Hyatt v. Callahan - UIM Coverage Settlement Dispute

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April 15, 2026 Get Citation Alerts Download PDF Add Note

Hyatt v. Callahan

Court of Appeals of North Carolina

• Citations: None known

• Docket Number: 25-867

• Opinion

• Authorities (7)

• Cited By (0)

• Summaries (0)

• Similar Cases (73.7K)

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Syllabus

Financial Responsibility Act, N.C.G.S. § 20-279.21(b)(4), right to approve settlement, tentative settlement, thirty-day period, plain language, statutory interpretation, Silvers v. Horace Mann Ins. Co., 324 N.C. 289, 296 (1989).

Combined Opinion

                        by Judge Julee Flood

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA25-867

Filed 15 April 2026

Anson County, No. 22CVS000405-030

CLIFFORD DEAN HYATT, Plaintiff,

v.

DANIEL CASE CALLAHAN and NORTH CAROLINA FARM BUREAU MUTUAL
INSURANCE COMPANY, INC., Defendants.

Appeal by defendant from order entered 16 January 2024 by Judge Dawn M.

Layton in Anson County Superior Court. Heard in the Court of Appeals 10 March

2026.

Poisson, Poisson & Bower, PLLC, by E. Stewart Poisson and F. Davis Poisson,
III, for plaintiff-appellee.

Caudle & Spears, P.A., by Christopher P. Raab and Harold C. Spears, for
defendant-appellant North Carolina Farm Bureau Mutual Insurance
Company, Inc.

No brief submitted for defendant-appellant Daniel Case Callahan.

FLOOD, Judge.

Defendant North Carolina Farm Bureau Mutual Insurance Company, Inc.,

appeals from the trial court’s orders granting summary judgment in favor of Plaintiff

Clifford Dean Hyatt and allowing arbitration. On appeal, Defendant Farm Bureau

argues the trial court erred in granting summary judgment in Plaintiff’s favor and

allowing arbitration where Plaintiff materially breached the motor insurance policy
HYATT V. CALLAHAN

Opinion of the Court

and violated underinsured motorist statutory requirements. Upon careful review, we

conclude the trial court erred in granting summary judgment in Plaintiff’s favor

where Plaintiff failed to provide Defendant Farm Bureau with the thirty-day period

during which to act on a tentative settlement.

I. Factual and Procedural Background

Plaintiff was insured by Defendant Farm Bureau when Plaintiff was seriously

injured in a motor vehicle accident on 11 June 2021 after Defendant Daniel Callahan

tried to pass in a no-passing zone. At the time of the accident, Defendant Callahan

was insured by Erie Insurance, and his bodily injury liability coverage was limited to

$300,000.00. Under Plaintiff’s insurance policy with Defendant Farm Bureau (the

“Policy”), however, Plaintiff had an underinsured motorist (“UIM”) policy that

provided up to $1,000,000.00 for bodily injury.

On 11 August 2022, Erie tendered Defendant Callahan’s $300,000.00 bodily

injury policy to settle Plaintiff’s claim against Defendant Callahan. Plaintiff’s counsel

emailed Defendant Farm Bureau that same day, informing Defendant Farm Bureau

of the tender and stating:

Pursuant to North Carolina General Statute §20-
279.21(b)(4), this will notify your client that they have
thirty (30) days to protect their subrogation rights against
the tortfeasor.

I have also enclosed a copy of the Covenant Not to Enforce
Judgment that Erie Insurance Company has provided for
[Plaintiff] to sign. I would appreciate your reviewing this
and confirming that [Plaintiff] can sign and that this will

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HYATT V. CALLAHAN

Opinion of the Court

preserve his underinsured motorist claim.

....

As of June 22, 2022, [Plaintiff] has incurred $273,830.95 in
medical expenses. He is still under medical care so the bills
will continue to accrue.

Please let me know if your client agrees to waive
subrogation. I will continue to keep you updated on
[Plaintiff’s] treatment status and look forward to working
with you on this claim. Please reach out to me to provide
your contact information at your earliest convenience.

