of service of the summons, complaint,or other process on the insurer.

b. Where the insured,under the uninsured motorist coverage, claims that he has sustained bodilyinjury as the result of collision between motor vehicles and asserts that theidentity of the operator or owner of a vehicle (other than a vehicle in whichthe insured is a passenger) cannot be ascertained, the insured may institute anaction directly against the insurer: Provided, in that event, the insured, orsomeone in his behalf, shall report the accident within 24 hours or as soonthereafter as may be practicable, to a police officer, peace officer, otherjudicial officer, or to the Commissioner of Motor Vehicles. The insured shallalso within a reasonable time give notice to the insurer of his injury, theextent thereof, and shall set forth in the notice the time, date and place ofthe injury. Thereafter, on forms to be mailed by the insurer within 15 daysfollowing receipt of the notice of the accident to the insurer, the insuredshall furnish to insurer any further reasonable information concerning theaccident and the injury that the insurer requests. If the forms are notfurnished within 15 days, the insured is deemed to have complied with therequirements for furnishing information to the insurer. Suit may not beinstituted against the insurer in less than 60 days from the posting of thefirst notice of the injury or accident to the insurer at the address shown onthe policy or after personal delivery of the notice to the insurer or itsagent. The failure to post notice to the insurer 60 days before the initiationof the suit shall not be grounds for dismissal of the action, but shallautomatically extend the time for filing of an answer or other pleadings to 60days after the time of service of the summons, complaint, or other process onthe insurer.

Providedunder this section the term "uninsured motor vehicle" shall include,but not be limited to, an insured motor vehicle where the liability insurerthereof is unable to make payment with respect to the legal liability withinthe limits specified therein because of insolvency.

Aninsurer's insolvency protection shall be applicable only to accidents occurringduring a policy period in which its insured's uninsured motorist coverage is ineffect where the liability insurer of the tort‑feasor becomes insolventwithin three years after such an accident. Nothing herein shall be construed toprevent any insurer from affording insolvency protection under terms andconditions more favorable to the insured than is provided herein.

Inthe event of payment to any person under the coverage required by this sectionand subject to the terms and conditions of coverage, the insurer making paymentshall, to the extent thereof, be entitled to the proceeds of any settlement forjudgment resulting from the exercise of any limits of recovery of that personagainst any person or organization legally responsible for the bodily injuryfor which the payment is made, including the proceeds recoverable from theassets of the insolvent insurer.

Forthe purpose of this section, an "uninsured motor vehicle" shall be amotor vehicle as to which there is no bodily injury liability insurance andproperty damage liability insurance in at least the amounts specified insubsection (c) of G.S. 20‑279.5, or there is that insurance but theinsurance company writing the insurance denies coverage thereunder, or hasbecome bankrupt, or there is no bond or deposit of money or securities asprovided in G.S. 20‑279.24 or 20‑279.25 in lieu of the bodilyinjury and property damage liability insurance, or the owner of the motorvehicle has not qualified as a self‑insurer under the provisions of G.S.20‑279.33, or a vehicle that is not subject to the provisions of theMotor Vehicle Safety and Financial Responsibility Act; but the term"uninsured motor vehicle" shall not include:

a. A motor vehicle ownedby the named insured;

b. A motor vehicle thatis owned or operated by a self‑insurer within the meaning of any motorvehicle financial responsibility law, motor carrier law or any similar law;

c. A motor vehicle thatis owned by the United States of America, Canada, a state, or any agency of anyof the foregoing (excluding, however, political subdivisions thereof);

d. A land motor vehicleor trailer, if operated on rails or crawler‑treads or while located foruse as a residence or premises and not as a vehicle; or

e. A farm‑typetractor or equipment designed for use principally off public roads, exceptwhile actually upon public roads.

Forpurposes of this section "persons insured" means the named insuredand, while resident of the same household, the spouse of any named insured andrelatives of either, while in a motor vehicle or otherwise, and any person whouses with the consent, expressed or implied, of the named insured, the motorvehicle to which the policy applies and a guest in the motor vehicle to whichthe policy applies or the personal representative of any of the above or anyother person or persons in lawful possession of the motor vehicle.

