THE STATE OF SOUTH CAROLINA In The Supreme Court

Government Employees Insur ance 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 DISTRI CT 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. S awyer, both of Murphy & Grantland, P.A., of Colu mbia, for Plaintiff.

Angela Christy Tyner and R onald 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., Sam uel R. Clawson, Jr., andChristy Fargnoli, both of C lawson Fargnoli, L.L.C., of Charleston; and Frank L. Eppe s, of Eppes & Plumblee, P.A., of Greenville; and Kath leen 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 Associati on 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 wheth er South Carolina law requires that punitive damages be apportioned pro rata between those sustained for bodily injury and property damage , respectively, under an autom obile insurance policy. We answer the question, "No."

FACTUAL BACKGROUND

Jack Poole and his wife, Jennifer, were riding in a vehicle ow ned by Doris Knight, Jennifer's mother, when a drunk driver crossed the cent er line and struck them. The Pooles were both seriously injured in the collision; although Jack survived, Jennifer's catastrophic injuries resulted in her deat h several days later. In contrast with the substantial bodily injuries, the Pooles susta ined minimal property damage because they did not own the vehicle. The total value o f the Pooles' property damaged in the collision was approximately $1,250.

The at-fault driver's liability carrier tendered its policy li mits. 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 es tate. The Pooles then sought re covery from their own insurer, Government Employees Ins urance Company (GEICO), which provided

them a split limits UIM policy w ith bodily injury coverage of u p to $100,000 per person and $50,000 for property da mage. GEICO tendered the UIM bodily injury limits of $100,000 each for Jack and Jennifer's estate. The Po oles requested another $50,000 from the UIM policy's property damage coverage in antic ipation of a large punitive damages award, but GEICO refused. GEICO then initiate d 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 theUIM policy because the source of the Pooles' UIM damages was tr aceable only to bodily injury. 1

After the parties filed cross-motions for summary judgment, th e district court determined the parties presented a novel issue of law 2 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 apportion ed pro rata

between those sustained for bod ily injury and those sustained f or property damage where the insurance policy is a split limits policy?

DISCUSSION

GEICO raises four grounds to support its claim that South Caro lina 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 re quired 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 tra nsforming the Pooles'

1 For the purposes of the declarat ory judgment action the partie s stipulated that an award of punitive damages in this case would exceed all availab le property damage

coverage.

2 Though not binding precedent, we note a 1971 case from the Dis trict 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 motori st argued any punitive damages awarded to the victim should be allocated pro rata acco rding to his actual property damages. Id. at 935. Finding the statutory definition of "damages" included both actual and punitive damages, and given the insure r's failure to cite any authority for prorating punitive damages, the court concluded p unitive damages were not allocable, and the victim could recover his award of p unitive 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 "da mages" includes punitive damages , it contends this requirement must be applied in the split limits context. There fore, one can collect actual and punitive damages traceable to bodily injury, and lik ewise for property damage. Under GEICO's theory, if an insurer must pay for punit ive damages, those punitive damages are "because of" bodily injury or property dam ages, respectively.

Mindful of the purpose and enforceability of split limits poli cies, 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 insu red or underinsured motorist . . . ." S.C. Code Ann. § 38-77-160 (2015) (em phasis added). "Damage s" 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 punitiv e 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 UI M statute makes no mention of allocation nor does it indicate that bodily injury a nd property damage must be analyzed separately before determining whether UIM cove rage is triggered.

Moreover, the rationale behind punitive damages is not to comp ensate an aggrieved party for his or her underlying injuries to body and property; rather, "punitive damages, in addition to punishing the defendant and d eterring similar conduct by the defendant and others, serve to vindicate the pri vate 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 da mages may be traceable directly to bodily injury and property damage, puniti ve damages are not so easily divisible. Reading the statutes to require allocation o f 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 viabili ty of split limits policies. In most cases, plaintiffs are entitled only to recov ering their actual damages, and state law has limite d the instances in which punit ive 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 convin cing evidence that his harm was the result of the defendant's wilful, wanton, or r eckless 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 sub tle or forced construction to limit or expand the statute's operation."). If the General Assembly

intended to require the allocati on of punitive damages, it could have done so with clear, express language. Accor dingly, because we find the stat utory scheme is silent on the issue of allocation, we dec line to reach the result urge d by GEICO.

II. DUE PROCESS

GEICO argues a failure to allocate punitive damages would resu lt 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 p unitive 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 t he tortfeasor in Gore

, GEICO's exposure to punitive dam ages is limited by the terms of the policy. In no

event would GEICO be liable fo r punitive damages beyond the pol icy limits. From the time GEICO entered into the contract to provide UIM coverag e, it was on notice that it may have to pay actual and punitive damages up to the p olicy limits upon an event triggering coverage. See Gore , 517 U.S. at 574 ("Elementary notions of

fairness enshrined in our constit utional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to pu nishment, 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 l imits, 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 ac cepted [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 compensato ry and punitive damages under the insurance contract, and it cannot now be hear d to complain that the delivery of benefits under th e 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 insuran ce code and the policy

itself make clear that the covera ge includes punitive damages. The allocation question does not concern the propriety of awarding punitive da mages or theforeseeability of those damages because GEICO has already contr acted 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 bi furcated and analyzed separately for bodily injury and property damage. However, the conduct giving rise to the punitive damages––here, the at-fault motorist's reckless ness––is a single,

indivisible act. Therefore, the potential award for punitive d amages in this case

would not be divided based on tw o 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 moto rist committed a single negligent act giving rise to the Poole's damages. GEICO has no t produced any authority to suggest that punitive damages must be bifurcated a ccording to each type of damages. To the contrary, the constitutionality of a puniti ve damages award is simply measured against (1) the degree of the defendant's repre hensibility or culpability; (2) the relationship between the penalty and the harm to the victim caused by the defendant's actions ; and (3) the sanctions impose d in other cases for comparable misconduct. Cooper Industries, Inc. v. Leatherman Tool Group, Inc.

, 532 U.S. 424, 434–35 (2001). There fore, we conclude due process limitations do not require the pro rata apportio nment of punitive damages in t his case.

III. CONTRACTUAL LANGUAGE

GEICO next argues faithful adhe rence 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 c onstruction and interpretation of the contractual terms at this juncture. We believe such a determination is properly reserv ed for the district court, wher e the presiding judge has the ability to review the contract in its entirety and is p rivy to any testimony or other documents which may be admissible in interpreting the con tract. Therefore, we do not address GEICO's argument that the insurance agreement must be construed to require apporti onment 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, wh ich is in the proper position to make such policy determinations given its ability t o conduct studies, collect information about insurance rates, and weigh the variou s 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 th e 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 limit s automobile insurance policy.

CERTIFIED QUESTION ANSWERED.

BEATTY, C.J., KITTR EDGE, FEW and JAMES, JJ., concur.