George v. Empire Fire and Marine Ins. Co., No. 2906.

• Court: Court of Appeals of South Carolina
• Writing for the Court: PER CURIAM
• Citation: 519 S.E.2d 107,336 S.C. 206
• Parties: Ernest GEORGE, Personal Representative of the Estate of Kate George, Plaintiff, v. EMPIRE FIRE AND MARINE INSURANCE COMPANY, W. Gene Whetsell, Personal Representative of the Estate of Angela Farmer, and John Shields Autos, Inc., Defendants, of Whom John Shields Autos, Inc., is Third-Party Plaintiff, v. Ken Rickel and Williams and Stazzone Insurance Agency, Third-Party Plaintiff. Ernest George, Personal Representative of the Estate of Marvelyn Ernette George, Plaintiff, v. Empire Fire and Marine Insurance Company, W. Gene Whetsell, Personal Representative of the Estate of Angela Farmer, John Shields Autos, Inc., Defendants, Of whom John Shields Autos, Inc., is Third-Party Plaintiff, v. Ken Rickel and Williams and Stazzone Insurance Agency, Third-Party Defendants, of Whom Empire Fire and Marine Insurance Company is Appellant, and Ernest George, Personal Representative of the Estates of Kate George and Marvelyn Ernette George, and W. Gene Whetsell, Personal Representative of the Estate of Angela Farmer, and John Shields Autos, Inc., are Respondents.
• Decision Date: 11 March 1999
• Docket Number: No. 2906.

336 S.C. 206
519 S.E.2d 107

Ernest GEORGE, Personal Representative of the Estate of Kate George, Plaintiff,
v.
EMPIRE FIRE AND MARINE INSURANCE COMPANY, W. Gene Whetsell, Personal Representative of the Estate of Angela Farmer, and John Shields Autos, Inc., Defendants, of Whom John Shields Autos, Inc., is Third-Party Plaintiff,
v.
Ken Rickel and Williams and Stazzone Insurance Agency, Third-Party Plaintiff.
Ernest George, Personal Representative of the Estate of Marvelyn Ernette George, Plaintiff,
v.
Empire Fire and Marine Insurance Company, W. Gene Whetsell, Personal Representative of the Estate of Angela Farmer, John Shields Autos, Inc., Defendants, Of whom John Shields Autos, Inc., is Third-Party Plaintiff,
v.
Ken Rickel and Williams and Stazzone Insurance Agency, Third-Party Defendants, of Whom Empire Fire and Marine Insurance Company is Appellant,
and Ernest George, Personal Representative of the Estates of Kate George and Marvelyn Ernette George, and W. Gene Whetsell, Personal Representative of the Estate of Angela Farmer, and John Shields Autos, Inc., are Respondents

No. 2906.

Court of Appeals of South Carolina.

Reheard March 11, 1999.

Refiled June 10, 1999.

Rehearing Denied September 11, 1999.

336 S.C. 210

Thomas J. Wills and James E. Reeves, both of Barnwell, Whaley, Patterson & Helms, of Charleston, for appellant

Gaines W. Smith, of Legare, Hare & Smith, of Charleston, for third-party plaintiff.

Perry M. Buckner of Walterboro, and Gedney M. Howe, III of Charleston, for respondent.

Lee R. Moody, of Walterboro, for defendant. Matthew Story, of Clawson & Staubes, of Charleston, for third-party defendants.

ORDER WITHDRAWING AND SUBSTITUTING OPINION

PER CURIAM:

Pursuant to our grant of Appellant's Petition for Rehearing, it is ordered that the opinion heretofore filed, Opinion No. 2906 filed November 23, 1998, be withdrawn and the attached Opinion be substituted.

IT IS SO ORDERED.

CURETON, Judge:

Ernest George (George), as Personal Representative of the Estates of Marvelyn and Kate George, filed this declaratory judgment action requesting the trial court declare the subject

336 S.C. 211

insurance policies provide coverage in the amount of $1,000,000 or, in the alternative, be reformed to provide this coverage. Empire Fire and Marine Insurance Company appeals Judge Whetstone's grant of summary judgment in George's favor. Additionally, Empire appeals Judge Dennis's grant of summary judgment to John Shields and W. Gene Whetsell on their cross-claims against Empire for reformation. We reverse and remand

FACTS

John Shields, a used car dealer doing business as John Shields Autos, Inc., obtained the insurance policies at issue from Empire on or about December 21, 1993. On August 1, 1994, Angela Farmer collided with a car driven by Marvelyn George while driving one of Shields's automobiles.¹ As a result of this accident, Marvelyn George, her daughter, Kate, and Farmer were killed.

George made claim upon Empire under Shields's policies.² Empire denied the claims, contending Shields's policies provided Farmer's Estate with only $15,000 in coverage. George brought suits against Empire, W. Gene Whetsell (as Personal Representative of Farmer's Estate), and John Shields Autos, Inc. George sought a declaratory judgment that the policies provided Farmer's Estate with $1,000,000 coverage. Alternatively, he asked the court to reform the policies to provide $1,000,000 in coverage.

Shields answered, filed a cross-claim against Empire, and joined Ken Rickel (the procuring agent) and Williams and Stazzone Insurance Agency as third-party defendants. Shields charged these parties with negligence and requested the same relief as George.

Both Empire and George moved for summary judgment. Judge Charles W. Whetstone, Jr. granted George's motion. His order declared the policies provided coverage of $1,000,000 to Whetsell. Alternatively, he ruled the primary policy should be reformed to provide coverage of $1,000,000.

