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State Farm Mutual Automobile Insurance v. Calcutt

Citations: 530 S.E.2d 896; 340 S.C. 231; 2000 S.C. App. LEXIS 70Docket: 3159

Court: Court of Appeals of South Carolina; May 1, 2000; South Carolina; State Appellate Court

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In the case of State Farm Mutual Automobile Insurance Company v. Mayo Rudy Calcutt, the South Carolina Court of Appeals addressed whether State Farm could offset workers' compensation benefits against underinsured motorist (UIM) coverage provided in Calcutt's personal insurance policy. Calcutt was injured in a work-related vehicle accident and received a settlement from the at-fault driver, but sought UIM benefits from State Farm, which included a clause allowing for a setoff of any workers' compensation benefits received.

The trial court found that this setoff provision conflicted with South Carolina UIM statutes and violated public policy, as the UIM coverage was purchased by Calcutt, not his employer. Consequently, the court granted summary judgment in favor of Calcutt, deeming the setoff provision invalid. State Farm appealed, arguing that the trial court erred in its interpretation of the insurance statutes.

The appellate court analyzed the relevant insurance statutes, noting that while parties can define their contracts, any conflicting policy provision must yield to statutory law. Specifically, the court found that the definition of an "underinsured motor vehicle" and the provisions concerning UIM policies did not inherently conflict with State Farm’s setoff clause. The appellate court ultimately reversed the trial court’s decision, indicating that the setoff provision should be enforceable.

The South Carolina Supreme Court upheld a setoff provision in an employer's Underinsured Motorist (UIM) policy, as established in Williamson v. United States Fire Ins. Co., which allowed UIM benefits to be reduced by the amount of workers' compensation benefits received by the employee. The court reasoned that since the coverage was voluntarily provided by the employer, and South Carolina law does not require automobile insurance policies to cover workers' compensation liabilities, employers should not face duplicative recoveries from employees who have excess coverage.

In the current case, the employee purchased the UIM policy, but section 38-77-160 permits a setoff provision regardless of the purchaser. The trial court's finding that State Farm's setoff provision violated public policy was based on Ferguson v. State Farm Mut. Auto. Ins. Co., which ruled that any limiting language in an insurance contract that reduces coverage below statutory requirements is contrary to public policy. Ferguson specifically addressed uninsured motorist (UM) coverage, stating that such coverage cannot be reduced by a setoff provision.

The distinction made in Ferguson is significant as it pertains to mandatory UM coverage, whereas UIM coverage is optional. The court in Williamson differentiated the cases based on the nature of the policy—Williamson’s policy was voluntary, and thus the public policy against setoffs for mandatory coverage does not apply to optional UIM coverage. Consequently, the court concluded that a setoff provision in a voluntary UIM policy is enforceable, regardless of whether purchased by an employer or employee, and determined that State Farm's policy complies with insurance statutes and public policy. Therefore, the setoff should be applied as outlined in the employee's UIM policy.

State Farm argues that the trial court erred in addressing the issue of Underinsured Motorist (UIM) coverage, which was not included in the pleadings and lacked supporting evidence. Additionally, State Farm contends that the court incorrectly determined fault in the accident related to the claim. A declaratory judgment regarding insurance coverage is an action at law, and factual findings by the trial judge are upheld on appeal unless unsupported by evidence. The trial court indicated that State Farm was required to offer UIM coverage to Mr. Calcutt, but claimed the offer did not adequately inform him of the insurer's offset rights related to workers' compensation benefits; this claim lacked evidentiary support. Furthermore, no evidence was presented regarding the specifics of the offer made to Calcutt, nor did Calcutt raise any claims about the adequacy of the offer. The trial court also found that the other driver was at fault, but this conclusion was similarly unsupported by the record. Consequently, the circuit court's order is reversed.