Bowman v. Continental Insur Co ( 2000 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ROBERT M. BOWMAN; SHIRLEY
BOWMAN,
Plaintiffs-Appellants,
v.
THE CONTINENTAL INSURANCE
COMPANY, Subsidiaries of the
Continental Insurance Companies; No. 99-2540
ROLLINS LEASING,
Defendants-Appellees,
and
MGA INSURANCE COMPANY,
INCORPORATED,
Defendant.
Appeal from the United States District Court
for the District of South Carolina, at Greenville.
Henry M. Herlong, Jr., District Judge.
(CA-98-3224-6-20)
Argued: June 7, 2000
Decided: August 18, 2000
Before MOTZ, TRAXLER, and KING, Circuit Judges.
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Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.
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COUNSEL
ARGUED: Donald Roscoe Moorhead, DONALD R. MOORHEAD,
P.A., Greenville, South Carolina, for Appellants. Roy Davis Howser,
III, HOWSER, NEWMAN & BESLEY, L.L.C., Columbia, South
Carolina; James D. Brice, GIBBES, GALLIVAN, WHITE & BOYD,
P.A., Greenville, South Carolina, for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Robert and Shirley Bowman appeal the district court's order of
October 18, 1999, granting summary judgment in favor of Continen-
tal Insurance Company ("Continental") and Rollins Leasing Corpora-
tion ("Rollins"). For the reasons set forth below, we affirm in part,
reverse in part, and remand for further proceedings.
I.
On October 23, 1996, Robert Bowman, a resident of Georgia, was
injured in an automobile accident in Greenville County, South Caro-
lina. In a negligence action in the District of South Carolina, Mr.
Bowman and his wife obtained a judgment in excess of two million
dollars against the at-fault driver. However, the negligent driver's lia-
bility insurance coverage was limited to $125,000, and the Bowmans
collected that sum from the driver's insurer, Allstate Insurance Com-
pany.
Thereafter, on November 3, 1998, the Bowmans filed a declaratory
judgment action seeking reformation of two automobile liability
insurance policies held by Media Transport, Inc. ("Media Transport")
2
and Rollins to provide underinsured motorist ("UIM") coverage.1
Tatham & Associates, Mr. Bowman's employer, had hired Media
Transport to provide common carrier services. In turn, Media Trans-
port had leased from Rollins the vehicle driven by Mr. Bowman at the
time of the accident. Pursuant to the lease agreement (the "Media
Transport-Rollins Lease"), Media Transport agreed to accept the auto-
mobile liability insurance coverage provided by Rollins. Rollins
secured such coverage under two automobile liability policies issued
by Continental, specifically Policy number SRB 9561300 ("Policy
1300") and Policy number SRB 3552846 ("Policy 2846"). Neither of
these policies expressly provided UIM coverage; indeed, both denied
such coverage to the extent permitted by law.
In their complaint, the Bowmans alleged that Continental violated
South Carolina law by failing to make a "meaningful offer" to provide
UIM coverage. Accordingly, they asserted that, as a matter of law,
Continental's policies had to be reformed and Continental was
obliged to provide UIM coverage. In response, Continental main-
tained that Georgia law, which merely requires the named insured to
reject UIM coverage in writing, governed the interpretation of the
Media Transport-Rollins Lease. Asserting that Rollins rejected UIM
coverage in writing under both Continental policies, Continental
moved for summary judgment. By order of October 18, 1999, the dis-
trict court granted Continental's motion. From that adverse judgment,
the Bowmans appeal.2
II.
We review the district court's grant of summary judgment de novo,
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1 UIM coverage obligates an insurer to pay the insured all sums -- up
to the limits of the policy in question -- which the insured is legally enti-
tled to recover as damages from the negligent owner or operator of an
underinsured motor vehicle. See Ga. Code Ann. § 33-7-11(a)(1) (1999).
2 In their complaint, the Bowmans also sought reformation of an insur-
ance policy provided to Media Transport by MGA Insurance Co.
