Nationwide v. Knight

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Nationwide Insurance Company of America,
Respondent,

v.

Kristina Knight, individually and as Personal
Representative of the Estate of Daniel P. Knight,
Appellant.

Appellate Case No. 2017-001348

Appeal From Greenville County
William H. Seals, Jr., Circuit Court Judge

Opinion No. 5685
Heard June 4, 2019 – Filed October 2, 2019

AFFIRMED

Edwin L. Turnage, of Harris & Graves, PA, of
Greenville, for Appellant.

Wesley Brian Sawyer and Adam J. Neil, both of Murphy
& Grantland, PA, of Columbia, for Respondent.

MCDONALD, J.: In this declaratory judgment action to determine whether
underinsured motorist (UIM) coverage exists under an automobile insurance
policy, Kristina Knight (Knight), individually and as personal representative of the
estate of Daniel Knight (Decedent), appeals the circuit court's order granting
summary judgment to Nationwide Insurance Company of America (Nationwide).
Knight argues South Carolina's excluded driver statute, section 38-77-340 of the
South Carolina Code (2015), and public policy considerations prohibit an insurer
from excluding a resident relative from uninsured motorist (UM) or underinsured
motorist (UIM) coverage, even when the policyholder has executed an
endorsement intentionally excluding the resident relative from "all coverages in
[the] policy." We affirm the circuit court's order granting summary judgment.

Facts and Procedural History

On May 22, 2014, Knight applied for a Nationwide automobile insurance policy
(the Policy) and completed an endorsement (Excluded Driver Endorsement) listing
Decedent as an individual excluded from coverage under the Policy.1 The
Excluded Driver Endorsement states, "With this endorsement, all coverages in
your policy are not in effect while Danny Knight is operating any motor vehicle."
Knight signed this page, on which she also checked the box confirming "the
excluded person has obtained insurance or other security to operate motor
vehicles."

On December 4, 2015, Nationwide issued the Policy to Knight, who was then
engaged to Decedent. The Policy insured a 1996 Ford Ranger and was effective
from December 4, 2015, through June 4, 2016. Decedent and Knight married later
in December 2015.

On February 2, 2016, a vehicle struck and killed Decedent while he was riding his
motorcycle. Decedent's estate collected from the at-fault driver's liability
coverage, Decedent's motorcycle policy, and Decedent's UIM coverage from his
own automobile policy. Knight subsequently made a claim with Nationwide,
seeking to stack her Policy's UIM limits with the other coverages. It is undisputed
that the damages here exceed the coverage limits of the Policy.

Nationwide filed a declaratory judgment action seeking a declaration "that it is not
required to provide any coverage, including but not limited to underinsured
motorist coverage," for any claim "made on account of the February 2, 2016
accident." Knight answered and counterclaimed for breach of contract.

Nationwide moved for summary judgment; Knight filed a cross motion for
summary judgment, arguing Nationwide's "insurance policy and [Excluded Driver]
endorsement violate the public policy of the State of South Carolina." The circuit

1
The title "Voiding Auto Insurance While Named Person is Operating Car"
appears at the top of the Excluded Driver Endorsement.
court heard the motions on May 22, 2017, and subsequently granted Nationwide's
motion for summary judgment.

Standard of Review

"Because declaratory judgment actions are neither legal nor equitable, the standard
of review depends on the nature of the underlying issues." Goldston v. State Farm
Mut. Auto. Ins. Co., 358 S.C. 157, 166, 594 S.E.2d 511, 516 (Ct. App. 2004).
"When the purpose of the underlying dispute is to determine whether coverage
exists under an insurance policy, the action is one at law." Williams v. Gov't
Employees Ins. Co. (GEICO), 409 S.C. 586, 593, 762 S.E.2d 705, 709 (2014)
(quoting S.C. Farm Bureau Mut. Ins. Co. v. Kennedy, 398 S.C. 604, 610, 730
S.E.2d 862, 864 (2012)).

"The purpose of summary judgment is to expedite the disposition of cases not
requiring the services of a fact finder. When reviewing the grant of a summary
judgment motion, this court applies the same standard that governs the trial court
under Rule 56(c), SCRCP." Lincoln Gen. Ins. Co. v. Progressive N. Ins. Co., 406
S.C. 534, 538, 753 S.E.2d 437, 439 (Ct. App. 2013) (quoting Nakatsu v.
Encompass Indem. Co., 390 S.C. 172, 177, 700 S.E.2d 283, 286 (Ct. App. 2010)).
"Summary judgment is proper when there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law." Id. (citing
Rule 56(c), SCRCP).

