Mcwhite v. Ace Am. Ins. Co.

STANLEY MCWHITE, laintiff-Appellant,

v.ACE AMERICAN INSURANCE COMPANY, efendant-Appellee.

No. 10-1373

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: December 8, 2010

Decided: February 25, 2011

UNPUBLISHED

Appeal from the United States District Court for the District of South Carolina, at Florence. R. Bryan Harwell, District Judge. (4:07-cv-01551-RBH)

Before Sandra Day O'CONNOR, Associate Justice (Retired), Supreme Court of the United States, sitting by designation, and DUNCAN and AGEE, Circuit Judges.

Affirmed by unpublished opinion. Justice O'Connor wrote the pinion, in which Judge Duncan and Judge Agee joined.

ARGUED: Stephen J. Wukela, WUKELA LAW FIRM, Florence, South arolina, for Appellant. John Robert Murphy, MURPHY & RANTLAND, PA, Columbia, South Carolina, for Appellee.

ON RIEF: Jeffrey C. Kull, MURPHY & GRANTLAND, PA, Columbia, South arolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

O'CONNOR, Associate Justice:

Appellant Stanley McWhite appeals the district court's grant of summary judgment to Appellee ACE American Insurance Company in his suit claiming that his employer's automobile insurance policy includes or should be reformed to include underinsured motorist coverage. For the reasons set forth below, we affirm the judgment of the district court.

I.

Appellant Stanley McWhite was employed by Ahold Americas Holdings, Inc. On February 10, 2005, McWhite was driving a tractor-trailer truck owned by Ahold, when the truck jack-knifed. McWhite exited the truck, and while setting up warning triangles along the road, as required by Ahold policy and Department of Transportation regulations, McWhite was struck and injured by a vehicle driven by an "underinsured" motorist.¹

After recovering $25,000 from the driver of the vehicle, see Covenant Not to Execute, J.A. 57, McWhite filed suit against his employer's insurance company, Appellee ACE American Insurance Company, in the Florence County, South Carolina, Court of Common Pleas. McWhite sought a declaratory judgment that he is an "insured" for purposes of underinsured motorist ("UIM") coverage under a policy issued by ACE to Ahold. ACE removed the case to the U.S. District Court for the District of South Carolina on the grounds of diversity of citizenship.

The district court ordered the parties to engage in discovery on the question of whether Ahold's insurance policy contained a UIM endorsement and, if not, whether ACE had made Ahold a meaningful offer of UIM coverage, as required by South Carolina law.

After discovery, the district court granted summary judgment for Appellee ACE. McWhite v. ACE American Ins. Co., No. 4:07-cv-01551-RBH, 2010 WL 1027872 (D.S.C. Mar. 17, 2010). The district court held that Ahold's insurance policy did not contain UIM coverage. Id. at *3. The district court further held that ACE had not made a meaningful offer of UIM coverage under S.C. Code Ann. § 38-77-350, id. at *4, and noted that it had "some concern" about whether ACE, alternatively, had made a meaningful offer pursuant to the South Carolina Supreme Court's decision in State Farm Mutual Auto Insurance Company v. Wannamaker, 354 S.E.2d 555 (S.C. 1986). McWhite, 2010 WL 1027872, at *5. The district court ultimately "[a]ssum[ed] without deciding" that no meaningful offer had been made andthat the policy could be reformed to include UIM coverage. Id. at *5-*6. It concluded, however, that McWhite would not constitute an "insured" under South Carolina law for purposes of UIM coverage, and thus that he would not benefit from any reformation of the contract. Id. at *8.

McWhite appeals the district court's grant of summary judgment for ACE.

II.

We review the district court's grant of summary judgment de novo, viewing the facts in the light most favorable to McWhite. See Meson v. GATX Tech. Servs. Corp., 507 F.3d 803, 806 (4th Cir. 2007). "Summary judgment is appropriate when 'there is no genuine issue as to any material fact and... the movant is entitled to judgment as a matter of law.'" Merrit v. Old Dominion Freight Line, Inc., 601 F.3d 289, 295 (4th Cir. 2010) (quoting Fed. R. Civ. P. 56(c)). In this diversity action, we must apply South Carolina law. See Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th Cir. 2005). We first address whether the policy contained UIM coverage and then turn to whether ACE made a meaningful offer of such coverage.

A.

McWhite argues that Ahold's insurance policy in effect at the time of the accident in February 2005 includes UIM coverage. Ahold argues that it does not, and the district court agreed with Ahold. McWhite, 2010 WL 1027872, at *2-*3.

Both parties point the Court to Endorsement #163, entitled "Limits of Insurance—Uninsured Motorists/Underinsured Motorists" for the period from December 1, 2004, to December 1, 2005. Under a heading for Uninsured Motorists Coverage and Underinsured Motorists Coverage, Endorsement #163 lists a $40,000 limit for South Carolina. J.A. 163. The parties offer different interpretations of the $40,000 notation.

