Nationwide Mut. Ins. Co. v. Rhoden, 27131.

• Court: United States State Supreme Court of South Carolina
• Citation: 728 S.E.2d 477,398 S.C. 393
• Decision Date: 31 July 2012
• Docket Number: No. 27131.,27131.
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY, Petitioner, v. Kelly RHODEN, Ashley Arrieta and Emerlynn Dickey, Respondents.

398 S.C. 393
728 S.E.2d 477

NATIONWIDE MUTUAL INSURANCE COMPANY, Petitioner,
v.
Kelly RHODEN, Ashley Arrieta and Emerlynn Dickey, Respondents.

No. 27131.

Supreme Court of South Carolina.

Heard Nov. 15, 2011.
Decided June 13, 2012.
Rehearing Denied July 31, 2012.

[728 S.E.2d 478]

J.R. Murphy and Ashley B. Stratton, both of Murphy & Grantland, of Columbia, for Petitioner.

[728 S.E.2d 479]

Dennis J. Rhoad and Sally H. Rhoad, both of Murphy & Grantland, of Moncks Corner, for Respondents.

Chief Justice TOAL.

[398 S.C. 396]Petitioner, Nationwide Mutual Insurance Company (Nationwide), contends that the court of appeals erred in ruling that Respondents Kelly Rhoden and Emerlynn Dickey are entitled to underinsured motorist (UIM) coverage under Kelly Rhoden's policy covering two “at-home” vehicles. We affirm based on South Carolina's well-settled public policy that UIM coverage is personal and portable.

Facts/ Procedural Background

Respondents Kelly Rhoden (Rhoden) and her daughters, Ashley Arrieta (Arrieta) and Emerlynn Dickey (Dickey), were involved in a motor vehicle accident while riding in a vehicle owned and operated by Arrieta. The parties stipulated that the Respondents are relatives residing in the same household, and that Arrieta's insurance policy with Nationwide did not provide UIM coverage.

Rhoden owned two vehicles that she also insured through Nationwide under a policy that did provide UIM coverage. Rhoden's policy contained a term specifying that the insurance it provided was primary when the covered vehicle was involved[398 S.C. 397]in the accident but excess when the involved vehicle was not the covered vehicle but was owned by the policyholder or a resident relative. The policy provides:

3. If a vehicle owned by you or a relative is involved in an accident where you or a relative sustains bodily injury or property damage, this policy shall:

a) be primary if the involved vehicle is your auto described on this policy; or

b) be excess if the involved vehicle is not your auto described on this policy. The amount of coverage applicable under this policy shall be the lesser of the coverage limits under this policy or the coverage limits on the vehicle involved in the accident.

(Emphasis added).

Nationwide brought a declaratory judgment action seeking a determination that UIM coverage was not available to any of the Respondents under Rhoden's policy. Nationwide contends that because Arrieta's policy had no UIM coverage, clause 3(b), a portability limitation clause, operates to prevent any of the Respondents from recovering under Rhoden's policy.¹

The trial court held that UIM coverage under Rhoden's policy was available to all three Respondents because such coverage is personal and portable, and Respondents were either named insureds or resident relatives under Rhoden's policy. Nationwide appealed the decision to the court of appeals, which reversed the trial court with regard to Arrieta. Nevertheless, the court of appeals affirmed the trial court's ruling that UIM coverage was available to Rhoden and Dickey under Rhoden's policy. It held that, while public policy supports the 3(b) portability limitation as against owners of an involved vehicle who have the ability to purchase UIM coverage but choose not to do so, it is offended when the limitation operates against non-owners, including resident relatives, because such non-owners are unable to ensure that the owner purchases UIM coverage. We granted certiorari to review this ruling.

[398 S.C. 398]Issue

Whether public policy is offended by a portability limitation clause preventing non-owner resident relatives from importing UIM coverage from an at-home vehicle's policy when the involved vehicle lacks UIM coverage.

Standard of Review

The standard of review in a declaratory action is determined by the underlying issues. Felts v. Richland Cnty., 303 S.C. 354, 356, 400 S.E.2d 781, 782 (1991). When the purpose of the underlying dispute is to determine if coverage exists under an insurance policy, the action is one at law.

