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Lowe v. Tarble

Supreme Court of North Carolina
May 1, 1985
313 N.C. 460 (N.C. 1985)

Summary

In Lowe v. Tarble, 313 N.C. 460, 329 S.E.2d 648 (1985), this Court construed an insurance policy in which the insurer expressly agreed to pay, in addition to its contractual limit of liability, "all costs taxed against the insured."

Summary of this case from Nationwide Mutual Insurance v. Mabe

Opinion

No. 28PA84

Filed 7 May 1985

1. Constitutional Law 23.4; Insurance 110.1 — prejudgment interest — due process not violated G.S. 24-5 does not violate the due process clause of the U.S. Constitution because the General Assembly had a reasonable basis for enacting the statute, the legislation is not arbitrary, and it is substantially related to legislative goals.

2. Constitutional Law 23.4; Insurance 110.1 — prejudgment interest — no violation of law of the land clause G.S. 24-5 does not violate Art. I, 19 of the Constitution of the State of North Carolina because it has a reasonable basis in relation to the public good likely to result from it.

3. Insurance 110.1 — prejudgment interest — insurer liable Prejudgment interest provided for by G.S. 24-5 was a cost within the meaning of the contract which the insurer was obligated to pay. G.S. 24-7.

ON rehearing of the decision of this Court reported at 312 N.C. 467, 323 S.E.2d 19 (1984), affirming judgment entered 20 September 1983 by Mills, J., in Superior Court, RANDOLPH County. By order dated 30 January 1985 this Court allowed defendants' petition for rehearing for the consideration of two issues: (1) whether N.C.G.S. 24-5 violates defendants' rights to substantive due process and (2) whether by contract or statute insurance carriers are liable for prejudgment interest allowed in judgments against their insureds. Heard in the Supreme Court 9 April 1985.

Brackett and Sitton, by William L. Sitton, Jr., for plaintiff appellees.

Henson, Henson Bayliss, by Perry C. Henson and Paul D. Coates, for defendant appellants.

Battle, Winslow, Scott Wiley, P.A., by Marshall A. Gallop, Jr., for North Carolina Association of Defense Attorneys, amicus curiae.


Justice MEYER dissenting.

Justice MITCHELL joins in the dissenting opinion.


I.

Defendants contend that N.C.G.S. 24-5 violates their substantive due process rights under the fourteenth amendment to the Constitution of the United States and article I, section 19 of the Constitution of North Carolina. Defendants argue that N.C.G.S. 24-5 is not a fundamentally fair statute, that it is unreasonable, and that the statute has no substantial or rational relation to legislative objectives. Substantive due process is a guaranty against arbitrary legislation, demanding that the law be substantially related to the valid object sought to be obtained. State v. Joyner, 286 N.C. 366, 211 S.E.2d 320 (1975).

The Supreme Court of the United States has stated with regard to fourteenth amendment due process:

The day is gone when this Court uses the Due Process Clause of the Fourteenth Amendment to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought. . . . We emphasize again what Chief Justice Waite said in Munn v. Illinois, 94 U.S. 113, 134 [ 24 L.Ed. 77, 87], "For protection against abuses by legislatures the people must resort to the polls, not to the courts."

Williamson v. Lee Optical Co., 348 U.S. 483, 488, 99 L.Ed. 563, 572 (1955) (citations omitted). See also, e.g., Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 124, 57 L.Ed.2d 91, 99 (1978); Ferguson v. Skrupa, 372 U.S. 726, 731, 10 L.Ed.2d 93, 97-98 (1963). See Lincoln Union v. Northwestern Co., 335 U.S. 525, 93 L.Ed. 212 (1949). See generally J. Nowak, R. Rotunda, and J. Young, Constitutional Law, 425-51 (2d ed. 1983); L. Tribe, American Constitutional Law, 427-55 (1978 Supp. 1979).

In this regard we note that a bill to amend N.C.G.S. 24-5 has been introduced as H.B. 234.

As long as there could be some rational basis for enacting N.C.G.S. 24-5, this Court may not invoke the due process clause of the fourteenth amendment to disturb the statute. Although defendants may have introduced evidence that the statute is irrational, they cannot prevail as long as it is evident from the considerations presented to the legislature that the question is at least debatable. See Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 461-63, 66 L.Ed.2d 659, 667-69 (1981). Here, the question is no longer debatable; it has been resolved against defendants. As discussed in Powe v. Odell, 312 N.C. 410, 322 S.E.2d 762 (1984), we have determined that the General Assembly did have a reasonable basis for enacting N.C.G.S. 24-5. Defendants concede that the governmental objectives of the statute are legitimate and permissible. The legislation is not arbitrary and is substantially related to the legislative goals. Therefore, we hold that N.C.G.S. 24-5 does not violate the due process clause of the fourteenth amendment of the United States Constitution.

As the United States Supreme Court stated in Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 470 n. 12, 66 L.Ed.2d 659, 673 n. 12 (1981): "From our conclusion under equal protection . . . it follows a fortiori that the Act does not violate the Fourteenth Amendment's Due Process Clause."

