Criterion Ins. Co. v. Hoffmann

• Decision Date: 01 May 1972
• Docket Number: No. 19406,19406
• Citation: 258 S.C. 282,188 S.E.2d 459
• Court: South Carolina Supreme Court
• Parties: CRITERION INSURANCE COMPANY, Respondent, v. Donald L. HOFFMANN and John Doe, Defendants, of Whom Donald L. Hoffmann is Appellant.

Page 459

188 S.E.2d 459

258 S.C. 282

CRITERION INSURANCE COMPANY, Respondent, v. Donald L. HOFFMANN and John Doe, Defendants, of Whom Donald L. Hoffmann is Appellant.

No. 19406.

Supreme Court of South Carolina.

May 1, 1972.

William Y. Rast, Jr., Lexington, Lee & Ball, Columbia, for appellant.

Lumpkin & Lafaye, Columbia, for respondent.

LITTLEJOHN, Justice:

The defendant, Donald L. Hoffmann, obtained a default judgment for $10,000 actual damages plus $5000 punitive damages against 'John Doe', an unknown motorist in an action commenced in the Richland County Court pursuant to our uninsured motorist law, § 46--750.31 et seq., S.C.Code Ann. (1962). Actual damages were for property loss and personal injuries. Plaintiff Criterion Insurance Company, (Hoffmann's own automobile liability insurance carrier) subsequently commenced this declaratory judgment action in the Court of Common Pleas of Richland County (Section 10--2001 et seq., S.C.Code) asking to be declared not liable for payment of the default judgment. From an order of that court barring Hoffmann's recovery of uninsured motorists benefits under his Criterion policy, Hoffmann has appealed.

On February 17, 1969, Criterion issued and delivered to Hoffman an automobile liability insurance policy; it included collision coverage. The policy contained the endorsement required by law (Section 46--750.33 of the Code) providing coverage for Hoffmann's bodily injuries and property damage caused by uninsured automobiles. 'Uninsured automobile,' as defined in the policy, includes hit-and-run vehicles or unknown motorist. (See Section 46--750.31 of the Code.)

On June 4, 1969, the following letter was written by Criterion to Hoffmann:

'Our records indicate that a non-payment cancellation notice was issued to be effective May 16, 1969. Because the notice was sent to an incorrect address, because your name was spelled with only one 'n', the following notice is given to allow you additional time to make your payment:

'THE INSURANCE PROVIDED BY THE POLICY AS NUMBERED ABOVE IS HEREBY TERMINATED AS OF 12:01 A.M. ON JUNE 15, 1969.

'If you will send us the amount due of $43.35 before the effective date of the above notice, your insurance will continue without lapse. Please remember checks, drafts and money orders are subject to collection only.

'We look forward to hearing from you soon.'

Hoffmann's car was sideswiped by a hit-and-run driver near Saluda, North Carolina on Friday, June 13, 1969, two days prior to the termination date set forth in Criterion's letter. The local policeman was promptly notified, and, with Hoffmann's assistance he commenced a search for the truck. Hoffmann and the police were unable to locate the truck or its driver. He filled out a report and proceeded to Columbia where he was stationed at Fort Jackson.

On the following day (Saturday), pursuant to instructions supplied with the policy, Hoffmann went to the Columbia office of Gay and Taylor, adjusters, and delivered a copy of the accident report. He was instructed to return to their office on Monday. On the report as relates to personal injuries he stated 'none to my knowledge.'

On Monday, June 16th, Hoffmann drove back to Saluda and picked up a copy of Officer Smith's police report. Smith had not positively determined the identity of the hit-and-run vehicle. However, his report bore the notation 'Rural Trash Truck . . . Truck believed to belong to Austin Lively, Hendersonville, N.C.' Hoffmann returned to Columbia on the same day and delivered to Gay and Taylor a copy of the police report.

On June 21 he employed an attorney. June 23 he saw Dr. John Riley, a physician (not a military doctor) in the city of Columbia.

On June 23, 1969, a summons styled 'Donald L. Hoffman v. John Doe' was filed in the Richland County Court. On June 24 a copy of the summons was served on Criterion through the South Carolina Insurance Commissioner. Under our statute insurance companies may be served by delivering papers to the Commissioner. No complaint was filed or served with the summons. The Commissioner forwarded the summons to Criterion and called attention to Section 46--750.33 of the Code.

A complaint and affidavit of default were filed with the clerk of court and a trial held on July 25, 1969, before the Honorable Legare Bates, Judge of the Richland County Court, without a jury. Hoffmann and his sister described his physical condition. Hoffmann was awarded $10,000 actual damages and $5,000 punitive damages against 'John Doe.' Criterion made no appearance and filed no pleadings in that action.

