Automobile Insurance and Apportioning Liability [Stacking]

Question 1

What are the statutory minimum requirements for auto insurance in South Carolina?

Answer 1

Automobile insurance policies must insure drivers for damages arising out of the ownership, maintenance, or use of their motor vehicles, at or above the following amounts:

1. $25,000 for bodily injury to one person in any one accident;
2. $50,000 for bodily injury to two or more persons in any one accident; and
3. $25,000 for injury to or destruction of another’s property in any one accident.

Question 2

Do you have to have automobile liability insurance in SC?

Answer 2

In order to obtain or renew a South Carolina Driver’s License, drivers must certify that they are insured by an automobile liability insurance policy.

Question 3

What is an Uninsured Motorist Clause?

Answer 3

An uninsured motorist clause or UM is a clause included in all SC auto insurance policies which enables a driver to recover damages for any injury he receives from an uninsured, negligent driver.

SC mandates that all auto insurance policies provide coverage for damages caused by uninsured motorists for at least the state minimum coverage amounts.

Question 4

What does it mean that UM coverage is “portable” in South Carolina?

Answer 4

UM coverage is portable in SC, meaning that coverage is triggered for the insured whether or not his insured vehicle is involved in the incident giving rise to the claim.

Question 5

What is the difference between UM and UIM?

Answer 5

UM or Uninsured Motorist Coverage is different from UIM or Underinsured Motorist Coverage in a number of ways. It is important to remember that the two are mutually exclusive – meaning that you may only use one or the other depending on the nature of the incident, but you will never use both together.

UIM is separate coverage purchased as part of an auto insurance policy. It provides coverage when the injured party’s damages exceed the liability limits of the at-fault motorist.

UM is required for all SC drivers, but UIM is optional coverage. It is required, though, that all insurance companies provide customers with a “meaningful offer” of UIM coverage up to the limits of the insured liability coverage.

Portability:

UM coverage is portable in SC, meaning that coverage is triggered for the insured whether or not his insured vehicle is involved in the accident.

UIM coverage is portable in SC ONLY to an insured who does NOT own a vehicle involved in the accident.

Question 6

What happens if you, an insured, are injured by an Unknown Driver?

Answer 6

Where a vehicle is damaged by an unknown driver of another vehicle, the insured’s UM coverage will cover the property damage and any bodily injury resulting from the accident provided the following three (3) statutory requirements are met:

1. The insured, or someone on his behalf, has reported the accident to an appropriate police authority within a reasonable time after its occurrence;
2. The insured was not negligent in failing to determine the identity of the other vehicle and its driver at the time of the accident; and
3. EITHER:
   
   1. the damage or injury was caused by physical contact with the unknown vehicle; OR
   2. the accident was witnessed by someone other than the owner or operator of the insured vehicle, and the witness signs and affidavit attesting to the truth of the facts that he witnessed.

Question 7

What factors does the court consider when determining whether a “meaningful offer” for UIM coverage has been made by an insurer?

Answer 7

The SC Supreme Court has adopted the four (4) part Wannamaker test:

1. the insurer’s notification process must be commercially reasonable;
2. the insurer must specify 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 coverage is available for an additional premium.

NOTE:

• Insurers are NOT required to make a meaningful offer of UIM coverage when issuing an auto policy that renews, extends, changes, supersedes, or replaces an existing policy.
• If an auto insurance policy is transferred, the transferee is considered a new applicant and must be afforded the opportunity to accept or reject UIM coverage.

Question 8

What is Subrogation?

Answer 8

Subrogation is a right reserved by an insurance company to pursue a 3rd Party that caused an insurance loss to the insured. This is usuall accomplished by recovering the amount of the claim paid to the insured for the loss.

EXAMPLE:

When an insured driver’s car is damages through the fault of another driver, the car owner’s insurer will reimburse the insured under the terms of the policy, and then pursue legal action against the driver at fault or his insurer.

To subrogate means to step into the shoes of another. Thus, when an insurer pays its insured for a loss resulting from the tortious conduct of a 3rd Party, the insurer is “subrogated” to the rights of the insured against the 3rd Party.

Subrogation is very similar to the doctrine of indemnity, in that the at-fault party is made to bear the loss.

