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Commercial Auto |
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Fraud |
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Retroactive Coverage |
Kelvin Lee Simpson was operating
his tractor-trailer On October 15, 2004 when he negligently struck a vehicle
owned by the North Carolina Department of Transportation (NCDOT). At the time
of the accident, he did not have insurance on the vehicle because his North
Carolina Farm Bureau Mutual Insurance Company (Farm Bureau) policy had expired
for his failure to pay premium. On the day of the accident, Simpson went to the
office of a local Farm Bureau agent and paid the past due premium for the
policy but did not tell the agent about the accident. Two weeks later, Farm
Bureau issued a policy effective 12:01 a.m. October 15, 2004.
The attorney for the driver
of the NCDOT vehicle contacted Farm Bureau in November 2004. Simpson had not
notified Farm Bureau of the accident or responded to its inquiries.
On November 3, Farm Bureau
filed a declaratory judgment action asking the court to determine that there
was no coverage for claims arising out of the October 15 accident. The lower
court found in favor of the NCDOT vehicle's driver, holding that Farm Bureau
provided liability coverage in the amount of $750,000. Farm Bureau appealed.
On appeal, the issue was
whether Simpson could retroactively obtain insurance coverage through his own
fraud. Farm Bureau argued that coverage was void under the terms of the policy
because of Simpson’s fraud. Simpson argued that the North Carolina Financial
Responsibility Act required that Farm Bureau’s obligation became absolute once
the accident occurred. The Court of Appeals of North Carolina found in favor of
Farm Bureau. The court found that coverage would have been absolute if the
policy was in effect at the time of the accident. However, Farm Bureau’s
obligation to provide coverage was not absolute because the policy was not in
effect at the time of the accident
The decision of the lower
court was reversed.
North Carolina Farm Bureau
Mutual Insurance Company vs. Simpson-No. COA08-898-Court of Appeals of North
Carolina-July 7, 2009-678 South Eastern Reporter 2d 753