[728 S.E.2d 480]

Goldston v. State Farm Mut. Auto. Ins. Co., 358 S.C. 157, 166, 594 S.E.2d 511, 516 (Ct.App.2004) (citation omitted). In an action at law, tried without a jury, the appellate court will not disturb the trial court's findings of fact unless they are found to be without evidence that reasonably supports those findings. Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976). However, “[w]hen 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.” In re Estate of Boynton, 355 S.C. 299, 301, 584 S.E.2d 154, 155 (Ct.App.2003) (citation omitted). In such a situation, the appellate court does not have to defer to the trial court's findings. Id. at 301–02, 584 S.E.2d at 155 (citations omitted).

Analysis

The court of appeals determined that public policy is offended by a limitation on UIM portability when applied to resident relatives like Rhoden and Dickey who do not own the vehicle involved in the accident. We agree.

It is axiomatic that “freedom of contract is subordinate to public policy[, and] agreements that are contrary to public policy are illegal.” Branham v. Miller Elec. Co., 237 S.C. 540, 545, 118 S.E.2d 167, 169 (1961); United Servs. Auto. Ass'n v. Markosky, 340 S.C. 223, 226, 530 S.E.2d 660, 662 (Ct.App.2000) (“[I]nsurers have the right to limit their liability and impose whatever conditions they desire upon an insured, provided they are not in contravention of some statutory inhibition or public policy.”). Our state's well-settled public [398 S.C. 399]policy that UIM coverage is personal and portable can be traced as far back as Hogan v. Home Insurance Company, 260 S.C. 157, 162, 194 S.E.2d 890, 892 (1973), where this Court found that limitations placed on the portability of UIM coverage contravened “the broad coverage required by [ ] statute.” Through the years, this public policy has been consistently reaffirmed by this Court. See, e.g., Burgess v. Nationwide Mutual Insurance Company, 373 S.C. 37, 41, 644 S.E.2d 40, 42 (2007) (“[A]s a general proposition, UIM coverage follows the individual insured rather than the vehicle insured, that is, UIM coverage, like UM, is ‘personal and portable.’ ”). Such a long and established precedent must be followed faithfully again here.

Accordingly, we find that our state's well-settled public policy that UIM coverage is personal and portable entitles Rhoden and Dickey to UIM coverage notwithstanding the portability limitation contained in the insurance contract. However, the denial of coverage to Arrieta, consistent with the insurance contract's portability limitation, does not violate public policy pursuant to our decision in Burgess and section 38–77–160 of the South Carolina Code given that Arrieta chose not to purchase UIM coverage for her vehicle, which was involved in the accident. 373 S.C. at 41, 644 S.E.2d at 42 (“Public policy is not offended by an automobile insurance policy provision which limits the portability of basic ‘at-home’ UIM coverage when the insured has a vehicle involved in the accident.”).² The dissent would deny coverage to all three [398 S.C. 400]Respondents based on the notion that public policy “requires limitation of UIM coverage portability when an insured seeks coverage beyond that purchased on the involved vehicle.” The dissent does not elaborate on the reasons which would support the adoption of such a public policy, but finds the logic for such a public

[728 S.E.2d 481]

policy from the express words of section 38–77–160 of the South Carolina Code, concluding that the “General Assembly has seen fit to .... limit excess UM and all UIM coverage for ‘insureds.’ ”

As we stated in Burgess,section 38–77–160 does not apply in a non-stacking ³ case such as this:

The Court of Appeals held the “If, however” sentence in § 38–77–160 applied only to stacking cases, found the issue here was not stacking....

... [W]e agree with the Court of Appeals that the “if, however” sentence in § 38–77–160, relied upon by Nationwide here, does not literally apply to these facts since Burgess is not attempting to stack excess UIM coverage from his Nationwide policy.... The “If, however” sentence in § 38–77–160 evinces the legislature's intent, in a stacking situation, to bind the insured....

Neither § 38–77–160 nor our prior decisions decide the [non-stacking] issue presented here[.]

373 S.C. at 41–42, 644 S.E.2d at 42–43 (emphasis added); see also S.C. Farm Bureau Mut. Ins. Co. v. Mooneyham, 304 S.C. 442, 445, 405 S.E.2d 396, 398 (1991) (“[W]e interpret the pertinent language of [38–77–160] as setting a...