("MGA"). By order of October 19, 1999, the district court granted
MGA's motion for summary judgment. After filing their notice of
appeal, the Bowmans moved to dismiss MGA from this appeal. On May
23, 2000, we granted their motion and dismissed MGA from this appeal.
3
viewing all facts and inferences in the light most favorable to the non-
moving party. Food Lion, Inc. v. S.L. Nusbaum Ins. Agency, Inc., 202
F.3d 223, 227 (4th Cir. 2000). In this review, we are mindful that
summary judgment is appropriate "where there is no genuine issue of
material fact, and the moving party is entitled to judgment as a matter
of law." Semple v. City of Moundsville, 195 F.3d 708, 712 (4th Cir.
1999) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).
III.
A.
The resolution of this appeal first requires that we determine
whether the insurance policies are governed by the law of South Car-
olina, as the Bowmans contend, or by the law of Georgia, as Conti-
nental and Rollins maintain. If the Bowmans are correct and South
Carolina law applies, Continental would have been required to make
a meaningful offer of UIM coverage. See S.C. Code Ann. § 38-77-
160. That is, section 38-77-160 requires automobile insurance carriers
to "offer, at the option of the insured, uninsured motorist coverage up
to the limits of the insured's liability coverage . . . ." In State Farm
Mut. Auto. Ins. Co. v. Wannamaker, 354 S.E.2d 555 (S.C. 1987), the
court set forth four requirements an insurance carrier must satisfy to
establish an effective offer of UIM coverage:
(1) provide commercially reasonable notification;
(2) specify the limits of optional coverage and not merely
offer additional coverage in general terms;
(3) intelligibly advise the insured of the nature of the
optional coverage; and
(4) convey to the insured that optional coverages are avail-
able for an additional premium.
Id. at 556. Under South Carolina law, the failure to satisfy any one
of these four prongs vitiates the offer of UIM coverage and requires
reformation of the insurance policy to include UIM coverage to the
4
limits of liability. See Ackerman v. Travelers Indem. Co., 456 S.E.2d
408, 411 (S.C. Ct. App. 1995).
Conversely, Continental maintains that Georgia law governs our
interpretation of these policies. Under Georgia law, an insurer is not
statutorily required to make a meaningful offer of UIM coverage.
Rather, to be relieved of its responsibility to provide such coverage,
the insurer simply must demonstrate that the named insured rejected
UIM coverage in writing. Ga. Code Ann. § 33-7-11(a)(3) (1999).
B.
A federal court sitting in diversity must apply the choice of law
rules of the forum state. See Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U.S. 487, 496 (1941). Thus, in resolving this choice of law ques-
tion, the district court correctly looked to South Carolina's choice of
law rules. In insurance coverage disputes, South Carolina courts have
historically followed the doctrine of lex loci contractus, applying the
law of the state where the insurance contract was formed.3 Jones v.
Prudential Ins. Co., 42 S.E.2d 331, 333 (S.C. 1947). See Unisun Ins.
Co. v. Hertz Rental Corp., 436 S.E.2d 182, 184 (S.C. Ct. App. 1993)
(citation omitted) ("A contract of insurance is governed by the law of
the state in which application for insurance was made, the policy
delivered, and the contract formed.").
This general rule was modified by statute in 1947, now codified as
S.C. Code Ann. § 38-61-10 (Law. Co-op. 1976). Section 38-61-10
provides:
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3 Of course, the parties may contract around the general choice of law
rules by expressly selecting the law to govern their dealings. See Unisun
Ins. Co. v. Hertz Rental Corp., 436 S.E.2d 182, 184 (S.C. Ct. App. 1993)
(recognizing that choice of law rules will not apply if "the parties agree
to a different rule").
Here, the Bowmans assert that Policy 1300 and Policy 2846 both con-
tain choice of law provisions providing for the application of South Car-
olina law. We find these assertions untenable, however, and we agree
with the district court that the provisions relied upon by the Bowmans
cannot reasonably be construed as "choice of law" provisions. J.A. 511.
