Cobb v. Benjamin

• Decision Date: 06 November 1996
• Docket Number: No. 2626,2626
• Citation: 325 S.C. 573,482 S.E.2d 589
• Court: South Carolina Court of Appeals
• Parties: Janice Lee COBB, Appellant/Respondent, v. Edith W. BENJAMIN, Nationwide Mutual Ins. Co., Respondents, Auto-Owners Ins. Co., Respondent/Appellant. . Heard

Page 589

482 S.E.2d 589

325 S.C. 573

Janice Lee COBB, Appellant/Respondent, v. Edith W. BENJAMIN, Nationwide Mutual Ins. Co., Respondents, Auto-Owners Ins. Co., Respondent/Appellant.

No. 2626.

Court of Appeals of South Carolina.

Heard Nov. 6, 1996.

Decided Jan. 27, 1997.

Rehearing Denied March 20, 1997.

Certiorari Denied Apr. 10, 1998.

J. David Standeffer and John P. Griffith, both of Standeffer & Brislane, Anderson, for appellant/respondent.

Carey C. Doyle, of Doyle & O'Rourke, Anderson, for respondents.

Phillip E. Reeves & Jennifer E. Johnsen, both of Gibbes, Gallivan, White & Boyd, Greenville, for respondent/appellant.

HOWARD, Judge:

In this declaratory judgment action, we are asked to determine whether or not S.C.Code Ann. § 38-77-160 (Supp.1995) requires the payment of liability limits under a tortfeasor's automobile insurance policy before underinsured motorist (UIM) coverage is recoverable by an injured party. The trial court held the UIM carrier is entitled to a credit for any amount of liability insurance coverage not exhausted in a settlement, but § 38-77-160 does not condition UIM coverage on the payment of all liability coverage. We agree and affirm.

Janice Lee Cobb was injured in an automobile accident when her vehicle collided with an automobile driven by Edith W. Benjamin and owned by Freddie Williams. Benjamin was driving with Williams's permission. Cobb maintained insurance through Auto-Owners Insurance Company (Auto-Owners) with $25,000 in UIM coverage. Williams had liability coverage through State Farm Insurance Company (State Farm) with $15,000 in liability coverage.

Cobb's medical bills exceeded $16,000. Cobb made a claim against Benjamin, and settled with State Farm by executing a settlement agreement and partial release in exchange for the State Farm policy limits of $15,000. In the agreement, Cobb released State Farm, Williams, and Benjamin from all liability arising out of the accident. The release agreement contained the following language reserving Cobb's claims for underinsured motorist benefits:

This release is not intended to and does not release any claims that I may have for underinsured motorist benefits. I expressly After settlement, Cobb's attorney discovered Benjamin also had liability insurance with Nationwide Mutual Insurance Company (Nationwide), with limits of $15,000. Cobb made a claim against Nationwide and Auto-Owners, both of whom denied payment. Nationwide contends the release of its insured also released Nationwide. Auto-Owners claims UIM coverage is not triggered because the liability insurance available to Cobb has not been exhausted by payment of liability limits available to Cobb. The underlying tort action has been stayed pending resolution of these questions.

reserve the right to prosecute a legal action in tort against FREDDIE WILLIAMS and EDITH W. BENJAMIN, if necessary, solely for the purpose of establishing claims against underinsured motorist carriers for underinsured[325 S.C. 577] motorist benefits. For the consideration recited above, we specifically agree and covenant that we will never seek to execute on such judgment obtained against FREDDIE WILLIAMS and EDITH W. BENJAMIN. I agree that I will only seek to collect such judgment from such underinsured motorist carriers as may be found to have such coverage. I further agree and covenant that if a verdict is returned in my favor against FREDDIE WILLIAMS and EDITH W. BENJAMIN, I will move the court to order that the judgment be entered against the underinsured motorist carrier and not against FREDDIE WILLIAMS and EDITH W. BENJAMIN. If a judgment is entered against FREDDIE WILLIAMS and EDITH W. BENJAMIN, I specifically agree and covenant that I and my attorneys will mark the judgment paid and satisfied as soon as is legally practicable to do so without making any effort to collect any amount from FREDDIE WILLIAMS and EDITH W. BENJAMIN.

The lower court determined the release of Benjamin did release Nationwide. The court also ruled Cobb may collect UIM coverage to the extent she proves a claim, but Auto-Owners is entitled to a credit for all unpaid liability insurance which was available to Cobb.

SCOPE OF REVIEW

This case involves an action at law for interpretation of a contract referred to the master-in-equity with direct appeal to the supreme court. Therefore, this court will correct any error of law, but we must affirm the master's findings unless there is no evidence reasonably supporting them. Jefferies v. Phillips, 316 S.C. 523, 451 S.E.2d 21 (Ct.App.1994).

