McArther v. State Farm Discusses Public Policy and Insurance Policy Provisions in the Carolina's


April 10, 2012
By Lee Law Offices, P.A. on April 10, 2012 1:38 PM |

When you are injured in a car accident in North Carolina, it is important that you receive the benefits you need to recover. Hiring an experienced North Carolina injury attorney can help you understand your rights.
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McArther v. State Farm Mutual Automobile Insurance Company is a Utah Supreme Court case dealing with the issue of underinsured motorist benefits.

Underinsured motorist (UIM) benefits were created to provide a driver, who was injured because of the negligence of an underinsured driver, necessary compensation. Drivers decide whether to purchase this coverage with their automobile insurance. Basically, if you are involved in an accident and the other driver was at fault but they do not have the sufficient coverage to pay for your injuries and damages, your insurance company pays the difference between what is available from the at fault driver and what you need. UIM is also used to provide benefits to an injured person who was the victim of a hit and run.

McArther (plaintiff) was injured in a vehicle accident. Plaintiff sought benefits from the at-fault parties insurance, and sought benefits from her automobile insurance for UIM benefits. The dispute arose because State Farm (Defendant) claimed that plaintiff had not exhausted the liability limits under the at-faults insurance policy. This policy of not extending benefits until the policyholder has exhausted benefits from the at-fault's insurance policy is called the exhaustion provision.

The court was then charged with analyzing whether an exhaustion provision in a Utah policy can be enforceable because it is contrary to public policy.

When a court has to interpret the applicability of language in an agreement, the court looks to whether the provisions which are seeking to be enforced are counter to state principals. Essentially, the court looks to state statute and guiding principals within the state to determine the enforceability of outside contractual provisions.

Automobile insurance is governed by state statute; therefore, the court had to look to the legislative intent behind the creation of these statutes. Through an analysis of the statutory text and the prior case law this court found that the exhaustion provision in the policy is enforceable. Although the court notes they do not endorse the use of this provision, they did find that using the exhaustion clause as a precondition to UIM coverage is acceptable within their state.

Plaintiff further argued that by enforcing this exhaustion provision it would limit the benefits a policyholder is entitled to. Because the policyholder has the choice of whether to purchase this coverage, the court stated that this exhaustion provision is accepted by the purchaser. The court found that the plaintiff failed to prove a link between his policy concerns and the applicable provisions of the state code.

For all of the reasons listed above, the court found that the public policy of the state does allow for provisions in UIM policies where the policyholder is unable to recover benefits from their insurance company until they exhaust benefits from the at-fault parties insurance. Subsequently, plaintiff did not recover from the insurance company to compensate for his damages.

UIM laws vary from state to state. However, this case shows that it is important to read your automobile insurance policy and know what you are entitled to before you are injured in an accident.

If you have been injured contact North Carolina injury attorneys at Lee Law Offices to schedule a free appointment today. Call 800-887-1965.

Additional Resources:

McArther v. State Farm Mut. Auto. Ins. Co., No. 2012 UT 22 (Ut. S.Ct. Apr. 3, 2012).