Case Name: FIREMAN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Appellant v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Glenn A. Mullins and Joan C. Locklear, of whom Glenn A. Mullins and Joan C. Locklear are Respondents
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1988-06-06
Citations: 295 S.C. 538
Docket Number: 22880
Parties: FIREMAN’S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Appellant v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Glenn A. Mullins and Joan C. Locklear, of whom Glenn A. Mullins and Joan C. Locklear are Respondents.
Judges: Gregory, Chandler, JJ., and Acting Associate Justice Lawrence E. Richter, Jr., concur.
Reporter: South Carolina Reports
Volume: 295
Pages: 538–556

Head Matter:
22880
FIREMAN’S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Appellant v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Glenn A. Mullins and Joan C. Locklear, of whom Glenn A. Mullins and Joan C. Locklear are Respondents.
(370 S. E. (2d) 85)
Supreme Court
Theron G. Cochran and William A. Coates, Love, Thornton, Arnold & Thomason, Greenville, for appellant.
Eugene C. Covington, Jr., of Foster, Covington & Patrick, Greenville, for respondents.
Heard Jan. 20, 1988.
Decided June 6, 1988.

Opinion:
Finney, Justice:
Appellant, Fireman's Insurance Company of Newark, New Jersey (Fireman's), filed a declaratory judgment action to determine the amount of uninsured and/or underinsured motorist benefits and medical payments to which respondents Glenn A. Mullins (Mullins) and Joan C. Locklear (Locklear) were entitled under an insurance policy issued by Fireman's to Mullins. The case was submitted to the trial judge without a jury on stipulated facts. The trial court permitted stacking of underinsured, uninsured and medical benefits. We reverse and remand for proceedings consistent with this opinion.
In December 1984, Earl Lewis Gentry (Gentry), a Florida resident, was operating a vehicle on U.S. 25 Bypass in Greenwood, South Carolina. He was involved in a collision with an automobile driven by Mullins and owned by Locklear, a passenger in the car. Mullins and Locklear sustained injuries and damages and filed claims against Gentry.
Gentry was insured with Coronet Insurance Company under a Florida automobile liability policy which provided maximum liability limits of ten thousand ($10,000) dollars per person and twenty thousand ($20,000) dollars per accident for bodily injury. The policy complied with the liability limits mandated by Florida law. However, it did not meet the liability limits of fifteen thousand ($15,000) dollars per person and thirty thousand ($30,000) dollars per accident required under S. C. Code Ann. § 56-9-820 (1976).
Locklear had liability coverage on her vehicle through State Farm Mutual Insurance Company (State Farm). The policy provided uninsured motorist coverage with maximum limits of $15,000 per person and $30,000 per accident. State Farm paid its $30,000 limit and is no longer a party to this action.
Mullins had an automobile liability policy with Fireman's insuring his three vehicles. The policy is a $35,000 single limits liability insurance policy and provides "uninsured (and underinsured)" coverage in the amount of $35,000 per accident. The declaration sheet of the policy provided "medical payments" coverage in the amount of $3,000 for each person.
The trial court ruled that Fireman's pay uninsured motorist coverage to Mullins in the amount of $45,000 ($15,000 per vehicle) and underinsured coverage to Mullins in the amount of $35,000 (the amount of policy coverage). The court further ordered that Fireman's pay uninsured motorist coverage to Locklear in the amount of $45,000 dollars ($15,000 per vehicle) and underinsured motorist coverage to Locklear in the amount of $45,000 ($15,000 per vehicle). The trial court also ruled that Locklear and Mullins were entitled to $9,000 ($3,000 per vehicle) in medical payments coverage. In short, the trial court permitted Mullins to stack his uninsured policy at $15,000 per vehicle, but did not allow Mullins to stack underinsured, limiting underinsured coverage to the policy limit of $35,000. The trial court permitted Locklear to stack uninsured and underinsured at $15,000 per vehicle, and both Mullins and Locklear were allowed to stack medical coverage. We disagree.
I.
Fireman's argues that uninsured and underinsured coverage are mutually exclusive and, therefore, the trial court erred in awarding Mullins and Locklear uninsured and underinsured payments.
Whether uninsured and underinsured coverage are mutually exclusive is of novel impression before this Court. It is the opinion of the Court that an individual may be either uninsured or underinsured, but not both. See I. Schermer, Automobile Liability Insurance, § 35.10 at 35-45 (1985). As Schermer explains in his treatise on motor vehicle insurance:
Uninsured motorist coverage refers to a motorist who either does not carry any liability coverage applicable to his motor vehicle or who carries liability coverage with limits less than those required by a state's financial responsibility law. Underinsured motorist coverage refers, on the other hand, to a motor vehicle covered by complying liability limits which are not adequate to compensate the . insured for his damages.
