Ackerman v. Travelers Indem. Co.

• Decision Date: 12 January 1995
• Docket Number: No. 2308,2308
• Citation: 318 S.C. 137,456 S.E.2d 408
• Parties: Norman D. ACKERMAN, Jr. and Jo Ann Ackerman, Respondents, v. The TRAVELERS INDEMNITY COMPANY, Appellant. . Heard
• Court: South Carolina Court of Appeals

Page 408

456 S.E.2d 408

Norman D. ACKERMAN, Jr. and Jo Ann Ackerman, Respondents, v.The TRAVELERS INDEMNITY COMPANY, Appellant.

No. 2308.

Court of Appeals of South Carolina.

Heard Jan. 12, 1995.

Decided Feb. 27, 1995.

M. Dawes Cooke, Jr. and Thomas B. Pritchard both of Barnwell, Whaley, Patterson & Helms, Charleston, for appellant.

Stephen Bucher of Bucher & Associates, Charleston, for respondents.

PER CURIAM:

Respondents, Norman D. Ackerman, Jr. and Jo Ann Ackerman(Ackermans), brought this suit for declaratory judgment and reformation of an automobile insurance policy against appellant, Travelers Indemnity Company(Travelers).The Ackermans asked the court to reform the policy to include underinsured motorist coverage up to the liability limits of the policy as a remedy for Travelers' alleged failure to comply with S.C.Code of Laws§ 38-77-160(1976as amended).This statute requires automobile insurance carriers to offer their insureds optional underinsured motorist coverage up to the limits of liability coverage.SeeState Farm Mut. Auto. Ins. Co. v. Wannamaker, 291 S.C. 518, 354 S.E.2d 555(1987).The trial court held the policy must be reformed to provide underinsured motorist coverage for the benefit of the Ackermans, and the amount of coverage provided should extend to the full $500,000 liability limits.Travelers appeals.We affirm.

The case arises out of an accident in which Mr. Ackerman was seriously injured on December 23, 1989 when he was struck by a car driven by Jarutha Scott(Scott).The insurance carrier for Scott paid the Ackermans its liability limit of $15,000 in consideration of a Covenant Not To Execute.¹

The truck Mr. Ackerman was occupying when the accident occurred was owned by his employer, Stuart's Exxon & Towing (Exxon).This truck was insured under a garage liability insurance policy issued by Travelers.The Travelers' policy provided liability coverage in single limits of $500,000 per occurrence, and combined uninsured and underinsured motorist coverage of $35,000 single limits.

Mr. Ackerman's medical injuries alone were in excess of the coverage afforded under Scott's policy.Therefore, after exhausting the limits of Scott's policy, the Ackermans claimed against Travelers for underinsured motorists benefits.They demanded underinsured benefits in excess of the $35,000 provided in the declaration of the Policy, contending Travelers failed to make Exxon a meaningful offer of underinsured motorist coverage as required by law.Because of this failure, Ackerman contends, the available underinsured motorist benefits must be the $500,000 single limits of liability.Travelers denied the $500,000 claim and, instead, determined the maximum underinsured motorist coverage available to the Ackermans should be $35,000 as provided by the policy.It is from this denial of underinsured motorist coverage or, in the alternative, limitation of the coverage to $35,000 that this declaratory judgment action arose.

At trial, Travelers denied liability and asserted several defenses: (1) because Travelers' policy was a replacement policy issued during the transitional period in 1989 before a new statutorily mandated offer form was implemented, no offer of underinsured motorist coverage was required; (2) if such an offer was required, an adequate offer was made and rejected; (3) the Ackermans are not insured under the underinsured motorist coverage, regardless of the amount of coverage available, because Mr. Ackerman was not "occupying" an insured vehicle at the time of the accident, but was instead walking next to it; ² and (4) the Covenant Not To Execute given by the Ackermans to Scott precluded recovery of underinsured motorist benefits.

The trial court rejected Travelers' arguments, and, instead determined that Travelers was required to make an effective offer of underinsured motorist coverage to Exxon under S.C.Code Ann. § 38-77-160(1987), and failed to do so.The court further concluded the Ackermans were insureds under the policy and that the Covenant Not To Execute did not bar them from pursuing their claims of underinsured motorist coverage.

I.

