Nationwide Mutual v. Powell ( 2002 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
NATIONWIDE MUTUAL INSURANCE 
COMPANY,
Plaintiff-Appellee,
v.  No. 01-1217
WILLIAM POWELL; DEBBIE POWELL,
Defendants-Appellants.

NATIONWIDE MUTUAL INSURANCE 
COMPANY,
Plaintiff-Appellee,
v.  No. 01-2390
WILLIAM POWELL; DEBBIE POWELL,
Defendants-Appellants.

Appeals from the United States District Court
for the District of South Carolina, at Florence.
Patrick Michael Duffy, District Judge.
(CA-00-1303-4-23)
Argued: April 2, 2002
Decided: May 31, 2002
Before WILKINS, TRAXLER, and GREGORY, Circuit Judges.
Reversed and remanded by published opinion. Judge Wilkins wrote
the opinion, in which Judge Traxler and Judge Gregory joined.
2 NATIONWIDE MUTUAL INS. v. POWELL
COUNSEL
ARGUED: Stuart Wesley Snow, DUSENBURY, SNOW & MCGEE,
P.A., Florence, South Carolina, for Appellants. John Robert Murphy,
MURPHY & GRANTLAND, P.A., Columbia, South Carolina, for
Appellee. ON BRIEF: E. Raymond Moore, III, MURPHY &
GRANTLAND, P.A., Columbia, South Carolina, for Appellee.
OPINION
WILKINS, Circuit Judge:
William Powell (William) and his wife, Debbie, appeal a district
court order granting summary judgment against them in an action
brought by Nationwide Mutual Insurance Company (Nationwide)
seeking a declaration that an automobile policy it issued to William
did not provide underinsured motorist ("UIM") coverage. We reverse
and remand for further proceedings.1
I.
Viewing the record in the light most favorable to the Powells, as
we must in deciding the appropriateness of granting summary judg-
ment to Nationwide, see Figgie Int’l, Inc. v. Destileria Serralles, Inc.,
190 F.3d 252, 255 (4th Cir. 1999), the facts, for purposes of this deci-
sion, are as follows. In February 1998, Debbie decided to change
insurers and to increase coverage on her vehicle. She contacted a
Nationwide agent and informed the agent that she wanted "full cover-
age." J.A. 104 (internal quotation marks omitted). Debbie showed the
agent the declarations page from her then-current policy, which indi-
cated that the policy contained UIM coverage. Nationwide subse-
quently issued her a policy with $100,000 liability coverage and
$35,000 UIM coverage.
1
Because we reverse the order granting summary judgment to Nation-
wide, we dismiss as moot the Powells’ appeal of the denial of their
motion for relief from judgment.
NATIONWIDE MUTUAL INS. v. POWELL 3
In June 1998, William authorized Debbie to obtain a rate quote and
an application from Nationwide for coverage of his two vehicles.
Debbie contacted the Nationwide agent from whom she had obtained
her own policy and informed the agent that her husband desired liabil-
ity coverage of $100,000 on his two vehicles and that he wanted "full
coverage" as he had with his then-current insurer. Debbie met with
the agent’s assistant, Sherry Volz, and at Volz’s direction signed Wil-
liam’s name beside several "X" marks on various forms. One of the
signatures was in a space indicating that the insurance applicant (Wil-
liam) did not wish to purchase UIM coverage. Another signature was
in a space confirming that the applicant had read the explanation of
UIM coverage contained in the form. Debbie did not know what UIM
coverage was, nor did Volz explain it to her. Additionally, Volz never
asked Debbie whether William had authorized her to apply for insur-
ance or reject UIM coverage on his behalf, and Debbie never told
Volz that she was so authorized.
William was displeased when he learned that Debbie had applied
for a policy, but when Debbie assured him that the resulting policy
would contain the "full coverage" that he desired, he chose not to
rescind the application. Accordingly, when Volz contacted him, Wil-
liam told her that he wanted the policy. (Volz did not ask William
whether Debbie had been authorized to act on his behalf, nor did she
specifically inquire as to whether William desired UIM coverage.)
Nationwide subsequently issued the policy with William listed as the
named insured and Debbie listed as a driver. The policy included,
inter alia, comprehensive, collision, towing, and rental-car reimburse-
ment coverage. Although the policy, which Nationwide sent William,
indicated that it did not provide UIM coverage, William never read
the policy and continued to believe that UIM coverage was included.
William never rescinded, modified, or canceled the policy, and he
paid the premium. Shortly after he had renewed the policy for an
additional six months, Debbie was driving one of William’s vehicles
when she was involved in an accident caused by another driver and
sustained injuries in excess of the other driver’s limits. When she sub-
sequently made a claim under William’s policy, Nationwide made
payments for property damage, towing, and automobile rental but
denied that the policy provided UIM coverage.2 Nationwide then
2
The record does not reflect whether at the time of the accident Debbie
still had the policy containing UIM coverage that she had purchased
from Nationwide on her own vehicle in February 1998.
4 NATIONWIDE MUTUAL INS. v. POWELL
instituted this action, and the district court subsequently granted sum-
mary judgment to Nationwide.
