A Policy In Evidence is Needed to Prove Coverage

How to Lose a Declaratory Relief Action by Not Trying

When a person seeks insurance coverage he or she is required to prove that a policy of insurance exists and that there is evidence that allows a finding that the person is covered. Usually, the person seeking coverage denied by an insurer sues the insurer and the insurer defends. However, in State Farm Mutual Automobile Insurance Company v. Turran Phillips, Court of Appeals of North Carolina, 2017 WL 2118705, No. COA16-162 (16 May 2017) the insurer sued for a finding there was no coverage.

When the case was called to trial State Farm convinced the trial court that the burden was on the the person claiming insurance and the court ordered the defendant to sit near the jury and present evidence first because, regardless of whoever won the race to court, the burden of proof fell to the person claiming to be an insured.

FACTS

In November of 2013, 29-year-old defendant Turran Phillips was a passenger in his girlfriend’s car when she lost control of her vehicle and defendant was injured in the accident. Defendant Phillips’s medical expenses from the accident were in excess of $30,000.00. Defendant Phillips’s girlfriend’s insurance company paid him its per-person liability limit of $30,000.00. In February of 2014, defendant Phillips then submitted a claim to State Farm for underinsured motorist coverage under a policy belonging to his father, Mr. Patrick Sharpless.

State Farm Mutual Automobile Insurance Company (“State Farm”) filed a complaint against defendant Turran Phillips for a declaratory judgment “declaring defendant Turran Phillips is not entitled to underinsured motorist coverage under the terms of Patrick Sharpless’s State Farm automobile insurance policy” because defendant is not a “resident” of his father’s “household” as required for coverage under the policy with plaintiff State Farm.

The complaint acknowledged that State Farm issued an automobile insurance policy to Sharpless and sets forth the factual circumstances of the accident and underinsured claim.
Defendant Phillips answered State Farm’s complaint by admitting most of the factual allegations but denying that he was not a resident of his father’s household for purposes of recovery under the policy.

At the close of defendant’s case-in-chief, plaintiff State Farm moved for a directed verdict because defendant Phillips failed to put into evidence sufficient materials to meet his burden; specifically, defendant put nothing into evidence the State Farm policy that’s at issue in this lawsuit. The burden required of the defendant was to show they’re entitled to coverage under the policy, and specifically the issue here is whether or not Mr. Phillips meets the definition of an insured under the family, which – specifically, the definition of family member.

The trial court allowed plaintiff State Farm’s motion for directed verdict and dismissed the jury. The trial court concluded that evidence presented by Defendant regarding his asserted right to coverage under the subject policy was not legally sufficient to support a right to coverage.

DIRECTED VERDICT

Although plaintiff State Farm filed the complaint, its counsel directed the trial court to case law determining that the initial burden of proof is on the alleged insured to prove he falls under the policy. The trial court then instructed the parties to switch tables after lunch since plaintiff State Farm had initially been seated closer to the jury, as customary in North Carolina. The only questions before the Court are whether the trial court properly allowed directed verdict and denied the motion for a new trial.

ANALYSIS

In North Carolina, like the rest of the country, the general rule is that when an insured claims benefits under a policy, the burden is on him to prove coverage. But the burden of showing an exclusion or exception is on the insurer. A showing by an insured that he is covered establishes a prima facie case that shifts the burden to the insurer. Defendant Phillips had the burden of presenting sufficient evidence to prove that he would be entitled to coverage under the language of the policy at issue. In this case, that evidence would include evidence of the policy as well as evidence that defendant is covered by the policy because he is a resident of his father’s household. If defendant Phillips failed to meet his burden, State Farm would properly prevail on a motion for a directed verdict.

At trial, defendant presented evidence of his living circumstances at the time of the accident seeking to show that he was a “resident” of his father’s household. Since State Farm based its motion for a directed verdict on defendant Phillip’s failure to place the policy at issue into evidence the court limited its analysis to that issue while confused why the insurance policy was never actually admitted during the trial. An insurance policy is a contract which must be “enforced as written.”

The appellate court concluded that one phrase with no context is not sufficient evidence of the terms of the policy. Even if none of the definitions in the policy would be relevant, the sentence fragment in the complaint does not address any exceptions or restrictions.

Without the whole policy in evidence or at least major relevant portions thereof, defendant Phillips failed to carry his burden of production to bring himself “within the insurance coverage.” The trial court properly allowed plaintiff State Farm’s motion for a directed verdict.

ZALMA OPINION

The defendant, acting properly as a plaintiff, created a problem for himself and by not putting the policy into evidence with evidence that he was entitled to coverage because he was a relative resident in his father’s household. State Farm did not need to present any evidence because the insured failed to present a prima facie case. He went to trial unprepared to present evidence, presented no evidence of the insurance policy and lost.

ZALMA-INS-CONSULT                      © 2017 – Barry Zalma

This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

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The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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