I. General

• Library: The Law of Automobile Insurance in SC (SCBar) (2015 Ed.)

I. General

In South Carolina, every motor vehicle must carry liability insurance coverage. "Motor vehicle" is defined in the definitional section of the Motor Vehicle Financial Responsibility Act (MVFRA) as:

Every self-propelled vehicle which is designed for use upon a highway, including trailers and semitrailers designed for use with these vehicles but excepting traction engines, road rollers, farm tractors, tractor cranes, power shovels, mopeds, and well drillers, and every vehicle which is propelled by electric power obtained from overhead wires but not operated upon rails. For purposes of this chapter, the term automobile has the same meaning as motor vehicle.¹

The minimum statutorily required policy limits for liability coverage are: $25,000 because of bodily injury to one person in any one accident, or $50,000 in the aggregate, which means because of bodily injury to two or more persons in one accident. The minimum limits also provide for $25,000 related injury to or destruction of property of others in any one accident.²

WHAT IS COVERED

A covered automobile is defined as any vehicle shown in the policy declarations, any private passenger automobile or pickup or van purchased by the insured, and any trailer.³ A trailer is defined as a vehicle designed to be pulled by a: (1) private passenger auto; or (2) pickup or van. A "trailer" also includes a farm wagon or farm implement while towed by a private passenger auto, pickup, or van.⁴

Some courts have held that a two-wheeled motorcycle did not meet the policy definition of "automobile."⁵ However, in Nationwide Mutual v. Erwood⁶ the Supreme Court held that § 38-77-150 (mandating minimum uninsured motorist coverage in all automobile insurance policies) enabled a woman injured on her husband's uninsured motorcycle to recover based on her policy insuring another vehicle.

A farm tractor is not a motor vehicle for insurance purposes.⁷

A. Ownership Requirement

The statutory requirement to issue liability coverage only applies to the "owner" of a motor vehicle.⁸ An insurer does not have to extend coverage to an insured for a non-owned vehicle.⁹

• "Owner": [a] person who holds the legal title of a motor vehicle, or, in the event a motor vehicle is the subject of an agreement for the conditional sale or lease thereof with the right of purchase upon performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee in the event a mortgagor of a vehicle is entitled to possession, then the conditional.¹⁰
• A vendee or lessee or mortgagor shall be considered the owner.¹¹
• While a certificate of title to an automobile is prima facie evidence of ownership, it is not conclusive of the issue.¹² Moreover the presumption of ownership evidenced by the certificate of title may be overcome by evidence that the true owner of the vehicle is a person other than the one in whose name the vehicle is registered."¹³

The issue of whether a sale of a vehicle is complete for purposes of insurance coverage when the purchaser has not yet completed his payments and the seller has retained title at the time of the loss has been heard by several courts. These cases have uniformly held that the sale is complete, rendering the purchaser the "owner" of the vehicle within the meaning of the purchaser's insurance policy, despite the language of section 56-19- 360.¹⁴

Section 56-19-360 states that "a transfer by an owner is not effective" unless there is compliance with the provisions of that section which require the owner to execute and deliver an assignment of the title to the transferee or to the Department of Motor Vehicles.¹⁵

- Insurable interest in the vehicle

A person must have an insurable interest in the vehicle in order to obtain insurance coverage. Although record ownership is not always required, it is essential that the insured have an insurable interest in the vehicle.

More specifically, "[t]he insurable interest required does not depend upon the named insured having either a legal or equitable interest in the property, 'but it is enough that the insured may be held liable for damages for its operation and use.'"¹⁶

In Continental Cas. Co. v. Penn Nat. Ins. Co.,¹⁷ the Fourth Circuit held that Pizza Hut's automobile insurance policy covered a delivery man injured in an accident even though his other employer not Pizza Hut owned the vehicle he was using to deliver pizzas on the night of the accident.

In American Mutual Fire Insurance Co. v. Passmore,,¹⁸ Lonnie Reed was unable to obtain liability insurance for his Chevrolet Nova, so he approached Leaman Foxworth who agreed to place the Nova on his policy in lieu of his wrecked vehicle and thereby utilize his unused premiums. The court rejected the argument that Foxworth had an insurable interest in the vehicle under the doctrine of negligent entrustment, as it found that Foxworth had no potential liability under the doctrine since he lacked both ownership and control over the vehicle.

