Shores v. Weaver
| Decision Date | 17 May 1993 |
| Docket Number | No. 2055,2055 |
| Citation | 315 S.C. 347,433 S.E.2d 913 |
| Court | South Carolina Court of Appeals |
| Parties | Linda Johnson SHORES, Personal Representative of the Estate of Kenneth Johnson, Respondent, v. Mitchell L. WEAVER and Pennsylvania National Mutual Casualty Insurance Company, Defendants, of whom Pennsylvania National Mutual Casualty Insurance Company is, Appellant. Appeal of PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY. . Heard |
Charles E. Carpenter, Jr., Deborah L. Harrison, and William H. Hensel, of Richardson, Plowden, Grier & Howser, Columbia, for appellant.
Jon Rene Josey, of Rogers & McBratney, Florence, for respondent.
Pennsylvania National Mutual Casualty Insurance Company appeals from a declaratory judgment holding it must provide coverage for an insured who suffered a judgment to be taken against him by default without providing notice to Pennsylvania National of the pending lawsuit as required by the policy. We affirm.
Pennsylvania National issued an automobile liability insurance policy to Mitchell Weaver. Among other things the policy required Weaver to promptly forward to Pennsylvania Mutual any legal papers in connection with an accident or loss, and provided that legal action could not be maintained against Pennsylvania Mutual unless Weaver fully complied with this condition. The policy provided minimal limits liability coverage.
On August 13, 1983, Kenneth Johnson was injured in an accident while riding as a passenger in Weaver's vehicle. Johnson suffered a serious brain injury which left him totally and permanently disabled. Pennsylvania National was notified of the accident on August 17, 1983 and assigned adjustment of the claim to Crawford and Company of Florence, South Carolina. In October 1983, Johnson's attorney, Marvin Jackson, notified Crawford and Company that he represented Johnson. Jackson wrote Crawford and Company again in December 1983 and February 1984, offering to settle the case for the policy limits. Finally, on February 14, 1984, Jackson wrote to Crawford and Company stating that he had heard nothing on his prior offer to settle and adding:
This offer to settle for $15,000 will remain open from ten (10) days of the date of this letter and if settlement is not consummated within this time, I will file suit on behalf of my Client and the settlement offer [contained] in this letter will be withdrawn.
The record reflects that Crawford and Company refused this demand.
Linda Johnson Shores, representing Johnson's estate, served an action on Weaver on May 7, 1986. Weaver did not forward the pleadings to Pennsylvania National or otherwise give any notice of the suit. Weaver failed to respond and on January 9, 1987, the court entered a default against him. After a hearing at which Weaver was present, the court entered a judgment for damages for Johnson against Weaver for $250,000 on January 27, 1988.
Pennsylvania National was not given notice of the entry of default, the damages hearing, or the entry of the order for judgment. Because six years had elapsed since the accident, Pennsylvania National destroyed its files in the matter.
Shores filed this action on behalf of Johnson seeking a declaration of coverage under Weaver's policy for the default judgment. Pennsylvania National answered and, in a motion for summary judgment, raised its policy defense that Weaver failed to forward the pleadings to Pennsylvania National. Johnson also moved for summary judgment. The circuit court heard the cross-motions for summary judgment and ruled that Pennsylvania National could not escape its liability to Johnson for Weaver's failure to forward the pleadings in compliance with the policy's provision. Pennsylvania National appeals.
Pennsylvania National argues that under the statutory scheme as it exists today, only "certified" or "SR-22" type policies may not be defeated or voided by the insured's breach of the policy conditions, and since Weaver's policy was not a "certified" policy, it was not subject to the mandatory policy provisions of S.C.Code Ann. § 56-9-20 (1991), which provides in pertinent part:
The following words and phrases when used in this chapter shall, for purposes of this chapter have the meanings respectively ascribed to ... them in this section, except in those instances where the context clearly indicates a different meaning:
* * * * * *
(7) "Motor vehicle liability policy": An owner's or an operator's policy of liability insurance that fulfills all the requirements of §§ 38-77-140 through 38-77-230, certified as provided in § 56-9-550 or 56-9-560 as proof of financial responsibility and issued, except as otherwise provided in § 56-9-560, by an insurance carrier duly authorized to transact 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:
* * * * * *
(b) Provisions deemed incorporated in such policy. Every motor vehicle liability policy is subject to the following provisions, which need not be contained therein:
(1) The liability of the insurance carrier with respect to the insurance required by this chapter shall become absolute whenever injury or damage covered by the motor vehicle liability policy occurs;
* * * * * *
(3) No Statement made by the insured or on his behalf and no violation of the policy shall defeat or void the coverage....
