Holt v. State Farm Mut. Auto. Ins. Co., Civ. A. No. 2:94-1418-18.

• Decision Date: 17 November 1994
• Docket Number: Civ. A. No. 2:94-1418-18.
• Citation: 870 F. Supp. 658
• Court: U.S. District Court — District of South Carolina
• Parties: Carol J. HOLT and Michael P. Holt, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

870 F. Supp. 658

Carol J. HOLT and Michael P. Holt, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

Civ. A. No. 2:94-1418-18.

United States District Court, D. South Carolina, Charleston Division.

November 17, 1994.

Edward Paul Gibson, Charleston, SC, for plaintiffs.

Max Mahaffee, Charleston, SC, for defendant.

ORDER

NORTON, District Judge.

This matter is before the court on cross motions for summary judgment. This is an underinsured (UIM) insurance motorist case based on South Carolina law. The issue presented is whether the Defendant, State Farm, complied with South Carolina law and made a meaningful offer of UIM to the Plaintiffs. Plaintiffs allege that the offer was defective and ask the court to reform three State Farm policies to provide UIM coverage for injuries Ms. Holt sustained in an automobile accident.

A. Facts

The facts of this case are not in dispute. Plaintiff Carol J. Holt was injured in an automobile accident on July 26, 1993, while driving a 1989 Oldsmobile Eighty-Eight. The parties responsible for the accident did not have adequate liability insurance to pay fully for the injuries she received as a result of the accident. At the time of the accident, Plaintiffs Carol and Michael Holt had State Farm automobile insurance coverage on three vehicles — the 1989 Oldsmobile Eighty-Eight involved in the accident, a 1984 Nissan pick-up truck, and a 1984 Pontiac Fiero.

Plaintiffs did not have UIM on any of these vehicles. In fact, on each of the three automobile policies purchased by Plaintiffs, it is undisputed that Plaintiff Michael Holt had checked the appropriate box rejecting UIM for his vehicles. On September 8, 1989, Mr. Holt originally rejected UIM coverage for the Oldsmobile on a form used by State Farm prior to December 1, 1989. In part, that form stated:

Underinsured motor vehicle Insurance provides coverage in the event that damages for bodily injury and property damage are sustained in excess of the limits available to the at-fault owner or operator of an underinsured motor vehicle. An underinsured motor vehicle is one that has available liability coverage limits that are less than the insured's underinsured motor vehicle coverage limits.

On that pre-1989 offer form, Mr. Holt had the option to check one of the following sentences:

I have been offered the right to purchase Underinsured Motor Vehicle Coverage up to the limits of my liability coverage, and instead I select lesser limits of / /.

I may reject Underinsured Motor Vehicle Coverage and I reject such coverage.

Mr. Holt checked the rejection sentence above continuing his history of rejecting offered UIM coverage on his vehicles.¹

On July 1, 1989, the South Carolina Legislature enacted S.C.Code section 38-77-350 (Law. Co-op.Supp.1993). That statute provides as follows:

(A) Not later than September 1, 1989, the Chief Insurance Commissioner shall approve a form which 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 after December 1, 1989. The form, at a minimum, must provide for each optional coverage required to be offered:

(1) a brief and concise explanation of the coverage,

(2) a list of available limits and the range of premiums for the limits,

(3) a space for the insured to mark whether the insured chooses to accept or reject the coverage and a space for the insured to select the limits of the coverage he desires,

(4) a space for the insured to sign the form which acknowledges that he has been offered the optional coverages,

(5) the mailing address and telephone number of the Insurance Department which the applicant may contact if the applicant has any questions that the insurance agent is unable to answer.

(B) If this form is properly completed and executed by the named insured it is conclusively presumed that there was an informed, knowing selection of coverage and neither the insurance company nor any insurance agent has any liability to the named insured or any other insured under the policy for the insured's failure to purchase any optional coverage or higher limits.

. . . . .

(D) Compliance with this section satisfies the insurer and agent's duty to explain and offer optional coverages and higher limits and no persons, 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.

S.C.Code Ann. § 38-77-350 (Law.Co-op. Supp.1993) (emphasis added).