On appeal, Travelers first argues it was not required to offer Exxon underinsured motorist coverage up to the liability limits because Exxon replaced an existing policy with the Travelers policy and pursuant to S.C.Code Ann. § 38-77-350(C)(1989) no offer of underinsured motorist coverage was required.The statute relied upon by Travelers reads:

An automobile insurer is not required to make a new offer of coverage on any automobile insurance policy which renews, extends, changes, supersedes, or replaces an existing policy.However, the first renewal notices for existing policies after December 1, 1989, must include the form provided in subsection (A).³

The general statute setting forth the duty of an insurer to offer underinsured motorist coverage, S.C.Code Ann. § 38-77-160(1987), mandates that insurers "shall ... offer, at the option of the insured, underinsured motorist coverage up to the limits of the insured liability coverage...."Travelers maintains that § 38-77-350(C) suspended the general statute as relates to replacement policies issued between July 1, 1989 and December 1, 1989.⁴

The Ackermans, on the other hand, contend § 38-77-350(C) does not apply in the instance where, as here, the insured has changed insurers.They reason that Travelers' policy was not a replacement policy within the contemplation of the statute because Travelers had not previously made an offer of underinsured motorists coverage to Exxon and the statute only relieves the insurer of the duty to make a "new" offer to insureds with whom they have dealt before.We agree with the Ackermans.

Exxon was not an existing insured of Travelers.Travelers wrote a garage liability policy for Exxon effective August 28, 1989 to replace two policies issued by Canal Insurance Company and American Mutual Insurance Company.⁵Although Canal obtained a written waiver of underinsured coverage from Exxon in 1988, no written waiver was acquired by Travelers when it issued the replacement policy.

We believe where § 38-77-350(C) states that the insurer is not required to make a "new" offer, it clearly envisions the circumstance where the insurer already made an "old" offer.In construing and interpreting this statute, our primary consideration is finding the intent of the legislature.SeeGarris v. Cincinnati Ins. Co., 280 S.C. 149, 311 S.E.2d 723(1984).Where two statutes are in apparent conflict, they should be construed, if reasonably possible, as to allow both to stand and to give force and effect to each.Stone & Clamp General Contractors v. Holmes, 217 S.C. 203, 60 S.E.2d 231(1950).If § 38-77-350(C) were interpreted to relieve Travelers of the general requirement of offering Exxon underinsured motorist coverage up to the liability limits of the policy, it would amount to an absolute repeal of § 38-77-160, which mandates that an automobile insurer offer underinsured motorist coverage up to the limits of the insureds' liability coverage.Thus, the only reasonable way to interpret the language in § 38-77-350(C) is to recognize that the insurer may rely on the effective past offers it has given to its insureds when these insureds continue coverage with the same insurer.Had the General Assembly meant to require no offer in the interim period, it would have said "no" offer rather than no "new" offer.SeeC.A.N. Enter. v. S.C. Health and Human Serv. Fin. Comm'n, 296 S.C. 373, 373 S.E.2d 584(1988)(where one construction makes a provision unusual or extraordinary and another construction which is equally consistent with the language employed, would make it reasonable, fair, and just, the latter construction must prevail).

Hence, we concur in the trial court's determination that the Legislature intended to exempt insurance companies who replaced existing policies before December 1, 1989, from making offers of underinsured motorist coverage to their already existing insureds.Exxon was a new insured whom Travelers had never dealt with before and consequently this exemption was inapplicable.Therefore, we affirm the trial court's conclusion that Travelers was bound pursuant to S.C.Code Ann. § 38-77-160(1987& Supp.1993) to offer underinsured motorist coverage up to the limits of Exxon's liability coverage.

II.

Travelers next argues that even if it was required to make an effective offer, the evidence shows that its agent, Mr. Webb, made an adequate offer which was rejected.We disagree.

The leading case establishing the standards for making an effective offer, State Farm Mut. Auto. Ins. Co. v. Wannamaker, 291 S.C. 518, 354 S.E.2d 555(1987), created a four prong test which must be met by the insurer to establish it complied with its duty to offer the optional underinsured motorist coverage:

(1) the insurer's notification process must be commercially reasonable, whether oral or in writing; (2) the insurer must specify the limits of optional coverage and not merely offer additional coverage in general terms; (3) the insurer must intelligibly advise the insured of the nature of the optional coverage; and (4) the insured must be told that optional coverages are available for an additional premium.

Wannamaker, 291 S.C. at 521, 354 S.E.2d at 556(adopted test formulated by the Minnesota Supreme Court in Hastings v. United Pac. Ins. Co., 318 N.W.2d 849(Minn.1982)).The initial burden of proving that a meaningful offer of optional coverage had been made to the insured is placed on the insurer.Jackson v. State Farm Mut. Auto. Ins. Co., 301 S.C. 440, 392 S.E.2d 472(Ct.App.1990), aff'd as modified, 303 S.C. 321, 400 S.E.2d 492(1991).The insurer must satisfy all four prongs of the Wannamaker test to prove there was an effective offer of underinsured motorist coverage, and failure of any one of these prongs vitiates the offer and requires reformation of the policy to...