Insurance Law—Professor Jedziniak
University of South Carolina School of Law
I. AUTOMOBILE INSURANCE
a. Overview—our laws are so favorable to finding coverage so that people can hold each other financially responsible for the injuries they cause
i. You must have insurance, and be able to prove you have it (i.e., carry a card), before you can legally drive. But there are exceptions
1. Self-Insured: where you develop your own insurance policy. A person or company who has at least 25 vehicles can qualify if the DMV formally concludes that the person/company is financially responsible and endowed enough to handle claims. § 56-9-60.
a. If you qualify, you can issue policies for your cars only.
b. Quasi-exception, since you are technically insured
2. Legally Uninsured: you pay the DMV a fee and then drive w/o no insurance; you’re still liable for damages, though
ii. Auto insurance policies cover both actual/compensatory and punitive/exemplary damages (rule in SC and most states). See § 38-77-30(4)
1. Compensatory Damages can be broken down (“liquidated”) and typically include (5 categories)
a. Special (economic)
i. Medical Bills
ii. Lost Wages
b. General (non-economic)
i. Pain and Suffering
ii. Lost Earning Capacity
iii. Hedonic damages: loss of enjoyment of life
a. In SC, comparative negligence does not apply to punitive, b/c CN is about apportioning actual fault, not setting an example
i. Note: Assumption of Risk & Last Clear Chance no longer work in SC
ii. Note: there is no intra-spousal or intra-family immunity in SC
b. Jedziniak: it’s not fair that UIM and UM should cover punitives; after all, it’s your insurance company that’s paying. How does that punish the other guy?
i. Partial response: first-party insurer might be able to seek contribution from at-fault driver (but he may well be broke and thus judgment proof)
c. Liberal states say that insurance doesn’t cover punitives
b. Types of Coverage
i. Fault/No Fault—Most states (including SC) are tort-based states; that is, insurance is not triggered without showing of fault (negligence at minimum)
1. No-fault: your own insurance pays for your damages, no matter how it happened
a. Only 13 states (mainly N.E.) use this, but none do pure no-fault
b. Jedziniak: this is a stupid, communist system
ii. Three Basic Types of Liability Insurance (limits as of 01/01/2007)
1. Individual Bodily Injury (BI): when only one occupant is hurt (fmrly $15K minimum; now $25K—see § 38-77-140)
2. Group BI: when > 1 occupant is hurt (fmrly $30K; now $50K)
a. BI covers use, maintenance , and ownership of vehicle
3. Property Damage (PD): e.g., busted quarter panel (fmrly $5K; now $25)
a. Usually not litigated, as it’s so easy to figure out (e.g., what’s the cost of a new bumper?)
b. Interesting consumer problem: you have a car worth $1000. Your windshield gets smashed, which costs $3000 to replace. The insurance company is going to “total” your car for $1000 and take your car
iii. Combined Single Limits (CSL): states the above three types as a single figure (e.g., $100K, rather than 25/50/25)
iv. First-Party Insurance: You buy this to protect yourself from harms caused by others, rather than to pay for harms you cause to others
1. When you trigger this as a plaintiff/claimant, your own insurance company will then step in and try to defend the defendant/other guy
a. Why? Because the insurance company has a financial interest in the claim; if it can prove that the defendant wasn’t at fault, it won’t have to pay you (same rationale with damage reduction)
b. In fact, in such a case your insurance company may have a duty to defend the other guy
2. Uninsured Motorist Coverage (UM): covers you when the other guy doesn’t have insurance
a. § 38-77-150(A): Any auto policy must automatically provide UM coverage up to the legal minimum limits (15/30/5; now, 25/50/25)
b. HWY Dep’t: 25–30% of motorists on SC roads are uninsured
c. Insurers can require deductibles up to $200. § 38-77-150.
i. However, because of this deductible, it’s less likely that a claim will trigger a raise in the premium
d. Additional UM (AUM): difference between minimum limits and the maximum coverage of your policy.
