Court Opinion

ID: 205547
Source: CourtListenerOpinion
Date Created: 2011-02-25 19:28:06+00
Date Added: 2024-06-11T17:27:48.553699
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                             No. 10-1373

STANLEY MCWHITE,

                Plaintiff - Appellant,

           v.

ACE AMERICAN INSURANCE COMPANY,

                Defendant - Appellee.

Appeal from the United States District Court for the District of
South Carolina, at Florence. R. Bryan Harwell, District Judge.
(4:07-cv-01551-RBH)

Argued:   December 8, 2010                 Decided:   February 25, 2011

Before Sandra Day O’CONNOR, Associate Justice (Retired), Supreme
Court of the United States, sitting by designation, and DUNCAN
and AGEE, Circuit Judges.

Affirmed by unpublished opinion.     Justice O’Connor wrote the
opinion, in which Judge Duncan and Judge Agee joined.

ARGUED: Stephen J. Wukela, WUKELA LAW FIRM, Florence, South
Carolina, for Appellant.      John Robert Murphy, MURPHY &
GRANTLAND, PA, Columbia, South Carolina, for Appellee.       ON
BRIEF: Jeffrey C. Kull, MURPHY & GRANTLAND, PA, Columbia, South
Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
O’CONNOR, Associate Justice:

      Appellant        Stanley    McWhite         appeals       the    district      court’s

grant of summary judgment to Appellee ACE American Insurance

Company   in    his     suit     claiming      that    his      employer’s         automobile

insurance      policy       includes    or    should       be    reformed       to    include

underinsured      motorist       coverage.           For    the       reasons      set   forth

below, we affirm the judgment of the district court.

                                             I.

      Appellant Stanley McWhite was employed by Ahold Americas

Holdings,      Inc.    On    February    10,       2005,     McWhite      was      driving   a

tractor-trailer         truck    owned    by       Ahold,    when      the    truck      jack-

knifed.     McWhite exited the truck, and while setting up warning

triangles      along    the     road,    as       required      by    Ahold     policy    and

Department of Transportation regulations, McWhite was struck and

injured by a vehicle driven by an “underinsured” motorist. 1

      After recovering $25,000 from the driver of the vehicle,

see Covenant Not to Execute, J.A. 57, McWhite filed suit against

his   employer’s         insurance       company,           Appellee         ACE     American

      1
        South Carolina law defines an “[u]nderinsured motor
vehicle” as “a motor vehicle as to which there is bodily injury
liability insurance or a bond applicable at the time of the
accident in an amount of at least that specified in Section 38-
77-140 and the amount of the insurance or bond is less than the
amount of the insureds’ damages.” S.C. Code Ann. § 38-77-30(15)
(2002).

                                              2
Insurance Company, in the Florence County, South Carolina, Court

of Common Pleas.            McWhite sought a declaratory judgment that he

is an “insured” for purposes of underinsured motorist (“UIM”)

coverage under a policy issued by ACE to Ahold.                       ACE removed the

case   to    the     U.S.     District      Court    for   the     District    of   South

Carolina on the grounds of diversity of citizenship.

       The     district       court    ordered      the    parties     to     engage   in

discovery on the question of whether Ahold’s insurance policy

contained a UIM endorsement and, if not, whether ACE had made

Ahold a meaningful offer of UIM coverage, as required by South

Carolina law.

       After        discovery,      the     district       court     granted     summary

judgment for Appellee ACE.                  McWhite v. ACE American Ins. Co.,

No. 4:07-cv-01551-RBH, 2010 WL 1027872 (D.S.C. Mar. 17, 2010).

The district court held that Ahold’s insurance policy did not

contain UIM coverage.               Id. at *3.        The district court further

held that ACE had not made a meaningful offer of UIM coverage

under S.C. Code Ann. § 38-77-350, id. at *4, and noted that it

had “some concern” about whether ACE, alternatively, had made a

meaningful offer pursuant to the South Carolina Supreme Court’s

decision       in     State    Farm       Mutual    Auto    Insurance       Company    v.