While we reserve the right to grant relief against unreasonable and arbitrary state statutes under article I, section 19 of the Constitution of North Carolina in circumstances under which no relief might be granted by the due process clause of the fourteenth amendment, see In re Hospital, 282 N.C. 542, 193 S.E.2d 729 (1973), we are satisfied that N.C.G.S. 24-5 does not offend article I, section 19 of our state charter. Whether a state statute violates the law of the land clause "is a question of degree and reasonableness in relation to the public good likely to result from it." 282 N.C. at 550, 193 S.E.2d at 735. As we have demonstrated in this opinion and in our equal protection analysis in Powe v. Odell, this statute has a reasonable basis in relation to the public good likely to result from it. It is not arbitrary and is reasonably related to the legislative objectives. Therefore, it does not contravene our law of the land clause.

II.

Plaintiffs argue that under the contract of insurance issued to defendant ARA Services, Inc. by the National Union Fire Insurance Company (which provided coverage for the judgment rendered in the trial court), the insurer is liable for payment of prejudgment interest.

Relevant parts of the insurer's obligations under the contract include the following:

AGREEMENT VI. DEFENSE, SETTLEMENT, SUPPLEMENTARY PAYMENTS

With respect to such insurance as is afforded by this policy, the company shall:

. . . .

(2) Pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid, tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon;

. . . .

and the amounts so incurred, except settlements of claims and suits, are payable by the company in addition to the applicable limit of this policy.

(Emphasis added.) Generally, "Costs incident to the action, or costs of the action are `entirely creatures of legislation and constitute an incident of the judgment' . . . ." Nichols v. Goldston and Hix v. Goldston, 231 N.C. 581, 584, 58 S.E.2d 348, 351 (1950) (quoting Ritchie v. Ritchie, 192 N.C. 538, 541, 135 S.E. 458, 459 (1926)).

In determining what are "costs" within the meaning of the contract, we turn to the General Statutes. See Insurance Co. v. Casualty Co., 283 N.C. 87, 91, 194 S.E.2d 834, 837 (1973) (provisions of a statute applicable to insurance policies are a part of the policy to the same extent as if written therein). Accord Insurance Co. v. Chantos, 293 N.C. 431, 238 S.E.2d 537 (1977). N.C.G.S. 24-5 requires payment of interest to the prevailing party from the date of the filing of the action. Such interest is a cost within the meaning of the contract of insurance. The most pertinent statute provides that:

While it is true that the contract specifically obligates the insurer to pay interest from the date of judgment, any implication arising therefrom that the insurer is not obligated to pay other interest must give way to express statutory provisions such as those contained in N.C.G.S. 24-5. See Insurance Co. v. Casualty Co., 283 N.C. 87, 91, 194 S.E.2d 834, 837 (1973).

Except with respect to compensatory damages in actions other than contract as provided in G.S. 24-5, when the judgment is for the recovery of money, interest from the time of the verdict or report until judgment is finally entered shall be computed by the clerk and added to the costs of the party entitled thereto.

N.C. Gen. Stat. 24-7 (Supp. 1983). Cf. N.C. Gen. Stat. 7A-305 (e) (1981). Therefore, we hold that prejudgment interest provided for by N.C.G.S. 24-5 is a cost within the meaning of the contract which, under the contract in the present case, the insurer is obligated to pay.

It is clear that this statute's reference to N.C.G.S. 24-5 is present because interest provided for in 24-5 begins to accrue at the time the action is instituted, whereas in N.C.G.S. 24-7 it begins to accrue at the time the verdict or report is returned. The exception in 24-7 in no way vitiates the obvious point that interest on judgments for the recovery of money is to be included as costs.

The issue of whether N.C.G.S. 24-5, which was enacted after the insurance policy was issued, impairs the obligation of the contract in prohibition of article I, section 19 of the Constitution of North Carolina was not raised by any of the parties at trial or in argument before this Court. It is therefore not properly before this Court and we do not pass upon it. Powe v. Odell, 312 N.C. 410, 416, 322 S.E.2d 762, 765 (1984).

The previous opinion in this case by this Court remains unchanged.

Affirmed.


Summaries of

Lowe v. Tarble

Supreme Court of North Carolina
May 1, 1985
313 N.C. 460 (N.C. 1985)

In Lowe v. Tarble, 313 N.C. 460, 329 S.E.2d 648 (1985), this Court construed an insurance policy in which the insurer expressly agreed to pay, in addition to its contractual limit of liability, "all costs taxed against the insured."

Summary of this case from Nationwide Mutual Insurance v. Mabe

In Lowe the insurer expressly agreed to pay, " all costs taxed against the insured," in addition to its contractual limit of liability.

Summary of this case from Eatman Leasing, Inc. v. Empire Fire Marine

construing Article I, Section 19

Summary of this case from Evans v. Cowan

In Lowe v. Tarble, 313 N.C. 460, 329 S.E.2d 648 (1985), the court interpreted language essentially identical to the language in the defendant's liability policy as including coverage for prejudgment interest under G.S. 24-5 as "costs."

Summary of this case from McNabb v. Town of Bryson City
Case details for

Lowe v. Tarble

Case Details

Full title:BOBBY VESTAL LOWE AND BETTY F. LOWE v. SAMUEL INGHAM TARBLE AND ARA…

Court:Supreme Court of North Carolina

Date published: May 1, 1985

Citations

313 N.C. 460 (N.C. 1985)
329 S.E.2d 648

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