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Nationwide Mutual Insurance Co. v. Land11/18/1986
Plaintiff Nationwide Mutual Insurance Company (Nationwide) seeks a declaratory judgment to determine whether a blanket automobile insurance policy issued by Nationwide to North Carolina National Bank (NCNB) provides coverage for injuries sustained by defendants Ronnie Wayne Land and Jessie H. Pruitt in an automobile collision that occurred in South Carolina on 12 April 1981. At the time of the accident, defendant Lumbermens Mutual Casualty Company provided uninsured motorists coverage for the vehicle
occupied by Land and Pruitt. A 1979 Chrysler Cordoba automobile owned by defendant NCNB and driven by defendant Archie Roland Talley was involved in the accident. The issue in this case is whether the Nationwide policy affords coverage for the liability incurred by Archie Roland Talley in the collision.
All parties waived a jury trial, and the trial court entered judgment declaring that Nationwide provided compulsory coverage pursuant to N.C.G.S. § 20-281 (1983) and voluntary coverage pursuant to the terms of its policy, "for legal liability of Archie Roland Talley for personal injury and property damage arising out of the operation of NCNB's 1979 Chrysler automobile on April 12, 1981 . . . ." The Court of Appeals reversed, holding that Talley was neither a lessee nor an insured, and, therefore, that Nationwide's policy provided neither compulsory nor mandatory coverage.
On discretionary review in this Court, defendants advance two alternative theories for finding coverage under the Nationwide policy: (1) that § 281 requires the policy to provide coverage because of the existence of a lessor-lessee relationship between NCNB and Talley; and (2) that the policy itself provides coverage for Talley as an "insured" because he was operating the automobile with the permission of NCNB. We find that the Nationwide policy provides coverage under neither of these theories and consequently affirm the Court of Appeals.
I.
The stipulations, admissions, and evidence in the record indicate that on 7 December 1979, Talley entered into a lease agreement with NCNB that provided that Talley rent the 1979 Chrysler Cordoba automobile, which would be owned by and registered to NCNB, for thirty-six months at a stated monthly rental payment. The lease required that Talley maintain liability, comprehensive, and collision insurance on the automobile during the
term of the lease. The lease further provided that Talley's failure to pay any rental payment when due or to maintain the insurance coverage in full force and effect would constitute "events of default." Also listed as events of default were other specified occurrences, such as when NCNB "reasonably deems itself insecure or its prospects for payment . . . impaired." Upon the occurrence of any event of default, the lease granted NCNB the right to terminate the lease without releasing Talley from any of his obligations under the lease agreement and the right to demand and receive immediate possession of the automobile.
Before closing the transaction, Mr. Watson, the NCNB loan officer who handled Talley's account, had a credit check run on Talley and called an automobile leasing company with which Talley had previously done business. Upon finding nothing derogatory, Watson proceeded to close the transaction. Talley delivered an insurance form, required by NCNB, indicating he had insurance coverage with Nationwide of the type and in the amount required by the lease. Watson verified that such a policy was in effect. Although no Nationwide policy was ever received by NCNB, NCNB subsequently received a policy meeting the lease requirements from United States Fidelity and Guar
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