For most types of insurance, no express contractual provision is required to reserve an insurer’s right of subrogation; it arises as a matter of law. BUT -

• In accident and health insurance policies, an insurer’s right of subrogation is waived unless expressly included within the terms of the policy.

Question 9

What happens when a person or property is covered by more than one (1) insurance policy?

Answer 9

Concurrent Coverage:

A primary insurance policy covers up to the policy’s limit whether or not other policies cover the same risk. In contrast, excess insurance is triggered only when the primary insurance is exhausted.

An excess clause in an insurance policy limits the insurer’s liability to the amount exceeding other available coverage. Therefore, this clause essentially requires other insurers to pay first.

EXAMPLE:

Where an insured was covered by his homeowner’s insurance and his company’s commercial general liability insurance policy pursuant to an incident in which his dog bit a child while on the business’s property, the court looked to the language of the policies to determine which policy, if either, provided primary coverage and which provided excess coverage. The court found that the language of the policies demonstrated one to be primary and the other to provide excess coverage.

• Disputes and litigation among insurance companies often arise where multiple policies cover the same risk and there are disagreements as to which insurer is liable for a claim.

Question 10

How does the Doctrine of Contribution apply to situations of concurrent coverage?

Answer 10

The doctrine of contribution apportions the payment of proceeds proportionately among all insurers. Contribution may take place at the time the payments are made, or, where one insurer pays the insured the full amount to which he is entitled, that insurer can seek contribution from other insurers.

SC Code § 38-75-20

“If two (2) or more policies are written upon the same property, they are considered to be contributive insurance, and, if the aggregate sum of all such insurance exceeds the insurable value of the property, as agreed by the insurer and the insured, each insurer, in the event of a total or partial loss, is liable for its pro rata share of insurance.”

Question 11

When two (2) or more auto insurance policies extend coverage to the operation of a vehicle, which policy is the primary policy?

Answer 11

The policy or policies insuring the liability of the owner are generally deemed primary, while others are considered excess.

Question 12

What happens when two (2) or more policies purport to cover a loss, each of the policies appear to provide for primary coverage, and each of the policies contain and excess clause?

Answer 12

If two (2) policies which purport to cover a loss both contain excess clauses but otherwise appear to provide for primary coverage, the excess clauses are disregarded, and the concurrently covered loss is prorated according to the policy limits of the respective policies.

• When comparing the two (2) policies, the fact that one provides specific coverage for particular losses and the other provides blanket coverage is immaterial.

Question 13

What is the analysis applied by the court where multiple policies appear to cover a loss and the court must determine whether the policies are intended to provide primary or secondary coverage?

Answer 13

In these cases, the courts employ the Total Policy Insuring Intent analysis, in which the following factors are considered:

1. the stated coverage provided by the policy;
2. the premium paid for such coverage;
3. any requirements in the policy that the insured have underlying insurance policies; and
4. other relevant factors.

As a result of this analysis, the court may find one or more policies to be primary and one or more others to be excess, or that the concurrent policies are contributive, in which case they are all liable for their pro rata share in accordance with the policy limits.

Question 14

What is stacking?

Answer 14

Subject to certain limitations, where an insured has multiple policies providing coverage and the loss recoverable exceeds the policy limits of one or more policies, he may “stack” the policies in succession until all of the damages are satisfie OR until the total limits of all policies have been exhausted.

Question 15

What is the difference between a Class I Insured and a Class II Insured?

Answer 15

In the context of auto insurance, the named insured along with his spouse and relatives residing in his household qualify as Class I Insured Persons.

A Class II Insured Person is a permissive user or guest of the named insured’s vehicle, and the user/guest of the insured did not have a vehicle of his own in the accident.

Question 16

What are the general Rules for Stacking UM and UIM Coverage?

Answer 16

Stacking Rules:

1. Class I insureds can stack UM or UIM policies.
2. Class II insureds cannot stack UM or UIM policies, but they can reach back to 1 policy/1 car at home.
3. Stacking may be limited by statute or by a valid policy provision.
4. The amount of UM coverage which can be stacked from policies on vehicles NOT involved in an accident is limited to an amount no greater than the coverage on the vehicle involved in the accident.
5. An insured can stack UIM coverage only in an amount equal to the UIM coverage on the vehicle involved in the accident.
   
