THE STATE OF SOUTH CAROLINA 

In The Supreme Court 

Wadette Cothran and Chris Cothran, Petitioners, 

v. 

State Farm Mutual Automobile Insurance Company and 

Robert Tucker, Defendants, 

of which State Farm Mutual Automobile Insurance 

Company is the Respondent.

Appellate Case No. 2018-000235 

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS 

Appeal from Spartanburg County 

L. Casey Manning, Circuit Court Judge 

Opinion No. 27914 

Heard May 29, 2019 – Filed August 7, 2019 

REVERSED 

Charles Logan Rollins II, Hawkins Law Firm, of 

Spartanburg, for Petitioners. 

Robert William Whelan, Charles R. Norris, of Charleston, 

and C. Mitchell Brown, of Columbia, all of Nelson 

Mullins Riley & Scarborough, LLP, for Respondent.
 

JUSTICE FEW: Section 38-77-144 of the South Carolina Code (2015) provides 

that no-fault personal injury protection (PIP) insurance coverage "is not subject to a 

setoff." This appeal requires us to consider whether section 38-77-144 prohibits an 

automobile insurance carrier from reducing its obligation to pay PIP benefits to its 

insured by the amount of workers' compensation benefits the insured received for 

medical expenses. We hold that it does. 

I. Facts and Procedural History 

Wadette Cothran incurred approximately $40,000 in medical expenses from injuries 

she received in an automobile accident. Her employer's workers' compensation

carrier paid all of her medical expenses. She was also covered by her automobile 

insurance policy issued to her and her husband Chris by State Farm Mutual

Automobile Insurance Company. The State Farm policy provided PIP coverage with 

a limit of $5,000. However, State Farm refused to pay her any PIP benefits for 

medical expenses based on a "Workers' Compensation Coordination" provision in 

the policy. The "Coordination" provision states, 

Any Personal Injury Protection Coverage provided by this 

policy applies as excess over any benefits recovered under 

any workers' compensation law or any other similar law. 

The Cothrans filed this lawsuit against State Farm alleging breach of contract and 

bad faith refusal to pay insurance benefits. 

The circuit court granted summary judgment to the Cothrans on the breach of 

contract claim, finding the "Coordination" provision violated section 38-77-144. 

The court of appeals reversed. Cothran v. State Farm Mut. Auto. Ins. Co., 421 S.C.

562, 808 S.E.2d 824 (Ct. App. 2017). We granted the Cothrans' petition for a writ 

of certiorari. We reverse the court of appeals, and reinstate the summary judgment.

II. Section 38-77-144 

We begin with the text of section 38-77-144.

There is no personal injury protection (PIP) coverage 

mandated under the automobile insurance laws of this 

State. Any reference to personal injury protection in Title 

38 or 56 or elsewhere is deleted. If an insurer sells nofault insurance coverage which provides personal injury 
protection, medical payment coverage, or economic loss 

coverage, the coverage shall not be assigned or subrogated 

and is not subject to a setoff. 

§ 38-77-144. 

We focus on the language "the [PIP] coverage . . . is not subject to a setoff." The

term "setoff" is not defined in our Insurance code. Therefore, we apply the term's

"usual and customary meaning." Perry v. Bullock, 409 S.C. 137, 140-41, 761 S.E.2d 

251, 253 (2014). Merriam-Webster defines "setoff" as "something that is set off 

against another thing" and as "the discharge of a debt by setting against it a distinct 

claim in favor of the debtor." Setoff, WEBSTER'S NINTH NEW COLLEGIATE

DICTIONARY (1988). The term is defined in BLACK'S LAW DICTIONARY as, "A

defendant's counterdemand against the plaintiff, arising out of a transaction

independent of the plaintiff's claim," and, "A debtor's right to reduce the amount of 

a debt by any sum the creditor owes the debtor." Setoff, BLACK'S LAW DICTIONARY

(11th ed. 2019). 

