Gov't Employees Ins. Co. v. Draine

• Decision Date: 11 August 2010
• Docket Number: No. 4726.,4726.
• Citation: 698 S.E.2d 866,389 S.C. 586
• Parties: GOVERNMENT EMPLOYEES INSURANCE COMPANY, Respondent,v.Eugene John DRAINE, Appellant.
• Court: South Carolina Court of Appeals

389 S.C. 586

698 S.E.2d 866

GOVERNMENT EMPLOYEES INSURANCE COMPANY, Respondent,v.Eugene John DRAINE, Appellant.

No. 4726.

Court of Appeals of South Carolina.

Heard May 19, 2010.

Decided Aug. 11, 2010.

Robert B. Ransom, of Columbia, for Appellant.

Bonum S. Wilson, III, of Charleston, for Respondent.

GEATHERS, J.

In this appeal, Eugene Draine argues that the circuit court erred by refusing to reform his automobile insurance policy with the Government Employees Insurance Company (GEICO) to provide for underinsured motorist (UIM) coverage in an amount equal to his liability coverage. Specifically, Draine contends that section 38-77-350(E) of the South Carolina Code (2002) required GEICO to add UIM coverage to his policy when, in renewing his policy, he failed to return an executed UIM offer form within thirty days after receiving it from GEICO. We affirm.

FACTS/PROCEDURAL HISTORY

The facts in this case are undisputed. Sometime in early 2003, Draine decided to switch his automobile insurance coverage from Farm Bureau Insurance to GEICO. In March 2003, GEICO sent Draine the documentation necessary to add him as a policyholder. Included therein was a form offering UIM coverage. On March 20, 2003, Draine completed the UIM offer form, rejecting all UIM coverage. The parties have stipulated that this March 2003 offer and rejection of UIM coverage complied with all aspects of South Carolina law.

Upon receipt of the completed UIM offer form and the required premium, GEICO issued an automobile insurance policy to Draine that did not include UIM coverage. In 2004, Draine's policy was renewed and, as before, it did not include UIM coverage.¹

On January 26, 2005, GEICO sent Draine materials so that his policy could again be renewed. Included in the documents that GEICO provided to Draine was a UIM offer form. Like the 2003 offer form, the 2005 offer form contained the following two provisions:

1. IF YOU ARE A NEW APPLICANT AND DO NOT SIGN AND RETURN THIS FORM, we will include Uninsured Motorist and Underinsured Motorist limits equal to your Bodily Injury and Property Damage Liability limits. This may result in a change to your premium.

2. IF YOU ARE A CURRENT SOUTH CAROLINA POLICYHOLDER, you must complete, sign and return this form only if you want to make changes to your policy.

Draine did not complete the offer form or return it to GEICO. Instead, Draine delivered to GEICO a check for the premium necessary to renew his existing policy, which included $25,000 in liability coverage but no UIM coverage.

GEICO subsequently renewed Draine's policy. The dates of coverage provided by the renewed policy were March 11, 2005 through September 11, 2005.

On March 13, 2005, Draine was involved in an automobile accident caused by another driver. As a result of the accident, Draine incurred damages in excess of the other driver's liability insurance coverage. After settling his claim against the driver, in exchange for a covenant not to execute, Draine submitted a claim to GEICO for UIM benefits. GEICO declined to pay the claim on the ground that Draine's policy did not include UIM coverage.

Thereafter, GEICO filed a declaratory judgment action seeking a judicial determination that Draine was not entitled to UIM benefits. Draine answered and counterclaimed, arguing that his policy should be reformed to include $25,000 in UIM coverage. Draine contended that such relief was appropriate under section 38-77-350(E) of the South Carolina Code (2002) because GEICO's 2005 renewal materials included a UIM offer form, which he had not returned.

The case proceeded to a non-jury trial before the circuit court, where it was tried on stipulated facts, exhibits, and the arguments of counsel. In an order filed July 2, 2008, the circuit court granted judgment in favor of GEICO, concluding that reformation of Draine's policy was not warranted. Specifically, the circuit court found that “a common sense reading” of section 38-77-350 demonstrated that the legislature intended to restrict subsection (E) of that statute to “new applicants.” Additionally, the circuit court found that reformation of Draine's policy was not warranted under contract law because (1) Draine never intended to change his policy to add UIM coverage and (2) Draine was sophisticated with regard to such matters and thus could not have been confused by the 2005 UIM offer form. This appeal followed.

ISSUE ON APPEAL

Did the circuit court err by holding that section 38-77-350(E) of the South Carolina Code (2002) did not mandate the reformation of Draine's automobile insurance policy to include $25,000 in UIM coverage?

