Buchanan v. S.C. Prop. & Cas. Ins. Guaranty Ass'n

• Decision Date: 05 September 2018
• Docket Number: Appellate Case No. 2016-002156,Opinion No. 27840
• Court: South Carolina Supreme Court
• Parties: Janette BUCHANAN and Shana Smallwood, Individually and as Co-Personal Representatives of the Estate of James S. Buchanan, Respondents, v. The SOUTH CAROLINA PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, Petitioner.

424 S.C. 542

819 S.E.2d 124

Janette BUCHANAN and Shana Smallwood, Individually and as Co-Personal Representatives of the Estate of James S. Buchanan, Respondents,

v.The SOUTH CAROLINA PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, Petitioner.

Appellate Case No. 2016-002156

Opinion No. 27840

Supreme Court of South Carolina.

Heard June 14, 2018

Filed September 5, 2018

Howard A. Van Dine, III, A. Mattison Bogan, and Erik T. Norton, all Nelson Mullins Riley & Scarborough, LLP, of Columbia, for Petitioner.

Daniel W. Luginbill, of Wilson & Luginbill, LLC, of Bamberg; and Blake A. Hewitt, of Bluestein Thompson Sullivan, LLC, of Columbia, both for Respondents.

JUSTICE KITTREDGE :

We issued a writ of certiorari to review the court of appeals’ decision affirming summary judgment in favor of Respondents Janette Buchanan and Shana Smallwood. Buchanan v. S.C. Prop. & Cas. Ins. Guar. Ass'n , 417 S.C. 562, 790 S.E.2d 783 (Ct. App. 2016). On certiorari, the South Carolina Property and Casualty Insurance Guaranty Association (the Guaranty) argues the court of appeals erred in construing the provisions of the South Carolina Property and Casualty Insurance Guaranty Association Act (the Act)¹ and affirming the trial court's finding that the Guaranty's statutory offset of $376,622 should be deducted from the claimant's total amount of stipulated damages of $800,000 rather than the Association's mandatory statutory claim limit of $300,000. We conclude the Act is ambiguous, and we further find the court of appeals correctly construed the Act to require that settlement amounts be offset from the total amount of an injured party's damages rather than from the $300,000 statutory cap. We therefore affirm the court of appeals' decision as modified.

I.

The underlying dispute arose following a deadly motor vehicle accident in Bamberg County on January 7, 2008. At the time of the accident, decedent James Buchanan was driving a tractor trailer traveling northbound on U.S. Highway 321. Heading southbound on U.S. Highway 321 were three vehicles—a logging truck followed by two tractor trailers, one driven by Willie Pelote and the other by his brother Roger Pelote, both of whom are former parties to this action. As the vehicles converged, a set of tandem tires came loose from the logging truck and struck Mr. Buchanan's vehicle, breaking the front axle. As a result, Mr. Buchanan's truck crossed the center line and struck the second tractor trailer. Mr. Buchanan's tractor trailer caught fire, and he died at the scene.

Thereafter, Respondents, as co-personal representatives of Mr. Buchanan's estate, filed a wrongful death claim against the driver of the logging truck; the owner of the logging truck; Strobel Tire Co., which performed tire maintenance work on the logging truck shortly before the accident; and the Pelotes.²

The logging truck was insured by a policy with a limit of $1,000,000 issued by Aequicap Insurance Co. (Aequicap), which became insolvent during the pendency of the wrongful death action. As a result of Aequicap's insolvency, Respondents asserted their claims against the Guaranty.

Created by the Act, the Guaranty is a nonprofit, unincorporated association, of which all property and casualty insurers conducting business in South Carolina are members. S.C. Code Ann. § 38-31-40 (2015). The Guaranty's "purpose is to provide some protection to insureds whose insurance companies become insolvent." S.C. Prop. & Cas. Ins. Guar. Ass'n v. Carolinas Roofing & Sheet Metal Contractors Self-Ins. Fund , 315 S.C. 555, 557, 446 S.E.2d 422, 424 (1994).

When an insurer becomes insolvent, the Guaranty steps into the shoes of the insurer "to the extent of its obligation on the covered claims." S.C. Code Ann. § 38-31-60(b) ; see Hudson ex rel. Hudson v. Lancaster Convalescent Ctr. , 407 S.C. 112, 124, 754 S.E.2d 486, 492 (2014) ("When [the] Guaranty steps into the shoes of an insolvent insurer, its liability is derivative of the insolvent insurance company's direct liability to the consumer."). But by virtue of the Act, the Guaranty's obligation to pay is limited to $300,000 per claim.³ Id . § 38-31-60(a)(iv).

Ultimately, the parties settled the wrongful death claim, stipulating the amount of damages to be $800,000. Thus far, Respondents have recovered a total of $376,622 from parties other than the Guaranty—$225,000 from the Pelotes' insurance carrier; $20,000 from Strobel Tire Co.; and $131,622 in workers' compensation death and funeral expenses.

