Goldston v. State Farm Mut. Auto. Ins. Co., 3749.

• Decision Date: 01 March 2004
• Docket Number: No. 3749.,3749.
• Citation: 594 S.E.2d 511,358 S.C. 157
• Parties: Cynthia P. GOLDSTON, Personal Representative of the Estate of Neil Bryan Goldston, Sr., Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
• Court: South Carolina Court of Appeals

358 S.C. 157

594 S.E.2d 511

Cynthia P. GOLDSTON, Personal Representative of the Estate of Neil Bryan Goldston, Sr., Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.

No. 3749.

Court of Appeals of South Carolina.

Heard January 13, 2004.

Decided March 1, 2004.

Rehearing Denied April 22, 2004.

Neil D. Wright, of Myrtle Beach, for Appellant.

Linda Weeks Gangi, of Conway, for Respondent.

HEARN, C.J.:

Cynthia P. Goldston, as personal representative to the estate of Neil Bryan Goldston, Sr., appeals the special referee's ruling in favor of State Farm Mutual Automobile Insurance Company in this declaratory judgment action concerning State Farm's obligation to pay underinsured motorist coverage benefits. We affirm, as modified.

FACTS

The facts in this case are undisputed. On August 22, 1991, Rickie D. Johnson was driving a pickup truck along a highway in Georgetown County, South Carolina. The truck ran off the highway and struck Neil Bryan Goldston, Sr., who died from injuries sustained in the collision. Johnson was involved in repossessing three vehicles on behalf of his employer, American Lenders Service Company of Charleston, Inc., at the time of the accident.

The truck driven by Johnson was insured under a policy issued by the South Carolina Insurance Company. This policy contained liability limits of $100,000 per person. At the time of the accident, the truck was titled under the name "S.C. Auto Sales & Recovery, by A.M Sprague, V.P." S.C. Auto Sales and Recovery is not, and never has been, a registered corporation, partnership, or other legal entity.

In 1974, Sprague formed a South Carolina corporation under the name of Southern Recovery Service, Inc., for the operation of a "collateral recovery" or repossession business. By amendment to the articles of incorporation, the business was renamed to South Carolina Auto Recovery Services, Inc. Sprague was the sole owner and stockholder of this corporation.

In September 1979, Sprague acquired a franchise from American Lenders Service Company of Odessa, Texas ("American of Texas") for the operation of a collateral recovery business under the name American Lenders Service Company of Charleston. From this time forward, the business of South Carolina Auto Recovery Services, Inc. was conducted under the name of American Lenders Service Company of Charleston. In 1984, Sprague and his wife, Linda, created a new South Carolina corporation under the name of American Lenders Service Company of Charleston, Inc. ("American of Charleston"). They are the company's sole owners, officers, and directors, and Sprague is an employee. All of the operating assets of South Carolina Auto Recovery Service, Inc. were transferred to American of Charleston, and South Carolina Auto Recovery Service, Inc. was dissolved in June 1985.

Although the Spragues have conducted their business under the name of American of Charleston since 1979, the trucks used to perform their repossession business were both titled and insured under the name of S.C. Auto Sales & Recovery. Even trucks purchased after the incorporation of American of Charleston were titled and insured under the name of S.C. Auto Sales & Recovery.

American of Charleston paid the purchase price of the truck Mr. Johnson was driving at the time of the accident as well as all of the insurance, taxes, gas, upkeep, and registration expenses. The truck is listed as an asset on American of Charleston's financial statements, and American of Charleston claimed depreciation of the truck on its income tax returns. Furthermore, the truck was used to repossess vehicles on behalf of American of Charleston, and was being so used at the time of the accident.

Appellant, the decedent's personal representative, commenced wrongful death and survival actions against the driver of the truck, the Spragues d/b/a S.C. Auto Sales and Recovery, American of Charleston, American of Texas, and General Motors Acceptance Corporation d/b/a GMAC Financial Services. All parties answered denying liability for Goldston's death.