STANDARD OF REVIEW

“When 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.” J.K. Constr., Inc. v. W. Carolina Reg'l Sewer Auth., 336 S.C. 162, 166, 519 S.E.2d 561, 563 (1999). “In such cases, the appellate court owes no particular deference to the trial court's legal conclusions.” Id.

LAW/ANALYSIS

Automobile insurance carriers like GEICO are required to offer “at the option of the insured” UIM coverage up to the limits of the insured's liability coverage. S.C.Code Ann. § 38-77-160 (2002). Section 38-77-350 of the South Carolina Code (2002 & Supp.2009) sets forth specific requirements regarding the offering of optional coverages, such as UIM coverage.

In the present case, Draine contends that, under section 38-77-350(E), GEICO was required to add UIM coverage to his policy when he failed to return the UIM offer form that he received as part of GEICO's 2005 renewal materials. We disagree.

“The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature.” Blackburn v. Daufuskie Island Fire Dist., 382 S.C. 626, 629, 677 S.E.2d 606, 607 (2009). In ascertaining legislative intent, “a court should not focus on any single section or provision but should consider the language of the statute as a whole.” Mid-State Auto Auction of Lexington, Inc. v. Altman, 324 S.C. 65, 69, 476 S.E.2d 690, 692 (1996). “A statute as a whole must receive a practical, reasonable, and fair interpretation consonant with the purpose, design, and policy of the lawmakers.” State v. Sweat, 386 S.C. 339, 350, 688 S.E.2d 569, 575 (2010) (quoting Browning v. Hartvigsen, 307 S.C. 122, 125, 414 S.E.2d 115, 117 (1992)).

The statute in question here, section 38-77-350, reads as follows:

(A) The director or his designee shall approve a form that automobile insurers shall use in offering optional coverages required to be offered pursuant to law to applicants for automobile insurance policies. This form must be used by insurers for all new applicants. The form, at a minimum, must provide for each optional coverage required to be offered: [the required contents of the form are omitted for brevity].

(B) If this form is signed by the named insured, after it has been completed by an insurance producer or a representative of the insurer, it is conclusively presumed that there was an informed, knowing selection of coverage and neither the insurance company nor an insurance agent is liable to the named insured or another insured under the policy for the insured's failure to purchase optional coverage or higher limits.

(C) An automobile insurer is not required to make a new offer of coverage on any automobile insurance policy which renews, extends, changes, supersedes, or replaces an existing policy.

(D) Compliance with this section satisfies the insurer and agent's duty to explain and offer optional coverages and higher limits and no person, including, but not limited to,

an insurer and insurance agent is liable in an action for damages on account of the selection or rejection made by the named insured.

(E) If the insured fails or refuses to return an executed offer form within thirty days to the insurer, the insurer shall add on uninsured motorist and underinsured motorist coverages with the same policy limits as the insured's liability limits.

S.C.Code Ann. § 38-77-350 (2002 & Supp.2009) (emphases added).

Under section 38-77-350(E), an insurer is required to add UIM coverage to an insured's policy when “the insured fails or refuses to return an executed offer form within thirty days to the insurer.” S.C.Code Ann. § 38-77-350(E) (2002). Here, it is undisputed that Draine timely returned an executed offer form rejecting UIM coverage when he initially became insured with GEICO in 2003. Although Draine did not return the 2005 UIM offer form he received when renewing his policy, section 38-77-350(E) does not expressly require an insured to return an executed offer form every time one is provided in order to avoid the addition of UIM coverage. Rather, it merely provides that “an executed offer form” must be returned “within thirty days.” ²

Draine nonetheless contends that if an insurer provides an existing insured with a UIM offer form when the insured renews his coverage, the insurer must add optional UIM coverage if the insured does not timely return the form, even if the insured had previously rejected UIM coverage. We disagree. In our view, reading section 38-77-350 as a whole leads to the conclusion that GEICO was not required to add UIM coverage to Draine's policy when Draine failed to return the UIM offer form he received when he renewed his policy in 2005. Moreover, we find that such an interpretation is consistent with the purpose and design of section 38-77-350.

A. Subsections (A) and (C) of Section 38-77-350

The underlying premise of Draine's argument in this case is that the term “form” in subsection (E) of section 38-77-350 includes UIM offer forms that are provided to insureds who are renewing their existing policies. However, when that subsection is read in conjunction with subsections (A) and (C) of section 38-77-350, it becomes apparent that Draine's premise is flawed.

Section 38-77-350(A), which sets forth the basic requirements for the UIM offer form, provides guidance as to...