Id. (footnote omitted). See also Gambrell v. Travelers Insurance Companies, 280 S. C. 69, 310 S. E. (2d) 814 (1983).
On the other hand, respondents contend Gambrell held that uninsured and underinsured are not mutually exclusive because of the following language utilized by the Court:
One buys uninsured motorist coverage to protect himself in case an at-fault driver has no liability coverage or has less liability coverage than required by statutes. Over and above uninsured coverage, he may procure underinsured motorist coverage to protect himself in case an at-fault driver has liability coverage but the amount is insufficient to cover the damages sustained. Uninsured motorist coverage is required by law. S. C. Code Ann. § 56-9-830 (1976). Accordingly, optional underinsured coverage would always be over and above either the at-fault driver's liability coverage or over and above the policyholder's own uninsured motorist coverage. This is the protection provided for the additional premium paid for the underinsured motorist coverage.
Gembrell, 280 S. C. at 72, 310 S. E. (2d) at 816.
We do not interpret this language to imply that the terms uninsured and underinsured are not mutually exclusive. The language employed in Gambrell is intended to comport with the classic definition of uninsured and underinsured coverage. In fact, the Court in Gambrell was not faced with the novel question of whether one could collect both uninsured and underinsured as a result of a collision with one tortfeasor and, thus, did not decide whether the terms are mutually exclusive.
Our conclusion that underinsured and uninsured coverage are mutually exclusive under the facts of this case is further supported by a reading of S. C. Code Ann. § 56-9-831 (1978 & Supp. 1986) (repealed by 1987 Act. No. 155 § 25, Jan. 1,1988). The statute states in pertinent part:
Automobile insurance carriers shall offer, at the option of the insured, uninsured motorist coverage up to the limits of the insured's liability coverage in addition to the mandatory coverage prescribed by § 56-9-830. Such carriers shall also offer, at the option of the insured, underinsured motorist 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.
Id.
We read the statute as allowing the purchase of extra insurance to cover two separate rate contingencies. Additional uninsured coverage applies when the at-fault motorist lacks liability insurance with minimum statutory limits. 2 A. Widiss, Uninsured and Underinsured Motorist Insurance, § 31.3 (1987). Underinsured coverage applies when the at-fault motorist has the required minimum liability coverage, but such coverage is insufficient to fully compensate the insured for damages sustained. 3 R. Long, The Law of Liability Insurance, § 24.22 (1987). Therefore, the two types of coverages are mutually exclusive.
The Minnesota Supreme Court addressed the question of whether uninsured and underinsured coverage are mutually exclusive under the Minnesota No-Fault Act. See Murphy v. Milbank Mutual Insurance Co., 368 N.W. (2d) 753 (Minn. Ct. App. 1985); aff'd in part, rev'd in part and reman'd, 388 N.W. (2d) 732 (Minn. S. Ct. 1986). In Murphy the Minnesota Supreme Court found that Minnesota's No-Fault Act, which combines uninsured and underinsured protection into one mandatory coverage, simultaneously permits both underinsured and uninsured coverage. The Court found the statutory language describing each coverage to be ambiguous and, thus, concluded that the legislature intended duplicative coverage. Id. However, the Court held "if the No-Fault Act allows duplicative coverages, it is clear that the act does not intend duplicate recoveries." Id. at 737.
While the Minnesota Court held that the statute's clear language permitting duplicate coverage precluded a finding of mutual exclusivity, we find persuasive the Court's conclusion that duplicative recoveries are prohibited. To the contrary, the law in South Carolina is clear that underinsured coverage and uninsured coverage are mutually exclusive. S. C. Code Ann. § 56-9-831 (1978 & Supp. 1986) (repealed by 1987 Act. No. 155 § 25, Jan. 1,1988). The tortfeasor's insurance coverage in this case was not legally sufficient under South Carolina law and, therefore, the uninsured motorist provision applied. S. C. Code Ann. § 56-9-810 (1977). Since the tortfeasor was uninsured in South Carolina, he could not simultaneously qualify as an underinsured possessing a policy which did not meet the required basic liability coverage. See S. C. Code Ann. § 56-9-831 (1978 & Supp. 1986) (repealed by 1987 Act. No. 155 § 25, Jan. 1, 1988), and Schermer, supra. Accordingly, we conclude that Locklear and Mullins are not entitled to un-derinsured indemnification, but only uninsured reparation under Section 56-9-810.
II.
