Nationwide Ins. Co. of Am. v. Knight

• Decision Date: 12 May 2021
• Docket Number: Opinion No. 28028,Appellate Case No. 2020-000026
• Court: South Carolina Supreme Court
• Parties: NATIONWIDE INSURANCE COMPANY OF AMERICA, Respondent, v. Kristina KNIGHT, individually and as Personal Representative of the Estate of Daniel P. Knight, Petitioner.

858 S.E.2d 633

NATIONWIDE INSURANCE COMPANY OF AMERICA, Respondent,

v.Kristina KNIGHT, individually and as Personal Representative of the Estate of Daniel P. Knight, Petitioner.

Appellate Case No. 2020-000026

Opinion No. 28028

Supreme Court of South Carolina.

Heard February 2, 2021

Filed May 12, 2021

Edwin L. Turnage, Harris & Graves, PA, of Greenville, for Petitioner.

Wesley Brian Sawyer, Murphy & Grantland, PA, of Columbia, for Respondent.

JUSTICE FEW :

Kristina Knight agreed to an endorsement to her Nationwide automobile insurance policy providing the coverage in the policy would not apply to her husband. She now claims the endorsement excluding coverage for her husband violates public policy and Nationwide cannot enforce it. We find the exclusion is clear and unambiguous and is not in violation of any statute. Therefore, we hold the exclusion is enforceable.

I. Facts and Procedural History

Nationwide Insurance Company of America issued an automobile insurance policy to Kristina Knight for her 1996 Ford Ranger. The policy provided $50,000 per person and $100,000 per accident in liability coverage and in uninsured motorist (UM) coverage. Knight also purchased $50,000 per person and $100,000 per accident in underinsured motorist (UIM) coverage.

Knight signed an exclusion, titled "Voiding Auto Insurance While Named Person is Operating Car," as an endorsement to the policy. The exclusion lists her husband, Danny Knight, as the excluded driver under the policy and provides "all coverages in your policy are not in effect while Danny Knight is operating any motor vehicle."¹ The policy itself also references the endorsement and provides, "The following driver(s) are excluded from all coverages and all vehicles on the policy: Danny Knight."

During the policy period, Danny was tragically killed in a motorcycle accident. Knight, as personal representative of Danny's estate, recovered $25,000 in UIM coverage under Danny's motorcycle insurance policy with Progressive Casualty Insurance Company and $25,000 in UIM coverage under a policy with ACCC Insurance Company insuring a different vehicle Danny owned.

Knight made a claim with Nationwide to recover an additional $25,000 in UIM coverage under her insurance policy. Nationwide denied the claim and filed this lawsuit asking the trial court to declare Nationwide did not have to pay the $25,000 because Danny was excluded from all coverages under the policy.

Both parties filed motions for summary judgment. The trial court granted Nationwide's motion and denied Knight's motion. The trial court held " ‘all coverages’ in the Nationwide policy were ‘not in effect’ at the time of the accident and [Danny] was specifically excluded and [Knight] is not entitled to collect UIM coverage from Nationwide." The court of appeals affirmed. Nationwide Ins. Co. of Am. v. Knight , 428 S.C. 451, 835 S.E.2d 538 (Ct. App. 2019). We granted Knight's petition for a writ of certiorari to review the court of appeals' decision. We affirm.

II. Discussion

We begin our analysis of coverage under any insurance policy by considering the language of the policy. In a public policy challenge to the validity of an insurance policy provision, we then examine the applicable statutes to determine whether the provision violates any legislatively-expressed public policy.

A. Terms of the Policy

The insuring language in Knight's policy provides several separate "coverages," including liability, UM, and UIM. The exclusion in the policy states, "With this endorsement, all coverages in your policy are not in effect while Danny Knight is operating any motor vehicle." The exclusion is unambiguous and clearly provides "all coverages" are "not in effect" while Danny is operating "any motor vehicle." Danny was operating a motor vehicle at the time of his tragic accident and death. Therefore, the UIM coverage in the Nationwide policy was not in effect.

B. Public Policy

Insurance companies and insureds are generally free to contract for exclusions or limitations on coverage. Jordan v. Aetna Cas. & Sur. Co. , 264 S.C. 294, 297, 214 S.E.2d 818, 820 (1975) ; see also Pa. Nat'l. Mut. Cas. Ins. Co. v. Parker , 282 S.C. 546, 551, 320 S.E.2d 458, 461 (Ct. App. 1984) ("Reasonable exclusionary clauses which do not conflict with the legislative expression of the public policy of the State as revealed in the various motor vehicle insurance statutes are permitted."). In Williams v. Government Employees Insurance Co. (GEICO) , 409 S.C. 586, 762 S.E.2d 705 (2014), we explained, "As a general rule, insurers have the right to limit their liability and to impose conditions on their obligations provided they are not in contravention of public policy or some statutory inhibition." 409 S.C. at 598, 762 S.E.2d at 712 (citing B.L.G. Enters., Inc. v. First Fin. Ins. Co. , 334 S.C. 529, 535-36, 514 S.E.2d 327, 330 (1999) ; Burns v. State Farm Mut. Auto. Ins. Co. , 297 S.C. 520, 523, 377 S.E.2d 569, 570 (1989) ; Cobb v. Benjamin , 325 S.C. 573, 580-81, 482 S.E.2d 589, 593 (Ct. App. 1997) ).

