Is a judgment against a defendant automatically satisfied when it is paid off in full? Not when that judgment is paid by a plaintiff's own UIM carrier, according to the North Carolina Court of Appeals’ decision in Wood v. Nunnery. Even though the plaintiff has been paid in full under the contractual terms of a UIM policy, the defendant is still liable in tort. As the court put it: since “the judgment was entered only against defendant [and not the UIM carrier] … defendant is responsible for satisfying the judgment entered against him.” (p. 9)
In Wood, Plaintiff won a jury verdict of $300,000. Defendant had only $30,000 in liability coverage, but Plaintiff’s own UIM carrier provided more than enough coverage to make up the difference. Once Plaintiff had received full payment for the judgment, Defendant asked the court to mark the judgment against him satisfied. Plaintiff objected, arguing that although the UIM carrier’s contractual obligations to Plaintiff had been discharged, Defendant’s tort liability had not. In an opinion authored by Judge Steelman and joined by Judges Geer and R.N. Hunter, the Court of Appeals agreed with Plaintiff.
Well, then, if an underinsured defendant pays a judgment that has already been paid by the UIM carrier, does that mean the plaintiff is allowed a double recovery? No, because the UIM statute provides the carrier with the right to be reimbursed from any proceeds paid by the tortfeasor:
In the event of payment, the underinsured motorist insurer shall be either: (a) entitled to receive by assignment from the claimant any right or (b) subrogated to the claimant’s right regarding any claim the claimant has or had against the owner, operator, or maintainer of the underinsured highway vehicle, provided that the amount of the insurer’s right by subrogation or assignment shall not exceed payments made to the claimant by the insurer.
In other words, the UIM carrier is entitled to an assignment of rights from the plaintiff or, absent an express assignment, becomes subrogated as a matter of law to the plaintiff’s claim against the tortfeasor. Thus, any payments made by a defendant over and above his liability coverage belong to the UIM carrier, and not to the plaintiff who, after all, has already been fully compensated.
An interesting twist to the Wood case is that it appears the UIM carrier (for reasons not discussed in the opinion) sided with Defendant on appeal and wanted the judgment marked satisfied. In dicta, the court hinted that the UIM carrier's support of Defendant on appeal might serve to waive the UIM carrier's subrogation rights: "Since no party has raised the issue of whether [the UIM carrier] is estopped from seeking subrogation from defendant by adopting defendant's brief, we do not address that issue." (p. 8)
Well, what happens if a UIM carrier in another case either waives, or for some reason is estopped from pursuing, its statutory right to subrogation? Might the judgment against the tortfeasor be marked satisfied then? After all, if the UIM carrier has no subrogation right, that means that neither the claimant nor the UIM carrier has any right to further recovery from the defendant. If no one has any right to further recovery from the defendant, it is difficult to see why the judgment should not then be marked satisfied. That issue was not raised by the parties and not analyzed by the court in Wood, but could present an interesting question for a future case.