Connelly v. Main St. Am. Grp.

• Decision Date: 12 August 2020
• Docket Number: Appellate Case No. 2017-002234,Opinion No. 5755
• Citation: 850 S.E.2d 627,432 S.C. 122
• Court: South Carolina Court of Appeals
• Parties: Stephany A. CONNELLY and James M. Connelly, Plaintiffs, v. The MAIN STREET AMERICA GROUP, Old Dominion Insurance Company, Allstate Fire and Casualty Insurance Company, Debbie Cohn, and Freya Trezona, Defendants, Of which Allstate Fire and Casualty Insurance Company, The Main Street America Group, and Old Dominion Insurance Company are the Appellants, and Stephany A. Connelly and James M. Connelly are the Respondents.

432 S.C. 122

850 S.E.2d 627

Stephany A. CONNELLY and James M. Connelly, Plaintiffs,

v. The MAIN STREET AMERICA GROUP, Old Dominion Insurance Company, Allstate Fire and Casualty Insurance Company, Debbie Cohn, and Freya Trezona, Defendants,Of which Allstate Fire and Casualty Insurance Company, The Main Street America Group, and Old Dominion Insurance Company are the Appellants,andStephany A. Connelly and James M. Connelly are the Respondents.

Appellate Case No. 2017-002234

Opinion No. 5755

Court of Appeals of South Carolina.

Submitted June 1, 2020

Filed August 12, 2020

Rehearing Denied December 3, 2020

Thomas Frank Dougall and Michal Kalwajtys, both of Dougall & Collins, of Elgin, for Appellants The Main Street America Group and Old Dominion Insurance Company.

Alfred Johnston Cox and Ashley Berry Stratton, both of Gallivan, White & Boyd, PA of Columbia, for Appellant Allstate Fire and Casualty Insurance Company.

Theile Branham McVey and John D. Kassel, both of Kassel McVey, of Columbia, for Respondents.

THOMAS, J.:

Stephany A. Connelly (Connelly) and James M. Connelly (collectively, Respondents) filed this declaratory judgment action against The Main Street America Group (MSA), Old Dominion Insurance Company (Old Dominion), Allstate Fire and Casualty Insurance Company (Allstate) (collectively, Insurers), Debbie Cohn, and Freya Trezona.¹ Insurers appeal the trial court's grant of summary judgment to Respondents. Insurers argue the trial court erred in (1) finding legal entitlement to recovery is not a condition precedent to recovery of uninsured motorist coverage; (2) finding the immunity granted by the Workers’ Compensation Act transforms a fully insured vehicle into an uninsured vehicle; and (3) failing to effectuate legislative intent. We affirm.

I. STIPULATED FACTS

The parties filed a Joint Stipulation of Facts. Old Dominion issued an automobile liability insurance policy (Old Dominion Policy) to Cohn containing liability coverage and uninsured motorist (UM) coverage of $100,000 per person, $300,000 per accident.² Trezona is Cohn's daughter. Cohn and Trezona owned a 2012 Jeep, which was insured under the Old Dominion Policy. Allstate issued an automobile policy to Respondents with liability coverage and UM coverage of $250,000 per person and $500,000 per accident (Allstate Policy).

On February 24, 2015, Connelly was riding as a passenger in the Jeep driven by Trezona. For purposes of this declaratory judgment action only, the parties stipulated that Trezona's negligence caused an accident resulting in injuries and damages to Connelly.

Connelly and Trezona were co-employees, both working within the course and scope of their employment with Apple One Employment Agency at the time of the accident. Connelly began receiving benefits under the South Carolina Workers’ Compensation Act (the Act). "Connelly is not legally entitled to recover damages from Trezona" because Trezona is immune from suit as a co-employee under the exclusivity provision of the Act.

Connelly made a claim for damages under the liability and UM coverage of the Old Dominion Policy. Old Dominion denied the claim, relying on Trezona's immunity under the Act. Connelly also made a claim under the UM coverage of the Allstate Policy. Allstate denied the claim on the grounds the vehicle was not uninsured at the time of the accident, and the Act provided Connelly's exclusive remedy.

II. OTHER FACTS

Respondents filed this declaratory judgment action. Insurers answered, denying liability and moving for summary judgment. Respondents also moved for summary judgment. The court heard arguments on the cross-motions for summary judgment. By order filed October 2, 2017, the court granted Respondents’ motion for summary judgment and denied Insurers’ motions for summary judgment. Insurers appeal.

III. STANDARD OF REVIEW

"Because declaratory judgment actions are neither legal nor equitable, the standard of review depends on the nature of the underlying issues." Goldston v. State Farm Mut. Auto. Ins. Co. , 358 S.C. 157, 166, 594 S.E.2d 511, 516 (Ct. App. 2004). The "determination of coverage under an insurance policy" is an action at law. Nationwide Mut. Ins. Co. v. Prioleau , 359 S.C. 238, 241, 597 S.E.2d 165, 167 (Ct. App. 2004). In an action at law, tried without a jury, the appellate court will not disturb the trial court's findings of fact unless they are found to be without evidence that reasonably supports those findings. Id. However, "[w]hen an appeal involves stipulated or undisputed facts, an appellate court is free to review whether the trial court properly applied the law to those facts." WDW Props. v. City of Sumter , 342 S.C. 6, 10, 535 S.E.2d 631, 632 (2000).