Wannamaker,         354    S.E.2d     555   (S.C.    1986).        McWhite,     2010   WL

1027872,     at      *5.      The   district       court   ultimately       “[a]ssum[ed]

without deciding” that no meaningful offer had been made and

                                              3
that the policy could be reformed to include UIM coverage.                           Id.

at    *5–*6.      It   concluded,       however,      that     McWhite     would     not

constitute an “insured” under South Carolina law for purposes of

UIM   coverage,    and   thus     that    he    would    not     benefit      from   any

reformation of the contract.           Id. at *8.

      McWhite     appeals   the       district    court’s       grant    of    summary

judgment for ACE.

                                         II.

      We review the district court’s grant of summary judgment de

novo, viewing the facts in the light most favorable to McWhite.

See Meson v. GATX Tech. Servs. Corp., 507 F.3d 803, 806 (4th

Cir. 2007).     “Summary judgment is appropriate when ‘there is no

genuine issue as to any material fact and . . . the movant is

entitled   to   judgment    as    a    matter    of     law.’”      Merrit      v.   Old

Dominion Freight Line, Inc., 601 F.3d 289, 295 (4th Cir. 2010)

(quoting Fed. R. Civ. P. 56(c)).                In this diversity action, we

must apply South Carolina law.                See Twin City Fire Ins. Co. v.

Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th

Cir. 2005).       We first address whether the policy contained UIM

coverage and then turn to whether ACE made a meaningful offer of

such coverage.

                                          4
                                              A.

      McWhite argues that Ahold’s insurance policy in effect at

the time of the accident in February 2005 includes UIM coverage.

Ahold argues that it does not, and the district court agreed

with Ahold.        McWhite, 2010 WL 1027872, at *2–*3.

      Both parties point the Court to Endorsement #163, entitled

“Limits of Insurance—Uninsured Motorists/Underinsured Motorists”

for   the       period    from    December    1,    2004,   to   December       1,   2005.

Under       a     heading        for    Uninsured      Motorists        Coverage        and

Underinsured         Motorists         Coverage,    Endorsement     #163        lists    a

$40,000 limit for South Carolina.                   J.A. 163.     The parties offer

different interpretations of the $40,000 notation.

      Ahold explains that Endorsement #163 states that it amends

“Item 2 of the Declarations.”                 Id.    Ahold then turns to Item 2

in the insurance policy listing the policy period from May 19,

2004, to December 1, 2004.               J.A. 116–117.      In Item 2, there is a

box labeled “Underinsured Motorists”; it says “See Endt. 6,”

which Ahold explains was the predecessor to Endorsement #163,

Appellee’s Br. at 54 n.15, and “Financial Responsibility*.”                             The

asterisk is linked to a footnote at the bottom of the page that

states      “where       rejection      not   permitted.”        J.A.    117.        Ahold

explains that since rejection of UIM coverage is permitted in

South Carolina, reading Endorsement #163 together with Item 2

clearly indicates that Ahold did not desire any UIM coverage.

                                              5
Appellee’s Br. at 54.                Ahold explains that the $40,000 in the

Endorsement applies only to uninsured motorist coverage, which

South Carolina does not permit an insured to reject.                        Id.

       In    contrast,          McWhite    argues    that   the   “Item     2”    in    the

original policy is irrelevant because it does not apply to the

period in which the accident occurred.                      He urges the Court to

look    only       to     the    “Renewal    Endorsement”       for   the    term      from

December 1, 2004, to December 1, 2005.                      J.A. 153.       The Renewal

Endorsement states, “This Endorsement changes the policy.”                              Id.

The Renewal Endorsement has a line for Underinsured Motorists

that states “See Endt. #163,” which, as previously explained,

lists $40,000 in coverage for South Carolina.                     Id.     Based on the

Renewal Endorsement and Endorsement #163, McWhite argues that

there       is    no     provision    in    the     insurance     contract       for    the

applicable period that rejects UIM coverage.                      Appellant’s Br. at

22–24.