i. AUM is not a mandatory coverage; however, the insurance company must offer it to you. Garris; Gambrell; see § 38-77-160
ii. Of course, most insurance companies don’t want to sell you AUM because the percentage of uninsured motorists out there (which means a fairly high likelihood of the company paying out a lot)
e. Scenarios that trigger your UM
i. Other guy is flat-out uninsured
ii. Other guy is driving legally uninsured: he paid DMV a fee to drive legally uninsured (in SC, $550 per car, per year)
1. A handful of people do this, almost surely because they can’t afford insurance—they’ve been too reckless
2. Of course, they’re still totally responsible for the wreck they cause, and b/c they have no insurance their assets will be exposed
iii. Hit-and-run/phantom driver: the guy may have insurance, but you can’t know because he’s not around (see below for more)
1. Three part test in defining a phantom driver:
a. Reported to police within reasonable amount of time
b. Physical contact with unknown vehicle (or an affidavit from an independent witness that follows the language in the statute under penalty of fraud)
c. Insured did nothing negligent in finding the phantom driver
iv. Other guy is insured, but the company went bankrupt/became insolvent
1. S.C. Property and Casualty Guaranty Assn: pays claims in this situation (state entity). It gets paid by assessing $ from the solvent companies, meaning that ultimately everyone helps pay
2. The legislature hated this plan, and so instead it said UM will take care of it
v. When the car that hit you is insured, but the insurance company legitimately disclaims/escapes coverage
1. Ex: dude steals other guy’s car, takes it for a joyride, and crashes it into your house
vi. When the limits of the at-fault guy are the state minimums of his state, and his minimums are less than your state’s minimum
1. Ex: GA guy with 20/40/20 hits you (SC) as you’re both on I-85
2. Important: here, your UM only kicks in to cover the deficiency between his policy and your state’s minimums
3. Note also that most policies of companies who operate in multiple states have provisions that say that if you’re driving in another state, and your limits are less than that state’s minimums, they will raise them to that state’s limits
4. out-of-state coverage provision
3. Underinsured Motorist Coverage (UIM): for when the other guy has some insurance, but not enough to cover your damages
a. In such a case, the other guy’s insurance will probably just pay its limits without a trial and let your insurance defend the other guy, as your insurer likely has more to lose. (Ex: other guy has 25/50/25 liability; you have 100/300/100 UIM)
b. UIM starts at zero; the law does not require an automatic UIM minimum, but the insurance company must offer it to you
c. Tests for Triggering UIM:
i. Limits-to-Damages (Excess) test: (developed in SC, in early 1980s, most follow): Your UIM kicks in if, and to the extent, your damag
nt significance that breaks the causal chain; and
1. Plaxco: Car used to jump plane, which then lurched forward and caused damages. Held: causal chain broken.
iii. (3) Car must be being used as transportation at time of injury
b. Use Cases
i. Wright v. North Area Taxi: taxi driver robbed and murdered; during murder, taxi hits parked car.
1. No causal connection for the murder. It was the mere situs of the injury, not the launchpad for it
a. Wright says that taxi robbery/murder is foreseeable, but court disagrees about the taxi was incidental to the robbery
2. Causal connection for the wreck.
ii. Doe & Roe v. S.C. Budg. & Ctrl. Bd.: Cop stopped Ps, on separate occasions, on DUI suspicion. He offered them the choice of sex or jail. In each case, they had sex either in or on the cop car
1. Ps’ claims fail Aytes test for fulfillment of the causal connection prong. Car was not an active accessory.
2. Also, acceptance of the quid pro quo was an act of independent significance.
3. Third, sex is not a use for transportation at the time of the injury
d. Service of Process
i. When you sue an insurance company, you have to serve the state’s director of insurance/insurance commissioner. § 38-77-70, -150, -160
i. Benefit of the Bargain Rule: SCOSC decided to allow stacking because if you bought first-party coverage for several cars, you bought it to protect yourself and thus should get to use as much of it as you need.
1. Ex: guy w/ 25/50 hits me. I have 3 UIMs of 250K each. I should be able to get up to 750K in UIM
2. Measuring Vehicle Principle: You can stack up to the amount of UIM on the car involved in the wreck; however, you can only get the limits of the car that’s not in the action .
i. Ex: one car is 100/300 UIM, the other is 25/50 UIM. Car one is wrecked. You get 125, not 200)
ii. Ex: same facts, except car 2 gets in the wreck. You get 50 (25 x 2)
b. Uninsured MV—Hypo: H and W are riding in car owned by H, which has no insurance. (W has UM on other cars). Wreck. May W stack?
i. Erwood v. Nationwide: UM is “personal and portable,” and mandatory, so if the at-fault driver (H) is uninsured, W can take from her at-home UM.
1. Note: this case does NOT explicitly does not deal with stacking, but
c. “Underinsured” MV—F and D are riding in F’s truck, which has min. liability and no UIM. (F has UIM on at-home cars). Wreck. May D stack?
i. Burgess v. Nationwide: she may not stack UIM where there is no UIM on the car involved
1. Rationale: unlike UM, UIM is not a mandatory coverage.
2. “Essentially, the insured is buying insurance coverage for situations, as where he is a passenger in another’s vehicle or is a pedestrian, where he cannot otherwise insure himself. When, however, the insured is driving his own vehicle, he has the ability to decide whether to purchase voluntary UIM coverage. Burgess chose not to do so when insuring his motorcycle.”