Uninsured Subrogation Rights
Does South Carolina recognize a carrier’s right of subrogation where mandated minimum uninsured motorist (UM) benefits are paid to an insured; or where additional UM benefits (i.e. above the mandated minimum) are paid out?
Due to ambiguities and clear contradictions within key statutes pertaining to UM coverage, coupled with the lack of any appellate case directly addressing a carrier’s UM subrogation rights after key 1987 amendments to both UM and underinsured motorist (UIM) statutes, arguments can be made that UM subrogation is disallowed or is limited to a narrow exception where the uninsured driver properly registers his vehicle as uninsured and pays a non-refundable fee. However, despite the defenses raised by counsel for an insured or the defendants(s) in any given case, the statutes can be reasonably interpreted to provide for a right of subrogation where mandated minimum UM motorist benefits are paid out, but not for additional UM benefits (i.e. above the mandated minimum).
An appellate court will try to rectify the contradictions within the key statutes to fulfill the intent of the legislature. If an appellate court finds that the clear intent of the legislature cannot be determined, then it could construe the ambiguities in favor of the insured by prohibiting subrogation and place the burden on the legislature to correct any ambiguity/contradiction so that the clear intent can be fulfilled. Consequently, UM subrogation claims are defensible due to lingering questions as to the specific intent of the 1987 statutory amendments and will remain defensible until an appellate court specifically rules on the issue of whether UM subrogation is barred by statute.
Although no argument can be made that the revisions to South Carolina’s UM and UIM motorist statutes in 1987 specifically barred subrogation for UIM motorist payments and additional UM motorist benefits (i.e. above the mandated minimum), the same cannot be said for mandated minimum UM benefits. However, due to ambiguities and contradictions within the key statutes addressing UM coverage, coupled with the lack of any appellate case directly addressing UM subrogation rights after the 1987 amendments, arguments can and will continue to be made that UM subrogation is disallowed, or at best, is limited to a narrow exception where the adverse driver is registered as uninsured after paying a non-refundable fee pursuant to S.C. Code Ann. § 56-10-510.
The situation where such defenses are typically made are where insurance is found for the alleged uninsured driver or where other joint tortfeasors with liability insurance can still be pursued for liability. The defense is not usually raised in situations by an uninsured driver because they do not usually hire an attorney but conceivably even an uninsured driver could argue UM benefits are not subject to subrogation or assignment. Additionally, although South Carolina has not specifically stated that it follows the made whole doctrine, there is binding precedent that could be cited to support that proposition. See Powers v. Calvert Fire Insurance Company, 57 S.E.2d 638 (SC 1950) (Where the Supreme Court held that an insurer who has paid a claim caused by a third person may be reimbursed out of funds received by insured in satisfaction of his claim against the third person, although recovery is usually limited against insurer to amount by which sum received by insured from wrong-doer, together with insurance, exceeds loss and expense incurred by insured in realizing on the claim against the wrong-doer)). Consequently, in situations where there is a death or severe injury and only limited liability coverage available, a UM carrier is not likely to get any reimbursement as the court hearing the matter will look at the equities between the carrier and the insured so if the insured cannot be “made whole”, a court will likely bar any subrogation lien or reimbursement claim since it received a valuable premium for the UM benefits that were paid out. However, in situations where there is ample coverage that can make an insured whole, the carriers are justified in claiming a right of subrogation based on S.C. Code Ann. § 38-77-190 which provides:
An insurer paying a claim under the uninsured motorist provision required by § 38-77-150 (mandated minimum section) is subrogated to the rights of the insured to whom the claim was paid against any and every person causing the injury, death or damage to the extent that payment was made. However, the insurer shall pay its proportionate part of any reasonable costs and expenses incurred in connection with any recovery, including reasonable attorney’s fees.
Despite the clear language in § 38-77-190, due to ambiguities and contradictions in related UM coverage statutes, defenses still arise and a court could rule in favor of the insured in disallowing the claim of subrogation if the statutes read as a whole cannot be rectified in which case they would rule its up to the legislature to fix any ambiguities so that the clear intent can be fulfilled. Moreover, an insured’s attorney will always argue his client was not “made whole” by a settlement despite the amount of coverage available which forces the carrier to at least consider a proportional reduction of its lien or even lien reduction until the insured is “made whole”. With any tort recovery by the insured (who remains the real party in interest under South Carolina law if not “made whole” by the mandated minimum UM payments), a UM carrier must pay its pro-rata share of the statutory mandated fees and costs noted in § 33-77-190 which is similar to South Carolina’s workers compensation subrogation provisions.