5
All contracts of insurance on property, lives, or interests in
this State are considered to be made in the State and all con-
tracts of insurance the applications for which are taken
within the State are considered to have been made within
this State and are subject to the laws of this State.
S.C. Code Ann. § 38-61-10.
In support of their position, the Bowmans rely on the Supreme
Court of South Carolina's decision in Sangamo Weston Inc. v. Nat'l
Sur. Corp., 414 S.E.2d 127 (S.C. 1992). In Sangamo Weston, insur-
ance policies covering a South Carolina manufacturing facility were
executed outside South Carolina by parties not citizens of South Caro-
lina. When the insured sought a declaratory judgment to determine
the scope of insurance coverage, the first issue to be resolved was
"which state's law should be applied in interpreting these insurance
contracts." Id. at 129. Critical to this determination was the fact that
the insured "property" at issue -- Sangamo Weston's manufacturing
facility -- was located in South Carolina. Id. at 130. Thus, insofar as
"both parties [although not residents of South Carolina] availed them-
selves of the law of South Carolina when they respectively provided
or received insurance on interests located in this state," id. at 131, the
court, pursuant to section 38-61-10, held that South Carolina law
applied.
According to the Bowmans, because the automobile collision
occurred in South Carolina, section 38-61-10 and Sangamo Weston
mandate the application of South Carolina law. However, this argu-
ment has been rejected in South Carolina. In Unisun, 436 S.E.2d 182,
the plaintiffs were injured in an automobile collision in South Caro-
lina, and they subsequently filed a declaratory judgment action seek-
ing a determination of the scope of insurance coverage. In resolving
the choice of law question, the court recognized that the insurance
policy at issue had been executed in New York by"a resident of New
York with a corporation doing business in New York." Id. at 184.
Moreover, the policy insured an automobile registered in New York.
Id. Under these facts, the court found section 38-61-10 -- and corre-
spondingly, South Carolina law -- inapplicable, since "at the time the
contract was made, the property and interests insured were in the
State of New York." Id. at 184 n.1 (emphasis added).
6
This case is virtually indistinguishable from Unisun. The insured
vehicle was licensed and garaged in Georgia; Media Transport was
headquartered in Georgia; and Mr. Bowman was a resident of Geor-
gia at the time of the accident. The only nexus with South Carolina
is the location of the automobile collision, which the Unisun decision
indicates is insufficient, standing alone, to trigger section 38-61-10.
Accordingly, we agree with the district court that South Carolina law
is inapplicable to this dispute.
C.
Besides South Carolina, the only other assertion as to the govern-
ing law made by the parties was Continental's claim that the law of
Georgia controlled; thus, the district court assumed"that Georgia law
is the applicable state law." J.A. 513. We see no reason to disturb this
determination, and we therefore conclude that Georgia law governs
these insurance policies.4
IV.
A.
Under Georgia law, the owner of a motor vehicle must carry a
minimum amount of liability insurance. Ga. Code Ann.§§ 33-34-3,
33-34-4 (1999). As a general rule, no automobile liability policy
"shall be issued or delivered" unless it contains UIM coverage. Ga.
Code Ann. § 33-7-11(a)(1). However, section 33-7-11(a)(3) provides
an important exception to this general rule: "The coverage required
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4 Our determination that Georgia law applies renders moot the parties'
arguments regarding whether Policy 2846 is a primary or excess policy.
Under South Carolina law, "[n]o uninsured or underinsured motorist cov-
erage need be provided in this State by any excess or umbrella policy of
insurance." S.C. Code Ann. § 38-77-161 (emphasis added). Thus, if
South Carolina law were to apply, and if Policy 2846 was determined to
be an excess policy, then Continental would be relieved of its duty --
under South Carolina law -- to make a "meaningful offer" of UIM cov-
erage. However, because we agree with the district court's conclusion
that Georgia law applies, this primary-excess distinction is irrelevant and
therefore fails to create a genuine issue of material fact.
7
under paragraph (1) of this subsection shall not be applicable where
any insured named in the policy shall reject the minimum coverage
in writing." Id. (emphasis added).