In Nationwide Mutual Insurance Company v. Smith,¹⁹ an uninsured motorist coverage case, the Court of Appeals held that in order to claim statutorily mandated UM coverage under a policy, the holder of the policy must have an insurable interest in the vehicle named in the policy. Without an insurable interest in the vehicle named in the policy, the policy is invalid.

The ISO Endorsement²⁰ defines "ownership" to include a vehicle leased under a written agreement to an insured for a continuous period of six months.²¹

- Automobile lessee can be an owner

In Unisun Insurance Co. v. First Southern Insurance Co.,²² two insurers claimed the other's coverage was primary. Both liability policies provided primary coverage if the named insured was the "owner" of the vehicle. The driver of the subject vehicle, Peters, was using the vehicle pursuant to a franchise sales agreement between his father and an automobile dealership. Under this arrangement, Peters had the use of the vehicle for a specified length of time, but the dealership retained title. The vehicle would be surrendered at the end of the term, and the dealership would then sell the vehicle and keep the entire proceeds.

Under these facts, the Supreme Court held that notwithstanding its reliance on the definition of "owner" in Title 56, ownership is a question of fact for insurance coverage purposes, and that under certain circumstances, someone other than the actual title owner can be deemed "the owner" for insurance purposes. "In those cases, however, the owners' failures to hold title (or its equivalent) resulted from mere technicalities."²³ In this case, however, Peters' failure to hold the certificate of origin was not a mere formality, and the court consequently held that the automobile dealer was the sole owner.

In Garnett v. WRP Enterprises, Inc.,²⁴ the Court of Appeals held that a woman who rented a vehicle and was injured in an accident by an at-fault motorist was entitled to coverage under the rental agency's policy.

B. Clauses Extending Coverage

The insurer normally has no liability for the insured's negligence when driving a vehicle not listed in his policy's declaration pages.

However, many policies include clauses which extend coverage under certain specified conditions to vehicles not listed in the declarations.

Since coverage for non-owned vehicles is not required by statute, the parties may choose their own terms regarding coverage for non-owned vehicles under voluntary contracts. ²⁵

There are three common clauses found in private passenger policies which extend liability coverage to particular non-described vehicles, the clauses include:

• "replacement vehicle" provision;
• "newly acquired auto" provision; and
• "temporary substitute vehicle" provision. (Provides coverage when the insured is temporarily using a non-owned vehicle as a substitute for his own).

1. "Replacement Vehicle" Provisions

Most automobile insurance policies provide coverage for replacement vehicles. To qualify for this coverage, the replacement vehicle must actually replace the vehicle described in the policy. The vehicle being replaced "must be disposed of or be incapable of further service at the time of replacement."²⁶

Most of the controversy surrounding this replacement coverage occurs where the insured retains possession of the "replaced" vehicle. The following is a summary of three such cases:

In Allstate Insurance Co. v. Government Employees Insurance Co.,²⁷ the Supreme Court held that "[m]ere retention of title and possession of the described automobile will not prevent the attachment of replacement coverage to one subsequently acquired, where the described automobile is incapable of further service."²⁸ The second vehicle in that case was held to be a replacement vehicle for the first. The insured retained possession of the first vehicle because at the time of purchase of the second vehicle, the first was jacked up on cinder blocks with the tires removed as a result of mechanical failure. The insured's third vehicle was also found to be a replacement vehicle for the second.²⁹

In State Farm Mutual Automobile Insurance Co. v. Tilton,³⁰ the insured retained possession of the replaced vehicle, a pickup truck, which he subsequently repaired and operated after an accident damaged the replacement vehicle. The court held that a proper replacement had taken place, because "the pickup was inoperable and incapable of further service at the time of the replacement."³¹

In, Miller v. Stuyvesant Insurance Co. of New York.,³² Miller owned a vehicle described in the policy, which was later transferred to his wife. The wife retained the car and resided in the same household during all relevant times. Subsequently, Miller purchased another vehicle which was involved in an accident. The insured contended that the second vehicle was a covered replacement vehicle for the vehicle transferred to the wife. The court rejected this argument because possession and...