Auto insurance policies in South Carolina are changing and not for the better. Thanks in part to a state appellate court ruling in 2000, insurance companies are writing "reduction" or "offset" clauses into their contracts that reduce the benefits an injured motorist may be able to recover following a car crash.
Generally, when a driver is involved in a car accident, the driver may be able to recover compensation for their losses from the other driver's insurance policy. If the responsible driver does not have sufficient insurance to pay for all of the covered losses, then the injured driver could claim benefits under their own insurance policy. More specifically, the driver could make a claim for the uninsured motorist (UM) or underinsured motorist (UIM) benefits in his or her own insurance contract.
However, a South Carolina appellate court case decided in 2000 allows insurance companies to offset the amount that may be recoverable under an auto insurance policy if the injured driver received compensation for the same injuries from another source.
In State Farm Mutual Auto Ins. Co. v. Calcutt, the appellate court ruled that insurers providing automobile coverage can offset the benefits available under a driver's UIM policy by the amount of workers' compensation benefits the driver received for the same injury.
In Calcutt, the driver, Rudy Calcutt, was operating a company-owned vehicle at the time of the accident. Calcutt received the maximum available benefits from the liable driver's insurance policy, but it was not enough to cover all of his losses. Calcutt then made a claim under his own UIM policy since the employer did not have UIM coverage in its policy. Calcutt also made a claim for workers' comp benefits for his injuries since the accident occurred while his was working.
The court ruled that State Farm had the right to reduce the UIM benefits payable to Calcutt by the amount of workers' comp benefits he received, in accordance with the offset clause in the insurance contract. The court reasoned that because South Carolina law does not require drivers have UIM coverage, it did not violate state law or public policy for State Farm to take an offset for the workers' comp benefits. The court held that to allow otherwise would permit Calcutt to collect double recovery for a single injury.
Currently, South Carolina law only mandates that insurance companies offer UIM coverage to their policyholders; the decision to purchase the additional coverage is left up to each policyholder.
In a previous case, Ferguson v. State Farm Mutual Auto Ins. Co., the state supreme court ruled that auto insurance companies cannot apply any offsets to UM policies because South Carolina law mandates all drivers have a minimum amount of UM coverage in their insurance contracts. Insurance companies are required to provide this minimum coverage and any offset that results in the insurer paying less UM benefits than required by state law is illegal.
Thus, under the rulings in Ferguson and Calcutt, auto insurers are not allowed to apply offsets to mandatory UM benefits, but they may apply them to optional UIM benefits.
While the Ferguson and Calcutt cases relate to offsets for workers' compensation benefits, insurance companies have been extending offset provisions in their contracts to apply to other types of benefits as well, including liability, personal injury protection (PIP) and medical payments (med pay) coverages. The insurance companies are stretching the bounds of the Calcutt decision in an attempt to deny their policyholders the full spectrum of benefits they are owed.
Accordingly, it is critically important that South Carolina drivers read their insurance policies before purchasing them and fully understand the terms of the policies. Otherwise, drivers may be in for quite a surprise when they have to make a claim under their policies and discover the insurer is not required to pay the full amount they believe they are owed.
If you have been denied coverage or have not received the full benefits you believe you are entitled to under your auto insurance policy, contact an attorney. The attorney can carefully review your policy to determine the offsets included in your contract and whether these offsets are permissible under state law. The lawyer also can determine whether you may be entitled to any other sources of compensation or benefits and help you file your claims.
Contact us for a free consultation as early in the process as possible.