In other words, as section 33-7-11(a)(3) makes clear, UIM cover-
age is not mandatory and therefore can be waived or rejected in writ-
ing by the named insured.5 As the Court of Appeals of Georgia
recognized in Nat'l Union Fire Ins. Co. v. Johnson, 357 S.E.2d 859(Ga. Ct. App. 1987), a written rejection "complies with the only statu-
tory requirement for rejection of uninsured motorist coverage,
namely, that such rejection be in writing. If the legislature had
intended any further formal requisites for the rejection of uninsured
motorist benefits, we must presume it would have specified them." Id.
at 860 (internal citations omitted). Although the court's literal lan-
guage indicates that "the only statutory requirement" for rejecting
UIM coverage is that the rejection be in writing, it is clear from the
statutory framework and the remainder of the Johnson opinion that
one additional requirement remains: the rejection must be made by
the policy's named insured. This additional requirement controls our
disposition of this appeal.
B.
Continental (the insurer) maintains that Rollins properly rejected
UIM coverage in writing. In support of this argument, Continental ini-
tially directs our attention to the "Georgia Automobile Supplemental
Application" filed by Rollins with respect to Policy 1300. In this
application, signed by Rollins's Risk Manager Lynn Moroz, the box
labeled "I reject uninsured/underinsured motorists bodily injury and
property damage coverage entirely" is checked with three typewritten
"X's". J.A. 479. Continental asserts that this application suffices to
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5 Moreover, § 33-7-11(a)(3) further provides that UIM coverage "need
not be provided in or supplemental to a renewal policy where the named
insured had rejected the coverage in connection with a policy previously
issued to him by the same insurer." Put simply, if the named insured has
exercised its option to reject UIM coverage, the insurer is under no fur-
ther obligation to offer the coverage, absent a request, for the life of the
policy. Merastar Ins. Co. v. Wheat, 469 S.E.2d 882, 883 (Ga. Ct. App.
1996).
8
reject UIM coverage under Georgia law, relying on Blalock v. South-
ern Ins. Co., 349 S.E.2d 32, 33 (Ga. Ct. App. 1986), in which the
court held that a checked "rejection" box, coupled with the signature
of the insured, operated as a legally binding rejection of UIM cover-
age.
Next, Continental relies on Johnson, 357 S.E.2d at 860, for the
proposition that a written communication -- from the insured to the
insurer -- expressing a desire to reject UIM coverage, operates as a
valid rejection under section 33-7-11(a)(3). In this regard, Continental
points to various letters signed by John P. Polakvic, Rollins's Director
of Risk Management, purporting to reject UIM coverage under both
Policy 1300 and Policy 2846. The district court agreed with Continen-
tal, concluding that "[b]ecause the Bowmans do not counter the evi-
dence offered by Continental that the written-rejection requirement
was met, the Bowmans cannot succeed on their claim to reform the
polic[ies]." J.A. 515.
C.
With respect to Policy 1300, we agree with the district court that
the "Georgia Automobile Supplemental Application," and the letters
signed by Mr. Polakvic on behalf of Rollins, were sufficient to reject
UIM coverage pursuant to § 33-7-11(a)(3): Rollins was the "named
insured" in Policy 1300 and these documents undoubtedly qualify as
written rejections of UIM coverage.
However, this does not resolve whether Rollins lawfully rejected
UIM coverage under Policy 2846. Indeed, the declaration page of Pol-
icy 2846 does not identify Rollins as a named insured; rather, it iden-
tifies that policy's named insured as "Certain Lessees of Rollins
Leasing Corp." J.A. 347. Furthermore, the policy's definition of "In-
sured" does not include Rollins, which is explicitly identified therein
as the "Lessor" rather that the "Lessee."6 Thus, the Bowmans contend
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6 Policy 2846 defines "Insured" as follows:
[A]ny person or organization who has been furnished a vehicle
under a written lease or rental agreement between such person or
organization (hereinafter called the Lessee) and Rollins Leasing
9
that Rollins was not the named insured in Policy 2846 and therefore
could not have effectuated a lawful rejection of UIM coverage under
that policy.