The parties reached a settlement in which the Appellant received $700,000. The liability insurance carrier on the truck involved in the accident, South Carolina Insurance Company, paid its limits of $100,000. The remainder of the settlement was paid by National American Insurance Company ("National"). American of Charleston maintained an insurance policy with National consisting of a commercial general liability coverage, commercial auto coverage, and commercial inland marine coverage, which contained limits of $1,000,000. American of Texas, the franchisor of American of Charleston, maintained an additional commercial policy with National, which had essentially the same commercial general liability coverage, commercial auto coverage, and commercial inland marine coverage as the policy issued by National to American of Charleston. This policy also contained limits of $1,000,000.

State Farm, the Respondent, issued an automobile insurance liability policy to the decedent, Goldston, which contained underinsured motorist coverage in the amount of $50,000 per person. State Farm consented to the settlement agreement described above, which ended both the wrongful death and survival claims against all defendants, while agreeing to preserve Appellant's claim to the underinsured motorist benefits under the State Farm policy. State Farm also stipulated that the damages recoverable in the actions brought by Appellant exceeded $150,000.

Appellant commenced this declaratory judgment action by filing a complaint seeking to determine whether State Farm was under an obligation to pay the underinsured motorist benefits contained in the policy issued to the decedent. By agreement of the parties, the matter was referred to a special referee. After two hearings, the special referee issued an order dismissing the action.

The referee's order states the issue to be decided was whether the commercial auto coverage or the commercial general liability coverage under the National policies issued to American of Charleston and American of Texas constitute "`applicable bodily injury liability and property damage liability insurance policies or bonds that apply to the bodily injury suffered by [the decedent].'"

The significance of this question lies in the fact that if the policies constituted liability policies applicable to the decedent, then by definition, the vehicle driven by Johnson could not be underinsured because these policies would provide coverage in excess of the $150,000 in damages stipulated to by the parties. Therefore, Appellant would not be entitled to collect the $50,000 in underinsured benefits provided for in State Farm's policy.

The special referee proceeded to make several conclusions of law, all of which Appellant argues were in error. First, the referee determined that the status of the at-fault vehicle, for purposes of the insurance policies issued by National to American of Charleston and American of Texas, was that of a "nonowned" vehicle or, in the alternative, a "hired auto." By making this determination, the referee concluded that the commercial auto coverage, as defined in the garage coverage form under the policies issued by National, provided applicable coverage to satisfy Appellant's claims.

The second conclusion of law asserted that, regardless of how the court characterized the at-fault vehicle under the National policies, coverage existed to pay Appellant's claims because at the time of the accident the vehicle was being used for garage operations. Thus, the special referee concluded the vehicle, and by necessity the accident, were covered under the commercial auto coverage section of the National policies. In fact, the referee went on to state that because the "clear and unambiguous language of the policy provides coverage for garage operations," and because the driver of the truck was performing garage operations at the time of the accident, clearly the National policies provided coverage.

The special referee's third conclusion of law was that coverage was also available for Appellant's claims under the commercial general liability coverage section of the National policies. Specifically, after interpreting the pertinent provisions of the policies, the referee held that because there were no applicable exclusions placing the acts of the at-fault driver outside the policy, coverage was available under the commercial general liability coverage section of the policy.

Appellant's motion for reconsideration of the referee's rulings was denied.

ISSUES

I. Did the referee err in excluding certain facts from his order of dismissal contained in the parties' stipulation of facts and relevant to the issues being ruled upon?

II. Did the referee err by concluding that the truck operated by Johnson at the time of the accident was a "non-owned auto" or, in the alternative, a "hired auto" for purposes of the commercial auto coverage section of the insurance policies issued by National to American of Charleston and American of Texas?

III. Did the referee err in concluding that the commercial auto coverage section of the insurance policies issued to American of Charleston and American of Texas provided liability insurance to pay the claims of Appellant because Johnson was involved in garage operations at the time of the accident?

IV. Did the referee err in concluding that the commercial general liability coverage section of the policies issued to American of Charleston and American of Texas provided coverage to pay the claims of Appellant?

V. Did the referee err in failing to conclude that there was a gap in coverage between the at-fault vehicle and the policies issued to American of Charleston and American of Texas?

VI. Assuming coverage existed under the policies issued by National to American of Charleston and American of Texas, did the referee err nevertheless in failing to conclude that these policies should

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