(3) (EffectiveFebruary 1, 2010) No policy of bodily injury liability insurance, coveringliability arising out of the ownership, maintenance, or use of any motorvehicle, shall be delivered or issued for delivery in this State with respectto any motor vehicle registered or principally garaged in this State unlesscoverage is provided therein or supplemental thereto, under provisions filedwith and approved by the Commissioner of Insurance, for the protection ofpersons insured thereunder who are legally entitled to recover damages fromowners or operators of uninsured motor vehicles and hit‑and‑runmotor vehicles because of bodily injury, sickness or disease, including death,resulting therefrom. The limits of such uninsured motorist bodily injurycoverage shall be equal to the highest limits of bodily injury liabilitycoverage for any one vehicle insured under the policy; provided, however, that(i) the limits shall not exceed one million dollars ($1,000,000) per person andone million dollars ($1,000,000) per accident regardless of whether the highestlimits of bodily injury liability coverage for any one vehicle insured underthe policy exceed those limits and (ii) a named insured may purchase greater orlesser limits, except that the limits shall not be less than the bodily injuryliability limits required pursuant to subdivision (2) of this subsection, andin no event shall an insurer be required by this subdivision to sell uninsuredmotorist bodily injury coverage at limits that exceed one million dollars($1,000,000) per person and one million dollars ($1,000,000) per accident. Whenthe policy is issued and renewed, the insurer shall notify the named insured asprovided in subsection (m) of this section. The provisions shall includecoverage for the protection of persons insured under the policy who are legallyentitled to recover damages from owners or operators of uninsured motorvehicles because of injury to or destruction of the property of such insured.The limits of such uninsured motorist property damage coverage shall be equalto the highest limits of property damage liability coverage for any one vehicleinsured under the policy; provided, however, that (i) the limits shall notexceed one million dollars ($1,000,000) per accident regardless of whether thehighest limits of property damage liability coverage for any one vehicleinsured under the policy exceed those limits and (ii) a named insured maypurchase lesser limits, except that the limits shall not be less than theproperty damage liability limits required pursuant to subdivision (2) of this subsection.When the policy is issued and renewed, the insurer shall notify the namedinsured as provided in subsection (m) of this section. For uninsured motoristproperty damage coverage, the limits purchased by the named insured shall besubject, for each insured, to an exclusion of the first one hundred dollars($100.00) of such damages. The provision shall further provide that a writtenstatement by the liability insurer, whose name appears on the certification offinancial responsibility made by the owner of any vehicle involved in anaccident with the insured, that the other motor vehicle was not covered byinsurance at the time of the accident with the insured shall operate as a primafacie presumption that the operator of the other motor vehicle was uninsured atthe time of the accident with the insured for the purposes of recovery underthis provision of the insured's liability insurance policy.

Inaddition to the above requirements relating to uninsured motorist insurance,every policy of bodily injury liability insurance covering liability arisingout of the ownership, maintenance or use of any motor vehicle, which policy isdelivered or issued for delivery in this State, shall be subject to thefollowing provisions which need not be contained therein.

a. A provision that theinsurer shall be bound by a final judgment taken by the insured against anuninsured motorist if the insurer has been served with copy of summons,complaint or other process in the action against the uninsured motorist byregistered or certified mail, return receipt requested, or in any mannerprovided by law; provided however, that the determination of whether a motoristis uninsured may be decided only by an action against the insurer alone. Theinsurer, upon being served as herein provided, shall be a party to the actionbetween the insured and the uninsured motorist though not named in the captionof the pleadings and may defend the suit in the name of the uninsured motoristor in its own name. The insurer, upon being served with copy of summons, complaintor other pleading, shall have the time allowed by statute in which to answer,demur or otherwise plead (whether the pleading is verified or not) to thesummons, complaint or other process served upon it. The consent of the insurershall not be required for the initiation of suit by the insured against theuninsured motorist: Provided, however, no action shall be initiated by theinsured until 60 days following the posting of notice to the insurer at theaddress shown on the policy or after personal delivery of the notice to theinsurer or its agent setting forth the belief of the insured that theprospective defendant or defendants are uninsured motorists. No defaultjudgment shall be entered when the insurer has timely filed an answer or otherpleading as required by law. The failure to post notice to the insurer 60 daysin advance of the initiation of suit shall not be grounds for dismissal of theaction, but shall automatically extend the time for the filing of an answer orother pleadings to 60 days after the time of service of the summons, complaint,or other process on the insurer.

Forthe purpose of this section, an "uninsured motor vehicle" shall be amotor vehicle as to which there is no bodily injury liability insurance andproperty damage liability insurance in at least the amounts specified insubsection (c) of G.S. 20‑279.5, or there is that insurance but theinsurance company writing the insurance denies coverage thereunder, or hasbecome bankrupt, or there is no bond or deposit of money or securities asprovided in G.S. 20‑279.24 or 20‑279.25 in lieu of the bodilyinjury and property damage liability insurance, or the owner of the motorvehicle has not qualified as a self‑insurer under the provisions of G.S.20‑279.33, or a vehicle that is not subject to the provisions of the MotorVehicle Safety and Financial Responsibility Act; but the term "uninsuredmotor vehicle" shall not include:

a. A motor vehicleowned by the named insured;

b. A motor vehicle thatis owned or operated by a self‑insurer within the meaning of any motorvehicle financial responsibility law, motor carrier law or any similar law;

c. A motor vehicle thatis owned by the United States of America, Canada, a state, or any agency of anyof the foregoing (excluding, however, political subdivisions thereof);

d. A land motor vehicleor trailer, if operated on rails or crawler‑treads or while located foruse as a residence or premises and not as a vehicle; or

e. A farm‑typetractor or equipment designed for use principally off public roads, exceptwhile actually upon public roads.

