IV. Definition of an "uninsured Motor Vehicle"

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

IV. Definition of an "Uninsured Motor Vehicle"

A. Definition

An "uninsured motor vehicle" is defined as a motor vehicle as to which:

(a) there is not bodily injury liability insurance and property damage liability insurance both at least in the amounts specified in Section 38-77-140; or
(b) there is nominally that insurance, but the insurer writing the same successfully denies coverage thereunder; or
(c) there was that insurance, but the insurer who wrote the same is declared insolvent, or is in delinquency proceedings, suspension, or receivership, or is proven unable fully to respond to a judgment; and
(d) there is no bond or deposit of cash or securities in lieu of the bodily injury and property damage liability insurance;
(e) the owner of the motor vehicle has not qualified as a self-insurer in accordance with the applicable provisions of law.

A motor vehicle is considered uninsured if the owner or operator is unknown. However, recovery under the uninsured motorist provision is subject to the conditions set forth in this chapter.

Any motor vehicle owned by the State or any of its political subdivisions is considered an uninsured motor vehicle when the vehicle is operated by a person without proper authorization.⁸²

The claimant-passenger in Price v. Government Emp. Insurance Co.⁸³ was injured through the negligence of an automobile owned by Keppers and operated by Loneta. Keppers had no liability coverage but Loneta was insured by Travelers Insurance Company, which paid its policy limits to the claimant and the others injured in the collision. The claimant then filed suit against the uninsured motorist insurer of the operator of the vehicle in which she was a passenger, arguing that the tortfeasor's vehicle was technically uninsured under what is now section 38-77-30(14) because its owner had no liability coverage. The district court rejected the claim, holding that an automobile driven by an insured driver, but without coverage provided by the owner of the automobile itself, was an insured, rather than uninsured, motor vehicle.

A motor vehicle shall also be deemed to be uninsured if the owner or operator thereof is unknown.⁸⁴ As detailed below, several cases have dealt with the question of when the vehicle must be uninsured in order to invoke coverage. Other issues arising in this context include coverage for state owned vehicles, public carriers, and non-four wheeled vehicles.

The ISO Endorsement⁸⁵ typically defines an "uninsured motor vehicle" as a "land motor vehicle or trailer of any type" with a number of exceptions, including vehicles owned by the insured, certain state-owned vehicles, vehicles operated on rails or crawler treads and vehicles designed mainly for use off public roads while not on public roads. At issue in Anderson v. State Farm Mutual Automobile Insurance Co.⁸⁶ was whether a farm tractor was a "motor vehicle" within the meaning of Title 38 of the insurance laws for purposes of uninsured motorist coverage. The supreme court found that it was not, stating:

Appellant contends that a farm tractor is within the statutory meaning of an uninsured motor vehicle. Appellant claims that accidents on a public highway involving an uninsured tractor are controlled by section 38-77-150; thus, no automobile insurance policy or contract may exclude an uninsured tractor from coverage.
Under the Motor Vehicle Financial Responsibility Act, a vehicle must be designed to operate on the highway in order to come within the term "motor vehicle." A farm tractor is defined as a machine designed and intended to be used as an agricultural implement and not as a means of transportation on the highway, although occasionally it may operate on a highway. Thus, we find that a farm tractor does not come under the plain and unambiguous definition of a motor vehicle because it is not "designed for use upon a highway" although it may be incidentally used on a highway.⁸⁷

The supreme court also noted that the "meaning of 'motor vehicle' for insurance purposes should be considered in its ordinary and popular sense rather than in a generic sense" and that "the uninsured motorist statutes were not intended to apply to injuries inflicted by vehicles not subject to registration or compulsory insurance provisions. Therefore, a farm tractor is not a motor vehicle for purposes of uninsured or underinsured motor vehicle coverage pursuant to the laws of this State."⁸⁸

1. Liability Insurer's Denial of Coverage

In the original formulation of the Act, paragraph two quoted above read in part that there "is such [liability] insurance but the insurance company writing it denies coverage thereunder."⁸⁹ The statute was amended in 1963 to include the words "nominally" and "successfully."

