The Supreme Court of South Carolina decided in a pair of cases that automobile insurers cannot limit the type of property damages recoverable in claims involving underinsured motorist (UIM) coverage.  The Court issued its decisions in USAA v. Rafferty and Nationwide v. Green on March 29, 2023, and relied on straightforward statutory interpretation to reach the decisions.  The decisions, however, could have other effects on the ability of insureds to recover punitive damages. 

Background

In both USAA and Nationwide, the insurance policy limited the type of UIM coverage for property damage to “covered autos.”  In USAA, the accident involved a woman riding a bicycle who was struck and killed by an underinsured motorist. The decedent’s personal representative made a claim for property damage to the bicycle under the decedent’s policy that carried $100,000 in UIM coverage for property damage to “your covered auto.” In Nationwide, Green was walking home from school when he was struck and injured by an underinsured motorist.  Green made a claim on his mother’s policy that carried $25,000 in UIM coverage for property damage to a “covered auto.”  The type of property damage suffered is unclear from the case, and filings during the appeal suggest generally that Green suffered personal property damage. Although USAA and Nationwide tendered the UIM bodily injury limits, they both refused to tender the UIM property damage limits because the property damage incurred was not to a “covered auto.”

            Court’s Analysis

Automobile insurance carriers in South Carolina must offer UIM coverage “up to the limits of the insured[‘s] liability coverage to provide coverage in the event that damages” sustained exceed the liability limits of the underinsured motorist.  S.C. Code Ann. § 38-77-160.  In addition to bodily injury coverage, insureds must carry at minimum $25,000 for property damage per accident. § 38-77-140.  Damages are defined to include both actual and punitive damages, and actual damages are understood to include property damage. § 38-77-30(4). Although UIM coverage is optional, if purchased it must comply with the statutes or the policy will be reformed.

The Court acknowledged that unambiguous statutes are to be applied according to their plain meaning.  When statutes are within a comprehensive statutory scheme, the statutes are read as a whole.  The Court held that, because the insurer must offer UIM coverage “up to the limits of the insured[‘s] liability coverage,” and liability coverage must include property damage coverage, the UIM offer must likewise include property damage coverage.  Further, because the definition of “damages” includes actual damages (which includes property damage), and the statutes do not distinguish between the type of property damaged, “damages” as used in the UIM statute includes damage to any property the insured owns.  Accordingly, if UIM coverage is offered, it cannot be limited by the type of property. 

            Impact of Ruling

By prohibiting the insurer’s ability to narrow UIM property damage coverage, the ruling on its face significantly expands UIM coverage.  In reality, however, the value of property damaged in most automobile injury cases involving a pedestrian is not likely to be significant.  For example, for Rafferty in USAA this means the damage to the bicycle is recoverable.  It is unclear what type of property Green claimed damage to in Nationwide, but one can imagine it would include clothing, school supplies, and a cell phone.  For both of these cases the value of the property damaged is not likely very high and does not exceed the coverage limits.

Nevertheless, there is an important consideration for UIM property damage coverage going forward for cases that have a potential for a punitive damages award.  Our courts have held that, in a claim involving bodily injury and property damage, an award of punitive damages is not divisible or apportioned between the UIM bodily injury and property damage coverages. See GEICO v. Poole, 424 S.C. 1, 817 S.E.2d 283 (2018).  GEICO involved a drunk driving fatality with obviously significant bodily injury damages, but only $1,250 in claimed property damage.  Id. at 3, 817 S.E.2d at 285.  The claimant demanded the total $50,000 in UIM property damage coverage anticipating a significant punitive damages award, but the insurer refused to tender the limit.  Id. 

In reasoning similar to USAA and Nationwide, the Court held the UIM statute applied to “damages” and did not mention allocation, or that bodily injury and property damage must be analyzed separately.  Id. at 5, 817 S.E.2d at 286.  Thus, if punitive damages were awarded and the insurer was obligated to pay, the insurer would be required to pay out of its property damage coverage limit regardless of whether the punitive damages were traceable to property damage or bodily injury. 

Under GIECO,assuming an insurer is obligated to pay punitive damages but no property is damaged to trigger the separate UIM property damage coverage, then the insurer’s obligation to pay actual and punitive damages is limited to the policy’s bodily injury limits.  Therefore, if the USAA and Nationwide policies could limit UIM property damage to a “covered auto,” and a “covered auto” was not damaged but the case involved the potential for punitive damages, the obligation to pay would not include the amount of the UIM property damage limit. 

Now that an insurer cannot limit UIM coverage by the type of property, however, it opens up the UIM property damage coverage to apply to punitive damages if any property is damaged at all.  Thus, although it is doubtful the bicycle in USAA or the unidentified property in Nationwide exceeds the UIM property damage limit in their respective policies, the fact the property damage coverage is triggered could obligate the insurer to pay punitive damages out of the property damage coverage amount. 

            The decisions are available below.

USAA Casualty Insurance Company v. Rafferty, Jr., Opinion No. 28143 (S.C. Sup. Ct. March 29, 2023).

Nationwide Affinity Insurance Company of America v. Green, Op. No. 28144 (S.C. Sup. Ct. March 29, 2023).