       The South Carolina Supreme Court has explained that “[a]

contract         is     ambiguous    when    the    terms   of    the   contract        are

reasonably susceptible of more than one interpretation.”                               S.C.

Dep’t of Natural Res. v. Town of McClellanville, 550 S.E.2d 299,

303 (S.C. 2001).            “It is a question of law for the court whether

the language of a contract is ambiguous.”                     McGill v. Moore, 672

S.E.2d 571, 574 (S.C. 2009).                      After considering the parties’

arguments, the district court held that the policy is ambiguous

                                              6
with    regard         to    whether     it       included         UIM     coverage       in   South

Carolina.        McWhite, 2010 WL 1027872, *3.                      We agree.

       In   light       of       this   ambiguity,       we        must    look     to    extrinsic

evidence of the intent of the parties to the contract.                                    Dixon v.

Dixon, 608 S.E.2d 849, 852 (S.C. 2005) (“If the vital terms of a

contract     are       ambiguous,       then,       in   an    effort       to     determine        the

intent      of    the       parties,        the     court      may        consider       probative,

extrinsic evidence.”); see also DeVore v. Piedmont Ins. Co., 142

S.E. 593 (S.C. 1928) (explaining that extrinsic, parol evidence

is   permissible            to    explain     the      intent       of    the     parties      to    an

ambiguous insurance contract).                         Normally, when a contract is

held to be ambiguous, the intent of the parties is a question of

fact for the jury.                Garrett v. Pilot Life Ins. Co., 128 S.E.2d

171,   174       (S.C.       1962).         In    this    case,          however,       the    record

contains uncontroverted evidence that neither Ahold nor ACE—the

parties to the contract—intended to include UIM coverage.                                           See

Deposition        of    Nicholas        A.    Parillo         at    38–40        (J.A.    263–265);

Deposition of Tony Dingrando at 35, 38–39 (J.A. 225, 282–283).

This question is therefore appropriate for summary judgment, and

we   affirm       the       district     court’s         holding          that    the     insurance

policy, as construed in light of the uncontroverted evidence of

the parties’ intent, does not include UIM coverage.

                                                   7
                                       B.

     We turn now to whether ACE made a meaningful offer of UIM

coverage   to   Ahold.        South    Carolina      Code    Ann.   § 38-77-160

requires an insurer to offer UIM coverage to the insured, 2 and

the South Carolina Supreme Court has explained that the offer

must be “meaningful.”         See Floyd v. Nationwide Mut. Ins. Co.,

626 S.E.2d 6, 12 (S.C. 2005).           If no meaningful offer is made,

then “the policy will be reformed by operation of law to include

UIM coverage up to the limits of liability insurance carried by

the insured.”    Ray v. Austin, 698 S.E.2d 208, 212 (S.C. 2010).

The meaningful offer requirement can be satisfied in one of two

ways:    compliance    with     S.C.       Code    Ann.     § 38-77-350(A)    or

satisfaction of the four-part test the South Carolina Supreme

Court    established     in   State    Farm       Mutual    Insurance   Co.   v.

Wannamaker, 354 S.E.2d at 556.         We consider each in turn.

     S.C. Code Ann. § 38-77-350(A) establishes requirements for

forms that insurers use to make offers of optional insurance,

     2
       That section, as applicable at the time of the insurance
contract in this case, provided, as relevant: “Automobile
insurance carriers shall 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 the statute.”      S.C.
Code. Ann. § 38-77-160 (2002).

                                       8
including UIM coverage.          At the time of the contract at issue

here, the provision stated:

       (A) The director or his designee shall approve a form which
       automobile   insurers  shall   use  in   offering  optional
       coverages required to be offered pursuant to law to
       applicants for automobile insurance policies. The form, at
       a minimum, must provide for each optional coverage required
       to be offered:

              (1) a brief and concise explanation of the coverage,

              (2) a list of available            limits       and    the   range    of
              premiums for the limits,

              (3) a space for the insured to mark whether the
              insured chooses to accept or reject the coverage and a
              space for the insured to select the limits of coverage
              he desires,

              (4) a space for the insured to sign the form which
              acknowledges that he has been offered the optional
              coverages,

              (5) the mailing address and telephone number of the
              Insurance Department which the applicant may contact
              if the applicant has any questions that the insurance
              agent is unable to answer.