In interpreting insurance contracts, courts construing Georgia law
have consistently recognized the literal meaning of the term "named
insured." Indeed, the term has been narrowly construed to refer solely
to a party who has been designated by name in the insurance policy
-- without qualification -- as an insured. See e.g., Griffin v. State
Farm Mut. Auto. Ins. Co., 199 S.E.2d 101, 104 (Ga. Ct. App. 1973);
Cotton States Mut. Ins. Co. v. Bowden, 221 S.E.2d 832, 833 (Ga. Ct.
App. 1975) (recognizing that the "literal meaning" of the term "named
insured" must be attributed to it).
As noted, Policy 2846 designated the named insured as "Certain
Lessees of Rollins Leasing Corp." As a general proposition, such des-
ignations must be accorded their ordinary meaning. As the court in
Lester v. Great Central Ins. Co., 226 S.E.2d 149 (Ga. Ct. App. 1976),
observed:
Where the contract is unambiguous, it must be construed to
mean what it says. This rule applies to language limiting
coverage. Of course if the contract is ambiguous the
ambiguity is to be resolved against the insurer. But ambigu-
ity is not to be created by lifting a clause or portion of the
contract out of context. The natural, obvious meaning is to
be preferred over any curious, hidden meaning which noth-
ing but the exigency of a hard case and ingenuity of a
trained and acute mind would discover.
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Corp. (hereinafter called the Lessor) providing for the exclusive
use of such vehicle by the Lessee and such written lease or rental
agreement requires the Lessor to provide insurance, but such
Lessee shall only be an insured to the extent of the limits, terms
and conditions set forth in the whole of such written lease or
rental agreement.
J.A. 349.
10
Id. at 150 (internal citations omitted). To the extent that Policy 2846's
named insured designation contained "no ambiguity or deceptive ver-
biage," we must construe the phrase to have its literal meaning. Bow-
den, 221 S.E.2d at 833 (citation omitted). The literal meaning of
"Certain Lessees of Rollins Leasing Corp.," plainly does not encom-
pass Rollins itself. Although Rollins negotiated both insurance poli-
cies with Continental, and both policies apparently comprised a
portion of Rollins's overall insurance plan, the fact remains that Rol-
lins is not a named insured on Policy 2846.7
We therefore conclude that the Bowmans are entitled to proceed
with their claim for reformation of Policy 2846, and in this regard, we
must reverse the district court's entry of summary judgment in favor
of Continental.
V.
The Bowmans' complaint also included a claim against Rollins. In
its October 18, 1999, order, the district court granted Rollins's motion
for summary judgment, noting that the Bowmans "apparently concede
that there is no claim against Rollins by virtue of their failure to
address this issue." J.A. 516. On appeal, the Bowmans fail to assert
any theory justifying possible relief against Rollins. Therefore, we
agree that the district court properly granted judgment in favor of Rol-
lins, and we also affirm that aspect of the district court's ruling.
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7 Even assuming there was no valid rejection, Continental maintains
that UIM coverage was waived by Media Transport. In support of this
argument, Continental points to Paragraph 6 of the Rollins-Media Trans-
port Lease, which provides:
The insurance shall have limits as indicated on the Lease(s) and
shall include any mandatory No Fault, Uninsured Motorist,
Underinsured Motorist and Personal Injury Protection required
by law and in the minimum amounts required by law.
J.A. 48. This argument is without merit. It would require considerable
imagination to construe the provision relied upon by Continental as an
unequivocal waiver of UIM coverage. Simply put, Paragraph 6 is not the
"clear, unambiguous, and capable of only one reasonable interpretation"
waiver required under Georgia law. See Nolley v. Maryland Cas. Ins.
Co., 476 S.E.2d 622, 625 (Ga. Ct. App. 1997).
11
VI.
For the foregoing reasons, we affirm the district court's grant of
summary judgment with respect Policy 1300 and the Bowmans'
claims against Rollins. However, we reverse its judgment as to Policy
2846 and remand this case for further proceedings.
AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED
12