Government Employees Insurance Company v. Poole

THE STATE OF SOUTH CAROLINA
In The Supreme Court
Government Employees Insurance Company, Plaintiff,
v.
Jack A. Poole, individually and as Personal
Representative of the Estate of Jennifer Knight Poole,
Defendant.
Appellate Case No. 2017-001540
CERTIFIED QUESTION
ON CERTIFICATION FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF SOUTH CAROLINA
Joseph F. Anderson, Jr., United States District Judge
Opinion No. 27821
Heard February 15, 2018 – Filed July 5, 2018
CERTIFIED QUESTION ANSWERED
J.R. Murphy and Wesley B. Sawyer, both of Murphy &
Grantland, P.A., of Columbia, for Plaintiff.
Angela Christy Tyner and Ronald A. Maxwell, Sr., both
of Maxwell Law Firm, P.C., of Aiken, for Defendant.
Bert Glenn Utsey, III, of Peters, Murdaugh, Parker,
Eltzroth & Detrick, P.A., Samuel R. Clawson, Jr., and
Christy Fargnoli, both of Clawson Fargnoli, L.L.C., of
Charleston; and Frank L. Eppes, of Eppes & Plumblee,
P.A., of Greenville; and Kathleen Chewning Barnes, of
Barnes Law Firm, L.L.C., of Hampton, all for Amicus
Curiae, South Carolina Association for Justice.
Carmelo Barnes Sammataro, of Turner Padget Graham &
Laney, P.A., of Charleston, for Amicus Curiae, Property
Casualty Insurers Association of America and the South
Carolina Insurance Association.
JUSTICE HEARN: We accepted a certified question from the United States
District Court for the District of South Carolina, asking whether South Carolina law
requires that punitive damages be apportioned pro rata between those sustained for
bodily injury and property damage, respectively, under an automobile insurance
policy. We answer the question, "No."
FACTUAL BACKGROUND
Jack Poole and his wife, Jennifer, were riding in a vehicle owned by Doris
Knight, Jennifer's mother, when a drunk driver crossed the center line and struck
them. The Pooles were both seriously injured in the collision; although Jack
survived, Jennifer's catastrophic injuries resulted in her death several days later. In
contrast with the substantial bodily injuries, the Pooles sustained minimal property
damage because they did not own the vehicle. The total value of the Pooles' property
damaged in the collision was approximately $1,250.
The at-fault driver's liability carrier tendered its policy limits. Farm Bureau,
the insurer on Knight's vehicle, then tendered its underinsured motorist (UIM) policy
limits for bodily injury––$25,000 to Jack individually and $25,000 to Jack as the
representative of Jennifer's estate. The Pooles then sought recovery from their own
insurer, Government Employees Insurance Company (GEICO), which provided
them a split limits UIM policy with bodily injury coverage of up to $100,000 per
person and $50,000 for property damage. GEICO tendered the UIM bodily injury
limits of $100,000 each for Jack and Jennifer's estate. The Pooles requested another
$50,000 from the UIM policy's property damage coverage in anticipation of a large
punitive damages award, but GEICO refused. GEICO then initiated a declaratory
judgment action in the District of South Carolina to establish that it was not liable to
pay any amounts for punitive damages under the property damage provision of the
UIM policy because the source of the Pooles' UIM damages was traceable only to
bodily injury.1
After the parties filed cross-motions for summary judgment, the district court
determined the parties presented a novel issue of law2 and certified the following
question to this Court.
CERTIFIED QUESTION PRESENTED
Under South Carolina law, when an insured seeks coverage under an
automobile insurance policy, must punitive damages be apportioned pro rata
between those sustained for bodily injury and those sustained for property damage
where the insurance policy is a split limits policy?
DISCUSSION
GEICO raises four grounds to support its claim that South Carolina law
requires the pro rata apportionment of punitive damages in this case. We address
each in turn and answer the certified question in the negative.
I. STATUTORY SCHEME
GEICO argues allocation is required by the plain language of the statutory
scheme because the insurance code allows for split limits policies. According to
GEICO, failure to allocate punitive damages would result in transforming the Pooles'
1
For the purposes of the declaratory judgment action the parties stipulated that an
award of punitive damages in this case would exceed all available property damage
coverage.