S.C.   Code    Ann.   § 38-77-350(A)       (2002).       At    the    time    of    the

contract in question, the statute stated that “[i]f this form is

properly   completed     and    executed    by    the   named       insured    it    is

conclusively      presumed     that   there      was    an    informed,       knowing

selection of coverage . . . .”                Id. § 38-77-350(B); see also

Grinell Corp. v. Wood, 698 S.E.2d 796, 799 (S.C. 2010) (holding

that if the offer form complies with the statutory requirements,

then there is a “conclusive presumption in favor of the insurer

                                       9
that the insured made a knowing waiver of the option to purchase

additional coverage”).

      Appellant McWhite contends that the offer ACE made to Ahold

deviates from the statutory requirements in several ways.                  He

argues that ACE improperly completed the form by failing to list

the available limits of UIM coverage up to the liability limit

of five million dollars and by failing to specify the range of

premiums for the different coverage limits.            Appellant’s Br. at

11–12.     He argues that Ahold’s employee, Nicholas Parillo, did

not   properly   complete      and   execute   the   form   in   the   manner

required because he failed personally to mark an “x” in a box

indicating that Ahold did not want UIM coverage and because he

signed the acknowledgement line of the offer form but did not

sign a second line where the form indicates the insured must

sign if it intends to decline coverage.          Id. at 12.

      The district court held that Parrillo’s failure to sign the

line to decline coverage, in addition to signing the general

acknowledgment line, rendered the form improperly completed such

that, “the insurer cannot rely on the statutory presumption.”

McWhite, 2010 WL 1027872, at *4.            It is sufficient, however, to

rely on ACE’s failure to complete the form with “a list of

available limits and the range of premiums for the limits,” as

required    by   S.C.   Code    Ann.    § 38-77-350(A)(2).       The   South

Carolina Supreme Court recently held that a nearly identical

                                       10
omission by an insurer meant that “the form failed to comply

with the requirements of section 38-77-350(A)(2),” such that the

insurer “was not entitled to the statutory presumption that a

meaningful offer of UIM coverage was made.”                Ray, 698 S.E.2d at

212.

       Even   though    ACE     is       not   entitled    to   the    statutory

presumption    that    it   made     a    meaningful   offer,   it    can    still

demonstrate that it made a meaningful offer by satisfying the

four-part test the South Carolina Supreme Court established in

Wannamaker.    Wannamaker requires that:

       (1) the insurer’s notification process is commercially
       reasonable, whether oral or in writing; (2) the
       insurer must specify the limits of optional coverage
       and not merely offer additional coverage in general
       terms; (3) the insurer must intelligibly advise the
       insured of the nature of the optional coverage; and
       (4) the insured must be told that optional coverages
       are available for an additional premium.

Wannamaker, 354 S.E.2d at 556.             The South Carolina Supreme Court

has held that an insurer must make a meaningful offer of UIM

coverage even in the context of a policy like the one at issue

here, which is a “fronting policy”—a policy that “contains a

deductible    equal    to     the    coverage     limits   contained    in     the

policy.” 3    Croft v. Old Republic Ins. Co., 618 S.E.2d 909, 911

       3
       Nicholas Parillo explained that Ahold needed such a policy
because the “fronting carrier” is “admitted to do business” in
the 42 states where Ahold operates and “meets the requirements
of each of those states for providing automobile insurance.”
(Continued)
                                          11
(S.C.    2005);     id.    at    917.      In    applying     the     Wannamaker      test,

“evidence of the insured’s knowledge or level of sophistication

is    relevant     and    admissible      when    analyzing      .    .   .   whether   an

insurer intelligibly advised the insured of the nature of the

optional . . . UIM coverage.”              Id. at 918.