Four days later, on 15 August 2022, Defendant Farm Bureau responded,

through counsel, in full:

[Counsel], I received the Letter of Representation for you[r]
client, Clifford Hyatt. I will get back with you in the next
few days as to if we are going to advance or not. If we do
not advance the covenant not to enforce judgement would
not affect the underinsured motorist claim. Hopefully I will
be able to let you know if ok before the end of the week.

Please let this be considered the acknowledgement for the
letter of representation.

On the following day, Plaintiff signed the Covenant Not to Enforce Judgment

provided by Erie, which released Defendant Callahan from “any personal liability

whatsoever as a result of said incident” and contracted Plaintiff

to hold harmless [Defendant Callahan] and to endorse any
judgment or order, in connection with any civil action
hereinafter filed, or judgment or order in any other action
duly entered, only against [Defendant] Farm Bureau as
underinsured motorist carrier for [Plaintiff] and not to
enforce any such judgment or order against [Defendant
Callahan] personally.

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HYATT V. CALLAHAN

Opinion of the Court

Plaintiff’s counsel emailed the signed Covenant Not to Enforce to Erie that same day

and requested that Erie issue its check, which it subsequently did.

At 4:02 p.m. on Friday, 9 September 2022, twenty-nine days following the

receipt of notice of Erie’s tender, Defendant Farm Bureau sent an email to Plaintiff’s

counsel and Erie informing them that it had decided to advance Erie’s liability tender

of $300,000.00 and it would be sending a check in the mail that day along with an

advance and trust agreement. Erie responded the next business day, 12 September

2022, stating “[t]his claim was settled and payment was issued on 8/16/22 to the

attorney & his client. I have enclosed copy of our covenant if you need.”

On 15 September 2022, thirty-six days after Defendant Farm Bureau received

the notice of Erie’s tender, Plaintiff received Defendant Farm Bureau’s envelope in

the mail, stamped 9 September 2022, containing a check for $300,000.00 and a

proposed advance and trust agreement for Plaintiff to sign. Defendant Farm Bureau’s

proposed advance and trust agreement provided, in relevant part:

Now therefore, in consideration of such payment, the
undersigned hereby agrees to take, through any
representative designated by [Defendant Farm Bureau],
such action as may be necessary or appropriate to recover
the damages suffered by the undersigned from any person
or persons, organization, association or corporation other
than [Defendant Farm Bureau] who may be legally liable
for said damages, and to hold any monies recovered from
any such persons or organizations, including all monies
received from Erie Insurance -and- [Defendant Callahan]
in trust for [Defendant Farm Bureau] immediately upon
recovery thereof, without deduction for any expense, costs

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HYATT V. CALLAHAN

Opinion of the Court

or attorney’s fee in connection therewith; PROVIDED,
however that any sums recovered in excess of the amount
paid to the undersigned by [Defendant Farm Bureau] in
consideration for this Trust Agreement shall be prorated
according to the provisions of [N.C.]G.S. [§] 20-279.21
(b)(4).

Plaintiff’s counsel, however, returned the check and unsigned agreement to

Defendant Farm Bureau, explaining “[t]he [c]heck and the [a]greement are being

returned to [Defendant] Farm Bureau as there has not been an appropriate and

timely advancement and payment of the tendered liability insurance limits in

accordance with N.C.G.S. § 20-279.21(b)(4).” Plaintiff’s counsel elaborated:

[Defendant] Farm Bureau was in “receipt” of the “notice” of
the Erie liability limit tender on August 11, 2022, [] the 30-
day statutory period to “advance a payment” expired on
September 10, 2022 (or at the latest Monday, September
12), and [] the payment was not received until day 35 –
September 15 – five days after expiration of the statutory
period. North Carolina law is clear that if the payment is
not made in this 30-day window, the statutory right to
subrogation has been waived.

