Bower v. NATIONAL GENERAL INS. CO.

• Decision Date: 15 July 2002
• Docket Number: No. 25493.,25493.
• Citation: 351 S.C. 112,569 S.E.2d 313
• Parties: Jason C. BOWER, Respondent, v. NATIONAL GENERAL INSURANCE COMPANY, Petitioner.
• Court: South Carolina Supreme Court

351 S.C. 112
569 S.E.2d 313

Jason C. BOWER, Respondent,
v.
NATIONAL GENERAL INSURANCE COMPANY, Petitioner

No. 25493.

Supreme Court of South Carolina.

Heard February 5, 2002.

Decided July 15, 2002.

Rehearing Denied September 17, 2002.

351 S.C. 114

C. Mitchell Brown and William C. Wood, Jr., both of Nelson Mullins Riley & Scarborough, L.L.P., of Columbia, for petitioner

Gene M. Connell, Jr., of Kelaher, Connell & Connor, P.C., of Surfside Beach, for respondent.

Justice WALLER.

We granted the petition for a writ of certiorari to review the Court of Appeals' decision in Bower v. National General Ins. Co., 342 S.C. 315, 536 S.E.2d 693 (Ct.App.2000). We affirm.

FACTS

Respondent Jason Bower was a passenger in his friend's car when the vehicle was involved in an accident. Bower was injured in the accident, and he made an underinsured motorist (UIM) claim as an insured under his father's policy with petitioner National General Insurance Company (National General). National General denied the claim based on the fact that Bower's father had rejected its offer to purchase UIM coverage.

Bower filed this action alleging that National General failed to make a meaningful offer of UIM coverage. Therefore, Bower sought to have the policy reformed to include UIM coverage up to the limits of the insurance policy.¹ On cross-motions for summary judgment, the trial court granted summary judgment in favor of National General. The Court of Appeals reversed and remanded with directions to the trial court to enter summary judgment in favor of Bower and to reform the contract up to the liability limits. Bower, supra.

The Court of Appeals found that National General's offer of UIM coverage was not meaningful because the offer did not inform Bower's father of the right to select optional coverages which were not listed on the form. The form stated in pertinent part:

Your automobile insurance policy does not automatically provide any underinsured motorist coverage. You have, however, a right to buy underinsured motorist coverage in

351 S.C. 115

limits up to the limits of liability coverage you will carry under your automobile insurance policy. The limits of underinsured motorist coverage, together with the additional premiums you will be charged, are shown upon this Form.

. . .

In the future, if you wish to increase or to decrease your limits of additional uninsured or underinsured coverage, you must then contact your insurance company.

(Emphasis added). On the other side of the form, under a separate heading entitled OFFER UNDERINSURED MTORISTS COVERAGE, the form listed four bodily injury limits with the applicable premium and four property damage limits with the applicable premium.² The form then continued as follows:

Do you wish to purchase Underinsured Motorists Coverage? Yes___No___

If your answer is "no" you must then sign here. ______________________

If your answer is "yes" then specify the limits which you desire. These limits cannot exceed your automobile insurance liability limits.

select Under insured Motorists Bodily Injury limits of: ___________/___________

select Under insured Motorists Property Damage limits of: ____________

Bower's father checked the "No" box declining UIM coverage and signed the form.

The Court of Appeals stated that the language on National General's form could be "fairly construed as an offer to purchase only those coverage amounts identified on the form. . . ." Bower, 342 S.C. at 319, 536 S.E.2d at 695 (emphasis in original). Because Bower's father was not informed he could choose any amount of UIM coverage, the Court of

351 S.C. 116

Appeals held National General failed to make a meaningful offer

ISSUE

Did National General make a meaningful offer of UIM coverage?

DISCUSSION

National General argues that the Court of Appeals erred in finding it did not make a meaningful offer of UIM coverage. Specifically, National General contends that the Court of Appeals failed to apply, or misapplied, the applicable precedents on this issue. We disagree.

Under South Carolina law, automobile insurance carriers must offer "at the option of the insured, underinsured motorist coverage up to the limits of the insured liability coverage. . . ." S.C.Code Ann. § 38-77-160 (Supp.2000). In Garris v. Cincinnati Ins. Co., 280 S.C. 149, 311 S.E.2d 723 (1984), we stated that "underinsured motorist coverage in any amount up to the insured's liability coverage must be offered to a policyholder." Id. at 154, 311 S.E.2d at 726 (emphasis added).

The insurer bears the burden of establishing it made a meaningful offer of UIM coverage. Butler v. Unisun Ins. Co., 323 S.C. 402, 475 S.E.2d 758 (1996). "[A] noncomplying offer has the legal effect of no offer at all." Hanover Ins. Co. v. Horace Mann Ins. Co., 301 S.C. 55, 57, 389 S.E.2d 657, 659 (1990). If an insurer fails to make a meaningful offer, the policy will be reformed by operation of law to include UIM coverage up to the insured's liability limits. E.g., id.; Butler, supra.

In State Farm Mut. Auto. Ins. Co. v. Wannamaker, 291 S.C. 518, 354 S.E.2d 555 (1987), we adopted the following four-prong test by which to determine whether an insurer made a meaningful offer of UIM coverage:

(1) the insurer's notification process must be commercially reasonable, whether oral or in writing;

351 S.C. 117

(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.

Id. at 521, 354 S.E.2d at 556.

The issue in the instant case involves the fourth prong of the Wannamaker test. Bower argued to the Court of Appeals that National General's offer did not inform him of the right to select optional coverages which were not listed on its form, and therefore, its offer was not meaningful under Wannamaker. The Court of Appeals agreed. National General's primary argument to this Court is that the instant case is indistinguishable from Norwood v. Allstate Insurance Co., 327 S.C. 503, 489 S.E.2d 661 (Ct.App.1997) where the Court of Appeals found the offer of UIM coverage meaningful.

In Norwood, Allstate's form listed three choices of UIM coverage up to Norwood's 25,000/50,000/25,000 liability limits.³ Allstate's form indicated Norwood could purchase UIM coverage "up to" her liability limits. According to the Court of Appeals' opinion, the offer form also "instruct[ed] Norwood how to either increase or decrease her limits of UIM coverage." Id. at 506, 489 S.E.2d at 663. Based on these considerations, the Court of Appeals concluded that Norwood "had the ability . . . to select varying amounts of UIM coverage up to the liability limits of her policy." Id.

National General contends that Norwood established a three-part test for the fourth prong of the Wannamaker test. According to National General, if a form offers at least three choices of UIM coverage, specifies that the applicant can

351 S.C. 118

purchase UIM coverage "up to" the liability limits, and instructs the applicant how to increase or decrease UIM coverage, then the offer is meaningful as a matter of law

We disagree that any such "test" was created by the Court of Appeals. However, National General is correct in that the Norwood court held Allstate's offer meaningful based primarily on these three factual considerations, and that the same facts are...