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The South Carolina Court of Appeals reversed an insurer's summary judgment and remanded to the trial court for a determination of whether an insured was operating a temporary substitute auto at the time of his accident and, thus, entitled to underinsured motorist ("UIM") coverage. In Zurich American Insurance Company v. Tolbert, Op. No. 4382 (S.C.Ct.App. filed May 2, 2008) (Shearouse Adv.Sh. No. 18 at 68) 2008 WL 1930626, Zurich issued a business auto policy to BMW of North America which contained a Drive Other Car Coverage ("DOCC") endorsement and a South Carolina UIM endorsement. BMW's employee leased a BMW auto from BMW which was covered under the Zurich policy. However, he also owned a Honda automobile for which he had rejected UIM coverage. He was involved in an accident while operating the Honda, collected the at-fault driver's statutory minimum limits of liability coverage and made a claim for UIM benefits under the Zurich policy. Zurich filed a declaratory judgment action seeking a determination that the policy provided no UIM coverage for the employee's claim. On cross motions for summary judgment, the trial court granted Zurich's motion holding that the policy's unambiguous language excluded UIM coverage for the employee's claim.
On appeal, the employee's argument that he was a Class I insured was summarily rejected by the court. It noted that BMW of North America, LLC was the named insured on the policy and was designated as a corporation. Because a corporation has no spouse or family members, no individual can be a Class I insured under a policy issued solely to a corporation. Though not discussed in the court's opinion, the significance of holding Class I status is the insured's ability to stack UIM coverage under the policy. The employee, if qualifying as an insured, qualified only as a Class II insured, entitled to only the amount of UIM coverage on the vehicle involved in the accident.
The court went on to agree with the trial court that the Zurich policy's exclusion of UIM coverage if the employee's claim arose out of accident involving a vehicle owned by the employee, but not specifically covered under the Zurich policy, was valid. It further agreed that the policy's DOCC endorsement, which applied to cars leased by BMW to its employees, excluded UIM for claims arising from the employee's occupancy of a vehicle owned by him or his family members.
Finally, the employee argued that under the South Carolina UIM endorsement, he was entitled to UIM coverage because that endorsement specifically included coverage for claims in which the employee was occupying a temporary substitute for a covered auto. Specifically, the employee submitted an affidavit alleging that he was driving the Honda on the day of the accident because his BMW was in need of servicing, being overdue an oil change. Zurich did not challenge whether the BMW was out of service because of its breakdown, repair, servicing, loss or destruction. Instead it argued that the employee's Honda could not serve as a temporary substitute for the BMW because it was owned by the employee; thus, there was nothing temporary in the employee's use of the Honda. The court disagreed and held that nothing in the endorsement prevented the employee's owned vehicle from serving as a temporary substitute. Therefore, the court reversed summary judgment for the insurer and remanded the case to the trial court. It noted that the employee would bear the burden of proving that the BMW was out of service due to its breakdown, repair, servicing, loss or destruction.
For insurers, Tolbert is a reminder that South Carolina's courts are typically not predisposed to granting summary judgment and will decline to grant it at the trial court level or reverse it where granted at the appellate court level if the insured can present a minimal showing of a disputed fact. Given the employee's rather flimsy basis for declaring the BMW out of service, its need for an oil change, further discovery may result in the insurer renewing its motion for summary judgment with the facts necessary to overcome the employee's characterization of the Honda as a temporary substitute for the BMW.
http://www.judicial.state.sc.us/opinions/displayOpinion.cfm?caseNo=4382
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