On 27 September 2022, Plaintiff sued Defendant Farm Bureau, requesting the

trial court to compel arbitration for Plaintiff’s UIM coverage claim. Defendant Farm

Bureau answered and sought declaratory judgment, claiming that, pursuant to

N.C.G.S. § 20-279.21(b)(4), Plaintiff was barred from his UIM coverage for breaching

the Policy and violating the Financial Responsibility Act. Plaintiff moved to dismiss

Defendant Farm Bureau’s claim, contending “[Defendant] Farm Bureau did not

advance a payment to Plaintiff of the liability insurance tender on or before

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HYATT V. CALLAHAN

Opinion of the Court

September 12, 2022, and has waived any right of subrogation under the UIM Statute

[N.C.G.S. § 20-279.21(b)(4)].” The trial court subsequently denied Plaintiff’s motion

to dismiss, stayed all claims, and ordered the parties to proceed to discovery regarding

Defendant Farm Bureau’s declaratory judgment claim. After discovery, both parties

filed cross motions for summary judgment, on which the trial court subsequently held

a hearing.

On 16 January 2024, the trial court entered an order denying Defendant Farm

Bureau’s motion for summary judgment and granting Plaintiff’s motion, finding that

“Defendant Farm Bureau failed to timely advance a $300,000[.00] payment to []

Plaintiff in compliance with N.C.G.S. § 20-279.21(b)(4), and as such, Defendant Farm

Bureau has waived its right to subrogation and Plaintiff is entitled to pursue his

underinsured motorist coverage claim.” Defendant Farm Bureau subsequently moved

to amend the judgment and add a certification of final judgment pursuant to Rules

59(e) and 54(b) of the North Carolina Rules of Civil Procedure.

On 14 February 2024, the trial court entered an order that, in relevant part,

denied Defendant Farm Bureau’s motion to amend, granted Plaintiff’s motion to

compel arbitration, and stayed the matters until the UIM claim could be determined

by arbitration.

The parties arbitrated the matter on 7 November 2024, with the arbitration

panel awarding Plaintiff $1,000,000.00. Plaintiff filed a motion with the trial court to

enter a final judgment confirming the award. On 30 January 2025, the trial court

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HYATT V. CALLAHAN

Opinion of the Court

ordered

Plaintiff have [j]udgment against Defendant [Farm
Bureau] in the total sum of $1,130,241.10, subject to the
credit for the pre-suit payment of liability proceeds of
$300,000.00 and medical payments proceeds of $5,000.00,
plus post-judgment interest at the legal rate of eight
percent (8%) or $152.33 per day ((.08 x $695,000.00)/365)
from the entry of this [j]udgment until this [j]udgment is
deemed satisfied.

Defendant Farm Bureau filed another motion to amend pursuant to “Rule 59(e)

and (a)(1) and/or Rule 60(b) of the North Carolina Rules of Civil Procedure[,]”

contending the judgment award contained a mathematical error and requesting the

trial court “specifically provide that it is a final judgment intended to be a full

adjudication of all claims and parties.” The trial court subsequently corrected the

judgment award and ordered it to be the final judgment for claims and parties.

Defendant Farm Bureau timely appealed.

II. Jurisdiction

This Court has jurisdiction to hear this appeal from a final judgment from a

superior court pursuant to N.C.G.S. §§ 7A-27(b) and 1-278 (2023). See Piazza v.

Kirkbride, 246 N.C. App. 576, 595 (2016), aff’d as modified on other grounds, 372 N.C.

137 (2019) (“This appeal arises from a final judgment. Accordingly, this Court has

jurisdiction to consider this appeal under N.C.[G.S.] § 7A-27(b)(1), and jurisdiction to

consider intermediate orders necessarily affecting the judgment under N.C.[G.S.] §

1-278.”).

