Todd v. Federated Mut. Ins. Co.

• Decision Date: 20 May 1991
• Docket Number: No. 23467,23467
• Citation: 305 S.C. 395,409 S.E.2d 361
• Court: South Carolina Supreme Court
• Parties: Ronnie TODD, Appellant-Respondent, v. FEDERATED MUTUAL INSURANCE COMPANY and South Carolina Farm Bureau Mutual Insurance Company, Defendants, of whom Federated Mutual Insurance Company is Respondent-Appellant. . Heard

Page 361

409 S.E.2d 361

305 S.C. 395

Ronnie TODD, Appellant-Respondent, v. FEDERATED MUTUAL INSURANCE COMPANY and South Carolina Farm Bureau Mutual Insurance Company, Defendants of whom Federated Mutual Insurance Company is Respondent-Appellant.

No. 23467.

Supreme Court of South Carolina.

Heard May 20, 1991.

Decided Sept. 9, 1991.

Flo S. Lester, John S. Wilkerson, III and Hugh M. Claytor, all of Turner, Padget, Graham & Laney, P.A., Florence, for appellant-respondent.

Michael M. Nunn and J. Boone Aiken, III, both of Coleman, Aiken & Chase, P.A., Florence, for respondent-appellant.

HARWELL, Justice:

Appellant Ronnie Todd commenced this declaratory judgment action against respondent Federated Mutual Insurance Company (Federated) to determine the amount of uninsured motorist coverage available under two insurance policies, a business automobile insurance policy (hereinafter "primary policy"), and a commercial umbrella liability policy (hereinafter "umbrella policy"). The issues on appeal are whether the trial judge erred in reforming the primary policy to include uninsured motorist coverage up to the amount of liability coverage, and whether the trial judge erred in holding that the umbrella policy need not provide uninsured motorist coverage. We affirm.

I. FACTS

On September 5, 1987, Todd was riding in a motorhome owned by C.G. Bass. An uninsured driver crossed the center line and hit the motorhome head-on, killing eight of the eleven occupants. It is uncontroverted that the operator of the other vehicle was responsible for the accident, that this vehicle was an uninsured motor vehicle under South Carolina law, and that the aggregate damages sustained by Todd and the other occupants exceed the total of all available coverages. It is also undisputed that the primary policy provided insurance coverage for Todd, as the motorhome was a covered vehicle under the primary policy.

Bass first purchased insurance coverage from Federated in October, 1985. At the time of the original insurance purchase, the primary policy provided liability coverage in the amount of $300,000 and uninsured motorist coverage with limits equal to the liability coverage, and the umbrella policy provided liability coverage in the amount of $4,000,000. On October 22, 1986 the primary policy and the umbrella policy were renewed by Federated. Upon renewal, the liability limits of the primary policy were increased to $500,000, and the umbrella policy limits were decreased to $3,000,000. ¹ The uninsured motorist coverage remained at $300,000. These policies were in full force and effect at the time of the accident.

Todd instituted this declaratory judgment action seeking to reform the primary policy to provide uninsured motorist coverage in an amount equal to the liability limits of the primary policy, and seeking to reform the umbrella policy to include uninsured motorist coverage in an amount equal to the liability limits of that policy. Both parties filed motions for summary judgment. After hearing the motions, the trial judge held that Federated had not made an effective offer to increase the uninsured motorist coverage up to the limits of the insured's liability coverage under the primary policy as required by S.C.Code Ann. § 38-77-160 (1989). As a result, the trial judge reformed the primary policy to provide $500,000 in uninsured motorist coverage. Federated appeals from this ruling of the trial judge. The trial judge also held that Federated's umbrella policy need not provide uninsured motorist coverage. Therefore, the trial judge refused to reform the umbrella policy to include uninsured motorist coverage. Todd appeals from this portion of the trial judge's order.

II. DISCUSSION

A. FEDERATED'S APPEAL

Federated contends that the trial judge erred in reforming the primary policy to include uninsured motorist coverage up to the amount of liability coverage. As noted above, the primary policy initially provided liability coverage and uninsured motorist coverage in the amount of $300,000. When the primary policy was renewed in 1986, the liability limits of the primary policy were increased to $500,000 due to Federated's underwriting requirements. However the uninsured motorist coverage remained at $300,000. At trial, Todd maintained that when the policy was renewed, Federated did not make an effective offer to increase the uninsured motorist coverage up to the limits of the insured's liability coverage under the primary policy. The trial judge agreed and reformed the primary policy to provide $500,000 in uninsured motorist coverage.

Section 38-77-160 provides that "[a]utomobile insurance carriers shall offer, at the option of the insured, uninsured motorist coverage up to the limits of the insured's liability coverage...." Not only must the insurer offer uninsured motorist coverage in any amount up to the liability limits, but the offer must be an effective offer that is meaningful to the insured. Dewart v. State Farm Mut. Auto. Ins. Co., 296 S.C. 150, 370 S.E.2d 915 (Ct.App.1988). The insurer has the burden of proving that it made a meaningful offer of optional coverage to the insured. Id.

In State Farm Mut. Auto. Ins. Co. v. Wannamaker, 291 S.C. 518, 354 S.E.2d 555 (1987), we adopted a four part test to determine whether an insurer has complied with its duty to offer optional coverages: (1) the insurer's notification process must be commercially reasonable, whether oral or in writing; (2) the insurer must specify the limits of optional coverage and not merely offer additional coverage in general terms; (3) the insurer must intelligibly advise the insured of the nature of the optional coverage; and (4) the insured must be told that optional coverages are available for an additional premium. We have also held that these criteria must be met at the time of policy renewal where the terms of the policy are changed upon renewal. Webb v. Nationwide Mut. Ins. Co., 407 S.E.2d 635 (S.C.1991).

Federated concedes that it did not make a written offer of uninsured motorist coverage to Bass. Instead, Federated claims that its agent, Leonce Wimberly, discussed the renewal with Bass and orally made an effective offer of uninsured motorist coverage to him. In support of its contention, Federated introduced into evidence a document entitled "Policyholder Security Survey Summary", which was signed by Bass and Wimberly, and which indicated that liability coverage was to be provided in the amount of $500,000, and that uninsured motorist coverage was to be provided in the amount of $300,000. Wimberly testified that although the document reflected that he had presented Bass with the option of purchasing uninsured motorist coverage in an amount equal to the liability limits, he could not remember whether he had actually discussed this option with Bass.

Since Bass was killed in the accident, Wimberly's testimony is the only evidence available regarding whether an effective offer of uninsured motorist coverage was made. Wimberly repeatedly testified that he could not remember whether he offered Bass the option of purchasing the additional uninsured motorist coverage. Consequently, we find that the evidence supports the trial judge's conclusion that Federated has failed to meet its burden of proving that it made a meaningful offer of uninsured motorist coverage to the...