Moser v. Employers Commercial Union Insurance Co. of America

ARNOLD, Judge. The trial court apparently was of the opinion that, based on this Court’s holding in Gore v. Insurance Co., 21 N.C. App. 730, 205 S.E. 2d 579 (1974), the exclusion did not apply since no encumbrance was recorded on the certificate of title. In Gore an automobile was sold under a conditional sales contract, but the transaction was not noted on the certificate of title. This Court held that under Insurance Co. v. Hayes, 276 N.C. 620, 174 S.E. 2d 511 (1970), the seller was the “owner of the auto [311] mobile for insurance purposes;” The rationale behind the Gore decision, however, is inapplicable to the case at bar. The question in this case is whether there was an encumbrance on the property within the meaning of Exclusion (k). We answer this question in the affirmative. Ordinarily, insurance contracts are to be construed liberally in favor of the insured, but clauses requiring disclosure of the insured’s interest in the property are to be construed fairly and rationally to protect the insurer from extraordinary risks. Roberts v. Insurance Co., 212 N.C. 1, 192 S.E. 873 (1937). The contract between plaintiff Moser and the Leighs clearly created a security interest as between the parties. See G.S. 25-1-201(37); cf. Food Service v. Balentine’s, 285 N.C. 452, 206 S.E. 2d 242 (1974). The Leighs had the right to compel Moser to transfer title upon final payment while Moser retained title as security for the purchase price. However it may be denominated, this security interest is an encumbrance on the insured property. The fact that the security interest was not perfected pursuant to G.S. 20-58 nor title or interest transferred pursuant to G.S. 20-72 (b) is irrelevant. See G.S. 25-9-202. An encumbrance exists and coverage is explicitly excluded. We hold that the trial court erred in granting plaintiff’s motion for summary judgment and in denying defendant’s motion. The judgment therefore is vacated, and the cause remanded for entry of judgment in accordance with this opinion. Vacated and remanded. Judges Morris and Vaughn concur.