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HYATT V. CALLAHAN

Opinion of the Court

III. Standard of Review

“The standard of review for summary judgment is de novo.” Forbis v. Neal, 361

N.C. 519, 524 (2007). “Under a de novo review, the court considers the matter anew

and freely substitutes its own judgment for that of the lower tribunal.” In re S.W.,

298 N.C. App. 39, 44 (2025) (citation modified). “Summary judgment is appropriate

when no genuine issue of material fact exists, and a party is entitled to judgment as

a matter of law.” Value Health Sols., Inc. v. Pharm. Rsch. Assocs., Inc., 385 N.C. 250,

267 (2023). We view the record “in the light most favorable to the non-movant, giving

it the benefit of all inferences which reasonably arise therefrom.” Murray v.

Nationwide Mut. Ins. Co., 123 N.C. App. 1, 8 (1996) (citation omitted).

Furthermore, we interpret the Financial Responsibility Act and examine the

terms of a motor vehicle insurance policy de novo, as those are also questions of law.

Osborne v. Paris, 283 N.C. App. 399, 404 (2022); N.C.G.S. §§ 20-279.1 through 20-

279.39 (2023). “[O]ur Supreme Court has held that statutory interpretation properly

begins with an examination of the plain words of the statute.” State v. Campbell, 285

N.C. App. 480, 487 (2022) (citation modified). “If the statutory language is clear and

unambiguous, the court eschews statutory construction in favor of giving the words

their plain and definite meaning.” JVC Enters., LLC v. City of Concord, 376 N.C. 782,

785 (2021); see also N.C. Farm Bureau Mut. Ins. Co., Inc. v. Dana, 379 N.C. 502, 510

(2021) (“Courts should give effect to the words actually used in a statute and should

neither delete words that are used nor insert words that are not used into the relevant

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HYATT V. CALLAHAN

Opinion of the Court

statutory language during the statutory construction process.”). “Statutes dealing

with the same subject matter[, however,] must be construed in pari materia, and

harmonized, if possible, to give effect to each.” Hoffman v. Edwards, 48 N.C. App.

559, 564 (1980) (quotation marks and citation omitted). “We presume that the

General Assembly acts with full knowledge of prior and existing law.” Osborne, 283

N.C. App. at 404.

IV. Analysis

On appeal, Defendant Farm Bureau argues the trial court erred in granting

Plaintiff’s motion for summary judgment and motion to compel arbitration where

Plaintiff materially breached the Policy and violated UIM statutory requirements.

Specifically, Defendant Farm Bureau contends that, “when [Plaintiff] settled with

[Defendant] Callahan without [Defendant] Farm Bureau’s consent and without

affording [Defendant] Farm Bureau thirty days to advance Erie’s liability tender,

[Plaintiff] violated the Policy and statutory requirements, barring UIM coverage.” We

agree.

“The purpose of the Financial Responsibility Act is to compensate the innocent

victims of financially irresponsible motorists. It is a remedial statute to be liberally

construed so that the beneficial purpose intended by its enactment may be

accomplished.” Id. (citation and internal quotation marks omitted). “The terms of the

Financial Responsibility Act are impliedly written into every policy of insurance as a

matter of law.” Id. (citation omitted).

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HYATT V. CALLAHAN

Opinion of the Court

Pursuant to the Financial Responsibility Act, in relevant part to UIM claims,

[n]o insurer shall exercise any right of subrogation or any
right to approve settlement with the original owner,
operator, or maintainer of the underinsured highway
vehicle under a policy providing coverage against an
underinsured motorist where the insurer has been provided
with written notice before a settlement between its insured
and the underinsured motorist and the insurer fails to
advance a payment to the insured in an amount equal to the
tentative settlement within 30 days following receipt of that
notice.

N.C.G.S. § 20-279.21(b)(4) (2023) (emphasis added). Thus, we read this statute as

preventing Defendant Farm Bureau from “exercis[ing] any right of subrogation . . .

where [Defendant Farm Bureau] has been provided with written notice before a

settlement between [Plaintiff] and [Defendant Callahan] and [Defendant Farm

Bureau] fails to advance a payment to [Plaintiff] in an amount equal to the tentative

settlement within 30 days following receipt of that notice.” See id.