Law and Analysis

"An insurance policy is a contract between the insured and the insurance company,
and the terms of the policy are to be construed according to contract law." Auto
Owners Ins. Co. v. Rollison, 378 S.C. 600, 606, 663 S.E.2d 484, 487 (2008). "As a
general rule, insurers have the right to limit their liability and to impose conditions
on their obligations provided they are not in contravention of public policy or some
statutory inhibition." Williams, 409 S.C. at 598, 762 S.E.2d at 712. "Public policy
considerations include not only what is expressed in state law, such as the
constitution and statutes, and decisions of the courts, but also a determination
whether the agreement is capable of producing harm such that its enforcement
would be contrary to the public interest or manifestly injurious to the public
welfare." Id. at 599, 762 S.E.2d at 712.

"[S]tatutes relating to an insurance contract are generally part of the contract as a
matter of law. To the extent a policy conflicts with an applicable statute, the
statute prevails." Lincoln Gen. Ins., 406 S.C. at 539, 753 S.E.2d at 439–40
(citation omitted). "The words of a statute must be given their plain and ordinary
meaning without resorting to subtle or forced construction." Jones v. State Farm
Mut. Auto. Ins. Co., 364 S.C. 222, 231, 612 S.E.2d 719, 724 (Ct. App. 2005). "A
court should not consider a particular clause in a statute as being construed in
isolation, but should read it in conjunction with the purpose of the whole statute
and the policy of the law." Id. at 232, 612 S.E.2d at 724.

South Carolina's excluded driver statute, § 38-77-340, provides:

Notwithstanding the definition of "insured" in Section
38-77-30, the insurer and any named insured must, by the
terms of a written amendatory endorsement, the form of
which has been approved by the director or his designee,
agree that coverage under such a policy of liability
insurance shall not apply while the motor vehicle is being
operated by a natural person designated by name. The
agreement, when signed by the named insured, is binding
upon every insured to whom the policy applies and any
substitution or renewal of it. However, no natural person
may be excluded unless the named insured declares in the
agreement that (1) the driver's license of the excluded
person has been turned in to the Department of Motor
Vehicles or (2) an appropriate policy of liability
insurance or other security as may be authorized by law
has been properly executed in the name of the person to
be excluded.

S.C. Code Ann. § 38-77-340 (2015). "The purpose of this section is to 'alleviate
the problem often faced by the owner of a family policy, who . . . has a relatively
safe driving record but is forced to pay higher premiums because another member
of the family . . . is by definition also included in the policy coverage.'" Lincoln
Gen. Ins., 406 S.C. at 541, 753 S.E.2d at 441 (alterations in original) (quoting
Lovette v. U.S. Fid. & Guar. Co., 274 S.C. 597, 600, 266 S.E.2d 782, 783 (1980)).

An automobile insurance company, in setting its rates,
bases those rates at least in part on the probabilities
involving the insured and the vehicle(s) he is insuring.
Where, as here, the vehicle is not insured by the company
from whom coverage is sought, the carrier cannot
accurately calculate its risks. It is one thing to insure
against "unknowable" risks, such as the chance that one
will be injured by an underinsured at-fault driver while a
passenger in another's vehicle, or as a pedestrian; it is an
entirely different calculus where a company's insured
owns and operates a motor vehicle, especially a
motorcycle, not insured by the carrier making its risk
assessments.

Burgess v. Nationwide Mut. Ins. Co., 373 S.C. 37, 42, 644 S.E.2d 40, 43 (2007)
(emphasis added).

Knight argues the plain language of § 38-77-340 contemplates an exclusion from
liability coverage only and the application of the excluded driver endorsement to
UIM coverage violates South Carolina's "strong, remedial public policy requiring
insurance companies who write automobile insurance in this State to provide
portable [uninsured] and [underinsured motorist] coverages to insureds and their
families." However, as the circuit court aptly noted, "UIM coverage is not
mandatory in South Carolina." See e.g., S.C. Code § 38-77-160 (2015) (requiring
that automobile insurance "carriers shall also offer, at the option of the insured,
underinsured motorist coverage up to the limits of the insured 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 or in excess of any
damages cap or limitation imposed by statute."). UIM coverage is sold as optional
"additional coverage" with a motor vehicle liability policy; thus, certain definitions
provided within Title 38, "Insurance," and Title 56, "Motor Vehicles," are helpful
to our analysis.

While Title 38 does not define "policy of liability insurance" (as referenced in §
38-77-340), Title 56's Motor Vehicle Financial Responsibility Act (MVFRA)2
defines a "motor vehicle liability policy" as

(5) An owner's or operator's policy of liability insurance
that fulfills all the requirements of Sections 38-77-140
through 38-77-230, certified as provided [in Title 56] and
issued, except as otherwise provided by Section 56-9-
560, by an insurance carrier duly authorized to transact

2
§§ 56-9-10 to -630 of the South Carolina Code (2018).
business in this State, to or for the benefit of the person
or persons named therein as insured, and any other
person, as insured, using the vehicle described therein
with the express or implied permission of the named
insured, and subject to the following special conditions:

...

