INSURANCE-RELATED COURT CASES

Digested from case reports published online

COURT DECISIONS

You can’t have it both ways

After sustaining injuries in a vehicle driven by her son, Kevin Simms, Belinda Pickens sought uninsured motorist coverage through her policy with United Services Automobile Association (USAA). At the time of the accident, Pickens’s policy covered five vehicles, including the 1997 Chevrolet involved in the accident. The policy provided liability, personal injury protection, uninsured motorist, and underinsured motorist coverage.

Pickens executed a named driver exclusion titled “Voiding Automobile Insurance While Named Person Is Operating Car” naming Kevin S. Pickens (see name clarification/stipulation below). Her declarations page also contained a provision that stated: “Coverages Excluded When Any Vehicle Operated by Kevin Simms.”

USAA denied the claim and initiated a declaratory judgment action asserting Pickens was not entitled to UM coverage because Simms, the excluded driver, was operating the vehicle at the time of the accident. Both parties filed motions for summary judgment.

Pickens asserted that South Carolina’s excluded driver statute applied solely to liability insurance. USAA argued that the endorsement that excluded all forms of coverage was expressly authorized by the statute, and to allow her to recover UM benefits in this case would create a “perverse incentive” for policyholders to exclude all members of their households.

The circuit court granted USAA’s motion for summary judgment and denied Pickens’ motion.

The parties entered into a stipulation and agreement, noting that the exclusion form should have listed Kevin Simms rather than Kevin Pickens as Pickens’ excluded resident relative; Pickens was a passenger in her 1997 Chevrolet, and Simms was operating the vehicle at the time Pickens was injured.

Pickens argued that the excluded driver statute applied only to liability coverage, and any exclusion permitted by the statute excluded coverage in relation to the named driver and not the policyholder. USAA contended that the excluded driver statute allowed exclusions on all forms of coverage under a liability policy, including UM coverage. Further, USAA asserted that the exclusion voided all coverage while the named driver operates the covered vehicle. The circuit court agreed with USAA.

As the court noted, no liability coverage would have been afforded to a third party had Simms been at fault, so it would violate public policy to allow Pickens to recover UM benefits when she was the person who executed the exclusion yet knowingly allowed Simms to drive her vehicle.

The circuit court held that the excluded driver endorsement was not limited to liability coverage but also applied to UM coverage, particularly given that UM was not sold as stand-alone coverage. The court further held that to permit Pickens to recover UM limits after having signed an exclusion naming Simms as an excluded driver would violate public policy. Lastly the court found that the excluded driver statute permitted the exclusion of UM coverage. Pickens appealed.

On appeal, the issue was: Did the circuit court err by interpreting the excluded driver statute to exclude Pickens’ claim for uninsured motorist coverage as a matter of law?

Pickens argued that the excluded driver statute applied only to liability coverage, and any exclusion permitted by the statute excluded coverage in relation to the named driver and not the policyholder. USAA contended that the excluded driver statute allowed exclusions on all forms of coverage under a liability policy, including UM coverage. Further, USAA asserted that the exclusion voided all coverage while the named driver operates the covered vehicle.

Pickens entered into an agreement with USAA that named Simms as an excluded driver. Pickens also verified that Simms had sufficient coverage on his own separate policy as required by statute. The appellate court held that where a party agrees to exclude coverage when a named driver is operating a vehicle, that exclusion applies to all forms of coverage in the policy.

As the circuit court noted, no liability coverage would have been afforded to a third party had Simms been at fault, so it would violate public policy to allow Pickens to recover UM benefits when she was the person who executed the exclusion yet knowingly allowed Simms to drive her vehicle.

The judgment of the circuit court was affirmed.

United Services Automobile Association v. Pickens—South Carolina Supreme Court—August 11, 2021—No. 28050.