Notwithstandingthe provisions of this subsection, no policy of motor vehicle liabilityinsurance applicable solely to commercial motor vehicles as defined in G.S. 20‑4.01(3d)or applicable solely to fleet vehicles shall be required to provide uninsuredmotorist coverage. When determining whether a policy is applicable solely tofleet vehicles, the insurer may rely upon the number of vehicles reported bythe insured at the time of the issuance of the policy for the policy term in question.In the event of a renewal of the policy, when determining whether a policy isapplicable solely to fleet vehicles, the insurer may rely upon the number ofvehicles reported by the insured at the time of the renewal of the policy forthe policy term in question. Any motor vehicle liability policy that insuresboth commercial motor vehicles as defined in G.S. 20‑4.01(3d) andnoncommercial motor vehicles shall provide uninsured motorist coverage inaccordance with the provisions of this subsection in amounts equal to thehighest limits of bodily injury and property damage liability coverage for anyone noncommercial motor vehicle insured under the policy, subject to the rightof the insured to purchase greater or lesser uninsured motorist bodily injurycoverage limits and lesser uninsured motorist property damage coverage limitsas set forth in this subsection. For the purpose of the immediately precedingsentence, noncommercial motor vehicle shall mean any motor vehicle that is nota commercial motor vehicle as defined in G.S. 20‑4.01(3d), but that isotherwise subject to the requirements of this subsection.

(4) (Effective untilFebruary 1, 2010) Shall, in addition to the coverages set forth insubdivisions (2) and (3) of this subsection, provide underinsured motoristcoverage, to be used only with a policy that is written at limits that exceedthose prescribed by subdivision (2) of this section, with limits equal to thehighest limits of bodily injury liability coverage for any one vehicle insuredunder the policy. The named insured may purchase underinsured motorist coveragewith greater limits, subject to the limitation that in no event shall theunderinsured motorist coverage limits exceed one million dollars ($1,000,000)per person and one million dollars ($1,000.000) per accident. The insurer shallnotify the named insured of his or her right to purchase underinsured motoristcoverage with greater limits, when the policy is issued and renewed, asprovided in subsection (m) of this section. An "uninsured motorvehicle," as described in subdivision (3) of this subsection, includes an"underinsured highway vehicle," which means a highway vehicle withrespect to the ownership, maintenance, or use of which, the sum of the limitsof liability under all bodily injury liability bonds and insurance policiesapplicable at the time of the accident is less than the applicable limits ofunderinsured motorist coverage for the vehicle involved in the accident andinsured under the owner's policy. For purposes of an underinsured motoristclaim asserted by a person injured in an accident where more than one person isinjured, a highway vehicle will also be an "underinsured highwayvehicle" if the total amount actually paid to that person under all bodilyinjury liability bonds and insurance policies applicable at the time of theaccident is less than the applicable limits of underinsured motorist coveragefor the vehicle involved in the accident and insured under the owner's policy.Notwithstanding the immediately preceding sentence, a highway vehicle shall notbe an "underinsured motor vehicle" for purposes of an underinsuredmotorist claim under an owner's policy insuring that vehicle unless the owner'spolicy insuring that vehicle provides underinsured motorist coverage withlimits that are greater than that policy's bodily injury liability limits. Forthe purposes of this subdivision, the term "highway vehicle" means aland motor vehicle or trailer other than (i) a farm‑type tractor or othervehicle designed for use principally off public roads and while not upon publicroads, (ii) a vehicle operated on rails or crawler‑treads, or (iii) avehicle while located for use as a residence or premises. The provisions ofsubdivision (3) of this subsection shall apply to the coverage required by thissubdivision. Underinsured motorist coverage is deemed to apply when, by reasonof payment of judgment or settlement, all liability bonds or insurance policiesproviding coverage for bodily injury caused by the ownership, maintenance, oruse of the underinsured highway vehicle have been exhausted. Exhaustion of thatliability coverage for the purpose of any single liability claim presented forunderinsured motorist coverage is deemed to occur when either (a) the limits ofliability per claim have been paid upon the claim, or (b) by reason of multipleclaims, the aggregate per occurrence limit of liability has been paid.Underinsured motorist coverage is deemed to apply to the first dollar of anunderinsured motorist coverage claim beyond amounts paid to the claimant underthe exhausted liability policy.

Inany event, the limit of underinsured motorist coverage applicable to any claimis determined to be the difference between the amount paid to the claimantunder the exhausted liability policy or policies and the limit of underinsuredmotorist coverage applicable to the motor vehicle involved in the accident.Furthermore, if a claimant is an insured under the underinsured motoristcoverage on separate or additional policies, the limit of underinsured motoristcoverage applicable to the claimant is the difference between the amount paidto the claimant under the exhausted liability policy or policies and the totallimits of the claimant's underinsured motorist coverages as determined by combiningthe highest limit available under each policy; provided that this sentenceshall apply only to insurance on nonfleet private passenger motor vehicles asdescribed in G.S. 58‑40‑15(9) and (10). The underinsured motoristlimits applicable to any one motor vehicle under a policy shall not be combinedwith or added to the limits applicable to any other motor vehicle under thatpolicy.