(d) Additional coverage permitted: Any policy which
grants the coverage required by a motor vehicle liability
policy may also grant any lawful coverage in excess of or
in addition to the coverage specified for a motor vehicle
liability policy and the excess or additional coverage
shall not be subject to the provisions of this chapter.
With respect to a policy which grants this excess or
additional coverage, the term "motor vehicle liability
policy" shall apply only to that part of the coverage
which is required by this article.[3]

S.C. Code Ann. § 56-9-20(5) (2018). Section 38-77-160, referenced in the
MVFRA definition, addresses the UIM coverage that may be purchased as
"Additional coverage" with the purchase of a motor vehicle liability policy.
Although Title 38 does not define "motor vehicle liability policy," section 38-77-
30(1) (2015) defines "Automobile insurance" as

automobile bodily injury and property damage liability
insurance, including medical payments and uninsured
motorist coverage, and automobile physical damage
insurance such as automobile comprehensive physical
damage, collision, fire, theft, combined additional
coverage, and similar automobile physical damage
insurance and economic loss benefits as provided by this
chapter written of offered by automobile insurers. An
automobile insurance policy includes a motor vehicle

3
Our court has referenced this definition in explaining that "so long as the
mandatory minimum coverage limits are met, an insurer may provide reasonable
limitations on optional coverage." Nationwide Mut. Fire Ins. Co. v. Walls, Op. No.
5653 (S.C. Ct. App. filed June 5, 2019) (Shearouse Adv. Sh. No. 23 at 15).
policy as defined in item (7)[4] of Section 56-9-20 and
any nonowner automobile insurance policy which covers
an individual private passenger automobile not owned by
the insured, a family member of the insured, or a resident
of the same household as the insured.

S.C. Code Ann. § 38-77-30(1) (2015). Section 38-77-30(10.5) defines a "Policy of
automobile insurance" or "policy" as

a policy or contract for bodily injury or property damage
liability insurance issued or delivered in this State
covering liability arising from the ownership,
maintenance, or use of any motor vehicle, insuring as the
named insured one individual or husband and wife who
are residents of the same household . . . .

Finally, section 38-77-30(15) defines "Underinsured motor vehicle" as "a motor
vehicle as defined in [this section] as to which there is bodily injury liability
insurance or a bond applicable at the time of the accident in an amount of at least
that specified in Section 38-77-140 [providing minimum limits] and the amount of
the insurance or bond is less than the amount of the insureds' damage." "UIM
coverage is entirely voluntary, and permits insureds, at their option, to purchase
insurance coverage for situations where they are injured by an at-fault driver who
does not carry sufficient liability insurance to cover the insureds' damages."
Burgess, 373 S.C. at 42, 644 S.E.2d at 43.

We find that to interpret § 38-77-340 to allow for the intentional exclusion of a
resident relative from liability coverage, but not UIM coverage offered as optional,
"additional coverage" in conjunction with the same liability policy, would impose a
forced construction of the statute not intended by the General Assembly. See
Jones, 364 S.C. at 231, 612 S.E.2d at 724 ("The words of a statute must be given
their plain and ordinary meaning without resorting to subtle or forced
construction."). In enacting § 38-77-340, the Legislature empowered consumers to
choose to limit their coverage—and corresponding premium—within applicable

4
"Presumably, the South Carolina General Assembly intended to amend this
section reference to read "item (5)." In the 1991 Code, item 7 defines motor
vehicle liability policy." Goldston, 358 S.C. at 177 n.4, 594 S.E.2d at 522 n.4.
However, in the 2018 Code, item 5 defines "motor vehicle liability policy" while
item 7 defines "nonresident operating privilege."
statutory constraints. In exercising this option, Knight likely paid a lesser
premium—serving the purpose the Legislature sought to achieve through § 38-77-
340. See Lincoln Gen. Ins., 406 S.C. at 541, 753 S.E.2d at 441 ("The purpose of
[section 38-77-340] is to 'alleviate the problem often faced by the owner of a
family policy, who . . . has a relatively safe driving record but is forced to pay
higher premiums because another member of the family . . . is by definition also
included in the policy coverage.'" (alteration in original) (quoting Lovette, 274 S.C.
at 600, 266 S.E.2d at 783).

Accordingly, we find the Excluded Driver endorsement validly excluded Decedent
from the UIM coverage Knight now seeks to stack. See Lincoln Gen. Ins., 406
S.C. at 547, 753 S.E.2d at 444 (finding "the named driver endorsement statute 'is
not inhibited by' the MVFRA's public policy because it constitutes separately
approved public policy. While the MVFRA protects the public, the named driver
endorsement statute 'protects, in limited situations, the right of the parties to make
their own contract.'" (citation omitted))

We affirm the circuit court's grant of summary judgment.

AFFIRMED.

LOCKEMY, C.J., and SHORT, J., concur.