However, the term "setoff" is also commonly used to describe any reduction in the 

amount a defendant or insurance company would otherwise be obligated to pay on 

a claim, when the right to the reduction arises as a result of a payment from a third

party. Our courts have used the term for this meaning in numerous cases. In Smith 

v. Widener, 397 S.C. 468, 724 S.E.2d 188 (Ct. App. 2012), for example, the plaintiff 

filed suit to recover funds she claimed should have been paid to her, but were 

wrongly paid to other parties. 397 S.C. at 471, 724 S.E.2d at 190. Before trial, the 

defendant who made the contested payment settled. At the conclusion of trial, the 

jury found the defendants who received the payment had done so wrongfully, and 

they must pay the funds to the plaintiff. Id. These defendants argued the judgment 

to be entered against them must be reduced by the amount the plaintiff received 

before trial in settlement. Id. The parties, the trial court, and the court of appeals 

framed the question as whether the non-settling defendants were entitled to a "setoff" 

because of this third-party payment. The court of appeals held that "before entering 

judgment on a jury verdict, the court must reduce the amount of the verdict to 

account for any funds previously paid by a settling defendant, so long as the 

settlement funds were paid to compensate the same plaintiff on a claim for the same 

injury." 397 S.C. at 471-72, 724 S.E.2d at 190. The court described this as a "setoff"

that arises by operation of law. 397 S.C. at 472, 724 S.E.2d at 190 (citing Ellis v. 

Oliver, 335 S.C. 106, 111, 515 S.E.2d 268, 271 (Ct. App. 1999)). See also Rutland 

v. S.C. Dep't of Transp., 400 S.C. 209, 217, 734 S.E.2d 142, 146 (2012) (finding the 

trial court properly reduced a jury verdict against one defendant by the amount paid 
 

 

 

 

 

 

 

in settlement by different defendants, and calling that a "set-off"); Huck v. Oakland 

Wings, LLC, 422 S.C. 430, 436, 813 S.E.2d 288, 291 (Ct. App. 2018) (stating, "A 

nonsettling defendant is entitled to credit for the amount paid by another defendant 

who settles," and calling that a "setoff" (quoting Welch v. Epstein, 342 S.C. 279, 

312, 536 S.E.2d 408, 425 (Ct. App. 2000))); Ellis, 335 S.C. at 109, 515 S.E.2d at 

270 (addressing whether a defendant was entitled to a "set-off" to reduce the 

judgment against him by the amount a third party paid the plaintiff for his medical 

expenses). 

A setoff, therefore, takes two primary forms. The first—not applicable here—is 

when person A's obligation to pay person B is reduced by the amount of B's 

obligation to A, regardless of whether the corresponding obligations arose from the 

same transaction or subject matter. See Setoff, BLACK'S LAW DICTIONARY. The

second—which is applicable here—is when A's (State Farm's) obligation to pay B

(Wadette) is reduced by the amount of C's (workers' compensation carrier's) payment 

to B, where A's and C's obligations to pay did arise from the same transaction or 

subject matter. 

The Legislature obviously intended to use the term "setoff" in this second form—as 

we did in Rutland, and the court of appeals did in Huck, Smith, Welch, and Ellis—

when it drafted section 38-77-144.1 In the context of PIP coverage, we can envision 

no situation in which an insured's obligation back to the insurer could reduce the 

insurer's obligation to the insured. Rather, the only thing that could ever be set off 

against PIP coverage is a third-party payment, such as a payment from a tortfeasor 

or the workers' compensation benefits Wadette received. Because "setoff" is not a

situation that could arise under the first definition, the term becomes relevant in 

section 38-77-144 only under the second definition. 

This discussion allows us to frame the issue before us more precisely. In section 38-

77-144, the Legislature intended—at least in part—to prevent an insurance company

1 Counsel for State Farm attempted to argue at oral argument that under this 

definition of setoff—which counsel contended was overbroad and thus ambiguous—

even a deductible would be a setoff. We do not agree. An insurance company's

obligation to pay is provided under the terms of the policy. A setoff is a reduction 

in the amount of the obligation to the extent there has been a third-party payment. If

there is a deductible, the insurance company was never obligated to pay the amount 

of the deductible. Rather, the reduction is provided under the terms of the policy. A

deductible, therefore, is not a setoff. 
 

 

 

 

 

 

 

 

 

 

 

that sells PIP coverage from reducing the amount of PIP it is obligated to pay because 

the insured received a third-party payment for the same expenses. If State Farm's 

"Coordination" provision has this effect, it is a setoff, and it violates the section. 