       In   this    case,       Ahold     and    its   Vice     President       for   Risk

Management       Nicholas       Parillo    are    clearly       sophisticated.          The

record shows that Parillo has decades of experience in insurance

and     risk   management,        is    responsible       for       procuring     Ahold’s

insurance coverage in the 42 states in which it operates, and

has some specific knowledge of South Carolina’s UIM coverage

law, including that UIM coverage is optional in South Carolina.

Deposition of Nicholas A. Parillo at 5–9, 12–13.                          Despite this,

the district court relied on a South Carolina Court of Appeals

case,    Grinnell      Corp.     v.    Wood,    663    S.E.2d    61    (S.C.    Ct.   App.

2008), which held that “an insurer failed to make a meaningful

offer despite the sophistication of a risk manager where the

operational coverages printed on the form were for amounts far

less    than     the     liability      limit”     and   “the       increased     premium

Deposition of Nicholas A. Parillo at 19.   He further explained
that “[i]f Ahold did not have a fronting insurer, [it] would
have had to have [its] captive insurance company admitted to do
business in each of those 42 states,” which “would have been
prohibitively expensive.” Id.

                                            12
charges      were     left    blank,”        in    addition        to     other      defects.

McWhite,     2010     WL    1027872,    *5.        Based     on    the    S.C.       Court   of

Appeals’ opinion in Grinnell, the district court stated that it

had “some concern with whether a meaningful offer was made under

the Wannamaker factors.”              Id.

       Since the district court issued its opinion, however, the

South Carolina Supreme Court reversed the S.C. Court of Appeals’

decision in Grinnell and held that despite technical failures in

compliance with the Wannamaker factors, a meaningful offer was

made     because      the     record        was    “replete       with     uncontroverted

evidence     that     the    insured        knew   its    options       with    respect      to

additional . . . UIM coverage in South Carolina and made an

informed decision as to the amount of coverage that best suited

its needs.”         Grinnell Corp. v. Wood, 698 S.E. 2d 796, 800 (S.C.

2010).       The Court noted that to hold no meaningful offer had

been   made     in    those        circumstances         would    produce       an    “absurd

result.”      Id.

       The    South    Carolina        Supreme       Court       relied    on     the    same

reasoning to find that a meaningful offer had been made in Ray

v. Austin, 698 S.E.2d 208, a case with facts very similar to

this one and issued the same day as Grinnell.                             In Ray, Cintas

Corporation—just            like     Ahold—“adopted          the        risk      management

strategy of declining . . . UIM in states where such coverage

was not required.”            Id. at 210.          Lumbermens Insurance provided

                                              13
Cintas   with     a    UIM    coverage       form    that     left    blank       the    lines

intended to show the increases in premiums for various levels of

UIM coverage, and Cintas’s employee failed to sign next to the

box where he checked “no” to decline UIM coverage.                            Id. at 211.

The    South    Carolina       Supreme       Court     held    that       Lumbermens       had

satisfied      three   of     the    Wannamaker        factors,      but    may    not    have

“specified the limits of UIM coverage and not merely offer[ed]

such   coverage       in     general    terms.”         Id.    at    213.         The    Court

explained that if it were to hold that there was no meaningful

offer,   it     “would       reach     the    absurd    result       of    reforming       the

insurance policy to give Cintas coverage it understood, did not

want, and clearly rejected.”                 Id.     In the face of that outcome,

the Court “refuse[d] to apply the Wannamaker factors in a manner

that contravenes the very purpose behind the meaningful offer

requirement”—“to           protect       insureds”          and      “give        them     the

opportunity      ‘to    know    their        options    and    to    make    an     informed

decision as to which amount of coverage will best suit their

needs.’”       Id. (quoting Floyd, 626 S.E.2d at 12).                             The Court

therefore found that there was a meaningful offer.                          Id.