II.
Because the district court sat in diversity, we must apply South
Carolina law and predict how the South Carolina Supreme Court
would decide this issue.3 See Doe v. Doe, 973 F.2d 237, 240 (4th Cir.
1992). South Carolina law provides that automobile insurance carriers
"shall . . . offer, at the option of the insured, underinsured motorist
coverage up to the limits of the insured liability coverage." S.C. Code
Ann. § 38-77-160 (Law. Co-op. 2002). The South Carolina Supreme
Court has formulated a four element test for determining whether an
insurer has complied with its duty to offer optional coverages:
(1) the insurer’s notification process must be commercially
reasonable, whether oral or in writing; (2) the insurer must
specify the limits of optional coverage and not merely offer
additional coverage in general terms; (3) the insurer must
intelligibly advise the insured of the nature of the optional
coverage; and (4) the insured must be told that optional cov-
erages are available for an additional premium.
State Farm Mut. Auto. Ins. Co. v. Wannamaker, 354 S.E.2d 555, 556
(S.C. 1987). The insurer’s failure to satisfy this test nullifies any
rejection of UIM coverage by the insured, see Hanover Ins. Co. v.
Horace Mann Ins. Co., 389 S.E.2d 657, 659 (S.C. 1990), and requires
that the policy "be reformed, by operation of law, to include UIM
coverage up to the limits of liability insurance carried by the insured,"
Butler v. Unisun Ins. Co., 475 S.E.2d 758, 760 (S.C. 1996).
A statute apparently passed in response to Wannamaker provides
guidelines for the forms that insurers must use to offer UIM coverage
to "new applicants." S.C. Code Ann. § 38-77-350(A) (Law. Co-op.
2002); see Rabb v. Catawba Ins. Co., 528 S.E.2d 693, 695 (S.C. Ct.
App. 2000) (stating that statute was apparently passed in response to
Wannamaker). Additionally, subsection (B) of this statute provides:
3
The parties agree that South Carolina law applies.
NATIONWIDE MUTUAL INS. v. POWELL 5
If this form is properly completed and executed by the
named insured it is conclusively presumed that there was an
informed, knowing selection of coverage and neither the
insurance company nor any insurance agent has any liability
to the named insured or any other insured under the policy
for the insured’s failure to purchase any optional coverage
or higher limits.
S.C. Code Ann. § 38-77-350(B) (Law. Co-op. 2002). However, pre-
sentation of a proper UIM coverage rejection form to a named
insured’s spouse does not constitute a meaningful offer of UIM cover-
age if the spouse is not acting as the named insured’s agent. See All-
state Ins. Co. v. Estate of Hancock, 545 S.E.2d 845, 848 (S.C. Ct.
App. 2001); see also id. at 848 n.4 (stating in dictum that it "may be
possible" for a named insured’s spouse to effectively reject UIM cov-
erage on behalf of the named insured if the spouse is authorized to act
on the named insured’s behalf).
Before the district court, Nationwide contended that Debbie was
acting as William’s agent when she procured the policy and that the
presentation of the UIM form to her constituted a meaningful offer of
UIM coverage.4 The district court agreed that an offer of UIM cover-
age made to a person acting as the named insured’s agent could con-
stitute a meaningful offer of UIM coverage. The court concluded,
however, that Nationwide failed to demonstrate as a matter of law that
Debbie had either actual or apparent authority to reject UIM coverage
on her husband’s behalf.5
4
It is undisputed that the content of the UIM form met the require-
ments of § 38-77-350(A).
5
Nationwide claims that the district court erred in concluding that
Nationwide had not established as a matter of law that Debbie had actual
authority to procure the insurance policy on her husband’s behalf. We
disagree. Because the Powells forecasted evidence that William only
authorized Debbie to obtain a rate quote and an application from Nation-
wide, the district court properly identified a genuine issue of fact regard-
ing Debbie’s agency. See Estate of Hancock, 545 S.E.2d at 848 n.4
(stating that when wife rejects UIM coverage for policy in which hus-
band is named insured, existence and scope of agency relationship
between spouses are questions of fact).
6 NATIONWIDE MUTUAL INS. v. POWELL
Nationwide also argued that even if Debbie lacked authority to pro-
cure the policy on her husband’s behalf, the policy should not be
reformed to include UIM coverage because William ratified Debbie’s
rejection of UIM coverage by accepting the policy without complaint.
The district court adopted this position and granted summary judg-
ment to Nationwide on this basis.
III.
Ratification is the "adoption and confirmation by one person of an
act or contract performed or entered into in his behalf by another who
at the time assumed to act as his agent." Lincoln v. Aetna Cas. & Sur.