Through its "Coordination" provision, State Farm attempts to designate the policy 

holder's opportunity to recover workers' compensation benefits as the policy holder's 

primary source of repayment for medical expenses. If the workers' compensation

benefits equal the medical expenses—as occurred here—or if the difference between 

workers' compensation benefits received and the total medical expenses is less than 

the policy limit for PIP coverage, the "Coordination" provision becomes effective.2

In the latter example, State Farm's obligation to pay PIP benefits would be reduced, 

but not eliminated. In the former example—as occurred here—the effect of the 

provision is that State Farm pays no PIP benefits. In this case, State Farm's 

obligation to pay PIP coverage to Wadette is reduced—eliminated, in fact—by the 

amount her employer's workers' compensation carrier paid her for medical expenses.

In other words, the "Coordination" provision is a setoff.3

2 The following scenarios illustrate the effect of the "Coordination" provision.

Wadette incurred approximately $40,000 in medical expenses. Her PIP benefits 

policy limit is $5,000. If her workers' compensation benefits were less than $35,000,

the "Coordination" provision would have no effect and State Farm would owe her 

the policy limit. If her workers' compensation benefits were $37,500, the 

"Coordination" provision would take effect and State Farm would owe her $2,500.

In this case, her workers' compensation benefits equaled the total amount of her 

medical expenses, so the effect of the "Coordination" provision would be to

eliminate State Farm's obligation to pay any PIP benefits. 

3 The term "setoff" is used universally to describe the reduction of PIP benefits by

the amount of a third-party payment, including workers' compensation. This is 

explained in APPLEMAN ON INSURANCE. "More often than not, multiple sources of 

recovery are available to the injured insured. As long as there is no policy or 

statutory provision limiting or restricting multiple recovery, payments may be made 

under more than one policy or plan." 6 Jeffrey E. Thomas, NEW APPLEMAN ON

INSURANCE LAW LIBRARY EDITION § 66.09[1] (2019). The APPLEMAN subsection 

goes on to explain, "Most no-fault statutes have some sort of coordination of benefits 

language," like the "Coordination" provision in State Farm's policy purports to be. 

However, subsection 66.09[1] and the next one—subsection 66.09[2][a] entitled

"Statutory Setoffs -- Workers' Compensation"—make it clear that when no-fault

benefits are reduced by payments from a workers' compensation carrier, it is a

"setoff." Thomas, supra § 66.09[2][a]; see also 12 Steven Plitt et al., COUCH ON
 

 

 

 

 

State Farm attempts to avoid this straightforward analysis by relying on this Court's 

opinion in State Farm Mutual Automobile Insurance Co. v. Richardson, 313 S.C.

58, 437 S.E.2d 43 (1993), and in particular our statement "the Legislature intended 

the set-off prohibition[4] . . . to apply only to the tortfeasor," 313 S.C. at 61, 437 

S.E.2d at 45. The court of appeals agreed with State Farm that Richardson is

controlling. Cothran, 421 S.C. at 569, 808 S.E.2d at 828. We do not agree 

Richardson may be read as expansively as State Farm argues and the court of appeals 

held. Richardson involved a different policy provision and a different set of facts. 

If Richardson is to control this case, it must be because the reasoning is applicable 

here, not simply because the words we chose to explain our reasoning—when read 

out of context—might appear to restrict the effect of the statute. As we will explain, 

the reasoning of Richardson is not applicable in this case. 

The question in Richardson was whether section 38-77-145, see supra note 4, 

invalidated a policy provision that prevented the stacking of PIP benefits from two 

automobile policies issued by the same insurer. 313 S.C. at 59, 437 S.E.2d at 44.5

INSURANCE § 171:67 (3d ed. 2018) ("[A] no-fault insurer may be entitled to setoff 

from the injured party's coverage amounts the insured has received from various 

other sources for the same injury."); 46A C.J.S. Insurance § 2236 (2018) 

("Ordinarily, a no-fault insurance carrier is entitled to set off insured's workers' 

compensation benefits . . . where the workers' compensation benefits are intended to 

serve the same purpose as no-fault benefits, and required to be paid." (footnotes

omitted)). The important point here is not that the law of other jurisdictions might 

permit—or even require—a setoff under the circumstances of this case, but that the 

effect the "Coordination" provision has in this case is universally called a "setoff." 

4 When originally enacted, and at the time this Court decided Richardson, section 

38-77-144 was numbered 38-77-145. See Act No. 148, 1989 S.C. Acts 427, 470;

S.C. Code Ann. § 38-77-145 (Supp. 1989); Richardson, 313 S.C. at 60, 437 S.E.2d 

at 45 (quoting S.C. Code Ann. § 38-77-145 (Supp. 1992)). 

