Recently, in Nationwide Mutual Fire Insurance Co. v. Walls, Op. No. 28012 (S.C. Sup. Ct. filed June 3, 2021) (Shearouse Adv. Sh. No. 18 at 14–22), the South Carolina Supreme Court addressed the relationship between “flight-from-law enforcement and felony step-down provisions” included in an automobile liability insurance policy and section 38-77-142(c) of the South Carolina Code. This section appears in the Automobile Insurance Chapter of the Code, and it contains requirements for who must be covered in a liability insurance policy, as well as the injuries that must be covered.
The incident giving rise to the case occurred on July 11, 2008, in Anderson County. Three people were passengers in a vehicle that crashed following a high-speed police chase. One of the passengers was the vehicle owner, which was being driven by someone else. Just prior to the chase, a trooper with the South Carolina Highway Patrol observed the car swerving over the center line and driving over the speed limit. The trooper activated his blue lights, but the driver refused to pull over. At times during the chase, the cars reached speeds of over 109 miles per hour. The passengers begged the driver to pull over, but he refused. Eventually, the trooper terminated the pursuit; however, the driver continued speeding and lost control of the car, wrecking it. One of the passengers died, and the other two passengers (including the owner) sustained serious injuries.
The car was insured through the owner’s policy with Nationwide, which contained a provision that limited coverage with respect to “[b]odily injury or property damage caused by: a) you; b) a relative; or c) anyone else while operating your auto; (1) while committing a felony; or (2) while fleeing a law enforcement officer.” Even though the Nationwide policy had “bodily injury and property damage liability coverage with limits of $100,000 per person and $300,000 per occurrence,” Nationwide relied on the “flight-from-law enforcement and felony step-down provisions” to only pay a total of $50,000 to the injured passengers, which is the statutory minimum mandated by section 38-77-140 of the South Carolina Code. (The driver’s insurance company also paid $50,000 total to the injured passengers.) Nationwide brought a declaratory judgment action seeking a declaration by the court “that the passengers were not entitled to combined coverage of more than $50,000 for any claims arising from the accident.”
The circuit court held a bench trial and determined that the step-down provisions in the Nationwide policy “were unconscionable and void as against public policy,” such that the two surviving passengers and the decedent passenger’s estate each “were entitled to recover $100,000 per person pursuant to the liability limits in [the owner’s] policy.” Nationwide appealed the circuit court’s decision that the step-down provisions were prohibited by section 38-77-142(C), and the Court of Appeals reversed.
The South Carolina Supreme Court then reversed the Court of Appeals, agreeing with the injured passengers that section 38-77-142(C), as previously interpreted by the Supreme Court in Williams v. GEICO, 409 S.C. 586, 762 S.E.2d 705 (2014), “prohibits any step-down provisions in a liability policy’s coverage.” The Supreme Court explained that subsections (A) and (B) of section 38-77-142 “provide required provisions for liability insurance policies, and once the insurer places the required provisions in the policy with the agreed-upon limits of coverage, any attempt by the insurer to reduce the coverage afforded by the provisions is void pursuant to subsection (C).”
The Supreme Court’s decision in the Williams case dealt with a “family step-down provision,” but Nationwide’s provisions at issue had the same effect—they operated to “reduce coverage from the contracted-for policy limit of $300,000 per occurrence to the statutory minimum of $50,000 per occurrence for damage caused by an insured while fleeing from law enforcement or engaging in a felony.” As a result, the Supreme Court concluded that the Nationwide step-down provisions were void and the injured passengers were entitled to recover $100,000 per person under the policy rather than $50,000 total. As a result, passengers injured as a result of a high-speed chase may nonetheless be able to recover pursuant to the liability limits in a policy, even if the policy purports to have a “step-down” provision, because our Supreme Court has determined such provisions are contrary to statute and void.
Posts by partner Marghretta Shisko. Click here to learn more about Marghretta.
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