2
Though not binding precedent, we note a 1971 case from the District of South
Carolina addressed a similar situation involving the allocation of punitive damages
in automobile insurance policies. State Farm Mut. Auto. Ins. Co. v. Hamilton, 326
F. Supp. 931 (D.S.C. 1971). The insurer for the at-fault motorist argued any punitive
damages awarded to the victim should be allocated pro rata according to his actual
property damages. Id. at 935. Finding the statutory definition of "damages"
included both actual and punitive damages, and given the insurer's failure to cite any
authority for prorating punitive damages, the court concluded punitive damages
were not allocable, and the victim could recover his award of punitive damages from
the at-fault motorist's property damage liability coverage. Id. at 935–36.
split limits policy into a combined single limit policy. While GEICO acknowledges
the statutory definition of "damages" includes punitive damages, it contends this
requirement must be applied in the split limits context. Therefore, one can collect
actual and punitive damages traceable to bodily injury, and likewise for property
damage. Under GEICO's theory, if an insurer must pay for punitive damages, those
punitive damages are "because of" bodily injury or property damages, respectively.
Mindful of the purpose and enforceability of split limits policies,3 we
nevertheless reject GEICO's statutory argument. South Carolina law requires that
carriers offer UIM coverage "up to the limits of the insured liability coverage to
provide coverage in the event that damages are sustained in excess of the liability
limits carried by an at-fault insured or underinsured motorist . . . ." S.C. Code Ann.
§ 38-77-160 (2015) (emphasis added). "Damages" are defined by statute to include
both actual and punitive damages. S.C. Code Ann. § 38-77-30(4). Beyond that, the
statutes are silent with regard to the apportionment of punitive damages. Thus, by
the plain language of the statute, the trigger for UIM coverage is an event that causes
damages––actual and punitive––which exceed the liability limits of the at-fault
motorist. Even when viewed in the split limits context, the UIM statute makes no
mention of allocation nor does it indicate that bodily injury and property damage
must be analyzed separately before determining whether UIM coverage is triggered.
Moreover, the rationale behind punitive damages is not to compensate an
aggrieved party for his or her underlying injuries to body and property; rather,
"punitive damages, in addition to punishing the defendant and deterring similar
conduct by the defendant and others, serve to vindicate the private rights of the
plaintiff and they provide some measure of compensation to plaintiffs for the
intentional violation of those rights that is separate and distinct from the usual
measure of compensatory damages[] . . . ." O'Neill v. Smith, 388 S.C. 246, 252, 695
S.E.2d 531, 534 (2010) (emphasis added). Thus, while actual damages may be
traceable directly to bodily injury and property damage, punitive damages are not so
easily divisible. Reading the statutes to require allocation of punitive damages
would result in adding language to the statutes, rather than merely interpreting them.
3
We note that punitive damage awards are rare in the context of automobile
collisions and our holding today does not eliminate the viability of split limits
policies. In most cases, plaintiffs are entitled only to recovering their actual
damages, and state law has limited the instances in which punitive damages may be
awarded. See S.C. Code Ann. § 15-32-520(D) (Supp. 2017) ("Punitive damages
may be awarded only if the plaintiff proves by clear and convincing evidence that
his harm was the result of the defendant's wilful, wanton, or reckless conduct.").
See Sloan v. Hardee, 371 S.C. 495, 499, 640 S.E.2d 457, 459 (2007) ("Words must
be given their plain and ordinary meaning without resort to subtle or forced
construction to limit or expand the statute's operation."). If the General Assembly
intended to require the allocation of punitive damages, it could have done so with
clear, express language. Accordingly, because we find the statutory scheme is silent
on the issue of allocation, we decline to reach the result urged by GEICO.
II. DUE PROCESS
GEICO argues a failure to allocate punitive damages would result in a
violation of constitutional due process. Citing BMW of North America, Inc. v. Gore,
517 U.S. 559 (1996), GEICO contends a constitutional ratio of punitive damages to
actual damages requires allocation.