Co., 386 S.E.2d 801, 803 (S.C. Ct. App. 1989). Ratification occurs
when three elements are present: (1) acceptance by the putative prin-
cipal (William) of the benefits of acts by the putative agent (Debbie),
(2) full knowledge of the facts by the putative principal, and (3) cir-
cumstances or an affirmative election demonstrating the putative prin-
cipal’s intent to accept the unauthorized arrangements. See id.The Powells do not deny that William ratified Debbie’s purchase
of the policy, nor do they deny that the form presented to Debbie, on
which she signed William’s name, would have been sufficient had it
been presented to and signed by William himself. For its part, Nation-
Although not raised by Nationwide, we have considered whether the
Powells should be estopped from denying that Debbie was authorized to
reject UIM coverage by virtue of her signing William’s name to the
appropriate forms. However, even if Debbie’s signing of William’s name
constituted an implicit representation that she was authorized to do so,
a party cannot be equitably estopped by virtue of her misrepresentation
when the party to whom the misrepresentation was made could have
acquired the true facts had it acted with reasonable diligence. See Adams
v. Adams, 66 S.E.2d 809, 812 (S.C. 1951). To determine whether Debbie
had possessed the authority to reject UIM coverage on William’s behalf,
Nationwide needed only to ask William. Although Volz did subsequently
ask William whether he wanted to accept the policy, she never asked him
whether Debbie had possessed the authority to reject UIM coverage. Nor
did William have any reason to know that that additional fact might carry
legal significance. Accordingly, no estoppel applies here.
NATIONWIDE MUTUAL INS. v. POWELL 7
wide does not deny that William was a new applicant. Nor does it dis-
pute that even when a named insured accepts an insurance agreement
not containing UIM coverage, the policy must be reformed to include
UIM coverage if no meaningful offer of UIM coverage has been
rejected by the named insured.
Where the parties disagree is on the question of whether Nation-
wide’s offer of UIM coverage to Debbie was a "meaningful offer."
The Powells contend that no meaningful offer was made because the
offer, including the information accompanying the offer, was pre-
sented not to the named insured, but to another person who, at least
for purposes of summary judgment, was not authorized to act on his
behalf. Nationwide responds that because the form it utilized was a
proper one, its offer to Debbie was a meaningful offer as a matter of
law. We agree with the Powells that Nationwide has not shown as a
matter of law that the offer was meaningful.
As we have stated, in order to be a "meaningful offer" of UIM cov-
erage, an offer must "intelligibly advise the insured of the nature of"
UIM coverage. Wannamaker, 354 S.E.2d at 556; see Estate of Han-
cock, 545 S.E.2d at 848 (concluding that "no [meaningful] offer was
made" when UIM form was presented to and signed by spouse of
named insured who was not authorized to reject UIM coverage); see
also McDonald v. S.C. Farm Bureau Ins. Co., 518 S.E.2d 624, 626
(S.C. Ct. App. 1999) (noting "legislature’s intent that all named
insured be offered UIM coverage"). Nationwide’s presentation of the
UIM form to Debbie clearly did not intelligibly advise William (the
named insured) about UIM coverage. Indeed, the Powells offered evi-
dence that William made the decision to accept the policy without
ever having seen the UIM form.
Nationwide maintains that it would be unjust to permit the Powells
to obtain the benefits of the policy Debbie procured without binding
them to Debbie’s rejection of UIM coverage. But this outcome is no
more unfair than the result we would have if William had applied for
the policy himself and specifically rejected an offer of UIM coverage,
but Nationwide had failed to intelligibly advise him concerning the
offer. In both cases, William would have entered into an agreement
that did not contain UIM coverage. But in both cases, Nationwide’s
failure to properly advise William regarding UIM coverage would
8 NATIONWIDE MUTUAL INS. v. POWELL
deprive its UIM coverage offer of any legal effect and require that the
policy be reformed. While the results in both cases might be viewed
as undeserved windfalls for the Powells, a contrary result in either
case would allow the insurer to avoid its duty to provide the critical
UIM information in a commercially reasonable manner to the named
insured, the individual who has the sole authority to decide whether
to purchase UIM coverage.6
Nationwide also contends that as a matter of law § 38-77-350(B)
prevents reformation of the policy. We disagree. Nationwide has
failed to demonstrate as a matter of law that it complied with that stat-
ute since the UIM form presented to Debbie was not, as the statute
requires, "completed and executed by" William. Moreover, even if the
statutory text could be construed to bar reformation when the named
insured has ratified a putative agent’s unauthorized rejection of UIM
coverage, such an interpretation would be directly at odds with the
purpose of the meaningful-offer requirement for the reasons already
discussed. Accordingly, we decline to interpret the statute in that
manner. See McDonald, 518 S.E.2d at 626 (stating that "[a] statute
must receive a practical and reasonable interpretation consonant with
the design of the legislature" (internal quotation marks omitted)).
IV.
In sum, we conclude that the district court erred in holding as a
matter of law that Nationwide’s presentation of the UIM form to Deb-
bie constituted a meaningful offer of UIM coverage. Accordingly, we
reverse the grant of summary judgment in favor of Nationwide and
remand for further proceedings.
REVERSED AND REMANDED
6
Because the Powells have offered evidence that Debbie was not
authorized to reject UIM coverage on William’s behalf, we do not
address whether presentation of the appropriate form to someone autho-
rized by the named insured to make the UIM coverage decision would
constitute a meaningful offer.