Fireman's contends the trial court erred in ruling that Mullins was entitled to stack uninsured coverage of $15,000 per vehicle for a total of $45,000.
In determining whether Mullins was entitled to stack his uninsured coverage, we must first examine the appropriate statutory provision. Section 56-9-831 provides in pertinent part:
If . an insured . is protected by uninsured or under-insured motorist coverage in excess of the basic limits, the policy shall provide that the insured is protected only to the extent of coverage he has on the vehicle involved in the accident. If none of the insured's or named insured's vehicles is involved in the accident, coverage is available only to the extent of coverage on any one of the vehicles with excess or underinsured coverage. Coverage on any other vehicle shall not be added to that coverage.
S. C. Code Ann. § 56-9-831 (1978 & Supp. 1986) (repealed by 1987 Act. No. 155 & 25, Jan. 1, 1988). (Emphasis added.)
There are two classes of insureds under Section 56-9-831. The first class, or Class I, applies when an insured or named insured has a vehicle in an accident. The second class, or Class II, insured is an insured whose vehicle(s) was not involved in the accident. Preliminary, the issue to be resolved is within which class is stacking permitted. This Court first addressed this issue in Gambrell and Garris v. Cincinnati Insurance Co., 280 S. C. 149, 311 S. E. (2d) 723 (1984). It held that Section 56-9-820 allowed stacking of underinsured motorist coverage up to the insured's maximum liability coverage. S. C. Code Ann. § 56-9-820 (1976). However, where the insured is a member of the second class (none of the insured's vehicles is involved in the accident), underinsured motorist recovery is limited to the extent of coverage on one vehicle with underinsured motorist coverage. Underinsured coverage in this instance on any other vehicle under the policy could not be stacked or added to that coverage. See Garris, 311 S. E. (2d) at 727; Gambrell, 310 S. E. (2d) at 814.
The decisions in Garris and Gambrell involved the issue of underinsured stacking. It was not until this Court's ruling in Nationwide Mutual Insurance Co. v. Howard, 288 S. C. 5, 339 S. E. (2d) 501 (1985), that we addressed the issue of stacking uninsured motorist coverage. In Nationwide, we held that stacking of uninsured motorist coverage was allowed when the insured comes within Class I — an insured or named insured has a vehicle involved in an accident.
In this case Mullins, the named insured under Fireman's policy, was driving Locklear's automobile when the collision occurred. Because none of Mullins' vehicles was involved in the accident, he is a Class II insured under the statute. As a consequence of Mullins being a Class II insured, he is not permitted to stack uninsured coverage.
Nonetheless, the trial court determined that Mullins was entitled to stack uninsured coverage. In reaching this determination, the trial court stated: "I do not interpret the intent of the legislature here to prohibit stacking of all uninsured coverages. I interpret the word 'excess' to mean excess uninsured coverage, not all uninsured coverage." The applicable part of Section 56-9-831 states: "If none of the insured's or named insured's vehicles is involved in the accident, coverage is available only to the extent of coverage on any one of the vehicles with the excess or underinsured coverage." S. C. Code Ann. § 56-9-831 (1978 & Supp 1986) (repealed by 1987 Act. No. 155 § 25, Jan. 1, 1988). The trial court mistakenly concluded that Fireman's single limits policy was not an excess policy. We do not agree with the trial court that a $35,000 policy merely incorporates the basic limits of 15/30/5 into one number. Under a basic limits policy, recovery is permitted to the extent of $15,000 per person for bodily injuries or $30,000 per accident; while under Fireman's policy, the amount of recovery is $35,000 per person or $35,000 per accident if more than one person is injured.
Accordingly, Mullins cannot stack uninsured benefits as a Class II insured; and because this is an excess policy, he is only entitled to $35,000 uninsured coverage as set forth in the policy.
III.
Fireman's next contends the trial court erred in ruling that Locklear was entitled to stack both uninsured and underinsured coverage in the amount of $45,000 each because' Locklear was a contractual insured and Fireman's policy limited the maximum amount payable from a single accident to $35,000.