Criterion, in its declaratory judgment action now before us, averred: that Hoffmann first reported the collision to Criterion on June 16, 1969, filing with their adjuster a written report dated June 13, 1969, in which he stated that there were no personal injuries to his knowledge; that Hoffmann for the first time on July 10, 1969, indicated that he had experienced headaches and neck injuries; that Criterion believed that it might be called upon to pay Hoffmann's judgment against 'John Doe;' and that Hoffmann's policy afforded him no coverage for the reason, among others, that the summons and complaint in the 'John Doe' action were not served upon Criterion as prescribed in the policy and as prescribed by statute. Criterion prayed for an order declaring that Hoffmann has no rights against it under the uninsured motorist provision of the insurance contract.

Hoffmann's answer denied that he failed to serve the summons and complaint upon Criterion 'as required by law.' It further alleged: that Hoffmann's attorney had notified Criterion's adjuster of the uninsured motorist suit early in July 1969; that the adjuster informed Hoffmann's attorney that Criterion's attorney would probably contact him (Hoffmann's attorney); that the adjuster on July 25, 1969, notified Hoffmann's attorney that the policy had been cancelled on May 16, 1969, for nonpayment of premium; and that Criterion had failed to make an appearance in the 'John Doe' action solely because it was of the opinion that the policy had been so cancelled. Hoffmann prayed for dismissal of this suit.

The evidence shows that on July 10 Dennis Walker, adjuster for Gay and Taylor went to Fort Jackson to talk with Hoffmann about his collision coverage. Until that time Hoffmann had not indicated to Criterion or its agemts that he had suffered any personal injuries. The written report required by the terms of the policy, and signed by Hoffmann, justified the belief by Criterion until July 10 that there were no personal injuries. On that day Hoffmann orally told Walker that he had 'been seeing a doctor because I had been having pains in the back of my neck and at the base of my skull and I'd been seeing a doctor because of the pain and he had been putting me on a prescription and a neck brace.' This was four days before the 'John Doe' action went into default on July 14.

Hoffmann testified that he developed headaches on June 16 and saw Dr. Riley first on June 23, and weekly until he left the Columbia area on August 27.

Later Criterion notified Hoffmann's attorney that there was no coverage. The date of giving such notice is not completely settled; there is some testimony that it was the 24th, 25th or 28th of July. In the interim between the date of the collision and the date of the denial of coverage Criterion had attempted unsuccessfully to locate the hit-and-run driver. Criterion does not now deny coverage, but takes the position that the judgment rendered is not collectible because of Hoffmann's failure to comply with the statute and the policy provisions.

The issues were referred to the Honorable Harry M. Lightsey, Master in Equity for Richland County. The master took the evidence and concluded that Hoffmann's failure to serve Criterion with a complaint as well as a summons in the 'John Doe' action barred his recovery of uninsured motorist benefits under the policy. This conclusion was affirmed by the trial judge and it is the validity of that holding which constitutes the cardinal issue on this appeal.

The automobile liability insurance policy was originally designed to afford protection for the automobile owner against claims and suits arising from accidents with other motorists. Later on, in order to benefit innocent injured persons, the states began enacting Financial Responsibility Acts which, under varying provisions, made the carrying of liability insurance compulsory or nearly compulsory. Still later, the uninsured motorist endorsement became a common feature of such insurance. This endorsement was designed to close a gap in the previous coverage by protecting those injured by the financially irresponsible motorist and the hit-and-run operator or unknown motorist.

The right to sue and collect from one's own liability insurance carrier in case of a loss caused by a hit-and-run driver or other driver of an uninsured automobile is a creature of the legislature. Except for the statute, and endorsements required, no right exists to recover from one's own insurance carrier. One must look to the terms of the uninsured motorist statute and policy endorsements and comply therewith to get the benefit of law.

Both our statute and the policy endorsements here involved require the service of a complaint. Other actions may be commenced by service of a summons only. (See Sections 10--401 and 10--633 of the Code). For reasons satisfactory to the legislature, service of the 'pleadings' is required in the usual uninsured motorist suit; and service of the 'summons and complaint' is required in a suit involving an unknown motorist or hit-and-run vehicle. It is the province of the lawmakers to create a right of action, to provide for process and to declare the procedure for collecting from one's own insurance carrier. They did just that.

Our statutes pertaining to uninsured motorist coverage contain the following provisions:

'A motor vehicle shall be deemed...