Dewart v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 16 May 1988
• Docket Number: No. 1203,1203
• Citation: 296 S.C. 150,370 S.E.2d 915
• Court: South Carolina Court of Appeals
• Parties: Angela W. DEWART, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent. . Heard

Page 915

370 S.E.2d 915

296 S.C. 150

Angela W. DEWART, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.

No. 1203.

Court of Appeals of South Carolina.

Heard May 16, 1988.

Decided Aug. 1, 1988.

Ricky K. Harris of Faucette, Haselden & Harris, Spartanburg, for appellant.

H. Spencer King of King, Cothran & Hray, Spartanburg, for respondent.

BELL, Judge:

This is an action in equity for reformation of an insurance contract. Angela W. Dewart seeks to include underinsured motorist coverage in her written contract of insurance with State Farm Mutual Automobile Insurance Company as a remedy for State Farm's alleged failure to comply with Section 1, Act No. 569, Acts and Joint Resolutions of the General Assembly of South Carolina, Regular Session, 1978, 60 Stat. at Large 1668. ¹ That statute required automobile insurance carriers to offer their insureds optional underinsured motorist coverage up to the limits of insured liability coverage. The circuit court denied relief. Dewart appeals. We reverse and remand.

In May, 1984, Dewart purchased automobile liability insurance for her Volkswagen automobile from a State Farm agent. The insurance application she signed contained no explanation of underinsured motorist coverage. She did not speak to the agent about her coverage. Dewart paid no additional premium for underinsured motorist coverage and her policy did not include it.

In August, 1984, State Farm mailed to all of its policyholders in South Carolina a nine page booklet entitled "Important Information about Coverages U and W." This booklet purported to explain underinsured motorist coverage and to offer it to the insured. Dewart admittedly received this mailing.

In November, 1984, State Farm sent Dewart a premium renewal notice. Included with the notice was a separate three page insert entitled "Important Information ... Offer Of--Coverage U, Coverage W." This insert also purported to explain underinsured motorist coverage and to offer it to the insured. Dewart did not add underinsured motorist coverage to her policy when she renewed it. Neither she nor her husband, who actually made the premium payment, read the insert. Her husband did, however, read the premium renewal notice.

On May 9, 1985, while she was a passenger in the automobile of another, Dewart suffered extensive injuries in a collision. After the accident, Dewart received a tender of the available liability limit on the at fault driver's insurance policy. Since her actual damages exceeded the amount of the at fault driver's insurance, Dewart then made a claim for underinsured motorist benefits under her own policy with State Farm. State Farm denied Dewart's claim on the ground that it made a meaningful offer of underinsured motorist coverage to Dewart, but she chose not to take the coverage when she renewed her policy. This suit followed.

In State Farm Mutual Automobile Ins. Co. v. Wannamaker, 291 S.C. 518, 520-521, 354 S.E.2d 555, 556 (1987), the Supreme Court held that Section 56-9-831, Code of Laws of South Carolina, 1976, as amended, requires an insurance carrier (1) to offer its insured underinsured motorist coverage up to the limits of the insured's liability coverage; (2) to effectively transmit this offer to the insured; (3) to give the insured the option of accepting or rejecting the offer; and (4) to provide the insured with adequate information, and in such a manner, as to allow the insured to make an intelligent decision of whether to accept or reject the coverage.

To determine whether an insurer has complied with the statutory mandate, the Court adopted the test formulated by the Minnesota Supreme Court in Hastings v. United Pacific Ins. Co., 318 N.W.2d 849 (Minn.1982). Hastings concluded that to make a meaningful offer: (1) the insurer's notification process must be commercially reasonable, whether oral or in writing; (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 how it differs from other coverages; and (4) the insurer must tell the insured that optional coverages are available for an additional stated premium. State Farm v. Wannamaker, supra.

If the insurer fails to comply with its statutory duty to make a meaningful offer to the insured, the policy will be reformed, by operation of law, to include underinsured motorist coverage up to the limits of liability insurance carried by the insured. Id. The insurer has the initial burden of proving that it made a meaningful offer of optional coverage to the insured. Holman v. All Nation Ins. Co., 288 N.W.2d 244, 248 (Minn.1980).

The issue presented by this appeal is whether the premium renewal notice and the accompanying insert which State Farm mailed to Dewart in November, 1984, constituted a meaningful offer as defined in Wannamaker. ²

Wannamaker first requires the insurer to give notification of the offer of underinsured coverage in a commercially reasonable manner. State Farm used written materials sent by mail to notify Dewart of the offer. Information about the offer was contained in the renewal notice and the separate insert. Since the premium renewal notice is an important document which the average insured will read, it is reasonably calculated to bring the offer to the insured's attention. The use of the mails is also a...