The Fireman's policy provided uninsured coverage to Locklear. Part 6 of the policy, which defines uninsured and underinsured motorist coverage, provides in Section A(d) that a covered person who has uninsured motorist coverage includes: "a person occupying any other motor vehicle operated by . (the named insured, Mullins)." Locklear was a passenger in the car operated by Mullins. Therefore, under the policy's provisions, Locklear is a contractual insured for the uninsured motorist endorsement. We agree with the trial court, contrary to the argument of Fireman's, that Locklear is not entirely a "gratuitous insured." The contract executed between Mullins and Fireman's provides that anyone occupying a vehicle operated by the insured Mullins is protected under the policy provision. Indeed, Mullins bargained for this policy provision which extended coverage to any person occupying a vehicle operated by him who incurred costs or suffered a loss resulting from bodily injuries caused by an uninsured motorist. Mullins' purchase and retention of the insurance policy contractually entitles him to the benefits of the bargain or contract. However, we disagree with the trial court's conclusion that Locklear is a Class I insured under Section 56-9-831 and, therefore, entitled to stack uninsured coverage. As defined in S. C. Code Ann. § 56-9-810 (1977), a Class I insured for purposes of Section 56-9-831 is the "named insured, his spouse and relatives residing in his household while in a motor vehicle or otherwise ." The named insured in Fireman's policy is Mullins, and Locklear is neither his spouse nor his relative. Locklear also was not a "guest in such vehicle to which the policy applies" as stated in Section 56-9-810 because she was a passenger in her own car, which is not a vehicle to which the Fireman's policy applies. Because the policy precludes stacking and Locklear is not a statutory insured as per the uninsured motorist laws of South Carolina, Section 56-9-820, et seq., she may not stack uninsured coverage.
Locklear is subject to the Fireman's policy's contractual provisions, which provides maximum coverage to an uninsured motorist in the amount of $35,000. This policy coverage is valid and enforceable. See, e.g., Kraft v. Hartford Insurance Companies, 279 S. C. 257, 305 S. E. (2d) 243 (1983) (this Court approved the contractual extension of liability coverage for the operation of non-owned vehicles, which was not required by statute).
IV.
Fireman's asserts that Locklear is not entitled to any payment under the Fireman's policy or, in the alternative, that Mullins and Locklear must split the $35,000 payment because the policy provides that the maximum payment for all claims from a single accident is $35,000.
As previously stated, Mullins is entitled to Fireman's uninsured coverage protection policy by virtue of being statutorily insured under the policy provisions; and Locklear, as an injured occupant, is contractually entitled to the coverage provided by the $35,000 single limits policy.
Nevertheless, we do not find it necessary to address Fire man's allocation of insurance proceeds argument. Whether Locklear is entitled to partial or total indemnification is a matter for the trial court upon remand based upon the evidence and extent of damages sustained by each. Accordingly, this Court concludes that Fireman's maximum liability under its single limits uninsured policy provision is $35,000.
V.
Finally, appellant argues that the trial court erroneously ruled that Mullins and Locklear were each entitled to $9,000 when Part 5E of the policy limits medical payment to $3,000 per person. Fireman's policy provisions governing medical payments states in part:
The most we will pay for each person injured in a single accident is the Limit of Coverage for your medical payments shown on the Coverage Data Page.
However, a separability clause contained in this provision provides that "[w]hen- two or more vehicles are insured under this policy, the coverage applies separately to each." It is our opinion that the separability clause contained in Fireman's medical payment coverage section is similar to the separability clause found in Kraft v. Hartford Insurance Companies, 279 S. C. 257, 305 S. E. (2d) 243 (1983). In Kraft, this Court held that, medical payments could be stacked because the separability clause in the policy treated each vehicle as if insured under a separate policy. Accordingly, we conclude that the circuit court properly ruled that Mullins and Locklear, can stack medical payments coverage, resulting in an award of $9,000 each.
For the reasons set forth herein, we find that the trial court erred in ruling that Mullins and Locklear were entitled to both uninsured and underinsured coverage. Under the law and the insurance contract executed between Mullins and Fireman's, this Court concludes that Fireman's maximum liability to Mullins and Locklear under its uninsured motorist policy provision is $35,000. We further conclude the court properly ruled that Mullins and Locklear could stack medical coverage and are entitled to a maximum of $9,000 each in medical payments from Fireman's.
Affirmed in part, reversed in part, and remanded.
Gregory, Chandler, JJ., and Acting Associate Justice Lawrence E. Richter, Jr., concur.
Ness, C. J., dissenting in separate opinion.
The following is a summary of the trial court's ruling:
MULLINS LOCKLEAR
UNINSURED MOTORIST $45,000 $45,000
($15,000/vehicle) ($15,000/vehicle)
UNDERINSURED MOTORIST $35,000 $45,000
(one vehicle) ($15,000/vehicle)
MEDICAL PAYMENTS $ 9,000 $ 9,000
($ 3,000/vehicle ($ 3,000/vehicle)
While the issue of underinsured stacking has been resolved by the finding that uninsured and underinsured coverages are mutually exclusive, this decision of underinsured stacking is intended only to provide background information to the reader.