In order to comply with this statute, State Farm drafted new optional coverage forms and mailed them to the South Carolina Department of Insurance for approval. The South Carolina Department of Insurance approved State Farm's new offer forms, and its approval is noted on the State Farm correspondence that originally requested approval by a stamp, which states: "APPROVED, November 20, 1989, STATE OF SOUTH CAROLINA, DEPARTMENT OF INSURANCE." Relying on this approval and S.C.Code section 38-77-350, State Farm as required by statute started using this form for all UIM offers after December 1, 1989.

On four separate occasions over a period of four years, Mr. Holt signed and dated the new policy form rejecting UIM. First, he signed the form and rejected UIM for the Oldsmobile on January 3, 1990. On February 10, 1992, he signed and rejected UIM coverage for the Pontiac Fiero. On July 26, 1993, Ms. Holt was involved in the accident in the Oldsmobile. Even after the accident, Mr. Holt continued to reject UIM coverage on his vehicles using the approved State Farm form. He signed and rejected UIM for the Nissan pick-up on April 1, 1994, and again rejected UIM coverage on the Fiero on April 1, 1994. The Holts filed this lawsuit on May 20, 1994, claiming the UIM offer for the Oldsmobile was ineffective and requesting the court to reform the policy to include UIM.

The dispute in this case concerns the offers that State Farm made for UIM coverage on all three Holt vehicles because the Holts ask the court to reform these policies to include UIM so that they might stack the UIM in equivalent amounts of their minimum liability policies. In evaluating these offers, the court will focus on the offer form used for the 1988 Olds although the applicable language in all three offer forms appears to be the same with the exception of differences in the dollar amounts associated with the listed optional premiums. That form included a chart of semi-annual premiums for UIM coverage and the following explanations:

Underinsured Motorist Vehicle (Coverage W)

Underinsured Motor Vehicle (Coverage W) can pay you or your passengers for bodily injury and property damage resulting from an accident for which an underinsured driver is legally responsible. Coverage W is being changed to an excess coverage effective October 1, 1989.

Here's how Underinsured Motor Vehicle Coverage works. If the other driver is at fault in an accident and damages for bodily injury or property damage to you or your passengers exceed the amount of that driver's liability policy, Coverage W can pay those excess damages up to the limits you have chosen. You or your passenger can never collect more than the actual amount of damages.

About Available Limits For Uninsured Motor Vehicle (Coverage U) and Underinsured Motor Vehicle (Coverage W). The minimum Coverage U limits required in South Carolina are $15,000 per person, $30,000 per accident for bodily injury and $5,000 for property damage (subject to a $200 property damage deductible). However, you may purchase Coverage U with limits up to your Liability (Coverage A) limits for bodily injury and property damage.

You may also purchase Coverage W with limits up to your Liability (Coverage A) limits for bodily injury and property damage.

The following chart shows the premiums for Coverage U² and Coverage W:

                                   Bodily Injury                     Underinsured
                                   Per Person/Per Accident/          Motor Vehicle
                                   Property Damage        (Coverage W)
                                   $15,000/   $30,000/    $5,000       $ 1.00
                                   $20,000/   $40,000/    $5,000       $ 9.00
                                   $25,000/   $50,000/    $5,000       $10.00
                                   $50,000/   $100,000/   $5,000       $16.00
                                   $100,000/  $300,000/   $5,000       $24.00
                                   $250,000/  $500,000/   $5,000       $35.00
                

The form also included a section that quoted semi-annual premiums for property damage UIM coverage in limits above $5,000 in the increments of $10,000, $25,000, and $50,000. Mr. Holt elected the minimum liability limits for the Oldsmobile of $15,000/$30,000/ $5,000, but rejected all variations of UIM.

Plaintiffs agree that the State Farm offer complied in part with S.C.Code section 38-77-350 by including a brief and concise explanation of the UIM coverage, a space for the insured to sign which acknowledges that the insured was offered the additional coverage, and the Insurance Department's mailing address and telephone number that the applicant could use if the applicant had any questions that the insurance agent was unable to answer. However, Plaintiffs argue that the form was not an "effective" offer of UIM under South Carolina law because it failed to offer UIM coverage in "any amount up to" the insured's liability coverage. Because this court finds the UIM offer complied with the statutory law and believes Plaintiffs' argument to be without merit and not commercially reasonable in light of S.C.Code section 38-77-350, this court grants summary judgment for Defendant State Farm.

B. Summary Judgment Standard

To grant a motion for summary judgment, this court must find "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In evaluating a motion for...