After Judge Whetstone's order was filed, Shields and Whetsell also moved for summary judgment. This summary judgment

336 S.C. 212

motion was heard by Judge R. Markley Dennis, Jr. Judge Dennis, deciding the reformation issue only, ruled in favor of Shields and Whetsell. He also denied Empire's subsequent motion to alter or amend the judgment

LAW/ANALYSIS

I. Standing

Empire asserts the trial court erred in finding George has standing to request reformation of the primary policy because neither George nor the estates he represents were party to the insurance contract. Ordinarily, a party requesting reformation must have been a party to the written document or in privity with a party. 66 Am.Jur.2d Reformation of Instruments § 60 (1973). However, a third-party beneficiary to an insurance contract may bring such an action. Id.; 76 C.J.S. Reformation of Instruments § 49 (1994); see Kaiser v. Carolina Life Ins. Co., 219 S.C. 456, 65 S.E.2d 865 (1951). Therefore, we agree with the trial court's holding that George has standing to seek reformation of the insurance policy as a third party beneficiary to the contract.

Empire also assigns error to Judge Dennis's order asserting that neither Farmer's Estate nor Shields Autos has standing to seek reformation of the policy because (a) Farmer was not a party to the contract and (b) Empire has "conceded" Shields Auto has $1,000,000 in coverage. Thus, Empire argues Shields Autos has no personal stake in the proceeding anymore. As to Farmer, we reiterate that a third-party beneficiary to an insurance contract may maintain an action for reformation of the contract. Id. As concerns the standing of Shields Autos, assuming without deciding, that Shields Autos has no standing, we see no prejudice resulting from Judge Dennis's ruling inasmuch as we hold herein that reformation was improvidently granted. See Stephens v. Draffin, 327 S.C. 1, 488 S.E.2d 307 (1997) (error without prejudice does not warrant reversal).

II. Policy Interpretation

A. Effect of Invalid Exclusion in 1993-94 Policy

Judge Whetstone held the 1993-94 policy should be reformed to provide $1,000,000 coverage because the policy

336 S.C. 213

contained an invalid exclusion. We disagree. Empire first insured Shields Auto in 1992. The first Empire policy provided $1,000,000 coverage, but attempted to limit coverage when a vehicle was driven by one of Shields's customers. According to the policy's exclusions, Shields's customers were covered only when (1) the customer was uninsured; or (2) the customer had insurance in an amount less than the statutory minimum. Customers such as Farmer (who had coverage equal to or greater than the statutory minimum) were excluded under the terms of the policy. It is conceded that these exclusions violate South Carolina law.³

When renewing Shields's policy in 1993, Empire contends it offered Shields the same coverage he had in the 1992 policy, but did so through two policies instead of one. The first, or primary policy, provided coverage equaling the statutory minimum of 15/30/5.⁴ This policy contains the same invalid exclusion found in the 1992 policy. The second policy was an excess policy providing CSL coverage of $1,000,000 ($985,000 in addition to the primary policy limits) for named insureds only. The trial judge held both policies failed to meet the statutory requirements, and reformed them to provide $1,000,000 coverage.

Under South Carolina law, an insurance policy issued on an automobile licensed or garaged in this state must include liability coverage equaling at least the statutory minimum. S.C.Code Ann. § 38-77-140 (1987). This requirement may be met by a single policy or combination of policies. S.C.Code Ann. § 56-9-20(5)(f) (Supp.1998). Although the law prescribes a minimum coverage amount, an insurer is free to provide coverage exceeding the statutory minimum. S.C.Code Ann. § 38-77-140. However, once a policy or combination of policies offers the statutorily mandated coverage, additional coverage amounts may be limited to named insureds. See Universal Underwriters Ins. Co. v. Metropolitan Property and Life Ins. Co., 298 S.C. 404, 380 S.E.2d 858 (Ct.App.1989).

336 S.C. 214

An excess policy is designed as supplementary insurance and would not exist except for the underlying primary policy. Todd v. Federated Mut. Ins. Co., 305 S.C. 395, 409 S.E.2d 361 (1991). The definition of a "motor vehicle liability policy" only applies to required coverage under the law, not excess coverages. See S.C.Code Ann. § 56-9-20(7)(d) (Supp. 1998).

Under this statutory scheme, the two policy structure Empire utilized in 1993 is valid. The primary policy clearly limits coverage for permissive users to the statutorily mandated 15/30/5. Only named insureds are covered by the excess policy. Because the law permits the exclusion of permissive users in an excess policy, the exclusion in question is invalid as to the primary policy only. Therefore, when the exclusion is removed from the 1993-94 primary policy, Respondents are entitled to coverage equaling 15/30/5, not $1,000,000. See Universal Underwriters, 298 S.C. 404, 380 S.E.2d 858.

B. Coverage Under the "Garage Liability" Portion of the Policy

Judge Whetstone also held the 1993 policy, on its face, provided $1,000,000 coverage for this accident because Empire's representative, James Schneider, "unequivocally testified that the definition of Garage Operations, which includes the operation, maintenance and use of covered autos, refers to Garage Operations—Other than Auto Only." In reaching this conclusion, the trial judge used Schneider's testimony concerning the broader category of "Garage Operations" as proof the policy provides $1,000,000 in coverage.

This interpretation misconstrues the policy by ignoring the division of garage operations into the two subcategories shown in the declarations and the policy itself. This analysis also ignores other portions of Schneider's testimony which clearly evidence liability...