Anunderinsured motorist insurer may at its option, upon a claim pursuant tounderinsured motorist coverage, pay moneys without there having first been anexhaustion of the liability insurance policy covering the ownership, use, andmaintenance of the underinsured highway vehicle. In the event of payment, theunderinsured motorist insurer shall be either: (a) entitled to receive byassignment from the claimant any right or (b) subrogated to the claimant'sright regarding any claim the claimant has or had against the owner, operator,or maintainer of the underinsured highway vehicle, provided that the amount ofthe insurer's right by subrogation or assignment shall not exceed payments madeto the claimant by the insurer. No insurer shall exercise any right ofsubrogation or any right to approve settlement with the original owner,operator, or maintainer of the underinsured highway vehicle under a policyproviding coverage against an underinsured motorist where the insurer has beenprovided with written notice before a settlement between its insured and theunderinsured motorist and the insurer fails to advance a payment to the insuredin an amount equal to the tentative settlement within 30 days following receiptof that notice. Further, the insurer shall have the right, at its election, topursue its claim by assignment or subrogation in the name of the claimant, andthe insurer shall not be denominated as a party in its own name except upon itsown election. Assignment or subrogation as provided in this subdivision shallnot, absent contrary agreement, operate to defeat the claimant's right topursue recovery against the owner, operator, or maintainer of the underinsuredhighway vehicle for damages beyond those paid by the underinsured motoristinsurer. The claimant and the underinsured motorist insurer may join theirclaims in a single suit without requiring that the insurer be named as a party.Any claimant who intends to pursue recovery against the owner, operator, ormaintainer of the underinsured highway vehicle for moneys beyond those paid bythe underinsured motorist insurer shall before doing so give notice to theinsurer and give the insurer, at its expense, the opportunity to participate inthe prosecution of the claim. Upon the entry of judgment in a suit upon anysuch claim in which the underinsured motorist insurer and claimant are joined,payment upon the judgment, unless otherwise agreed to, shall be applied prorata to the claimant's claim beyond payment by the insurer of the owner,operator or maintainer of the underinsured highway vehicle and the claim of theunderinsured motorist insurer.

Aparty injured by the operation of an underinsured highway vehicle whoinstitutes a suit for the recovery of moneys for those injuries and in such anamount that, if recovered, would support a claim under underinsured motoristcoverage shall give notice of the initiation of the suit to the underinsuredmotorist insurer as well as to the insurer providing primary liability coverageupon the underinsured highway vehicle. Upon receipt of notice, the underinsuredmotorist insurer shall have the right to appear in defense of the claim withoutbeing named as a party therein, and without being named as a party mayparticipate in the suit as fully as if it were a party. The underinsuredmotorist insurer may elect, but may not be compelled, to appear in the actionin its own name and present therein a claim against other parties; providedthat application is made to and approved by a presiding superior court judge,in any such suit, any insurer providing primary liability insurance on theunderinsured highway vehicle may upon payment of all of its applicable limitsof liability be released from further liability or obligation to participate inthe defense of such proceeding. However, before approving any such application,the court shall be persuaded that the owner, operator, or maintainer of theunderinsured highway vehicle against whom a claim has been made has beenapprised of the nature of the proceeding and given his right to select counselof his own choice to appear in the action on his separate behalf. If anunderinsured motorist insurer, following the approval of the application, paysin settlement or partial or total satisfaction of judgment moneys to theclaimant, the insurer shall be subrogated to or entitled to an assignment ofthe claimant's rights against the owner, operator, or maintainer of theunderinsured highway vehicle and, provided that adequate notice of right ofindependent representation was given to the owner, operator, or maintainer, afinding of liability or the award of damages shall be res judicata between theunderinsured motorist insurer and the owner, operator, or maintainer ofunderinsured highway vehicle.

Asconsideration for payment of policy limits by a liability insurer on behalf ofthe owner, operator, or maintainer of an underinsured motor vehicle, a partyinjured by an underinsured motor vehicle may execute a contractual covenant notto enforce against the owner, operator, or maintainer of the vehicle anyjudgment that exceeds the policy limits. A covenant not to enforce judgmentshall not preclude the injured party from pursuing available underinsuredmotorist benefits, unless the terms of the covenant expressly provideotherwise, and shall not preclude an insurer providing underinsured motoristcoverage from pursuing any right of subrogation.

