S.C. Supreme Says Law Voids ‘Step-Down’ Provisions in Auto Policies

A South Carolina Supreme Court opinion published Thursday nullifies auto insurance policy provisions that “step down” the maximum payout in instances where the insured was committing a felony or attempting to flee a law enforcement officer.

The 3-2 decision provides an additional $250,000 in insurance coverage to the victims of a 2008 crash that killed one person and seriously injured the driver and two passengers. The majority overturned a Court of Appeals ruling that found Nationwide was liable only for the $50,000 statutory minimum instead of the $300,000 policy limit.

The two dissenters said the majority was overreaching. “In so ruling, the Court is legislating. Make no mistake about it,” the dissenting opinion written by Justice John W. Kittredge said.

Sharmin Christine Walls was a passenger in her car, a Chevrolet Lumina, while she and several friends drove around Anderson, South Carolina on July 11, 2008. Korey Mayfield was driving.

When a South Carolina state trooper spotted Mayfield speeding and crossing the yellow center line, he flashed his emergency lights and siren. Instead of stopping, Mayfield speeded up. The trooper followed in a chase where speeds exceeded 100 mph.

The trooper abandoned pursuit for public safety reasons, but Mayfield didn’t stop speeding. The passengers in the car begged him to stop, but Mayfield refused. He lost control of the vehicle and crashed, killing passenger Christopher A. Timms and injuring Walls, Deborah Timms and Randi Harper.

Mayfield was paralyzed by the crash. He pleaded guilty to vehicular homicide in 2010. Judge Cordell Maddox sentenced him to two years of unmonitored home incarceration and five years probation, according to a report by the Independent Mail newspaper.

Walls’ policy with Nationwide had a $300,000 per occurrence and $100,000 per person coverage limit. But after the accident, the insurer sought declaratory judgment that it could reduce the total benefit to $50,000 because of a provision in the policy that reduced the maximum benefit to the statutory minimum if the accident occurred while the insured was committing a felony or fleeing law enforcement. Both parties agreed that Mayfield was insured because he was a permissive user of Walls’ car.

The Circuit Court Judge refused, but Nationwide appealed. The Court of Appeals ruled that the policy language reduced the amount of coverage owed and ruled in favor of the insurer.

United Policyholders and the South Carolina Association for Justice filed amicus briefs when the case was appealed to the state Supreme Court.

The Supreme Court majority said its ruling was required by Section 38-77-140 of South Carolina statutes. That law states that any policy provision “which purports or seeks to limit or reduce the coverage afforded by the provisions required by this section is void.”

The state Supreme Court had cited that law to restrict the use of step-down provisions once before. In Williams v. Government Employees Ins. Co. (2014) the high court ruled that reduced benefits to the statutory minimum when a family member of the at-fault insured was the claimant.

The Supreme Court majority said the same reasoning requires it to void the step-down provision in Nationwide’s policy.

The dissenters said the court majority was using “judicial sleight of hand” to create policy under the guide of interpreting a statute.

The dissenting opinion says “every other jurisdiction in the United States that follows a similar statutory scheme permits criminal conduct exclusions that reduce liability coverage to the statutory minimum where the injury is caused by an insured.”