S.C. Supreme: Ambiguous Policy Language Allows Auto Claimant to Stack Benefits

A woman who was injured in a crash while driving a rental car provided by an auto insurer may collect uninsured motorist benefits from more than one policy, the South Carolina Supreme Court ruled Wednesday.

In a 3-2 decision, the high court ruled that an “anti-stacking” provision in a policy written by State Farm Mutual Automobile Insurance Co. does not apply because the language was unclear about whether a replacement rental car fell within the terms of the exclusion.

“Because both parties offer reasonable interpretations of the policy language, we believe an ambiguity exists, which we construe against the drafter,” the majority opinion says.

Myra Windham was involved in two accidents within the span of six days in 2012, through no fault of her own. On Sept. 29, her Toyota Camry collided with another vehicle. The other driver’s insurer, Allstate, provided Windham a rental vehicle while her Camry was being repaired.

On Oct. 5, a motorist ran a stop sign and struck the rental car. The crash injured Windham’s back and resulted in surgery to install a spinal cord stimulator, according to her attorney.

Windham and her family owned five vehicles, each insured by State Farm with a $100,000 uninsured motorist limit. State Farm, however, contended that she could collect from only one of those policies because state law prohibits stacking insurance benefits for accidents involving vehicles that are “not owned” by the policyholder.

The insurer paid Windham $100,000 but denied anything was owed from the policies on the other four vehicles. State Farm filed a lawsuit seeking a declaratory judgment. The Lexington County Circuit Court agreed that coverage was owed from only one policy.

The Court of Appeals reversed, determining that the policy language clearly allowed coverage for an accident while the policyholder is driving a temporary substitute car.

The Supreme Court agreed that separate coverage was owed but found that the policy was far from clear on that point. It affirmed the Court of Appeals decision, but for different reasons.

The majority opinion explained that in South Carolina, a policyholder must be a Class I insured to stack benefits. State law allows coverage from only one vehicle if the damages result from an accident that does not involve “the insured’s or named insured’s vehicle.”

Previous cases have established that a vehicle does not have to be owned by an insured person to be considered an “insured’s vehicle,” the opinion says. Drivers of cars that are leased or borrowed, for example, are also Class I insureds.

One sentence in State Farm’s policy seems to make clear that stacking is not allowed for “non-owned cars.” But a separate sentence in the policy says, “if a car qualifies as both a non-owned car and a temporary substitute car, then it is considered a temporary substitute car only.”

The majority said that language creates an ambiguity because if a car is considered “only” a temporary substitute car, it cannot also be a non-owned car.

“While it is debatable that this alone transforms them into owned vehicles, that is nevertheless a reasonable interpretation,” the majority opinion says. “On one hand temporary substitute vehicles are not-owned, but on the other, the policy clearly states they are not to be considered non-owned.”

Windham’s attorney, Stephen H. Cook with Koon Cook and Walters in Columbia, said he intends to seek a jury verdict for the full $500,000 in coverage available. He said the spinal stimulator inserted into his client’s back will have to be replaced after eight years. Also, his client’s ability to earn income has been negatively affected because employers are often reluctant to hire workers who have suffered back injuries.

Cook said Windham’s situation provides a strong argument for motorists who own multiple vehicles to make sure the policy limits on each are the same. He said many car owners will buy lower-limit policies for vehicles that their children drive. Cook said if a certain amount of coverage is needed, it makes no sense to limit the potential recovery according to which vehicle is involved in a crash.

Cook said he expects State Farm to file a petition for reconsideration, but he said the Supreme Court’s opinion should stand. He said if Windham had been driving one of her other vehicles at the time of the crash, there would be no question that she was entitled to coverage from all give insurance policies.

Justices George C. James and John Cannon Few dissented. James wrote in a dissenting opinion that the majority ignored the fact that Windham did not own the rental car, which clearly excluded in from coverage.