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Stacking of Liability Coverage


Gerald M. Finkel

On September 14, 1990, Sonja Ruppe was killed in a head-on automobile collision when another vehicle entered Interstate 85 in the wrong direction. The driver of that vehicle and her husband owned two cars, both of which were covered for liability insurance by Auto-Owners Insurance under a combined liability policy. In its claim, Ruppe’s estate sought to stack the liability coverage, but was met with resistance by the insurer. Arguing that a "Limit of Liability" provision in the policy prevented intra-policy stacking, the carrier rejected the Estate’s claim and instead paid coverage under only one vehicle ($100,000.00). Not satisfied, the Estate instituted a declaratory judgment action to determine the applicable limits of coverage. The trial court ruled that the liability coverage could be stacked. Auto-Owners appealed.

In Ruppe v. Auto-Owners Ins., 323 S.C. 425, 475 S.E.2d 771 (Ct. App. 1996), The South Carolina Court of Appeals affirmed, with some modification, the ruling of the trial court. The Court began its analysis by stating that "stacking is generally permitted unless limited by statute or by a valid policy provision. Id. at 428, 774. However, "a policy provision attempting to limit stacking of statutorily-required coverage is invalid; and liability insurance is statutorily-required." Id. (referring to S.C. Code Ann. § 38 -77-140 (1989)). In this regard, intra-policy stacking is permissible where "coverage on each vehicle in a multiple vehicle coverage policy is treated as a ‘theoretical separate policy.’" Id. (quoting Thompson v. Continental Ins. Co., 291 S.C. 47, 351 S.E.2d 904 (Ct. App. 1986)).

The Court concluded that the coverages were indeed two theoretically separate policies because the cars were not identical, separate premiums were paid for each and only one vehicle was listed on each declaration. The Court held that the insurer was precluded from "restricting the stacking of liability coverages in a single policy covering multiple vehicles as to sums required to be provided by statute." Id. at 429, 775. The Court stopped short, however, of awarding Plaintiffs an additional $100,000.00. Noting that S.C. Code Ann. § 38-77-140 only requires liability coverage in the amount of $15,000.00 as the result of bodily injury in any one accident, the Court further held that Plaintiff could only stack the coverages in the amount of an additional $15,000.00.

This new rule was destined to live a short life. On February 9, 1998, the South Carolina Supreme Court reversed the Appeals Court’s holding. Ruppe v. Auto-Owners Ins. Co., Op. No. 24761 (S.C. Sup. Ct. filed Feb. 9, 1998) (Davis Adv. Sh. No. 6 at 18). The Estate again argued stacking of statutorily required coverage cannot be contractually prohibited, but the Supreme Court dismissed this argument as an "oversimplification of our stacking law." Id. The Court explained:

First, stacking of uninsured and underinsured coverages, which are both statutorily required coverages, is governed specifically by statute. SeeS.C. Code Ann. § 38-77-160 (Supp. 1996). Construing specific statutory language, we have held an insured is entitled to stack underinsured or uninsured coverage on the vehicle involved in the accident. S.C. Farm Bureau Mut. Ins. C. v. Mooneyham, 304 S.C. 442, 405 S.E.2d 396 (1991). To this extent, stacking cannot be contractually prohibited. Nationwide Mut. Ins. Co. v. Howard, 288 S.C. 5, 339 S.E.2d 501 (1985). Where none of the insured’s vehicles is involved in the wreck, however, stacking of underinsured or uninsured coverage may be prohibited. [ Brown v. Continental Ins. Co., 315 S.C. 393, 434 S.E.2d 270 (1993)].

Id. Accordingly, the Court concluded that the stacking of non-owned liability coverage is controlled by Jackson v. State Farm Mut. Auto Ins. Co., 342 S.E.2d 603 (S.C. 1986) and Giles v. Whitaker, 376 S.E.2d 278 (S.C. 1989) wherein the Court had previously found that "stacking of this type [of] coverage may be prohibited by contract because it is notstatutorily required coverage." [Emphasis theirs]. Id. Therefore, the Court held that Defendant insurer’s policy provision prohibiting stacking of liability coverage is valid:

In this case, we look to § 38-77-140 which mandates liability insurance in this State. This section requires coverage under a policy issued to the owner of a motor vehicle for liability arising out of the ownership, maintenance, or use of that motor vehicle. Liability coverage, therefore, while statutorily required, is limited to the particular vehicle for which it is purchased. The extent of liability coverage is thus statutorily defined by the amount of coverage on the insured vehicle and does not encompass coverage applicable to other vehicles. Accordingly, a policy provision prohibiting stacking is consistent with statutory insurance requirements regarding liability coverage. [Emphasis theirs].

Id. In short, the "guiding principle to be gleaned from our current stacking law is that stacking may be prohibited by contract if such a prohibition is consistent with statutory insurance requirements." Id.

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