The following represents a brief outline of the key UM statutes which has created the confusion as to whether UM subrogation in South Carolina is allowed, and if so, is it limited to a narrow exception or any time minimum UM benefits are paid out.
vS.C. Code Ann. § 38-77-150 – This statute only addresses mandated minimum UM benefits. Under sub-part (C), the statute reads: “Benefits paid pursuant to this section are subject to subrogation and assignment if an uninsured motorist has selected the option to be uninsured by paying the fee pursuant to § 56-10-510”. § 56-10-510 as explained above allows a motorist to register their vehicle as uninsured if they pay a non-refundable fee.
vS.C. Code Ann. § 38-77-160 – This statute addresses both additional UM (i.e. above the mandated minimum) and optional UIM coverages. The statute specifically provides “Benefits paid pursuant to this section are not subject to subrogation and assignment”. Consequently, it would appear that the intent of the legislature was to bar subrogation where the insured is paid additional UM coverage or optional UIM coverage.
vS.C. Code Ann. § 38-77-190 – This statute, as cited above, directly addresses the subrogation rights of an insurer which pays minimum required UM benefits mandated by § 38-77-150. This statute does not make specific reference to part C of § 38-77-150 which is the only place in that statute where subrogation is referenced. However, this statute indicates that not only the uninsured driver can be pursued for subrogation, but also “every person causing the injury, death or damage to the extent that payment was made”. Therefore, it would appear that the intent was not to limit UM subrogation only to situations where a motorist registered the vehicle as uninsured and paid a non-refundable fee since the statute also allows subrogation against all other potential joint tortfeasors, whether insured or uninsured.
vS.C. Code Ann. § 38-77-260 – This statute addresses the inability of any carrier to negotiate an assignment or full release in exchange for the payment of UM benefits. The statute specifically states that any such general release or “article of subrogation” is null and void unless full disclosure is made to the insured that the first party benefits payable are separate and distinct from any obligation which the other person may have because of legal liability to the insured requesting the first party benefits. Consequently, such disclosures are rarely done properly nor is an insured obligated to sign it in exchange for the benefits. It’s important for all carriers to realize that its insured still has rights even after being paid UM benefits against the adverse driver(s).
vS.C. Code Ann. § 56-10-510 – This statute provides that a person may register an uninsured motor vehicle but must pay a non-refundable fee.
Experienced personal injury attorneys often respond to the claim of UM subrogation pursuant to § 38-77-190 by arguing that this statute only indicates subrogation is allowed if benefits are paid under § 38-77-150. Since § 38-77-150(C) specifically provides that UM benefits are only subject to subrogation and assignment “if an uninsured motorist has selected the option to be uninsured by paying the fee pursuant to § 56-10-510”, they argue that their situation is distinguishable because the uninsured motorist was not registered nor did he pay a fee pursuant to § 38-77-150(C). These attorneys also cite to § 38-77-160 which addresses additional coverage for UM and optional UIM and note that it specifically states “benefits paid pursuant to this section are not subject to subrogation and assignment”. There is a South Carolina Appellate Court case that addressed § 38-77-160 purely in the context of a claim related to the alleged assignment/subrogation for UIM benefits paid out. In McMillan v. John M. Hughes Seafood Company, Inc., 493 S.E.2d 91 (1997), the Court concluded that the settlement agreement was an impermissible assignment of a claim for UIM benefits and was contrary to the statute providing that UIM benefits are not subject to subrogation and assignment. The Court went on to note in footnote #1 that the 1987 amendments to § 38-77-160 deleted the provision allowing underinsured and uninsured carriers the rights of subrogation and assignment. The McMillan Court also referenced Covington, et al., The Law of Automobile Insurance in South Carolina, at V-46(3d Ed. 1996), which noted that the effect of § 38-77-160 was to eliminate subrogation and assignment of additional uninsured as well as underinsured motorist benefits.
How Might a South Carolina Appellate Court Interpret the UM Statutes as a Whole
The courts primary consideration in interpreting a statute is finding the intent of the legislature. State v. Squires, 311 S.C. 11, 14, 426 S.E.2d 738, 739 (1992)
. “In construing statutory language, the statute must be read as a whole and sections which are a part of the same general statutory law must be construed together and each one given effect.” South Carolina State Ports Authority v. Jasper County, 368 S.C. 388, 398, 629 S.E.2d 624, 629 (2006)
(citing TNS Mills, Inc. v. South Carolina Dept. of Revenue, 331 S.C. 611, 503 S.E.2d 471 (1998)
). “A statute should not be construed by concentrating on an isolated phrase.” Id.
(citing Laurens County School Districts 55 and 56 v. Cox, 308 S.C. 171, 417 S.E.2d 560 (1992)
); but see Ramsey v. County of McCormick, 306 S.C. 393, 397, 412 S.E.2d 408, 410 (1991)
(citing Jolly v. Atlantic Greyhound Corp., 207 S.C. 1, 35 S.E.2d 42 (1945)
) (“Under the ‘last legislative expression’ rule, where conflicting provisions exists, the last in point of time or order of arrangement, prevails.”); Eagle Container Co., LLC v. County of Newberry, 379 S.C. 564, 572, 666 S.E.2d 892, 896 (2008)
(quoting Feldman v. S.C. Tax Commission, 203 S.C. 49, 54, 26 S.E.2d 22, 24 (1943)
) (“The last legislative expression rule, however, ‘is purely an arbitrary rule of construction and is to be resorted to only when there is clearly an irreconcilable conflict, and all other means of interpretation have been exhausted.’ ”).