Furthermore, the Policy between Plaintiff and Defendant Farm Bureau

provides, in respect to UIM coverage:

This coverage does not apply to:

1. Any claim settled by the “insured” or any legal representative of the “insured” without our consent. However, this exclusion does not apply to a settlement made with the insurer of [an underinsured motor vehicle] in accordance with the procedure described in Paragraph A.2.b.

(Emphasis added.) The procedure of paragraph A.2.b. of the Policy reiterates the UIM

Statute requirements:

• 10 - HYATT V. CALLAHAN

Opinion of the Court

With respect to damages resulting from an “accident” with
a vehicle . . . of the definition of “uninsured motor vehicle[,”]
we will pay under this coverage only if Paragraph a. or b.
below applies:

....

b. A tentative settlement has been made between an
“insured” and the insurer . . . of [an] “uninsured motor
vehicle” and we:

(1) Have been given prompt written notice of such
tentative settlement; and

(2) Advance payment to the “insured” in an amount
equal to the tentative settlement within 30 days
after receipt of notification.

(Emphasis added.) The Policy further provides:

A person seeking coverage from an insurer, owner or
operator of [an underinsured motor vehicle] must also
promptly notify us in writing of a tentative settlement
between the “insured” and the insurer and allow us to
advance payment to that “insured” in an amount equal to
the tentative settlement within 30 days after receipt of
notification to preserve our rights against the insurer,
owner or operator of such vehicle.

(Emphasis added.)

Defendant Farm Bureau does not dispute it received written notice of the

proposed settlement; instead, Defendant Farm Bureau argues Plaintiff breached the

Policy and violated the UIM Statute when, prior to the expiration of the requisite

thirty-day time period, Plaintiff signed the Covenant Not to Enforce.

Pursuant to the plain language of the statute, see Campbell, 285 N.C. App. at

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Opinion of the Court

487, which is impliedly written into the Policy as a matter of law, Osborne, 283 N.C.

App. at 404, an insurer must advance payment for a tentative settlement, not a signed

settlement, in order to exercise its right to approve a settlement and its right to

subrogate, see N.C.G.S. § 20-279.21(b)(4). Although unpublished and thus not

binding, our decision in Erie Ins. Exch. v. Strickland addressed this very issue, and

we align here with our previous analysis. 2025 WL 1324059, review denied, 923

S.E.2d 232 (N.C. 2025).

In Strickland, the insured sought UIM coverage with his insurance company

after he provided written notice of a tentative settlement agreement but signed the

agreement thirteen days later. Id. at *1. The insurer did not advance any payment.

Id. When the insured brought a claim for his UIM coverage, the insurer filed a claim

for declaratory judgment, claiming it did not owe UIM coverage, and the trial court

agreed. Id. at *2. On appeal, we affirmed the trial court and explained:

The unambiguous language of [N.C.G.S. §] 20-279.21(b)(4),
however, provides that an UIM insurer shall not exercise
any right of subrogation or any right to “approve
settlement” if it fails to advance a payment “in an amount
equal to the tentative settlement” within thirty-days
following the written notice. An interpretation of “to
approve settlement” and “tentative settlement,” by its
plain meaning, implies that an UIM insurer has thirty
days to act before the finalization of a settlement between
the insured and the primary liability insurance carrier.[]
Stated differently, an UIM insurer cannot “approve” of a
settlement that has already been completed and is no
longer “tentative.”

Id. at *6 (citation modified) (emphasis in original).

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Opinion of the Court

Plaintiff, however, argues that even if this Court concludes he breached the

Policy and violated N.C.G.S. § 20-279.21(b)(4) by failing to give Defendant Farm

Bureau the full thirty days to act on its right to approve, Defendant Farm Bureau’s

subrogation rights were not lost because another portion of the statute, added in

1997, provides: “[a] covenant not to enforce judgment shall not preclude the injured

party from pursuing available underinsured motorist benefits, unless the terms of

the covenant expressly provide otherwise, and shall not preclude an insurer providing

underinsured motorist coverage from pursuing any right of subrogation.” N.C.G.S. §

20-279.21(b)(4) (emphasis added). In making this argument, Plaintiff contends the

language of the Covenant Not to Enforce holds only Plaintiff personally—not

Defendant Farm Bureau—as contracted not to hold Defendant Callahan liable.