COBB'S APPEAL

Cobb argues the lower court erred in finding the settlement agreement relieved Benjamin, and therefore Nationwide, from all liability. We disagree.

The lower court found the settlement agreement was a covenant not to execute rather than a release. A covenant not to execute is treated differently than a settlement agreement which is a release. See Ackerman v. Travelers Indem. Co., 318 S.C. 137, 456 S.E.2d 408 (Ct.App.1995). To determine whether an instrument is a covenant not to execute or a release, we look to the intention of the parties. Id. Here, the parties agreed not to execute a judgment against Benjamin, but specifically reserved the right to proceed against any available UIM coverage. Accordingly, the agreement was a covenant not to execute. See id. at 146, 456 S.E.2d at 413 (a covenant not to sue is a promise not to enforce a right of action or to execute a judgment when one had such right at the time of entering into the agreement). In Ackerman, our court ruled a covenant does not operate to relieve a UIM carrier of its obligations where the written agreement shows the parties did not intend to do so. Id.

When a contract is unambiguous, clear, and explicit, it must be construed according to the terms the parties have used, to be taken and understood in their plain, ordinary, and popular sense. C.A.N. Ent. v. Health & Human Services, 296 S.C. 373, 373 S.E.2d 584 (1988). The duty of the appellate court is limited to the interpretation of the contract made by the parties themselves "regardless of its wisdom or folly, apparent unreasonableness, or failure to guard their rights carefully." Id. at 378, 373 S.E.2d at 586.

In the covenant, Cobb explicitly reserved the right to collect proceeds from any applicable UIM carriers. She did not reserve the right to collect from any undiscovered liability carriers. Under the agreement, Cobb may not execute on a judgment against Benjamin and, in the event of a favorable verdict, she can enter judgment only against the UIM carrier and not Benjamin. The language relieves Benjamin from the personal obligation to pay any judgment. An insurance company is only obligated to pay "those sums which the insured becomes legally obligated to pay." Smalls v. Blackmon, 269 S.C. 614, 617, 239 S.E.2d 640, 641 (1977). An automobile liability insurance policy is a contract of indemnity and the carrier is placed in the same position as its insured. Id. When Cobb removed the obligation to pay a judgment from Benjamin, she also relieved Nationwide of its liability to pay under Benjamin's policy. The trial court was correct in its determination the covenant not to execute relieved Nationwide from liability.

Cobb argues Nationwide is still obligated under the liability policy because it did not provide consideration for the agreement. Cobb asserts the release of one joint tortfeasor does not release the other joint tortfeasors unless the intention of the parties was otherwise or the plaintiff has received full compensation to his satisfaction. This argument is without merit.

Benjamin was an insured under the State Farm policy as a permissive user of the vehicle. S.C.Code Ann. § 38-77-30 (1989) (defining "insured" to include permissive users). State Farm paid $15,000 on behalf of its insured in consideration for the settlement agreement. When a liability insurance carrier provides consideration for a release, the release protects the insured. The money for a release is paid by or on behalf of the insured. Brown v. Walker Lumber Co., 128 S.C. 161, 165, 122 S.E. 670, 671 (1924). Therefore, the consideration for the settlement agreement protects State Farm's insured, Benjamin. Nationwide, which is in the same position as Benjamin, is also protected. See Smalls at 614, 239 S.E.2d 640. Moreover, Nationwide is a liability carrier, not a joint tort-feasor. It is not directly liable for Cobb's damages. Id. Cobb may not recover under the Nationwide policy. ¹

AUTO-OWNERS' APPEAL

In its cross-appeal, Auto-Owners claims Cobb cannot receive UIM benefits because she failed to exhaust the full limits from all available liability policies.

Preliminarily, Cobb argues Auto-Owners is not a party "aggrieved by an order or judgment" and therefore does not have the right to appeal. See Rule 201, SCACR; S.C.Code Ann. § 18-1-30 (1976). Auto-Owners alleged in its answer and counterclaim the alternative position that Cobb is not entitled to UIM benefits unless she first proves damages exceeding the liability limits of all available policies. The final order essentially granted this relief by giving a credit for the Nationwide coverage. Cobb asserts by this ruling Auto-Owners was granted the relief they requested, and is therefore not "aggrieved." We find this position to be without merit, and dispose of it pursuant to S.C.Code Ann. § 14-8-250 (Supp.1995), Rule 220(b), SCACR, and the following authorities: Cisson v. McWhorter, 255 S.C. 174, 178, 177 S.E.2d 603, 605 (1970) (A person is aggrieved by a judgment or decree "when it operates on his rights of property or bears directly upon his interest, the word aggrieved referring to a substantial grievance, a denial of some personal or property right or the imposition on a party of a burden or obligation."); Rule 8, SCRCP (relief in the alternative or of several different types may be demanded).

Auto-Owners asserts Cobb's UIM policy contains a clause...