The parties agree $376,622 is the set-off amount. The only disputed issue is what amount, if any, of the remaining $423,378 is within the Guaranty's statutory cap after setoff.

Specifically, the question is whether the settlement amount is offset from the $800,000 of total damages or from the $300,000 statutory maximum obligation.

Respondents filed a declaratory judgment action seeking an order that the Guaranty is obligated to pay the full $300,000 amount of the statutory cap. The parties filed cross motions for summary judgment. Respondents argued that the $376,622 is offset from the $800,000 total, leaving $423,378 in unpaid damages, of which the Guaranty is responsible for only $300,000—the statutory cap. In contrast, the Guaranty argued the statutory cap is first applied to the overall claim, reducing it from $800,000 to $300,000; then, the $376,622 in settlements are offset, leaving the Guaranty liable for nothing.

Following a hearing, the trial court entered summary judgment in favor of Respondents, and ordered the Guaranty to pay $300,000. The court of appeals affirmed, concluding the Act was unambiguous and that its plain language required any recovery from solvent insurers to be deducted from the total amount of the damages rather than from the Guaranty's $300,000 cap. Buchanan , 417 S.C. at 569, 790 S.E.2d at 786. This Court issued a writ of certiorari to review the court of appeals' decision.

II.

The Guaranty argues the court of appeals correctly found the Act was unambiguous but erred in construing its provisions, which the Guaranty claims entitle it to deduct the $376,622 offset from its $300,000 statutory maximum claim obligation, thus eliminating the Guaranty's liability altogether. We disagree. Although we find the court of appeals erred in concluding the relevant statutory provisions are unambiguous, we nevertheless affirm the court of appeals' ultimate construction of the Act.

"Questions of statutory interpretation are questions of law, which we are free to decide without any deference to the court below."

S.C. Prop. & Cas. Ins. Guar. Ass'n v. Brock , 410 S.C. 361, 365, 764 S.E.2d 920, 922 (2014) (quotation marks and citation omitted). "Because [the] Guaranty is a creature of statute, its duties, liabilities, and obligations are controlled by the terms and conditions set forth in the Act." Id. at 365–66, 764 S.E.2d at 922.

The Act defines a covered claim as "an unpaid claim ... which arises out of and is within the coverage and is subject to the applicable limits of an insurance policy to which this chapter applies." S.C. Code Ann. § 38-31-20(8) (2015).⁴ The Guaranty "is obligated to the extent of claims existing before the determination of insolvency." Id . § 38-31-60(a). "This obligation includes only the amount each covered claim is in excess of two hundred fifty dollars and is less than three hundred thousand dollars." Id . § 38-31-60(a)(iv). Before seeking payment from the Guaranty, a claimant is required to exhaust "all coverage and limits" available through any other applicable policy. Id . § 38-31-100(1) (2015).

Regarding setoff, the Act provides in relevant part:

(1) A person, having a claim under an insurance policy, whether or not it is a policy issued by a member insurer, and the claim under such other policy arises from the same facts, injury, or loss that gave rise to the covered claim against the association, is required to first exhaust all coverage and limits provided by any such policy. Any amount payable on a covered claim under this chapter must be reduced by the full limits of such other coverage as set forth on the declarations page and the association shall receive a full credit for such limits, or, where there are no applicable limits, the claim must be reduced by the total recovery . Notwithstanding the foregoing, no person may be required to exhaust all coverage and limits under the policy of an insolvent insurer.

(a) A claim under a policy providing liability coverage to a person who may be jointly and severally liable with or a joint tortfeasor with the person covered under the policy of the insolvent insurer that gives rise to the covered claim must be considered to be a claim arising from the same facts, injury, or loss that gave rise to the covered claim against the association. Any amount payable on a covered claim under this chapter must be reduced by the full and combined policy limits of all joint tortfeasers .

(b) To the extent that the association's obligation is reduced by the application of this section, the liability of the person insured by the insolvent insurer's policy for the claim must be reduced in the same amount.

Id . § 38-31-100(1) (emphasis added).⁵

The key phrase "amount payable on a covered claim" is not defined in the Act. In construing its meaning, "[t]he question of Legislative intent is, of course, the pivotal question with which we are here concerned." Crescent Mfg. Co. v. Tax Comm'n , 129 S.C. 480, 485–86, 124 S.E. 761, 763 (1924) (noting "the essential nature and raison d'être of [the subject matter] are properly borne in mind" in approaching the construction of an act).

The Guaranty contends the court of appeals' interpretation of the phrase "amount payable on a covered claim" to be the full amount of the covered claim (i.e. total damages) renders the words "amount payable" meaningless and reads that phrase out of the statute. The Guaranty argues that key phrase is given effect only when the setoff provision in section 38-31-100 is applied to...