IV. LAW/ANALYSIS

A. "Legally Entitled to Recover"

Insurers argue the trial court erred in finding legal entitlement to recovery is not a condition precedent to entitlement to UM coverage. We disagree.

The Allstate policy states as follows:

Insuring Agreements

If a premium is shown on the Policy Declarations for Uninsured Motorists Insurance, we will pay those damages that an insured person is legally entitled to recover from the owner or operator of an uninsured auto because of:

1. bodily injury sustained by an insured person; and

2. property damage.

The Old Dominion Policy similarly states, "We will pay damages which an ‘insured’ is legally entitled to recover from the owner or operator of an ‘uninsured motor vehicle’ because of: 1. "Bodily injury" ... and 2. ‘Property damage’ ...."

The South Carolina UM statute provides that a UM policy must "pay the insured all sums which he is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle ...." S.C. Code Ann. § 38-77-150 (A) (2015).

Insurers argue Connelly is precluded from coverage because "legally entitled to recover" requires Connelly to be able to maintain an action against Trezona and secure a judgment against her before receiving UM coverage. Because Trezona is immune from suit under the Act's exclusivity provision, and Connelly stipulated she was not legally entitled to recover from Trezona, Insurers argue Connelly cannot recover under the UM provisions of the policies.

The trial court found "if the meaning of the statutory language [‘legally entitled to recover’] is ambiguous and simply means the insured must demonstrate fault on the part of the uninsured driver[,] then the discussion is far from over." The court noted the language is not defined in either the statute or the insurance policies. The court also noted a "[r]eview of decisions from other jurisdictions addressing similar language and coming to different interpretations suggest[s] ambiguity of this statutory language."

The trial court acknowledged the jurisdictions "interpreting the ‘legally entitled to recover language’ as a fatal obstacle" to Connelly's ability to collect UM benefits. See Otterberg v. Farm Bureau Mut. Ins. Co. , 696 N.W.2d 24, 30–31 (Iowa 2005) (holding an insured was not legally entitled to recover UM benefits because the injuries sustained were covered under the workers’ compensation system); State Farm Mut. Auto. Ins. Co. v. Slusher , 325 S.W.3d 318, 324 (Ky. 2010) (denying UM coverage for injuries resulting from a co-employee's negligent operation of a motor vehicle where the workers’ compensation law granted immunity to the co-employee); Wachtler v. State Farm Mut. Auto. Ins. Co. , 835 So. 2d 23, 28 (Miss. 2003) (finding a claimant was not legally entitled to recover UM benefits from his personal insurer because he was not legally entitled to recover damages from his co-employee due to the exclusivity provision of the workers’ compensation statute). However, the court also noted other jurisdictions that "have interpreted the same or similar language in a broader vein." See Torres v. Kansas City Fire & Marine Ins. Co. , 849 P.2d 407, 410 (Okla. 1993) (finding a claimant was entitled to UM coverage despite a negligent co-employee's immunity because the coverage was intended to compensate an insured for a loss for which the tortfeasor is unable to make full compensation, and the insurer assumed the risk); Jenkins v. City of Elkins , 230 W.Va. 335, 738 S.E.2d 1, 11 (2012) (finding "[t]he lack of a statutory or policy definition for the phrase ‘legally entitled to recover,’ and the parties’ conflicting interpretation of the same" rendered the phrase ambiguous); id. at 14 (construing " ‘legally entitled to recover’ ... to mean that an insured is entitled to uninsured coverage merely by establishing fault on the part of the tortfeasor and the amount of the insured's damages").

The West Virginia court in Jenkins summarized the issue as follows:

The parties have pointed out that there is a split of authority on the meaning that should be attached to the phrase. Our research indicates that a slight majority of courts that have considered the issue have determined that the phrase "legally entitled to recover," or its equivalent, means that an insured is entitled to uninsured motorist coverage merely by establishing fault on the part of the tortfeasor and the amount of the insured's damages; the tortfeasor's immunity, for whatever reason, does not prevent coverage.

738 S.E.2d at 12. The court in Jenkins continued, stating as follows:

[T]he existence of a tort immunity or other limitation on the insured's rights against the tortfeasor should not preclude claims under the uninsured motorist coverage on the ground that the insured would not be legally entitled to recover from the tortfeasor.

First, the immunity only absolves the defendant from liability. Since the uninsured motorist insurance company has no relation to the tortfeasor and allowing an insured to recover uninsured motorist insurance benefits does not adversely affect any interest of the tortfeasor which the tort immunity protects, the tort immunity should have no effect on whether an insurance company providing first party, uninsured motorist insurance coverage for an individual is obligated

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