(4) (EffectiveFebruary 1, 2010) Shall, in addition to the coverages set forth insubdivisions (2) and (3) of this subsection, provide underinsured motoristcoverage, to be used only with a policy that is written at limits that exceedthose prescribed by subdivision (2) of this subsection. The limits of suchunderinsured motorist bodily injury coverage shall be equal to the highestlimits of bodily injury liability coverage for any one vehicle insured underthe policy; provided, however, that (i) the limits shall not exceed one milliondollars ($1,000,000) per person and one million dollars ($1,000,000) peraccident regardless of whether the highest limits of bodily injury liabilitycoverage for any one vehicle insured under the policy exceed those limits, (ii)a named insured may purchase greater or lesser limits, except that the limitsshall exceed the bodily injury liability limits required pursuant tosubdivision (2) of this subsection, and in no event shall an insurer be requiredby this subdivision to sell underinsured motorist bodily injury coverage atlimits that exceed one million dollars ($1,000,000) per person and one milliondollars ($1,000,000) per accident, and (iii) the limits shall be equal to thelimits of uninsured motorist bodily injury coverage purchased pursuant tosubdivision (3) of this subsection. When the policy is issued and renewed, theinsurer shall notify the named insured as provided in subsection (m) of thissection. An "uninsured motor vehicle," as described in subdivision(3) of this subsection, includes an "underinsured highway vehicle,"which means a highway vehicle with respect to the ownership, maintenance, oruse of which, the sum of the limits of liability under all bodily injury liabilitybonds and insurance policies applicable at the time of the accident is lessthan the applicable limits of underinsured motorist coverage for the vehicleinvolved in the accident and insured under the owner's policy. For purposes ofan underinsured motorist claim asserted by a person injured in an accidentwhere more than one person is injured, a highway vehicle will also be an"underinsured highway vehicle" if the total amount actually paid tothat person under all bodily injury liability bonds and insurance policiesapplicable at the time of the accident is less than the applicable limits ofunderinsured motorist coverage for the vehicle involved in the accident andinsured under the owner's policy. Notwithstanding the immediately precedingsentence, a highway vehicle shall not be an "underinsured motorvehicle" for purposes of an underinsured motorist claim under an owner'spolicy insuring that vehicle unless the owner's policy insuring that vehicleprovides underinsured motorist coverage with limits that are greater than thatpolicy's bodily injury liability limits. For the purposes of this subdivision,the term "highway vehicle" means a land motor vehicle or trailerother than (i) a farm‑type tractor or other vehicle designed for useprincipally off public roads and while not upon public roads, (ii) a vehicleoperated on rails or crawler‑treads, or (iii) a vehicle while located foruse as a residence or premises. The provisions of subdivision (3) of thissubsection shall apply to the coverage required by this subdivision.Underinsured motorist coverage is deemed to apply when, by reason of payment ofjudgment or settlement, all liability bonds or insurance policies providingcoverage for bodily injury caused by the ownership, maintenance, or use of theunderinsured highway vehicle have been exhausted. Exhaustion of that liabilitycoverage for the purpose of any single liability claim presented forunderinsured motorist coverage is deemed to occur when either (a) the limits ofliability per claim have been paid upon the claim, or (b) by reason of multipleclaims, the aggregate per occurrence limit of liability has been paid.Underinsured motorist coverage is deemed to apply to the first dollar of anunderinsured motorist coverage claim beyond amounts paid to the claimant underthe exhausted liability policy.

Inany event, the limit of underinsured motorist coverage applicable to any claimis determined to be the difference between the amount paid to the claimantunder the exhausted liability policy or policies and the limit of underinsuredmotorist coverage applicable to the motor vehicle involved in the accident.Furthermore, if a claimant is an insured under the underinsured motoristcoverage on separate or additional policies, the limit of underinsured motoristcoverage applicable to the claimant is the difference between the amount paidto the claimant under the exhausted liability policy or policies and the totallimits of the claimant's underinsured motorist coverages as determined bycombining the highest limit available under each policy; provided that thissentence shall apply only to insurance on nonfleet private passenger motorvehicles as described in G.S. 58‑40‑15(9) and (10). Theunderinsured motorist limits applicable to any one motor vehicle under a policyshall not be combined with or added to the limits applicable to any other motorvehicle under that policy.

Anunderinsured motorist insurer may at its option, upon a claim pursuant tounderinsured motorist coverage, pay moneys without there having first been anexhaustion of the liability insurance policy covering the ownership, use, andmaintenance of the underinsured highway vehicle. In the event of payment, theunderinsured motorist insurer shall be either: (a) entitled to receive byassignment from the claimant any right or (b) subrogated to the claimant'sright regarding any claim the claimant has or had against the owner, operator,or maintainer of the underinsured highway vehicle, provided that the amount ofthe insurer's right by subrogation or assignment shall not exceed payments madeto the claimant by the insurer. No insurer shall exercise any right ofsubrogation or any right to approve settlement with the original owner,operator, or maintainer of the underinsured highway vehicle under a policy providingcoverage against an underinsured motorist where the insurer has been providedwith written notice before a settlement between its insured and theunderinsured motorist and the insurer fails to advance a payment to the insuredin an amount equal to the tentative settlement within 30 days following receiptof that notice. Further, the insurer shall have the right, at its election, topursue its claim by assignment or subrogation in the name of the claimant, andthe insurer shall not be denominated as a party in its own name except upon itsown election. Assignment or subrogation as provided in this subdivision shallnot, absent contrary agreement, operate to defeat the claimant's right topursue recovery against the owner, operator, or maintainer of the underinsuredhighway vehicle for damages beyond those paid by the underinsured motoristinsurer. The claimant and the underinsured motorist insurer may join theirclaims in a single suit without requiring that the insurer be named as a party.Any claimant who intends to pursue recovery against the owner, operator, ormaintainer of the underinsured highway vehicle for moneys beyond those paid bythe underinsured motorist insurer shall before doing so give notice to theinsurer and give the insurer, at its expense, the opportunity to participate inthe prosecution of the claim. Upon the entry of judgment in a suit upon anysuch claim in which the underinsured motorist insurer and claimant are joined,payment upon the judgment, unless otherwise agreed to, shall be applied prorata to the claimant's claim beyond payment by the insurer of the owner,operator or maintainer of the underinsured highway vehicle and the claim of theunderinsured motorist insurer.

