Opinion ID: 1288711
Heading Depth: 1
Heading Rank: 6

Heading: requirement of meaningful offer in sale of exempt commercial policy

Text: Plaintiff contends that, even if the policy at issue is an exempt commercial policy, Old Republic is required to make a meaningful offer of UIM coverage because the Legislature has not exempted such policies from this requirement. Old Republic argues the Legislature's creation of a special category of `exempt commercial policies' indicates a belief that large commercial accounts do not need the same close regulation and court supervision as unsophisticated purchasers of insurance do. Thus, it was not required to offer UIM coverage to Penske. The cardinal rule of statutory interpretation is to ascertain and effectuate the intention of the Legislature. Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000); Mid-State Auto Auction of Lexington, Inc. v. Altman, 324 S.C. 65, 69, 476 S.E.2d 690, 692 (1996). In ascertaining the intent of the Legislature, a court should not focus on any single section or provision but should consider the language of the statute as a whole. Mid-State, 324 S.C. at 69, 476 S.E.2d at 692. When a statute's terms are clear and unambiguous on their face, there is no room for statutory construction and a court must apply the statute according to its literal meaning. Carolina Power & Light Co. v. City of Bennettsville, 314 S.C. 137, 139, 442 S.E.2d 177, 179 (1994). S.C.Code Ann. § 38-77-160 (2002) provides [automobile insurance] 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 or in excess of any damages cap or limitation imposed by statute. An automobile insurance carrier in South Carolina is required to make a meaningful offer of UIM coverage when selling an exempt commercial policy to a commercial insured. Old Republic indisputably is an automobile insurance carrier and, as such, was required to make a meaningful offer of UIM coverage to Penske. No statutory provision exempts insurers which sell exempt commercial policies from the requirement of making a meaningful offer of UIM coverage to a commercial insured as mandated by Section 38-77-160. The only statutes addressing exempt commercial policies are those discussed in Question 1. A review of those statutes reveals the Legislature modified Department's oversight of exempt commercial policies by establishing a system in which approval of such policies is granted upon filing, subject to later review and order by Department. The Legislature also exempted such policies from the usual rate-making and approval processes. These changes were intended to promote reasonable competition among commercial insurers, as explicitly stated by the Legislature. See Section 38-73-10(a)(4). However, the Legislature did not similarly exempt insurers which sell such policies from complying with the usual requirements of offering UIM coverage to their commercial insureds. Old Republic's argument is based on sheer speculation about the Legislature's intentions. The Legislature could have created such an exemption in Act No. 235 in 2000 when it defined exempt commercial policies and exempted them from certain other requirements; however, it did not do so. Moreover, the Legislature's amendment in 2002 and 2003 of three statutes addressing exempt commercial policies supports our conclusion. In redefining exempt commercial policies in Section 38-1-20(40), the Legislature in 2002 and 2003 changed the phrase large commercial insureds to commercial insureds. The Legislature also deleted from the definition the phrase where the total combined premiums to be paid for these policies for one insured is greater than fifty thousand dollars annually. See footnote 1. Similarly, the Legislature in 2002 amended Sections 38-73-340 and 38-73-520 to change the phrases large commercial policies and exempt large commercial policies to simply exempt commercial policies. See footnote 2. These amendments mean insurers may sell exempt commercial policies to commercial insureds of all sizes, from multi-national corporations to mom-and-pop operations. Therefore, such a policy may be presented not only to potentially knowledgeable risk managers for large corporations, as occurred in the present case, but also to less sophisticated and knowledgeable insureds who own or manage small businesses. The Legislature apparently recognized that fact and chose not to create an exemption for exempt commercial policies from the requirements of Section 38-77-160. Accordingly, we answer Question 2 yes, automobile insurance carriers in South Carolina are required to make a meaningful offer of optional UIM coverage when selling an exempt commercial policy as that term is defined in Section 38-1-20(40).