5

 The policy provision on which State Farm relied in Richardson stated, 

If two or more policies issued by us to you, your spouse, 

or your relatives provide vehicle Medical Payments 

Coverage and apply to these same bodily injuries 

sustained . . . the total limits of liability under all such 
 

 

 

 

 

 

 

The insureds "incurred medical expenses in excess of $20,000 . . . [and] filed a claim 

for PIP benefits under two State Farm automobile insurance policies that each

carried a $10,000 maximum." Id. State Farm paid the insureds $10,000 under one

policy, but refused to make any PIP payment under the other policy. Id. We found 

the provision on which State Farm relied was not a "setoff." 313 S.C. at 61, 437 

S.E.2d at 45. 

Both policies at stake in Richardson were issued by State Farm, and the PIP 

coverages in each were identical. This is important for two reasons. The first reason

is the policy provision defined the coverage State Farm sold to its insured; it was not 

an attempt to direct how separate coverages from different insurers interact. The

provision in both State Farm policies stated that if there are two policies "issued by 

us to you," you may recover only the limits of one policy. On the other hand, had 

the two policies been issued by different insurers, the provision would not have 

applied. Thus, there was no setting off of one coverage against another. Rather, 

there was but one coverage, and that coverage was to be paid according to the terms 

of the State Farm policies. For this reason, we held "the disputed language in its

policy comprises [sic] an anti-stacking[] clause rather than a set-off." 313 S.C. at 60, 

437 S.E.2d at 44. 

The second reason this is important is the coverages in the State Farm policies were

identical no-fault PIP. The coverages in this case—PIP coverage and workers'

compensation coverage—are not the same. PIP coverage is first-party coverage a

policy holder purchases to pay medical expenses no matter who is at fault in causing

the accident. See S.C. Code Ann. § 38-77-10(4) (1989) (repealed by Act No. 148, 

1989 S.C. Acts 427, 513). "The key concept embodied in PIP no fault coverage is 

that an injured person needs to promptly pay expenses necessarily arising out of 

injuries sustained, and needs support for himself and his family during the period of 

recuperation." Hamrick v. State Farm Mut. Auto. Ins. Co., 270 S.C. 176, 180, 241 

S.E.2d 548, 549 (1978); see also 46A C.J.S. Insurance § 2184 (2018) ("No-fault 

statutes are intended to protect persons injured in accidents involving a motor 

vehicle, by assuring that such accident victims receive compensation, reparations, or 

financial assistance, that is certain, and that is provided in a prompt and expeditious 

policies shall not exceed that of the policy with the highest 

limit of liability. 

313 S.C. at 59, 437 S.E.2d at 44. 
 

 

 

 

 

 

 

 

 

 

fashion . . . ." (emphasis added) (footnotes omitted)).6 State Farm's contention that 

it can take insurance that is by definition primary and simply label it as "excess" in

an attempt to make it not primary is a stretch under any circumstances.7 Under 

section 38-77-144, it is prohibited. 

Finally, we disagree with State Farm and the court of appeals that the legislative 

history we considered in Richardson supports a finding that the "Coordination" 

provision in this case is not a setoff.8 The legislative history of section 38-77-144 

supports our reading of the plain language of the section that the "Coordination"

provision is a setoff. 

As we stated in Richardson, the Legislature "made sweeping reforms in automobile 

insurance law" in 1989. 313 S.C. at 60, 437 S.E.2d at 45. We stated, 

6 Workers' compensation insurance is also no-fault. Nicholson v. S.C. Dep't of Soc. 

Servs., 411 S.C. 381, 389, 769 S.E.2d 1, 5 (2015). However, it is not first-party 

insurance like PIP, and its availability to an employee is subject to the provisions of 

the Workers' Compensation Act after potentially protracted litigation in front of the

workers' compensation commission. But see Russell v. Wal-Mart Stores, Inc., 426 

S.C. 281, 285, 287, 826 S.E.2d 863, 865-66 (2019) (refocusing the commission on 

its "primary" role in avoiding "complicated and protracted litigation").

7 State Farm contends the "Coordination" provision does not violate section 38-77-

144 because it "is an excess clause, not a setoff." According to State Farm, "An

excess clause is '[a]n insurance-policy provision . . . that limits the insurer's liability 

to the amount exceeding other available coverage. This clause essentially requires 

other insurers to pay first." (quoting Excess clause, BLACK'S LAW DICTIONARY (10th 

ed. 2014)).

