The North Carolina Court of Appeals recently ruled in favor of Benjamin Eagles, the court-appointed receiver for Ikeem Cherry, in a legal dispute against Discovery Insurance Company. The court's decision, filed on October 21, 2026, addresses issues surrounding insurance coverage and the responsibilities of insurers when their clients are involved in accidents. This ruling could have significant implications for how insurance companies handle claims in the future.

The case, officially titled Eagles v. Discovery Ins. Co. (Docket No. 25-610), stemmed from a 2020 car accident involving Cherry, who was driving a vehicle owned by Melanie Sauls. Cherry was involved in a single-vehicle crash that injured his passenger, Samuel Tomlin. At the time of the accident, the vehicle was insured by Discovery Insurance Company, which initially refused to cover Cherry’s claims, arguing that he had stolen the vehicle.

Following the accident, Tomlin filed a lawsuit against Cherry and Sauls, leading to a default judgment of $3 million against Cherry after he failed to respond. Subsequently, Eagles was appointed as the receiver for Cherry to manage the claims against Discovery. The receiver then initiated legal action against Discovery, claiming breach of duty to defend, unfair and deceptive trade practices, and bad faith failure to defend.

Discovery Insurance Company appealed a series of orders from the Nash County Superior Court, which had granted summary judgment in favor of the receiver and awarded attorney fees and costs. The court's ruling highlighted the issues of whether Discovery had a duty to defend Cherry and whether it had acted in bad faith by refusing to cover the claims.

Background

The dispute began with a car accident on May 10, 2020, when Ikeem Cherry crashed a Honda owned by Melanie Sauls. Cherry had taken the vehicle without her permission after visiting her to drop off a Mother's Day gift. Following the accident, Sauls informed Discovery that Cherry had stolen the vehicle, leading the insurance company to deny coverage for his claims.

In December 2020, Tomlin filed a lawsuit against both Cherry and Sauls, which Discovery was notified of but did not adequately respond to on behalf of Cherry. After a default judgment was entered against Cherry in March 2021, Eagles was appointed as the receiver in May 2022 to manage Cherry's assets and pursue claims against Discovery Insurance Company.

The receiver's lawsuit against Discovery was initiated in June 2022, alleging that the insurance company failed to fulfill its duty to defend Cherry in the underlying lawsuit. The case involved several legal complexities, including a motion by Discovery to quash a subpoena for its president and a settlement agreement reached between Discovery and Tomlin in May 2024, which Discovery argued should terminate the receiver's claims.

The Ruling

The North Carolina Court of Appeals, led by Judge Tobias Hampson, ruled in favor of the receiver, affirming the lower court's decision to grant summary judgment on the claims of breach of duty to defend, unfair and deceptive trade practices, and bad faith failure to defend. The court found that Discovery had received adequate notice of the lawsuit against Cherry and had a responsibility to defend him.

The court stated, "The trial court did not lose subject matter jurisdiction over Receiver’s claims against Discovery when Tomlin and Discovery entered into the Settlement Agreement. Therefore, the trial court did not err by allowing Receiver to continue pursuing claims against Discovery on behalf of Cherry after Tomlin and Discovery entered into the Settlement Agreement."

Additionally, the court ruled that Discovery's failure to investigate the circumstances surrounding the accident and its refusal to defend Cherry constituted bad faith. The court noted that the allegations in the complaint against Cherry could potentially fall under the coverage of the insurance policy, emphasizing that the insurer's duty to defend is broad and extends to any claims that could be covered by the policy.

Furthermore, the court upheld the trial court's award of attorney fees to the receiver, stating that Discovery had willfully engaged in acts prohibited by law and had made an unwarranted refusal to settle the matter. The receiver was awarded a total of $16,325.00 for his own fees and an additional $246,425.00 for the fees incurred in hiring Cherry's attorney.

Impact

This ruling has significant implications for both insurance companies and policyholders in North Carolina. It reinforces the principle that insurers have a broad duty to defend their insureds against claims that could potentially fall within the coverage of their policies. The court's decision also highlights the importance of insurers conducting thorough investigations before denying claims based on allegations of theft or unauthorized use of a vehicle.

The ruling may encourage policyholders to pursue claims against their insurers more aggressively, knowing that courts may be sympathetic to claims of bad faith and unfair practices. Additionally, this case sets a precedent for how courts may interpret the responsibilities of insurers in similar situations, potentially leading to changes in how insurance companies handle claims.

What's Next

Discovery Insurance Company has the option to appeal the ruling to the North Carolina Supreme Court, although it remains unclear whether they will pursue this route. The outcome of this case could influence future litigation involving insurance claims and the responsibilities of insurers in North Carolina.