NORTH CAROLINA FARM BUREAU V. SMITH

In NC Farm Bureau v. Smith, the Court of Appeals (on May 21, 2013) held that where the victims of an automobile accident signed an agreement with the tortfeasor (and his insurance company) to not execute on any judgment obtained, they lost any claims they had for insurance coverage against the defendant insurance company (which might have provided additional coverage to the victims).

This ruling is in accord with other North Carolina cases on the issue of the effect of a release and a covenant. When settling the liability claim in a situation where there is UIM coverage, the claimant can execute such a covenant and preserve his UIM (underinsured motorst coverage) claim, but this procedure does not work for additional liability coverage (which is invoked ony if the tortfeasor is "legally responsible" for the claim.

One interesting aspect of this decision is that one of the victims of the accident was a minor. There is no indication in the opinion that the settlement (i.e. covenant) was approved by a court. Absent court approval, the settlement of a minor's claim is generally not binding, and can be voided. The settlement in NC Farm Bureau v. Smith may have been subject to South Carolina law, which seems to have a different procedure for minor's settlements under a given threshhold. John Kirby has written extensively on the issue of minor's claims in North Carolina, publishing an article on this topic in the Campbell Law Review in 2012.