We believe GEICO's reliance on Gore is misplaced, in part, because the issue
in this case is not whether punitive damages should be awarded and in what amount;
rather, the issue is GEICO's contractual responsibility to pay those punitive damages
to which its insureds are entitled. More importantly, unlike the tortfeasor in Gore,
GEICO's exposure to punitive damages is limited by the terms of the policy. In no
event would GEICO be liable for punitive damages beyond the policy limits. From
the time GEICO entered into the contract to provide UIM coverage, it was on notice
that it may have to pay actual and punitive damages up to the policy limits upon an
event triggering coverage. See Gore, 517 U.S. at 574 ("Elementary notions of
fairness enshrined in our constitutional jurisprudence dictate that a person receive
fair notice not only of the conduct that will subject him to punishment, but also of
the severity of the penalty that a State may impose."). Having accepted payments
from the Pooles for UIM coverage up to the agreed upon policy limits, GEICO
cannot persuade us that fulfilling its contractual duty to pay those policy limits would
somehow result in a violation of due process. See O'Neill, 388 S.C. at 255, 695
S.E.2d at 535–36 ("Plaintiffs accepted [UIM coverage] and paid the corresponding
premiums for coverage and are entitled to this contractual benefit. State Farm set its
premiums with the knowledge that they are liable for compensatory and punitive
damages under the insurance contract, and it cannot now be heard to complain that
the delivery of benefits under the contract would thwart public policy.").
Additionally, the Gore court was largely concerned with the rationale behind
punitive damages and the connection to the tortfeasor's conduct. 517 U.S. at 575–
80. That issue is not present in this case because the insurance code and the policy
itself make clear that the coverage includes punitive damages. The allocation
question does not concern the propriety of awarding punitive damages or the
foreseeability of those damages because GEICO has already contracted to pay those
sums. Moreover, GEICO's proposed application of Gore is based on the premise
that the ratio of punitive damages to actual damages must be bifurcated and analyzed
separately for bodily injury and property damage. However, the conduct giving rise
to the punitive damages––here, the at-fault motorist's recklessness––is a single,
indivisible act. Therefore, the potential award for punitive damages in this case
would not be divided based on two separate occurrences or acts.
GEICO's liability for punitive damages is contingent upon the contract, and it
arises from the at-fault motorist's conduct. The at-fault motorist committed a single
negligent act giving rise to the Poole's damages. GEICO has not produced any
authority to suggest that punitive damages must be bifurcated according to each type
of damages. To the contrary, the constitutionality of a punitive damages award is
simply measured against (1) the degree of the defendant's reprehensibility or
culpability; (2) the relationship between the penalty and the harm to the victim
caused by the defendant's actions; and (3) the sanctions imposed in other cases for
comparable misconduct. Cooper Industries, Inc. v. Leatherman Tool Group, Inc.,
532 U.S. 424, 434–35 (2001). Therefore, we conclude due process limitations do
not require the pro rata apportionment of punitive damages in this case.
III. CONTRACTUAL LANGUAGE
GEICO next argues faithful adherence to the contract requires pro rata
apportionment of punitive damages. However, given our limited capacity in
answering a certified question, we abstain from ruling on the construction and
interpretation of the contractual terms at this juncture. We believe such a
determination is properly reserved for the district court, where the presiding judge
has the ability to review the contract in its entirety and is privy to any testimony or
other documents which may be admissible in interpreting the contract. Therefore,
we do not address GEICO's argument that the insurance agreement must be
construed to require apportionment of punitive damages.
IV. PUBLIC POLICY
Lastly, GEICO argues public policy is served by finding South Carolina law
requires the apportionment of punitive damages in the UIM context. We, however,
find this concern is best addressed by the General Assembly, which is in the proper
position to make such policy determinations given its ability to conduct studies,
collect information about insurance rates, and weigh the various courses of action.
Accordingly, we decline to find that public policy, as a matter of law, requires the
pro rata apportionment of punitive damages.
CONCLUSION
Based on the foregoing, we answer the certified question in the negative and
hold that South Carolina law does not require punitive damages be apportioned pro
rata between bodily injury and property damage in a split limits automobile
insurance policy.
CERTIFIED QUESTION ANSWERED.
BEATTY, C.J., KITTREDGE, FEW and JAMES, JJ., concur.