       The facts of this case are analogous to those in Grinnell

and Ray.        ACE’s offer satisfied three of the four Wannamaker

factors.       First, ACE notified Ahold, via a broker (McGriff), of

the availability of UIM coverage in a “commercially reasonable”

manner “in writing” by providing Ahold with its standard UIM

                                              14
offer form.         See J.A. 238–243.           As in Grinnell, even a deficient

form can constitute a “commercially reasonable” offer when the

insured is a sophisticated party, as Ahold’s agent, Parillo, is

here.     Grinnell, 698 S.E.2d at 800 (“[T]he record contains ample

evidence that [the insured] knew his options with respect to

additional . . . UIM coverage, thus, based on the sophistication

of the parties, [the insurer] made a commercially reasonable

offer to [the insured].”).                Second, the UIM coverage offer form

itself       “intelligibly       advise[d]”         Ahold    of   “the   nature   of    the

optional       coverage.”         Offer    of       Optional      Additional   Uninsured

Motorist Coverage and Optional Insured Motorist Coverage, J.A.

242 (“Underinsured motorist coverage compensates you . . . for

amounts which you may be legally entitled to collect as damages

from    an    owner      or   operator    of    an    at-fault       underinsured    motor

vehicle.       An underinsured motor vehicle is a motor vehicle which

is     covered      by    some   form     of    liability         insurance,   but     that

liability coverage is not sufficient to fully compensate you for

your damages.”); see Ray, 698 S.E. 2d at 213 (“The form itself

intelligibly advised Cintas of the nature of UIM coverage.”).

Finally,      the     form    also   informed        Ahold    that    UIM   coverage    was

available for an “additional premium[].”                       J.A. 242; see Ray, 698

S.E.2d at 213.

       As in Ray, Ahold fails, however, to satisfy the Wannamaker

factor requiring the insurer to “specify the limits of optional

                                               15
coverage and not merely offer additional coverage in general

terms.”   Wannamaker, 354 S.E.2d at 556.                Like the form at issue

in Ray, ACE left blank the lines on the form for the premiums

for different limits of UIM coverage, and Ahold’s representative

Parillo did not sign the line next to the “no” box, declining

UIM coverage.      J.A. 243; Ray, 698 S.E. 2d at 211.                       Like the

insured in Ray, however, Ahold nonetheless understood the offer

of UIM coverage and “made a business decision to refuse” it with

“full awareness of the nature of the coverage it was rejecting.”

Ray, 698 S.E.2d at 213.            Parillo explained in his deposition

that Ahold’s strategy “has always been to only purchase . . .

underinsured    motorist      coverage    in    those    states     where    it    was

mandated. . . . And where it was not mandated, not to purchase.”

Deposition of Nicholas A. Parillo at 38 (J.A. 263).                          Parillo

explained that Ahold declined UIM coverage because, due to the

nature of the fronting policy, Ahold itself would have born the

added risk of payouts under the UIM coverage.                       Id. at 39–40

(J.A. 264–265).

      Applying South Carolina’s precedents, we decline to “reach

the   absurd   result    of   reforming       the    insurance   policy     to    give

[Ahold]   coverage      it    understood,      did    not   want,    and     clearly

rejected.”     Ray, 698 S.E.2d at 213.              We therefore hold that, in

the circumstances of this case, ACE made a meaningful offer of

                                         16
UIM   coverage.         There    is,    therefore,     no    justification      for

reforming the policy to include UIM coverage.

                                        III.

      Because we hold that ACE made a meaningful offer of UIM

coverage    pursuant      to    the    Wannamaker     factors,   we    need     not

consider    the    district     court’s    holding    that   McWhite     does   not

constitute an “insured” under the policy and South Carolina law.

See Strawser v. Atkins, 290 F.3d 720, 728 n.4 (4th Cir. 2002)

(recognizing that “we may affirm on any ground revealed in the

record”).         For   the    foregoing   reasons,    the    judgment    of    the

district court is

                                                                       AFFIRMED.

                                          17