   1. In other words, the vehicle involved in the accident is the “measuring vehicle” in terms of measuring how much UIM coverage may be collected on other insured vehicle policies.
6. Since UM and UIM coverage are mutually exclusive, an insured cannot recover benefits under both types of coverage for the same accident.

Question 17

What can the at-fault driver in an auto accident recover?

Answer 17

The at-fault driver CANNOT RECOVER under his or her own policies. Unless the at-fault driver has PIP coverage [Personal Injury Protection Coverage] then they will not recover.

However, a passenger (Class II) in the at-fault driver’s car can get liability from that car, the UIM of that car, and then he may reach back to one of his own cars for more UIM. A Class I passenger can obtain the liability from the at-fault driver’s car, and then may stack his own UIM.

Question 18

When writing your essay for a stacking problem, how do you begin?

Answer 18

Always begin by stating the Rules 1-11:

1. The statutory requirement for liability insurance in SC is 25/50/25. The first $25k is per person, the $50k is per occurrence, and the second $25k is for personal property.
2. Because liability coverage is limited to the particular vehicle for which it is purchased, there is no stacking of liability coverage.
3. An at-fault driver cannot collect his own liability coverage.
4. UM coverage is mandatory in SC for the amount of $25k. It is a fault-based policy and is available when an at-fault driver has no liability insurance, or has insurance coverage below the SC statutory requirement of 25/50/25.
5. UIM coverage is not required in SC. It is a fault-based policy, meaning a party can only collect it if her is not at fault. It is available when an at-fault driver has liability coverage equal to or above the SC statutory minimum, but damages exceed the available liability coverage. A Class I insured can stack UIM coverage on the car the at-fault driver was driving at the time of the accident (the “measuring vehicle”).
6. UM and UIM coverage are both personal and portable. A non-owner resident relative may import UM or UIM coverage from their own at-home vehicle’s policy when the involved vehicle lacks UIM coverage.
7. Because UM and UIM are fault-based policies, an at-fault driver cannot collect these policies.
8. Class I insured are the named insured, along with his/her spouse and relatives that reside within his/her household. The spouse and/or relatives must reside with the named insured, which requires more than just short-term periodic visits.
9. Class II insured are all other permissive users and guests. A permissive user is someone with permission from the named insured to use the insured’s car.
10. Class II insureds cannot stack from a Class I policy.
11. A Class II insured who does not have a vehicle in the accident can reach back to one of his policies at home to which he is a Class I insured in order to collect.

Then, if any of these issues are relevant, include Rules 12-18:

• RULE 12: Personal Injury Protection [PIP] coverage is not mandated by SC statute. A Class I insured can stack PIP coverage from another Class I insured. The driver is entitled to the total amount of PIP coverage from the car he is driving, and then he may stack from other policies. However, the first $1,000 of PIP from other vehicles is considered to be Basic PIP and cannot be stacked. Anything in addition to that first $1,000 CAN be stacked because it is considered Additional PIP.
• RULE 13: A permissive driver is anyone who the owner allows to drive the car. Permissive use coverage only applies when another driver has the owner’s consent to drive a vehicle. Implied consent comes from the insured or someone acting on the insured’s behalf. The following factors should be considered when determining if implied consent is applicable:
  
  • the past and present conduct of the insured;
  • the relationship between the driver and the insured; and
  • the usage and practice of the parties over an extended period of time to the use in question.

The usage and practice of the parties must be such that it would indicate to a reasonable mind that the driver had the right to assume that she had permission under particular circumstances.

• RULE 14: A guest is one who takes a ride in a car driven by another person, merely for his or her own pleasure or on his or her own business, and without making any return or conferring any benefit on the operator of the car. A guest is a person who is carried in an automobile gratuitously, that is, one who gives no compensation for the carriage.
• RULE 15: One who is a guest at the invitation of the driver has, by implication, the consent of the named insured, unless he or she has knowledge to the contrary. A passenger can only rely on the driver’s representations regarding his status as a permissive user. A determination that a passenger qualifies as a “guest” under the statute must be viewed from the passenger’s perspective.
• RULE 16: Meaningful Offer
• RULE 17: Unknown Driver
• RULE 18: Ownership, Maintenance, or Use