(emphasis added). 1 Pennsylvania National basically takes issue with the finding by the circuit court that "the Automobile Reparation Reform Act incorporated by express reference the provisions of Chapter 9 of Title 56." We need not decide whether the trial court was correct in this assertion, however. We hold on other grounds that a liability insurance policy required by statute before one can register a motor vehicle may not be defeated or voided after a loss by the insured's failure to forward to the insurer the pleadings in an action brought against the insured by a third party victim of the insured's negligence. See Rule 220(c), SCACR ().
Prior to 1974 there was no requirement that all owners and operators of motor vehicles carry liability insurance. Barkley v. International Mut. Ins. Co., 227 S.C. 38, 86 S.E.2d 602 (1955). Owners and operators had to prove financial responsibility only after an accident resulting in liability or after accumulating too many traffic violation points. S.C.Code Ann. §§ 46-135 through 46-138.2 (1962); Act No. 311, 1959 S.C. Acts 567, § 14. One way to do so was by obtaining a certificate of insurance. See Act No. 723, § 18, 1952 S.C. Acts 1853; S.C.Code Ann. § 46-747 (1962). Accordingly, motor vehicle liability insurance was "voluntary" except where the statutes required a person to prove financial responsibility, and the person elected to do so by obtaining insurance. Even in this era of voluntary insurance, an insured's failure to forward suit papers to the insurer under a "voluntary" policy did not bar recovery by an innocent third party unless the insurer could show that the failure to give such notice resulted in substantial prejudice to its rights. Factory Mutual Liab. Ins. Co. v. Kennedy, 256 S.C. 376, 182 S.E.2d 727 (1971).
Our legislature recognized, however, that public liability insurance not only affords protection to insured motorists, but also serves the public purpose of affording protection to innocent victims of motor vehicle accidents. Factory Mutual Liab. Ins. Co. v. Kennedy; Evans v. American Home Assurance Co., 252 S.C. 417, 166 S.E.2d 811 (1969). Accordingly, the legislature enacted the Automobile Reparation Reform Act in 1974. See S.C.Code Ann. 56-11-10, et seq (repealed by 1987 Act No. 155 § 25(b) and recodified in Chapter 77 of Title 38 and Chapter 10 of Title 56) (Act No. 155, § 9, 1987 S.C. Acts 385). Part of that Act, S.C.Code Ann. § 56-10-220 (1991), requires that every person applying to register a motor vehicle and obtain a license for the vehicle declare the vehicle to be insured and to furnish to the Department of Highways and Public Transportation "his certificate that such motor vehicle is an insured motor vehicle and that he will maintain insurance thereon during the registration period." Hence, the legislature decided that all vehicles registered and licensed in this State must be insured to the minimal coverage and limits required by the Motor Vehicle Financial Responsibility Act. With the passage of this Act, South Carolina became a mandatory insurance state. 2 Pennsylvania National Mut. Casualty Ins. Co. v. Parker, 282 S.C. 546, 320 S.E.2d 458 (Ct.App.1984). Compare Factory Mutual Liab. Ins. Co. v. Kennedy ( that as of 1971, South Carolina was among those states which sought protection for highway victims, short of compulsory insurance, by the enactment of financial responsibility and uninsured motorist statutes, rather than compulsory liability insurance for all registered vehicles).
The public purpose of affording protection for innocent parties injured by another's negligence has long been a part of our law. In Ott v. American Fidelity & Casualty Co., 161 S.C. 314, 159 S.E. 635 (1931), the Supreme Court had before it a case involving a liability insurance policy issued in accordance with Section 5 of Act No. 170 of the 1925 Statutes, which required applicants for certificates of passenger carrying vehicles on public highways to procure liability insurance. The plaintiff sued a transit company for injuries the plaintiff received on the transit company's bus. The plaintiff also served the complaint on the insurance company. The circuit court granted non-suit for the insurer...
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