Ahold explains that Endorsement #163 states that it amends "Item 2 of the Declarations." Id. Ahold then turns to Item 2 in the insurance policy listing the policy period from May 19, 2004, to December 1, 2004. J.A. 116-117. In Item 2, there is a box labeled "Underinsured Motorists"; it says "See Endt. 6," which Ahold explains was the predecessor to Endorsement #163, Appellee's Br. at 54 n.15, and "Financial Responsibility*." The asterisk is linked to a footnote at the bottom of the page that states "where rejection not permitted." J.A. 117. Ahold explains that since rejection of UIM coverage is permitted in South Carolina, reading Endorsement #163 together with Item 2 clearly indicates that Ahold did not desire any UIM coverage.

Appellee's Br. at 54. Ahold explains that the $40,000 in the Endorsement applies only to uninsured motorist coverage, which South Carolina does not permit an insured to reject. Id.

In contrast, McWhite argues that the "Item 2" in the original policy is irrelevant because it does not apply to the period in which the accident occurred. He urges the Court to look only to the "Renewal Endorsement" for the term from December 1, 2004, to December 1, 2005. J.A. 153. The Renewal Endorsement states, "This Endorsement changes the policy." Id. The Renewal Endorsement has a line for Underinsured Motorists that states "See Endt. #163," which, as previously explained, lists $40,000 in coverage for South Carolina. Id. Based on the Renewal Endorsement and Endorsement #163, McWhite argues that there is no provision in the insurance contract for the applicable period that rejects UIM coverage. Appellant's Br. at 22-24.

The South Carolina Supreme Court has explained that "[a] contract is ambiguous when the terms of the contract are reasonably susceptible of more than one interpretation." S.C. Dep't of Natural Res. v. Town of McClellanville, 550 S.E.2d 299, 303 (S.C. 2001). "It is a question of law for the court whether the language of a contract is ambiguous." McGill v. Moore, 672 S.E.2d 571, 574 (S.C. 2009). After considering the parties' arguments, the district court held that the policy is ambiguouswith regard to whether it included UIM coverage in South Carolina. McWhite, 2010 WL 1027872, *3. We agree.

In light of this ambiguity, we must look to extrinsic evidence of the intent of the parties to the contract. Dixon v. Dixon, 608 S.E.2d 849, 852 (S.C. 2005) ("If the vital terms of a contract are ambiguous, then, in an effort to determine the intent of the parties, the court may consider probative, extrinsic evidence."); see also DeVore v. Piedmont Ins. Co., 142 S.E. 593 (S.C. 1928) (explaining that extrinsic, parol evidence is permissible to explain the intent of the parties to an ambiguous insurance contract). Normally, when a contract is held to be ambiguous, the intent of the parties is a question of fact for the jury. Garrett v. Pilot Life Ins. Co., 128 S.E.2d 171, 174 (S.C. 1962). In this case, however, the record contains uncontroverted evidence that neither Ahold nor ACE—the parties to the contract—intended to include UIM coverage. See Deposition of Nicholas A. Parillo at 38-40 (J.A. 263-265); Deposition of Tony Dingrando at 35, 38-39 (J.A. 225, 282-283). This question is therefore appropriate for summary judgment, and we affirm the district court's holding that the insurance policy, as construed in light of the uncontroverted evidence of the parties' intent, does not include UIM coverage.

B.

We turn now to whether ACE made a meaningful offer of UIM coverage to Ahold. South Carolina Code Ann. § 38-77-160 requires an insurer to offer UIM coverage to the insured, ² and the South Carolina Supreme Court has explained that the offer must be "meaningful." See Floyd v. Nationwide Mut. Ins. Co., 626 S.E.2d 6, 12 (S.C. 2005). If no meaningful offer is made, then "the policy will be reformed by operation of law to include UIM coverage up to the limits of liability insurance carried by the insured." Ray v. Austin, 698 S.E.2d 208, 212 (S.C. 2010). The meaningful offer requirement can be satisfied in one of two ways: compliance with S.C. Code Ann. § 38-77-350(A) or satisfaction of the four-part test the South Carolina Supreme Court established in State Farm Mutual Insurance Co. v. Wannamaker, 354 S.E.2d at 556. We consider each in turn.

S.C. Code Ann. § 38-77-350(A) establishes requirements for forms that insurers use to make offers of optional insurance, including UIM coverage. At the time of the contract at issue here, the provision stated:

(A) The director or his designee shall approve a form which automobile insurers shall use in offering optional coverages required to be offered pursuant to law to applicants for automobile insurance policies. The form, at a minimum, must provide for each optional coverage required to be offered:

(1) a brief and concise explanation of the coverage,

(2) a list of available limits

...