VII. Benefits

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

VII. Benefits

A. Basic and Additional Uninsured Motorist Coverage

Section 38-77-150 provides that the uninsured motorist endorsement must undertake to pay the insured "all sums which he is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle, within limits which may be no less than the requirements of section 38-77-140." Section 38-77-140 provides for minimum policy limits, exclusive of interest and costs, for any one accident of $25,000 for bodily injury or death of one person, $50,000 because of bodily injury or death to two or more persons, and $25,000 of property damage coverage. In 1978, the Legislature added section 38-77-160, which provided that "[a]utomobile insurance insurers shall offer, at the option of the insured, uninsured motorist coverage up to the limits of the insured's liability coverage in addition to the mandatory coverage prescribed by section 38-77-150. Such insurers shall also offer, at the option of the insured, underinsured motorist coverage up to the limits of the insured['s] liability coverage to provide coverage in the event that damages are sustained in excess of the liability limits carried by an at fault insured or underinsured motorist."

Section 38-77-150 mandates UM coverage be included in an automobile policy, but this mandate is not applicable to nonresidents who are in an accident in the state. Such was the issue in Newton v. Progressive Northwestern Ins. Co.¹⁸⁶ The nonresident insured rejected UM coverage pursuant to Georgia law. Later, the insured was in an accident with an uninsured motorist in South Carolina and contended "the Motor Vehicle Financial Responsibility Act required reformation of his policy to include the minimum uninsured motorist coverage required by South Carolina law."¹⁸⁷ The court disagreed, upholding the trial court's holding that section 38-77-30(10.5) only applies to "a policy. . .issued or delivered in this State. . . ," and "Section 38-77-150 does not affect policies issued in other states..... . . . ."¹⁸⁸

B. "Offer" Requirement for Additional Uninsured Motorist Benefits

1. Case Law Discussion Prior to Act 148 of 1989

Section 38-77-160¹⁸⁹ requires insurers to "offer" additional uninsured, as well as underinsured, motorist benefits to their insureds. "Not only must the insurer offer uninsured motorist coverage in any amount up to the liability limits, but the offer must be an effective offer that is meaningful to the insured. The insurer has the burden of proving that it made a meaningful offer of optional coverage to the insured."¹⁹⁰ Failure of the insurer to offer this optional coverage entitles the insured to the optional coverages by operation of law.¹⁹¹ The Act was silent as to the requirements for a valid "offer" prior to Act Number 148 of 1989.

In State Farm Mutual Automobile Insurance Co. v. Wannamaker,¹⁹² the insured received a renewal premium notice accompanied by a nine page "stuffer" booklet from State Farm which he did not read. Thereafter, he went to his State Farm agent's office to pay the renewal premium, and no mention was made of underinsured motorist coverage by either the insurance agent or the insured. The insured's daughter was subsequently killed in an automobile wreck. The insured then filed suit contending that he was entitled to underinsured motorist coverage from State Farm because State Farm had failed to offer such coverage to him. The issue in the case was whether the unread nine page booklet constituted an effective offer of coverage.

The booklet informed the insured that higher limits of additional uninsured motorist coverage as well as underinsured motorist coverage were available; it defined these coverages; and it contained a premium chart listing the premiums charged for various limits of additional underinsured and underinsured motorist coverage. The booklet informed the insured that he should contact his insurance agent if he wished to purchase additional uninsured or underinsured coverage, and that "[i]f no change in coverage is desired, you need do nothing."¹⁹³ Included in the booklet were State Farm's actual endorsements for uninsured and underinsured motorist coverages.

In holding that the booklet did not constitute an effective offer, the court noted that (1) "the burden is on the insurer to effectively transmit the offer to the insured;"¹⁹⁴ and (2) "the statute mandates the insured to be provided with adequate information, and in such a manner, as to allow the insured to make an intelligent decision of whether to accept or reject the coverage."¹⁹⁵ The court then compared the State Farm booklet, which was not quoted in the decision, to the one rejected in Minnesota case of Hastings v. United Pacific Insurance Co.,¹⁹⁶ in which the Minnesota Supreme Court stated "[t]he message printed on the bottom of the premium notice was, at best, vague. It gave no explanation of the underinsured motorist coverage and how it differed from uninsured [motorist] coverage." The decision did not specifically state why the State Farm mailer failed to meet the standard laid out in Hastings.

The supreme court also noted that the insured had a personal meeting with his State Farm insurance agent and "State Farm did not ask Wannamaker [the insured] about, explain, communicate or in any way offer him underinsured motorist coverage. If the agent had discussed it and made a verbal offer to Wannamaker to purchase, this clearly would have met the statutory burden of providing the insured the option of rejecting or accepting the coverage."¹⁹⁷

In Todd v. Federated Mutual Insurance Co.,¹⁹⁸ the insured was killed in an automobile accident. A permissive user brought suit alleging that the insurer failed to make an effective offer of coverage at renewal time. The insurer conceded that it did not make a written offer, but claimed that its insurance agent made an oral offer. The insurer produced a form signed by the insurance agent and the insured showing the policy limits for liability and uninsured motorist coverage which were in force at the time of the accident. However, that agent testified that he had no actual recollection of his conversation with the insured. As a...