New South Insurance v. Velez

CAMPBELL, Judge. Under North Carolina case law an insurer who pays damages to the insured is subrogated to whatever rights the insured may have against the tort-feasor. 4 Strong, North Carolina Index 2d, Insurance, § 75, p. 553 (1968). Furthermore, an in [702] surer’s right to subrogation under a collision insurance policy includes a claim against any judgment secured by the insured against the tort-feasor for the amount paid by the insurer in satisfaction of the collision claim. Couch On Insurance 2d, § 61:237 (Supp. 1973). Finally, paragraph 11 of the insurance policy, issued by plaintiff to defendant and Wachovia, entitled “Subrogation,” reads: “In the event of any payment under this policy, the company shall be subrogated to all the insured’s rights of recovery therefor against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights.” We hold that the insurer is also subrogated to any rights its insured might have against a coinsured, where the coinsured has settled with the tort-feasor, applied the funds to his own use, and released the tort-feasor, in effect destroying any rights the first insured might have against the tort-feasor. This is particularly true where the insurer then has to pay a claim presented by the first insured. The issue then becomes, what are the rights as between the coinsureds? What are the rights of the security interest holder in the proceeds obtained from the tort-feasor by the mortgagor in settlement for damages to the collateral? The security agreement expressly included, as part of the total price, a provision for collision insurance. It is clear that the parties to the security agreement intended that the security interest of the mortgagee (Wachovia) would continue in any insurance proceeds obtained by the mortgagor as recompense for damage to the collateral. It is also clear that the mortgagee would have an equitable lien upon the proceeds of any insurance obtained for the better security of the mortgagee to the extent of his interest in the property destroyed. Couch On Insurance 2d, § 29:82, p. 366 (1960). It follows then that the mortgagee would also have an equitable lien in any judgment or settlement obtained by the mortgagor against a tort-feasor for damage to the collateral. We hold that the insurer, New South Insurance Company, is subrogated to any rights Wachovia may have had against its coinsured, Carmen L. Velez. Cf. Wilson v. Motor Lines, 207 N.C. 263, 176 S.E. 750 (1934); Robinson v. Breuninger, 152 Kan. 644, 107 P. 2d 688 (1940); Couch On Insur703 anee 2d, § 29:89, p. 372 (1960). We, therefore, hold that it was error for the trial court to grant defendant’s motion for directed verdict, and we reverse and remand for further proceedings in accordance with this decision. Reversed and remanded. Judge Morris concurs. Judge Vaughn dissents.