Opinion
No. COA09-850.
Filed February 16, 2010.
Swain County No. 08CVD31.
Appeal by plaintiffs from order entered 8 April 2009 by Judge Steven J. Bryant in Swain County District Court. Heard in the Court of Appeals 8 December 2009.
Williams Cassady, P.L.L.C., by Rich Cassady, for plaintiffs-appellants. Tin Fulton Walker Owen, P.L.L.C., by Nancy E. Walker, for defendant-appellee.
Corey ("Corey") and Falishia Bumgarner (collectively "plaintiffs"), assignees of Across the Trax, Inc. ("Across the Trax"), and as third party beneficiaries, appeal an order granting summary judgment to Burlington Insurance Company ("defendant"). We affirm.
On or about 3 August 2006, Corey was a patron at Across the Trax, a bar located in Bryson City, North Carolina. Upon exiting Across the Trax, Corey was assaulted by Manuel Alvarez ("Alvarez"). Alvarez was subsequently convicted of feloniously assaulting Corey in Swain County Superior Court.
On 16 April 2007, plaintiffs initiated an action against, inter alia, Alvarez and Across the Trax, in Swain County Superior Court. Plaintiffs' specific claim against Across the Trax was its failure to safeguard Corey from the reasonably foreseeable criminal acts of others.
At the time of Corey's injuries, Across the Trax had a Commercial General Liability Insurance Policy ("the policy") in effect through defendant. The policy explicitly excluded from coverage any bodily injury "arising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery." As a result of the policy exclusion, defendant declined to provide a legal defense for Across the Trax against plaintiffs' action.
On 22 January 2008, Across the Trax and its owners, Michael and Dawn Marsden, entered into an agreement with plaintiffs entitled "Settlement of Doubtful or Contested Claim; Release of All Claims" ("the settlement agreement"). Under the terms of the settlement agreement, plaintiffs agreed to dismiss their claim against Across the Trax in exchange for $300,000 and plaintiffs released Across the Trax from any and all subsequent liability relating to either the felonious assault on Corey or the settlement agreement. The settlement agreement also included an assignment from Across the Trax to plaintiffs. The assignment gave plaintiffs any and all rights or causes of action Across the Trax had against defendant for breach of contract. Plaintiffs expressly agreed to seek payment of the settlement from defendant, based upon the policy. Across the Trax made no representations about the validity of the assignment.
Based on the assignment from Across the Trax, on 6 February 2008, plaintiffs filed a "Complaint for Declaratory Judgment" against defendant for breach of the policy and payment of the $300,000 settlement amount. On 2 January 2009, defendant filed a "Motion for Summary Judgment." Defendant and plaintiffs each filed affidavits to support their respective positions on summary judgment. On 8 April 2009, the trial court entered summary judgment in favor of defendant. Plaintiffs appeal.
This Complaint was dismissed in part, due to deficiencies in the pleadings. An "Amended Complaint for Declaratory Judgment," which corrected these deficiencies, was then filed 19 September 2008.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2007).
The party moving for summary judgment ultimately has the burden of establishing the lack of any triable issue of fact.
A defendant may show entitlement to summary judgment by (1) proving that an essential element of the plaintiff's case is non-existent, or (2) showing through discovery that the plaintiff cannot produce evidence to support an essential element of his or her claim, or (3) showing that the plaintiff cannot surmount an affirmative defense.
Summary judgment is not appropriate where matters of credibility and determining the weight of the evidence exist.
Once the party seeking summary judgment makes the required showing, the burden shifts to the nonmoving party to produce a forecast of evidence demonstrating specific facts, as opposed to allegations, showing that he can at least establish a prima facie case at trial.
Edwards v. GE Lighting Sys., Inc., ___ N.C. App. ___, ___, 685 S.E.2d 146, ___ (2009) (citation omitted). We review an order allowing summary judgment de novo. Id.
Plaintiffs argue that the trial court erred in granting summary judgment to defendant. Plaintiffs contend that defendant is obligated to pay the $300,000 settlement amount based upon defendant's liability under the policy. We disagree.
"Because an insurance company's liability is derivative in nature, `its liability depends on whether or not its insured is liable to the plaintiff.'" Terrell v. Lawyers Mut. Liab. Ins. Co., 131 N.C. App. 655, 661, 507 S.E.2d 923, 927 (1998) (quoting Lida Manufacturing Co. v. U.S. Fire Ins. Co., 116 N.C. App. 592, 595, 448 S.E.2d 854, 856 (1994)). Therefore, "when an insurance policy contains language such as `legally obligated to pay,' an insurer has no obligation to an injured party where the insured is protected by a covenant not to execute." Lida, 116 N.C. App. at 596, 448 S.E.2d at 857.
In the instant case, the policy contains the following language: "We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies." (emphasis added). The settlement agreement states:
Plaintiffs agree they will only seek payment of this settlement from Defendant Across the Trax, Inc.'s Insurer Burlington Insurance Company based upon Defendant Across the Trax, Inc.'s assignment of those rights, causes of action, and any other legitimate basis and not directly from Defendant Across the Trax, Inc., its directors, officers, shareholders, or employees or Michael or Dawn Marsden individually. Plaintiffs further agree not to file any future action against Across the Trax, Inc., Michael Marsden or Dawn Marsden arising out of or otherwise related to any of the events described in the above-referenced action or arising out of or otherwise related to this Release.
This Court has previously held that, when an insured, such as Across the Trax, is given such a release, the defendant insurer "is not `legally obligated to pay' plaintiff[s] for any damages based on breach of contract or otherwise. Defendant's obligations under the policy were extinguished by the execution of the [settlement agreement]. . . ." Terrell, 131 N.C. App. at 661, 507 S.E.2d at 927. Therefore, any claims which plaintiffs are attempting to assert against defendant were extinguished by the execution of the settlement agreement.
Plaintiffs cite Naddeo v. Allstate Ins. Co., 139 N.C. App. 311, 533 S.E.2d 501 (2000) and Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 340 S.E.2d 374 (1986), in support of their argument that defendant still has a legal obligation to pay for plaintiffs' claims. Neither Naddeo nor Waste Management involved the execution of a settlement agreement containing a full release for the insured and therefore, the holdings of Naddeo and Waste Management are not applicable to the instant case. Plaintiffs' argument is without merit.
Since we have determined that summary judgment was appropriate because defendant's obligations under the policy were extinguished by the settlement agreement, we need not consider plaintiffs' additional arguments. The trial court properly granted summary judgment to defendant.
Affirmed.
Judges WYNN and BEASLEY concur.
Report per Rule 30(e).