Few cases have dealt with the extent to which the tortfeasor's putative, solvent, liability insurer must go to deny coverage before the claimant can make a claim under the uninsured motorist endorsement, that is, whether the uninsured motorist insurer may require a court order that the liability insurer owes no coverage before it has any liability.⁹⁰ In one of the few pronouncements on the subject the supreme court in North River Insurance Co. v. Gibson⁹¹ quoted the Virginia Supreme Court as follows:

"There is no apparent reason why the words in the phrase 'denies coverage' should not be given their natural and commonly understood meaning in the context in which they are used.
'To deny means to withhold, to refuse to grant.' Ballentine's Law Dict., p.360. A person in distress is denied help when one who hears his cries says nothing but walks away.
* * * An insurer denies coverage to its insured when it fails or refuses to accord him the protection it contracted to give. Here National [the liability insurer] has failed to give Mazza [the uninsured motorist] protection against the damages he has 'become legally obligated to pay' which National specifically promised to pay for him. Its failure to appear, to defend and to pay was a denial of coverage. . ., and Mazza's car was therefore 'an uninsured motor vehicle.'"⁹²

The court held in the Gibson case that the receiver for the insolvent liability insurer effectively denied coverage when he withdrew from the defense of the action against the tortfeasor's estate.

2. When the Vehicle Must be "Uninsured"; Insolvency of the Tortfeasor's Liability Insurer

Often a claimant can become involved in an automobile accident with a tortfeasor who had adequate liability insurance at the time of the accident but who thereafter — even years after the accident, lost such coverage. This could arise from a variety of causes, but principally results from the insolvency of the liability insurer subsequent to the accident. As a result, uninsured motorist insurers argued in several cases that the rights of the parties with respect to whether the tortfeasor was uninsured "must be determined as of the date of the collision."⁹³ As a result of this uncertainty, the Legislature amended the uninsured motorist statute in 1963 to specifically provide for the insolvency of the liability insurer subsequent to the accident.⁹⁴ The court held in North River Insurance Co. v. Gibson⁹⁵ that this amendment merely clarified rather than broadened the uninsured motorist coverage, which had always applied to certain situations in which the tortfeasor was not, literally, the operator of an uninsured motor vehicle at the time of the collision because any denial of coverage would almost always be subsequent to the accident.⁹⁶

Aside from subsequent insolvency, the liability insurer might also initially defend the tortfeasor under a reservation of rights, only to withdraw such representation at a later date, for instance, where it appeared that the tortfeasor stole the vehicle⁹⁷ or was not a permissive user.⁹⁸ The uninsured motorist endorsement would also apply to these situations.

While it is now clear that the uninsured motorist endorsement applies even where the tortfeasor has liability insurance at the time of the accident, the determination of when the tortfeasor subsequently becomes uninsured is still important for purposes of giving the requisite notice.

B. "Ownership, Maintenance or Use" of the Uninsured Motor Vehicle

In Wausau Underwriters Insurance Co. v. Howser,⁹⁹ the court noted that insureds "must show two related prerequisites for coverage. First, the motor vehicle with the unknown owner or driver must have caused the damage or injury as provided in section 38-77-170. Second, the injury must have 'aris[en] out of the ownership, maintenance, or use of' the wrongdoer's motor vehicle as provided in section 38-77-140."¹⁰⁰ The court went on to hold that gunshot wounds arising out of a vehicular chase did not arise out of the ownership, maintenance or use of the unknown gunman's vehicle. In addition, the court found that the gunman's vehicle did not cause the plaintiff's injuries as is required by section 38-77-170.

However, the Fourth Circuit reversed the court of appeals' decision.¹⁰¹ Answering certified questions from the Fourth Circuit Court of Appeals, the South Carolina Supreme...