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Bowles v. BCJ Trucking Services8/2/2005
a matter of law the novation resulted only in a change of the parties to the original contract, while the terms and obligations of the original insurance contract remained unchanged. As noted above, IGA failed to make exceptions to the Commission's findings of fact and they are binding on appeal. Creel, 126 N.C. App. at 552, 486 S.E.2d at 480-81 (citation omitted). The Commission found as fact the assumption reinsurance agreement was a novation. It held the novation extinguished the contract between Selective and BCJ and that Reliance expressly assumed 100 percent of Selective's obligations. Tomberlin, 250 N.C. at 644, 109 S.E.2d at 367-68. The agreement did not create a new contract for insurance coverage but solely substituted a new party, Reliance for Selective, to the contract. Through novation, Reliance is deemed to have replaced Selective as if Reliance had issued the original contract of insurance to BCJ. Id. The novation replaced the parties to the contract, did not change the obligations under the contract for insurance itself, and the agreement did not operate retroactively to cover known or unknown losses.
Plaintiff's claim for injury occurred after the original contract for insurance was entered into by BCJ and Selective, now BCJ and Reliance. Reliance, through novation, became BCJ's insurance company beginning 1 November 1994 to the time of plaintiff's claim. Plaintiff's claim is a "covered claim" within the coverage of the insurance policy issued by Reliance, a direct insurer as defined by N.C. Gen. Stat. § 58-48-20. After Reliance became insolvent and was ordered into liquidation by the Pennsylvania Commonwealth Court, IGA became liable for all covered claims issued by an insolvent direct insurer. N.C. Gen. Stat.§ 58-48-20; N.C. Gen. Stat. § 58-48-35(a)(1) (2003). The Commission correctly concluded plaintiff's claim met the definition of a "covered claim" under N.C. Gen. Stat. § 58-48-20 and holding IGA to be liable for plaintiff's claim. This assignment of error is overruled.
VI. Statutory Obligation of IGA
IGA argues the Commission erred in finding plaintiff's claim rests within the statutory obligations of IGA under the North Carolina Insurance Guaranty Association Act. N.C. Gen. Stat. § 58-48 et seq.
Under N.C. Gen. Stat. § 58-48-20(4), a "'Covered claim' means an unpaid claim, . . . arises out of and is within the coverage . . . an insurance policy to which this Article applies as issued by an insurer, if such insurer becomes an insolvent insurer . . . ." Under N.C. Gen. Stat. § 58-48-20(5), an "'Insolvent insurer' means (i) an insurer licensed and authorized to transact insurance in this State either at the time the policy was issued or when the insured event occurred and (ii) against whom an order of liquidation with a finding of insolvency has been entered . . . ."
Under N.C. Gen. Stat. § 58-48-35(a)(2), IGA stepped into the shoes of the insurance company found to be insolvent and is deemed the insurer having "all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent." (Emphasis supplied).
Under N.C. Gen. Stat. § 58-48-35, IGA is liable for all claims on policies of direct insurance companies which have been foundinsolvent. Reliance is a direct insurance company who is deemed to have issued an insurance policy to BCJ and is an active member of IGA. Plaintiff's claim is a "covered claim" in that it arose out of Reliance's coverage of BCJ. The Pennsylvania Commonwealth Court found Reliance insolvent and ordered it liquidated. After Reliance was found to be insolvent, IGA stepped into the shoes of Reliance and must pay its claims. The Commission properly concluded plaintiff's
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