Aparty injured by the operation of an underinsured highway vehicle whoinstitutes a suit for the recovery of moneys for those injuries and in such anamount that, if recovered, would support a claim under underinsured motoristcoverage shall give notice of the initiation of the suit to the underinsured motoristinsurer as well as to the insurer providing primary liability coverage upon theunderinsured highway vehicle. Upon receipt of notice, the underinsured motoristinsurer shall have the right to appear in defense of the claim without beingnamed as a party therein, and without being named as a party may participate inthe suit as fully as if it were a party. The underinsured motorist insurer mayelect, but may not be compelled, to appear in the action in its own name andpresent therein a claim against other parties; provided that application ismade to and approved by a presiding superior court judge, in any such suit, anyinsurer providing primary liability insurance on the underinsured highwayvehicle may upon payment of all of its applicable limits of liability bereleased from further liability or obligation to participate in the defense ofsuch proceeding. However, before approving any such application, the courtshall be persuaded that the owner, operator, or maintainer of the underinsuredhighway vehicle against whom a claim has been made has been apprised of thenature of the proceeding and given his right to select counsel of his ownchoice to appear in the action on his separate behalf. If an underinsuredmotorist insurer, following the approval of the application, pays in settlementor partial or total satisfaction of judgment moneys to the claimant, theinsurer shall be subrogated to or entitled to an assignment of the claimant'srights against the owner, operator, or maintainer of the underinsured highwayvehicle and, provided that adequate notice of right of independentrepresentation was given to the owner, operator, or maintainer, a finding ofliability or the award of damages shall be res judicata between theunderinsured motorist insurer and the owner, operator, or maintainer ofunderinsured highway vehicle.

Notwithstandingthe provisions of this subsection, no policy of motor vehicle liabilityinsurance applicable solely to commercial motor vehicles as defined in G.S. 20‑4.01(3d)or applicable solely to fleet vehicles shall be required to provideunderinsured motorist coverage. When determining whether a policy is applicablesolely to fleet vehicles, the insurer may rely upon the number of vehiclesreported by the insured at the time of the issuance of the policy for thepolicy term in question. In the event of a renewal of the policy, when determiningwhether a policy is applicable solely to fleet vehicles, the insurer may relyupon the number of vehicles reported by the insured at the time of the renewalof the policy for the policy term in question. Any motor vehicle liabilitypolicy that insures both commercial motor vehicles as defined in G.S. 20‑4.01(3d)and noncommercial motor vehicles shall provide underinsured motorist coveragein accordance with the provisions of this subsection in an amount equal to thehighest limits of bodily injury liability coverage for any one noncommercialmotor vehicle insured under the policy, subject to the right of the insured topurchase greater or lesser underinsured motorist bodily injury liabilitycoverage limits as set forth in this subsection. For the purpose of theimmediately preceding sentence, noncommercial motor vehicle shall mean anymotor vehicle that is not a commercial motor vehicle as defined in G.S. 20‑4.01(3d),but that is otherwise subject to the requirements of this subsection.

(c) Such operator'spolicy of liability insurance shall insure the person named as insured thereinagainst loss from the liability imposed upon him by law for damages arising outof the use by him of any motor vehicle not owned by him, and within 30 daysfollowing the date of its delivery to him of any motor vehicle owned by him,within the same territorial limits and subject to the same limits of liabilityas are set forth above with respect to an owner's policy of liabilityinsurance.

(d) Such motor vehicleliability policy shall state the name and address of the named insured, thecoverage afforded by the policy, the premium charged therefor, the policyperiod and the limits of liability, and shall contain an agreement or beendorsed that insurance is provided thereunder in accordance with the coveragedefined in this Article as respects bodily injury and death or property damage,or both, and is subject to all the provisions of this Article.

(d1) Such motor vehicleliability policy shall provide an alternative method of determining the amountof property damage to a motor vehicle when liability for coverage for the claimis not in dispute. For a claim for property damage to a motor vehicle againstan insurer, the policy shall provide that if:

(1) The claimant and theinsurer fail to agree as to the difference in fair market value of the vehicleimmediately before the accident and immediately after the accident; and