While Plaintiff may be correct that Defendant Farm Bureau may statutorily

have the right to subrogate in this scenario, our Supreme Court has explained an

insurance company should have the right to approve a settlement or, if the insured

fails to allow the insurance company the right to approve, the insurance company

should be allowed the opportunity to “establish any prejudice” by this failure. Silvers

v. Horace Mann Ins. Co., 324 N.C. 289, 296 (1989). In Silvers, the Court considered

the issue of “whether an insured plaintiff who has entered into a consent judgment

with a tortfeasor and the tortfeasor’s liability insurance carrier, without notice to or

the consent of the insured’s [UIM] coverage carrier, in violation of the terms of the

UIM policy, may nevertheless recover UIM benefits under that policy.” Id. at 290.

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Opinion of the Court

The insurer argued that, not only did the notice and right to approve clauses protect

the insurer’s right to subrogate, but “[t]he clauses also serve to protect the UIM

carrier against collusion between the tortfeasor and the insured and noncooperation

on the part of the tortfeasor after his or her release by the insured.” Id. at 299. The

Court agreed, holding “the insurance company should have an opportunity to

establish any prejudice that may have been caused by [the insured’s] failure to notify

it and to obtain consent to settlement as required by the policy.” Id. at 299. The Court

reasoned this approach “has the advantage ‘of providing coverage whenever[,] in the

reasonable expectations of the parties[,] it should exist and of protecting the insurer

whenever failure strictly to comply with a condition has resulted in material

prejudice.’” Id. at 299 (quoting Great Am. Ins. Co. v. C. G. Tate Const. Co., 303 N.C.

387, 396 (1981)).

The Court thus remanded to the trial court with instructions to determine

whether the insurer was materially prejudiced by the insured’s failure to give notice

and to allow the insurer the opportunity to consent to the settlement. Id. Accordingly,

although the portion of the statute protecting the right to subrogate in the face of a

covenant not to enforce was added after Silvers was decided, Silvers’ holding

nonetheless stands as to the rights of an insurer where its insured fails to obtain the

consent of the insurer. See id.

Here, Plaintiff gave proper written notice but then signed the Covenant Not to

Enforce five days later without Defendant Farm Bureau’s consent. Thus, while the

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Opinion of the Court

plain language of the amended statute would protect Defendant Farm Bureau’s right

to subrogate if there were an agreed-upon settlement between Plaintiff and the

tortfeasor, depending on the language of the settlement, Plaintiff failed to give

Defendant Farm Bureau the right to consent. By entering into an actual settlement,

Plaintiff’s settlement agreement foreclosed Defendant Farm Bureau’s right to

approve and subrogate during the thirty-day tentative settlement period provided

pursuant to N.C.G.S. § 20-279.21(b)(4).

Accordingly, we reverse and remand the trial court’s grant of summary

judgment in favor of Plaintiff. On remand, the trial court must determine whether

Defendant Farm Bureau was materially prejudiced by Plaintiff’s failure to allow it to

exercise its right to approve the settlement. See Silvers, 324 N.C. at 299. “Our role is

not to speculate about the consequences of the language the legislature chose; we

interpret that language according to its plain meaning and if the result is unintended,

the legislature will clarify the statute.” Ennis v. Haswell, 292 N.C. App. 112, 119

(2024) (citation and internal quotation marks omitted).

V. Conclusion

Upon careful review, we conclude the trial court erred in granting summary

judgment in Plaintiff’s favor where Plaintiff failed to provide Defendant Farm Bureau

with the statutory the thirty-day period during which to act on a tentative settlement.

REVERSED AND REMANDED.

Judges TYSON and GRIFFIN concur.

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