Where two portions of a statute appear on their face to be conflicting, every effort should be made to reconcile these apparently conflicting provisions and bring them into harmony, if possible. See Ex parte Chase, 38 S.E. 718, 724 (1901) (Recognizing the well settled rule that a court must try to harmonize conflicting provisions if possible). On the other hand, where a statute cannot be harmonized and the intent cannot be made known due to ambiguities, the remedy lies with the legislature. See Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E. 2d 206 (1964) (If the applicable code sections in question fail to accomplish the legislative purpose, the remedy lies with the Legislature and not with the Courts).
The clear prohibition of subrogation and assignment noted in § 38-77-160, and addressed in the McMillan decision, can be argued to only apply to situations where additional UM benefits are paid out above the statutory required minimum. Additionally, since § 38-77-190 only references UM subrogation rights when paid out under § 38-77-150 (the mandated minimum UM limit section), the intent of the legislature would likely be interpreted to not completely bar UM subrogation, as it did optional UIM, but to only bar subrogation for additional UM payments above the mandated minimum. Consequently, a good argument can still be made that even when basic UM benefits are stacked, they are still subject to subrogation pursuant to § 38-77-190 because they are paid out under § 38-77-150.
The more pressing problem seems to be with the express language in § 38-77-150 which only indicates subrogation is allowed when an uninsured is registered prior to the accident and the non-refundable fee is paid. Although personal injury attorneys argue that unless that situation is present there is no right of subrogation, a court must still acknowledge that under the last legislative expression rule, where conflicting provisions exist, the last in point of time or order of arrangements prevails. Since § 38-77-190 was adopted last in the point of time or order of arrangement, an argument can be made that it prevails. However, defense counsel will still argue that § 38-77-190 only allows subrogation when it is paid pursuant to § 38-77-150 and will try to tie that in to § 38-77-150(C) despite the fact that the legislature chose not to specifically limit it by specific reference to § 38-77-150(C). Even assuming ambiguity, “[a] well established rule of statutory construction is ‘expressio unius est exclusio alterius,’ which means that the enumeration of particular things excludes the idea of something else not mentioned”. See Pennsylvania Nat’l Mut. Casualty Ins. Co. v. Parker
, 320 S.E.2d 458, 463 (S.C. App. 1984). Additionally, had the legislature intended that § 38-77-190 shall only apply to those uninsured drivers who properly register their vehicles and pay a non-refundable fee, then it would not be logical for the legislature to also include, pursuant to § 38-77-190, a right of subrogation against not only the uninsured driver, but also “every person causing the injury, death or damage to the extent that payment was made”.
Nonetheless, the statutes are poorly written. For example, it makes no sense why the legislature thought the need to reference a right of subrogation for registered uninsured motor vehicles who pay a fee in § 38-77-150(C) if at the same time it was their intent to allow the right of subrogation against any potential at-fault parties once the minimum UM benefits are paid. With these ambiguities, and without a binding appellate case on point, carriers as well as the insureds are in limbo because they must speculate on how a South Carolina appellate court may interpret the statutory scheme as a whole. If the appellate court finds that it cannot harmonize conflicting provisions without potentially destroying the intent of the legislature, they will likely opine that subrogation is barred or limited to the exception noted in 38-77-150(C) and it is up to the legislature to fix the ambiguity or contradictions that prevent a reasonable interpretation and application of the statutory scheme. The court will also likely look to public policy considerations wherein a carrier could argue that it was the Legislature’s intent to allow subrogation as to the basic statutory mandated minimum UM coverage so as to help off-set the costs to carriers in providing the mandated UM coverage. It also provides some level of accountability to uninsured drivers who otherwise may escape free if the insured receiving the UM benefits elects not to pursue them for any additional claims they may have above the UM minimum limits paid out. Although § 38-77-190 provides that subrogation applies to any recovery from any party contributing, I suspect that an appellate court would also require that an insured must be made whole from any recovery before the carrier is reimbursed from the tort recovery (or at least order that the UM lien be reduced proportionately similar to workers compensation subrogation liens).
In my opinion, the best case to appeal would be a situation where there are ample assets or coverage found for the uninsured driver, or ample coverage available to other joint tortfeasors that could conceivably make the insured whole. In those situations, if a court finds that the insured was made whole, then the payment of basic UM benefits would constitute a double recovery. Obviously, the intent of mandatory UM coverage was not to allow an insured to obtain a double recovery, but was designed to provide the insured some relief in situations where injury is suffered by the negligence of a driver who has failed to comply with South Carolina’s Financial Responsibility Act requiring liability coverage up to the minimum limits specified by law.
There is some persuasive authority interpreting § 38-77-190 from the United States Fourth Circuit Court of Appeals wherein they note that the word “causing” would be the equivalent to “liable for” so as to eliminate any defenses to exclude subrogation rights of insurers in claims against those held responsible on the basis of vicarious or imputed liability. See Allstate Insurance Company v. Skeeters
, 846 F.2d 932 (4th
Cir. (S.C) 1988).