(2) The difference inthe claimant's and the insurer's estimate of the diminution in fair marketvalue is greater than two thousand dollars ($2,000) or twenty‑fivepercent (25%) of the fair market retail value of the vehicle prior to theaccident as determined by the latest edition of the National Automobile DealersAssociation Pricing Guide Book or other publications approved by theCommissioner of Insurance, whichever is less, then on the written demand ofeither the claimant or the insurer, each shall select a competent anddisinterested appraiser and notify the other of the appraiser selected within20 days after the demand. The appraisers shall then appraise the loss. Shouldthe appraisers fail to agree, they shall then select a competent anddisinterested appraiser to serve as an umpire. If the appraisers cannot agreeupon an umpire within 15 days, either the claimant or the insurer may requestthat a magistrate resident in the county where the insured motor vehicle isregistered or the county where the accident occurred select the umpire. Theappraisers shall then submit their differences to the umpire. The umpire thenshall prepare a report determining the amount of the loss and shall file thereport with the insurer and the claimant. The agreement of the two appraisersor the report of the umpire, when filed with the insurer and the claimant,shall determine the amount of the damages. In preparing the report, the umpireshall not award damages that are higher or lower than the determinations of theappraisers. In no event shall appraisers or the umpire make any determinationas to liability for damages or as to whether the policy provides coverage forclaims asserted. The claimant or the insurer shall have 15 days from the filingof the report to reject the report and notify the other party of suchrejection. If the report is not rejected within 15 days from the filing of thereport, the report shall be binding upon both the claimant and the insurer.Each appraiser shall be paid by the party selecting the appraiser, and theexpenses of appraisal and umpire shall be paid by the parties equally. Forpurposes of this section, "appraiser" and "umpire" shallmean a person who as a part of his or her regular employment is in the businessof advising relative to the nature and amount of motor vehicle damage and thefair market value of damaged and undamaged motor vehicles.

(e) Uninsured orunderinsured motorist coverage that is provided as part of a motor vehicleliability policy shall insure that portion of a loss uncompensated by anyworkers' compensation law and the amount of an employer's lien determinedpursuant to G.S. 97‑10.2(h) or (j). In no event shall this subsection beconstrued to require that coverage exceed the applicable uninsured orunderinsured coverage limits of the motor vehicle policy or allow a recoveryfor damages already paid by workers' compensation. The policy need not insure aloss from any liability for damage to property owned by, rented to, in chargeof or transported by the insured.

(f) Every motorvehicle liability policy shall be subject to the following provisions whichneed not be contained therein:

(1) Except ashereinafter provided, the liability of the insurance carrier with respect tothe insurance required by this Article shall become absolute whenever injury ordamage covered by said motor vehicle liability policy occurs; said policy maynot be canceled or annulled as to such liability by any agreement between theinsurance carrier and the insured after the occurrence of the injury or damage;no statement made by the insured or on his behalf and no violation of saidpolicy shall defeat or void said policy. As to policies issued to insureds inthis State under the assigned risk plan or through the North Carolina MotorVehicle Reinsurance Facility, a default judgment taken against such an insuredshall not be used as a basis for obtaining judgment against the insurer unlesscounsel for the plaintiff has forwarded to the insurer, or to one of itsagents, by registered or certified mail with return receipt requested, orserved by any other method of service provided by law, a copy of summons,complaint, or other pleadings, filed in the action. The return receipt shall,upon its return to plaintiff's counsel, be filed with the clerk of courtwherein the action is pending against the insured and shall be admissible inevidence as proof of notice to the insurer. The refusal of insurer or its agentto accept delivery of the registered mail, as provided in this section, shallnot affect the validity of such notice and any insurer or agent of an insurerrefusing to accept such registered mail shall be charged with the knowledge ofthe contents of such notice. When notice has been sent to an agent of theinsurer such notice shall be notice to the insurer. The word "agent"as used in this subsection shall include, but shall not be limited to, anyperson designated by the insurer as its agent for the service of process, anyperson duly licensed by the insurer in the State as insurance agent, anygeneral agent of the company in the State of North Carolina, and any employeeof the company in a managerial or other responsible position, or the NorthCarolina Commissioner of Insurance; provided, where the return receipt issigned by an employee of the insurer or an employee of an agent for theinsurer, shall be deemed for the purposes of this subsection to have beenreceived. The term "agent" as used in this subsection shall notinclude a producer of record or broker, who forwards an application forinsurance to the North Carolina Motor Vehicle Reinsurance Facility.

Theinsurer, upon receipt of summons, complaint or other process, shall beentitled, upon its motion, to intervene in the suit against its insured as aparty defendant and to defend the same in the name of its insured. In the eventof such intervention by an insurer it shall become a named party defendant. Theinsurer shall have 30 days from the signing of the return receipt acknowledgingreceipt of the summons, complaint or other pleading in which to file a motionto intervene, along with any responsive pleading, whether verified or not,which it may deem necessary to protect its interest: Provided, the court havingjurisdiction over the matter may, upon motion duly made, extend the time forthe filing of responsive pleading or continue the trial of the matter for thepurpose of affording the insurer a reasonable time in which to file responsivepleading or defend the action. If, after receiving copy of the summons,complaint or other pleading, the insurer elects not to defend the action, ifcoverage is in fact provided by the policy, the insurer shall be bound to theextent of its policy limits to the judgment taken by default against theinsured, and noncooperation of the insured shall not be a defense.

