S(l)imms Pickens for UM Coverage in South Carolina When At-Fault Driver is Excluded from Insured’s Policy

Written by: Alan R. Belcher, Jr., Esq.

USAA v. Pickens, __ S.C. ____, 2021 (Filed August 11, 2021.)

In this appeal, the Supreme Court of South Carolina was asked to address the applicability of mandatory uninsured motorist coverage (UM) under a USAA personal lines auto policy (Policy).  The Court determined that the Policy did not provide UM benefits to the USAA insured passenger in her own, insured vehicle when the at-fault driver was subject to a “named drivers exclusionary endorsement” on the insured’s accident-involved vehicle.

By way of brief background, Plaintiff/Appellant Pickens apparently had a resident-relative (Simms) with a driving record that was “uninsurable” by USAA standards.  As a result, USAA required Pickens and Simms to execute a version of the customary “named driver exclusionary endorsement.”  That endorsement required an acknowledgment by Simms and Pickens that Simms would be insured under separate coverage.  Pickens’ declarations page from the USAA Policy also contained a provision that stated, “***COVERAGES EXCLUDED WHEN ANY VEHICLE OPERATED BY KEVIN SIMMS***.”  (As a preliminary matter, this sort of amendatory exclusion has been approved by the South Carolina General Assembly pursuant to S.C. Code Ann. § 38-77-340 (2015).)

At some point thereafter, Pickens was a passenger in one of her insured vehicles in which Simms was the operator.  An accident ensued and Pickens was injured.  Apparently, Simms had failed to secure alternative coverage as required by S.C. Code Ann. § 38-77-340 that would “fully” cover Pickens’ damages.

When the coverage issue was raised, USAA filed a declaratory judgment in the Court of Common Pleas for Richland County, South Carolina to resolve the dispute between Pickens and USAA.

The presiding judge for the Court of Common Pleas of Richland County, South Carolina (Hood, Robert E., J.) determined that Pickens was not entitled to UM coverage under the Policy.  Pickens filed an appeal.

On appeal, Pickens asserted that S.C. Code Ann. § 38-77-340 applied solely to liability insurance. Furthermore, because she made an UM claim, she asserted that she was entitled to benefits under the Policy, regardless of who was operating the insured vehicle.

USAA argued that the “named driver exclusionary endorsement” excluded all forms of coverage, and that this endorsement was expressly authorized by S.C. Code Ann. § 38-77-340.  USAA further argued that to allow Pickens to recover under the UM provisions of the Policy in this case would create a “perverse incentive” for policyholders to exclude all members of their households from coverage under their personal lines policies.

The SC Supreme Court held that Pickens (as a passenger in her own, insured vehicle) was not entitled to UM coverage under the circumstances.  The Court began its analysis with reference to Nationwide Insurance Co. of America v. Knight, 428 S.C. 451, 835 S.E.2d 538 (Ct. App. 2019), aff’d, Op. No. 28028 (S.C. Sup. Ct. filed May 12, 2021) (Shearouse Adv. Sh. No. 16).

Knight addressed a similar issue on similar facts concerning underinsured motorist coverage (UIM), and arrived at the same result. In Knight, the Court held that S.C. Code Ann. § 38-77-340 the statutory provision allowing the “named driver exclusionary endorsement” did not prohibit the exclusion of UIM coverage.

When the Court applied Knight to the facts in the Pickens appeal, it held:

Like Knight, Pickens entered into an agreement with USAA naming Simms as an excluded driver. Pickens also verified that Simms had sufficient coverage under his own, separate policy as required by statute. See S.C. Code Ann. §§ 38-77- 140, -150 (2015). The Supreme Court held that its reasoning expressed in Knight applies equally here: where the parties agree to exclude coverage when a named driver is operating a vehicle, that exclusion extends to all forms of coverage in the policy, including mandatory UM coverage. The exclusion at issue specifically applies to “such insurance as is afforded under this policy,” and provides that USAA will not be liable when Simms is operating a vehicle described in the Policy. Accordingly, USAA’s denial of UM coverage to Pickens did not violate S.C. Code Ann. § 38-77-340.

In closing, the SC Supreme Court held, “excluding a named driver from all forms of coverage—even mandatory coverage—is permitted by S.C. Code Ann. § 38-77-340 and therefore does not violate S.C. Code Ann. § 38-77-150.”

The “take-home” message from Pickens: regardless of whether coverage is statutorily mandated or contractually permitted”, i.e., UM v. UIM, PIP, etc., that coverage will not extend to motor vehicle accidents, where excluded drivers are behind the wheel and involved in a motor vehicle accident.