CREED V. SMITH -- ARBITRATION OF UNDERINSURED MOTORIST CASES

On August 21, 2012, the Court of Appeals held that the insured has a right to arbitrate his UIM claim, even where the liability carrier has not paid its insurance limits. This occurred in a situation where the UIM carrier "advanced" the amount of the "tender," pursuant to the UIM statute, and the UIM carrier argued that the liability policy was not "exhausted." The case of Creed v. Smith resolved an issue that has been raised often in the lower courts, but not decided on appeal. John Kirby raised this precise issue in a case appealed to the Court of Appeals, but that case was resolved on other grounds. The North Carolina statute for the tender/advancing process is extremely complicated, and many of the issues that can arise have not been addressed by our appellate courts, and are not clearly answered by the statute. One ramification of the court's holding in this case is that the UIM carrier will be bound by an arbitration award, and the UIM carrier generally has a right of subrogation against the underinsuerd motorist. It is not clear whether the arbitration award is binding against the underinsured motorist, who never agreed to arbitrate the claim. This website contains other recent North Carolina cases.