Ifthe plaintiff initiating an action against the insured has complied with theprovisions of this subsection, then, in such event, the insurer may not cancelor annul the policy as to such liability and the defense of noncooperationshall not be available to the insurer: Provided, however, nothing in thissection shall be construed as depriving an insurer of its defenses that thepolicy was not in force at the time in question, that the operator was not an"insured" under policy provisions, or that the policy had beenlawfully canceled at the time of the accident giving rise to the cause of action.

Providedfurther that the provisions of this subdivision shall not apply when theinsured has delivered a copy of the summons, complaint or other pleadingsserved on him to his insurance carrier within the time provided by law forfiling answer, demurrer or other pleadings.

(2) The satisfaction bythe insured of a judgment for such injury or damage shall not be a conditionprecedent to the right or duty of the insurance carrier to make payment onaccount of such injury or damage;

(3) The insurancecarrier shall have the right to settle any claim covered by the policy, and ifsuch settlement is made in good faith, the amount thereof shall be deductiblefrom the limits of liability specified in subdivision (2) of subsection (b) ofthis section;

(4) The policy, the writtenapplication therefor, if any, and any rider or endorsement which does notconflict with the provisions of the Article shall constitute the entirecontract between the parties.

(g) Any policy whichgrants the coverage required for a motor vehicle liability policy may alsogrant any lawful coverage in excess of or in addition to the coverage specifiedfor a motor vehicle liability policy and such excess or additional coverageshall not be subject to the provisions of this Article. With respect to a policywhich grants such excess or additional coverage the term "motor vehicleliability policy" shall apply only to that part of the coverage which isrequired by this section.

(h) Any motor vehicleliability policy may provide that the insured shall reimburse the insurancecarrier for any payment the insurance carrier would not have been obligated tomake under the terms of the policy except for the provisions of this Article.

(i) Any motor vehicleliability policy may provide for the prorating of the insurance thereunder withother valid and collectible insurance.

(j) The requirementsfor a motor vehicle liability policy may be fulfilled by the policies of one ormore insurance carriers which policies together meet such requirements.

(k) Any binder issued pendingthe issuance of a motor vehicle liability policy shall be deemed to fulfill therequirements for such a policy.

(l) A party injured byan uninsured motor vehicle covered under a policy in amounts less than thoseset forth in G.S. 20‑279.5, may execute a contractual covenant not toenforce against the owner, operator, or maintainer of the uninsured vehicle anyjudgment that exceeds the liability policy limits, as consideration for paymentof any applicable policy limits by the insurer where judgment exceeds thepolicy limits. A covenant not to enforce judgment shall not preclude theinjured party from pursuing available uninsured motorist benefits, unless theterms of the covenant expressly provide otherwise, and shall not preclude aninsurer providing uninsured motorist coverage from pursuing any right ofsubrogation.

(m) (Effective untilFebruary 1, 2010) Every insurer that sells motor vehicle liability policiessubject to the requirements of subdivisions (b)(3) and (b)(4) of this sectionshall give reasonable notice to the named insured, when the policy is issuedand renewed, that the named insured may purchase uninsured motorist bodilyinjury coverage and, if applicable, underinsured motorist coverage with limitsup to one million dollars ($1,000,000) per person and one million dollars($1,000,000) per accident. An insurer shall be deemed to have given reasonablenotice if it includes the following or substantially similar language on thepolicy's original and renewal declarations pages or in a separate noticeaccompanying the original and renewal declarations pages in at least 10 pointtype:

"NOTICE: YOU MAY PURCHASEUNINSURED MOTORIST BODILY INJURY COVERAGE AND, IF APPLICABLE, UNDERINSUREDMOTORIST COVERAGE WITH LIMITS UP TO ONE MILLION DOLLARS ($1,000,000) PER PERSONAND ONE MILLION DOLLARS ($1,000,000) PER ACCIDENT. THIS INSURANCE PROTECTS YOUAND YOUR FAMILY AGAINST INJURIES CAUSED BY THE NEGLIGENCE OF OTHER DRIVERS WHOMAY HAVE LIMITED OR ONLY MINIMUM COVERAGE OR EVEN NO LIABILITY INSURANCE. YOU SHOULDCONTACT YOUR INSURANCE COMPANY OR AGENT TO DISCUSS YOUR OPTIONS FOR OBTAININGTHIS ADDITIONAL COVERAGE. YOU SHOULD ALSO READ YOUR ENTIRE POLICY TO UNDERSTANDWHAT IS COVERED UNDER UNINSURED AND UNDERINSURED MOTORIST COVERAGES."

(m) (EffectiveFebruary 1, 2010) Every insurer that sells motor vehicle liability policiessubject to the requirements of subdivisions (b)(3) and (b)(4) of this sectionshall, when issuing and renewing a policy, give reasonable notice to the namedinsured of all of the following:

(1) The named insured isrequired to purchase uninsured motorist bodily injury coverage, uninsuredmotorist property damage coverage, and, if applicable, underinsured motoristbodily injury coverage.

(2) The named insured'suninsured motorist bodily injury coverage limits shall be equal to the highestlimits of bodily injury liability coverage for any one vehicle insured underthe policy unless the insured elects to

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North Carolina Codes and Statutes

§ 20-279.21. "Motor vehicle liability policy" defined.