American Mut. Fire Ins. Co. v. Passmore, 21377

• Citation: 275 S.C. 618,274 S.E.2d 416
• Decision Date: 19 January 1981
• Docket Number: No. 21377,21377
• Court: United States State Supreme Court of South Carolina
• Parties: AMERICAN MUTUAL FIRE INSURANCE COMPANY, Appellant, v. James PASSMORE, Linda Passmore, Harleysville Mutual Insurance Company, The Travelers Insurance Company, Helen Whitehead; and Shirley Faye Palmer, Respondents.

Page 416

274 S.E.2d 416

275 S.C. 618

AMERICAN MUTUAL FIRE INSURANCE COMPANY, Appellant, v. James PASSMORE, Linda Passmore, Harleysville Mutual

Insurance Company, The Travelers Insurance

Company, Helen Whitehead; and Shirley

Faye Palmer, Respondents.

No. 21377.

Supreme Court of South Carolina.

Jan. 19, 1981.

Paul J. Foster, Jr., and Dana C. Mitchell, III, of Foster & Richardson, Greenville, for appellant.

Joseph E. Major, of Leatherwood, Walker, Todd & Mann, Greenville, for respondents.

NESS, Justice:

This is a declaratory judgment action to determine liability insurance coverage between appellant, American Mutual Fire Ins. Co. and other corporate insurers. The trial judge concluded appellant provided coverage for a collision between vehicles driven by the girl friend of Lonnie Reed and James Passmore on May 21, 1977. We disagree and reverse.

In late March or early April of 1977, Helen Whitehead agreed to sell her 1970 Chevrolet Nova to Lonnie Reed for a down payment of $150.00, and assumption of the existing indebtedness, provided Reed obtain liability insurance. Reed was given possession of the car, but the title was withheld until he paid the full purchase price. Reed was unable to obtain liability insurance for the car. He approached Leaman Foxworth, who agreed to place the Nova on his policy in lieu of his wrecked Mustang and thereby utilize the unused premiums. Foxworth requested appellant's agent to delete the Mustang and add the Nova to his policy.

Appellant first asserts the trial judge erred in finding an insurable interest was not required for liability insurance in South Carolina. We agree.

The trial judge's reliance on Clouse v. American Mutual Liability Ins. Co., 344 F.2d 18 (4 Cir. 1965), as not requiring any insurable interest for liability coverage, is misplaced. Liability insurance, like other forms of insurance, must be supported by an insurable interest in the named insured. See: 7 Am.Jur.2d, Automobile Insurance, § 44 (1980); 44 C.J.S., Insurance § 198 (1945); 77 A.L.R. 1256; 1 A.L.R.3d 1197; Couch on Insurance 2d, § 24:159, page 273; Cassidy v. Liberty Mutual Ins. Co., 154 N.E.2d 353 (Mass.1958). The 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 to its operation and use." Nationwide Mutual Ins. Co. v. Douglas, 273 S.C. 243, at 255, 255 S.E.2d 828 (1979) (Lewis, C. J., dissenting). We conclude the trial judge erred in finding an insurable interest was not required for liability insurance in South Carolina.

Appellant next asserts the trial judge erred in finding Foxworth had an insurable interest under a theory of negligent entrustment because he lacked ownership or control of the car. We agree.

The theory of negligent entrustment provides: " the owner or one in control of the vehicle and responsible for its use who is negligent in entrusting it to another can be held liable for such negligent entrustment." 19 A.L.R.3d 1175, 1192, cited in Bahm v. Dormanen, 543 P.2d 379, 381 (Montana 1975). Essential elements of this cause of action are absent: (1) Foxworth did not own the car; (2) he did not have control over the car; and (3) he was not...