8

 Ordinarily, after concluding the plain language of a statute controls, we would not 

consider legislative history or any other indication of legislative intent. See Timmons 

v. S.C. Tricentennial Comm'n, 254 S.C. 378, 401, 175 S.E.2d 805, 817 (1970) ("If a 

statute is clear and explicit in its language, then there is no need to resort to statutory

interpretation or legislative intent to determine its meaning."). We do so in this case

solely to address the error of the court of appeals in relying on our legislative history 

analysis in Richardson. See Cothran, 421 S.C. at 570-71, 808 S.E.2d at 829 (stating 

"despite the language of section 38-77-144 appearing to prohibit any setoff of PIP 

benefits, our supreme court declared the legislative intent of that section was to 

prohibit tortfeasors from reducing their liability by the amount of PIP benefits"

(citing Richardson, 313 S.C. at 61, 437 S.E.2d at 45)). 
In section 57 of [Act 148], the Legislature repealed the 

tortfeasor's statutory "set-off" authorized by section 38-

77-290(f). See 1989 S.C. Acts at 513. Concurrently, in 

section 34 of Act 148, the Legislature expressly provided 

that PIP coverage was not subject to a "set-off." See 1989 

S.C. Acts at 470. In our view, the Legislature intended

for the "set-off" prohibition in section 34 of Act 148 to 

refer to the statute allowing reduction of a tortfeasor's 

liability which was repealed in section 57 of Act 148. 

Accordingly, we find that the "set-off" prohibited by 

section 34 of Act 148, now codified in section 38-77-145, 

is the tortfeasor's reduction in liability formerly allowed

by section 38-77-290(f). 

Id. 

Our legislative-history focus in Richardson was the repeal of subsection 38-77-

290(f), which—prior to its repeal—required the setoff of PIP benefits in favor of a

tortfeasor. See § 38-77-290(f) (1989) (providing PIP "benefits received or recovered 

. . . must be deducted from any tort recovery, settlement, or judgment for bodily

injury"). The fact the Legislature repealed the provision requiring a setoff against a 

tortfeasor's liability, and simultaneously prohibited any setoff against PIP coverage 

when it enacted section 38-77-145, see supra note 4, was important to us in 

understanding whether the anti-stacking provision was invalidated by the setoff 

prohibition in section 38-77-144. 

It was not necessary in Richardson for us to discuss the fact the Legislature also

repealed former subsection 38-77-290(d) in 1989. Subsection 38-77-290(d) required 

a setoff of workers' compensation benefits received by an insured against an insurer's

obligation to pay PIP benefits. See § 38-77-290(d) (1989) (repealed by Act No. 148, 

1989 S.C. Acts at 513) ("Benefits payable [under the PIP statute9

] must be reduced 

to the extent that the recipient has recovered benefits under workers' compensation 

laws . . . ."). Thus, former subsection 38-77-290(d) required by law precisely what 

State Farm seeks to obtain in this case by policy provision. The Legislature, 

however, repealed the subsection. If the repeal of subsection 38-77-290(f) was 

 

9 Here, former subsection 38-77-290(d) referred to former section 38-77-240 of the 

South Carolina Code (1989) (repealed by Act No. 148, 1989 S.C. Acts at 513), which 

is the section that required PIP coverage. 
 

 

 

useful to us in Richardson to understand whether an anti-stacking provision violated 

section 38-77-144, then the repeal of subsection 38-77-290(d) is even more 

important to us in understanding whether State Farm's "Coordination" provision is 

prohibited. In other words, the fact the Legislature repealed the legal requirement 

that workers' compensation benefits be set off against PIP, and simultaneously

provided PIP coverage "is not subject to a setoff," is forceful proof that the

Legislature intended the setoff prohibition must apply to workers' compensation 

benefits. 

III. Conclusion 

When an insurer seeks to reduce its obligation to pay benefits based on a third party's 

previous payment for the same claim, it is a setoff. Because that is the precise effect

of State Farm's "Coordination" provision, section 38-77-144 prohibits the provision 

from reducing State Farm's obligation to pay PIP benefits to the Cothrans. We 

reverse the court of appeals and reinstate the summary judgment in their favor. 

REVERSED. 

BEATTY, C.J., KITTREDGE, HEARN and JAMES, JJ., concur.