To be clear, however, this Court has no authority to invalidate an automobile insurance policy provision simply because we believe it is inconsistent with our own notion of "public policy." See Burns , 297 S.C. at 523, 377 S.E.2d at 570 (rejecting a challenge to the validity of an exclusion in an automobile insurance policy, and stating, "It is the responsibility of this Court to construe statutes; we have no power to legislate"); S.C. Farm Bureau Mut. Ins. Co. v. Mumford , 299 S.C. 14, 19, 382 S.E.2d 11, 14 (Ct. App. 1989) ("Once the Legislature has made that choice, there is no room for the courts to impose a different judgment based upon their own notions of public policy."). Rather, the General Assembly establishes the public policy relating to automobile insurance and enacts statutes to let the public and the courts know what that policy is. When an insured challenges a policy provision on the ground the provision violates public policy, the Court's authority is limited to determining whether the policy provision violates a statute.

This was the challenge the Court heard in Williams . The insured filed a declaratory judgment action claiming a "family step-down provision" in its automobile insurance policy violated public policy. 409 S.C. at 591, 762 S.E.2d at 708. The three-Justice majority of this Court, the two-Justice dissent, and the circuit court judge who heard the case (now-Justice James), all determined the policy provision was clear and unambiguous. All agreed the effect of the policy provision was to reduce the available liability insurance for non-named insureds from the $100,000 limits purchased by the named insured to the $15,000 statutory mandatory minimum limits. See Williams , 409 S.C. at 597, 762 S.E.2d at 711 (majority discussing the unambiguous effect of the policy provision and agreeing with circuit court); 409 S.C. at 608, 762 S.E.2d at 717 (Pleicones, J., dissenting) (agreeing with majority on this point).

The Williams Court then addressed whether the unambiguous family step-down provision violated subsection 38-77-142(C) of the South Carolina Code (2015). 409 S.C. at 599-604, 762 S.E.2d at 712-15. As is often the case, section 38-77-142 is not crystal clear. After a lengthy analysis, the Williams majority found the effect of the statute was to prevent other policy provisions from reducing the face amount of liability insurance policy limits purchased by the insured. The majority stated, relying particularly on subsection 38-77-142(C), "Therefore, once the face amount of coverage is agreed upon, it may not be arbitrarily reduced or limited by conflicting policy provisions that effectively retract this stated coverage." 409 S.C. at 604, 762 S.E.2d at 715. Based on this interpretation of section 38-77-142, the Williams majority concluded the family step-down provision violated subsection 38-77-142(C) because it reduced the agreed-upon policy limits below the face amount of coverage for family members of the named insured. 409 S.C. at 608, 762 S.E.2d at 717.

The Williams dissent did not agree with the majority's interpretation of section 38-77-142, and therefore did not agree that subsection 38-77-142(C) rendered the step-down provision unenforceable. 409 S.C. at 608-10, 762 S.E.2d at 717-18 (Pleicones, J., dissenting). The circuit court also did not agree. 409 S.C. at 593, 762 S.E.2d at 709. Nevertheless, the disagreement was on how to interpret section 38-77-142, not on the Justices' different conceptions of public policy. The majority view became the official interpretation of section 38-77-142 by a three to two vote.²

We recently considered another public policy challenge to the enforceability of an automobile insurance policy provision. Nationwide Mut. Fire Ins. Co. v. Walls , Op. No. 28012 (S.C. Sup. Ct. filed March 10, 2021) (Shearouse Adv. Sh. No. 8 at 56). In Walls , the insured claimed two step-down provisions in the policy were unenforceable under the same section we considered in Williams , section 38-77-142. Walls , (Shearouse Adv. Sh. No. 8 at 57). Like the Court did in Williams , and as we must do here, we considered only whether the policy provisions violated the applicable statute. Walls , (Shearouse Adv. Sh. No. 8 at 60 n.3). Relying on the Williams interpretation of section 38-77-142, we held that once the insurance company sold the liability coverage, section 38-77-142 prohibited the insurance company from reducing the amount of the agreed-upon coverage. Walls , (Shearouse Adv. Sh. No. 8 at 63). Thus, we did no more in Walls than consider whether the step-down provisions violated the legislatively-declared public policy as set forth in a statute. See Walls , (Shearouse Adv. Sh. No. 8 at 61) (holding "section 38-77-142(C), as interpreted by this Court in Williams , prohibits any step-down provisions in a liability policy's coverage").

To the extent the Williams Court made any suggestion that its ruling on the public policy challenge was...