XII. Actions

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

XII. Actions

A. Procedure Where the Identity of the Uninsured Motorist is Known

1. General

Actions in uninsured motorist cases, in which the identity of the uninsured motorist is known, are governed generally by two statutes, section 38-77-150 and section 38-77-160.²⁴⁶ In 1963, the Legislature added what is now section 38-77-150 which requires the insured to serve the uninsured motorist insurer with the pleadings "in the action establishing [such] liability," and it grants the uninsured motorist insurer the right to defend the direct action in the name of the uninsured motorist. This section remedied a defect in the original Act, which "was completely silent on the procedure available to an insurer to defend a claim under the Uninsured Motorist Endorsement provision of the policy. It did not prohibit the insurer from appearing in behalf of the alleged negligent uninsured motorist, neither did the statute spell out the appropriate procedure to be followed in such case."²⁴⁷

Section 38-77-200 does not prohibit the insurer from incorporating "Notice of Legal Action" or other reasonable clauses in its uninsured motorist endorsement²⁴⁸ but it does prohibit the insurer from requiring the insured to submit to a physical examination.²⁴⁹

Uninsured motorist actions have two components: an initial action establishing the legal liability of the tortfeasor and the amount of the claimant's damages, and a subsequent action by the insured against his insurer to enforce the uninsured motorist endorsement. The principles between the two should not be confused:

Recovery under the uninsured [motorist] endorsement is subject to the condition that the insured establish legal liability on the part of the uninsured motorist. Such an action is one ex delicto and the only issues to be determined therein are the liability and the amount of damage. After judgment is entered against the uninsured motorist, a direct action ex contractu can be brought to recover from the insurance company on its endorsement, and policy defenses may be properly raised by the insurance company.²⁵⁰

The insured must strictly comply with the procedures set forth in the uninsured motorist statutes,²⁵¹ and the court will be very wary to find any waiver of either the statutes or policy provisions on the part of the insurer.²⁵²

2. Tort Actions

The first step in establishing the claimant's entitlement to uninsured motorist benefits is a tort action against the uninsured motorist²⁵³ to establish his legal liability and the amount of the claimant's damages.²⁵⁴ This action is identical to any other tort negligence action, except that copies of the pleadings in the tort action must be served on the uninsured motorist insurer "in the manner provided by law,"²⁵⁵ which requires service on the Director of Insurance.²⁵⁶ The uninsured motorist must be served as well. Service merely on the insurance company is not sufficient in and of itself.²⁵⁷ Rather, the action must be commenced against the uninsured motorist in order to preserve the right to seek recovery of uninsured benefits. Neither evidence of the service on the uninsured motorist insurer, nor any other mention of the existence of uninsured motorist coverage should be introduced into evidence before the jury in the tort action.²⁵⁸

The tort action is one ex delicto against the uninsured motorist and the uninsured motorist insurer is not required to, nor should it, interpose policy or other ex contractu defenses in such action. The insurer would accordingly not be required to plead in the tort action the claimant's previous execution of a release in favor of the uninsured motorist insurer,²⁵⁹ or that the insurer had already paid out its policy limits.²⁶⁰ The supreme court has been very hesitant in finding any waiver or estoppel on the part of the uninsured motorist insurer by its failure to raise such defenses in the tort action. Thus, in Sheffield v. American Indemnity Co.,²⁶¹ the uninsured motorist insurer did not waive the right to assert the defense that it had already paid out its policy limits by its failure to raise such defense in the tort action. Similarly, in Criterion Insurance Co. v. Hoffmann,²⁶² the uninsured motorist insurer did not waive its right to contest the claimant's defective service on it in the tort action. Finally, in Hatchett v. Nationwide Mutual Insurance Co.,²⁶³ the uninsured motorist insurer did not waive the right to assert the claimant's failure to comply with the policy's notice provisions by its failure to intervene in the tort action where the tortfeasor was already in default. Likewise, in Wright v. Smallwood,²⁶⁴ the court held that "UM coverage does not sound in tort, but in contract."²⁶⁵ This distinction led to the court to hold that, despite being an exclusive remedy, workers' compensation law does not bar contractual claims for UM benefits.

Although strict compliance with rules governing uninsured motorist actions is required on the part of the claimant,²⁶⁶ nevertheless where conditions make literal compliance impossible the claimant will not be barred from recovery. In Gunnells v. American Liberty Insurance Co.,²⁶⁷ the tortfeasor did not become an uninsured motorist until after a judgment had been rendered against him when his liability insurer became insolvent. The claimant then sought to recover after judgment from his uninsured motorist insurer, which denied liability on the grounds that it had not been served with the pleadings in the tort action and that literal compliance with what is now section 38-77-150 was a condition precedent to recovery. Holding that the statute "was never intended to be applicable to the instant factual situation," the court stated that "[h]ere the endorsement did not become operative until after judgment against the tort defendant, and promptly after it was ascertained that such had become operative, American [the uninsured insurer] was notified."²⁶⁸

3. Compliance with Uninsured Motorist Policy Provisions

Section 38-77-200 provides that "nor may anything not otherwise herein provided for or as may be provided in the form prescribed by the Director be required of the insured." In Hatchett v. Nationwide Mutual Insurance Co.,²⁶⁹ the court, in validating a Notice of Legal Action policy provision, held that by enacting section 38-77-200 "the legislature never intended by this language to hold an insurance company liable without notice or opportunity to investigate or contest the claim."²⁷⁰ Although the lower court's decision arose prior to the 1963 amendments which required the insured to serve the uninsured motorist insurer, and gave the insurer the right to defend the action, the Batchett decision is presumably still good law. Accordingly the careful practitioner should always attempt to ascertain and comply with all valid provisions found in the claimant's uninsured motorist endorsement and not rely exclusively on compliance with the statutory scheme.²⁷¹

a. Specimen Policy Provisions

The Uninsured Motorist Endorsement promulgated by the Insurance Department contains the following pertinent policy provisions:

CONDITIONS
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2. PROOF OF CLAIM
As soon as practicable, the insured or other person making claim shall give to the company written proof of claim, under oath if required, giving full particulars of the nature and extent of the injuries, treatment and other details....
The injured person shall submit to physical examinations...²⁷² and he,..., shall upon each request from the company execute authorization to enable the company to obtain medical reports and copies of records.
The insured ...shall file proof of loss with the company within sixty days after the occurrence of loss..., in the form of a sworn statement setting forth the interest of the insured and all others in the property affected, any encumbrances thereon, the actual cash value thereof at time of loss, [and] the amount, place, time and cause of such loss.
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4.

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