Davis Adv. Sh. No. 30
S.E. 2d
THE STATE OF SOUTH CAROLINA
In The Supreme Court
Henry Sanders
McMillan, Jr. and
Evelyn Marie McMillan, Plaintiffs,
v.
John M. Hughes
Seafood Company, Inc.
and CSX
Transportation, Inc., Defendants.
On Certification from the United States District
Court for the District of South Carolina
Matthew J. Perry, United States District Judge
Opinion No. 24703
Heard September 18, 1997 - Filed October 27, 1997
CERTIFIED QUESTION ANSWERED
Blake G. Arata, Jr., C. Perrin Rome, III, Benjamin
B. Saunders, all of Davis, Saunders, Arata & Rome,
of Metairie, Louisiana; Austin J. Tothacer, Jr., of
Moncks Corner, for plaintiffs.
Stephen F. McKinney, of Haynsworth, Marion.
McKay & Guerard, L.L.P., of Columbia, for
Defendant CSX Transportation, Inc.
Henry Grimball, of Buist, Moore, Smythe & McGee,
P.A., of Charleston, for State Farm Mutual Ins. Co.
p. 3
MCMILLAN, et al. v. SEAFOOD COMPANY
FINNEY, C.J.: The United States District Court for the
District of South Carolina has certified the following question to this
Court:
Do the settlement agreements entered into between plaintiffs and
defendant CSX Transportation, Inc., constitute an impermissible
assignment of a claim for underinsured motorists benefits
contrary to S.C. Code Ann. 38-77-160 (Supp. 1996)?
Henry McMillan was injured when a train owned by CSX struck-
a tractor-trailer owned by defendant John Hughes Seafood Co. The plaintiffs
entered into a settlement agreement with defendants. As part of the
agreement, the plaintiffs agreed to pursue all excess insurance recoveries
available to them, including underinsurance coverage, and pay any recoveries
to CSX. Plaintiffs brought a federal action to seek recovery of the $100,000
in underinsurance coverage with any recovery, net of fees and expenses, being
paid to CSX. State Farm, plaintiffs' underinsurance carrier, filed a motion
to dismiss the claims with prejudice on the ground that plaintiffs and CSX
have entered into an impermissible assignment of a claim for underinsured
motorist benefits contrary to S.C. Code Ann. 38-77-160 (Supp. 1996). We
agreed to answer the certified question.
The settlement and final release of all claims executed on July 17,
1996, states that the plaintiffs "agrree to cooperate without expense to
themselves in conjunction with CSX Transportation, Inc., to pursue insurance
coverages which may be in effect relative to the damages" resulting from the
accident. The second settlement and final release agreement executed on
March 3, 1997, states the plaintiffs retain the right to pursue any action to
seek further compensation out of any personal insurance coverage or any
applicable underinsured motorist coverage (UIM) available to plaintiffs. The
agreement further states that if plaintiffs collect any insurance coverage
proceeds they will pay, such proceeds to CSX Transportation.
State Farm contends plaintiffs have fully released their claims
and thus, any purported transfer of underinsured benefits to CSX is invalid
based on S.C. Code Ann. 38-77-160. Section 38-77-160, which requires
insurers to make an offer of uninsured and underinsured motorist coverage,
states that "[b]enefits paid pursuant to this section are not subject to
subrogation and assignment."
Plaintiffs and CSX assert the settlement agreement is an
executory contract and therefore does not affect an assignment relieving the
p. 4
MCMILLAN, et al.. v. SEAFOOD COMPANY
insurer of its obligation to pay benefits. Plaintiffs further assert that it is
beyond the authority and control of the carrier to decide how proceeds are
used. This argument ignores the language of the agreement which states
that plaintiffs will pay such proceeds collected to CSX. The statutory
language is clear that underinsured benefits paid are not subject to
subrogation and assignment.1 The settlement and final release agreements
set forth an intent to assign plaintiffs' interest in UIM benefits which is
contrary to 38-77-160.
Plaintiffs and CSX assert that the restrictive language applies
only to uninsured motorist coverage because only uninsured coverage is
addressed in the paragraph ending with the restrictive language. We
disagree. The first paragraph ending with the restriction on subrogation and
assignment discusses both types of coverage and includes three references to
underinsured motorist coverage. Further, the restrictive language indicates
that it applies to all coverage mentioned in the section not paragraph.
Clearly, section refers to more than just a paragraph of a statutory section.
Plaintiffs and CSX maintain there was no assignment of an UIM
claim involved in the agreements. Plaintiffs assert the parties agreed the
plaintiffs would liquidate any available UIM or other excess insurance claims
and, if successful, make the proceeds available to CSX. However, this
interpretation is contrary to the explicit language of the agreements.
We conclude the settlement agreements at issue here constitute
an impermissible assignment of a claim for underinsured motorist benefits
contrary to section 38-77-160.
CERTIFIED QUESTION ANSWERED.
TOA.L, MOORE, WALLER and BURNETT, JJ., concur.
1 We noted in Rattenni v. Grainger that the 1987 amendment to 38-77-160 deleted the provision allowing underinsurance and uninsured
carriers the rights of subrogation and assignment. 298 S.C. 276, 379
S.E.2d 890 n.2 (1989). Further, Covington, et al., The Law of Automobile
Insurance in South Carolina, at V-46 (3d Ed. 1996) notes that the effect of
38-77-160 is to eliminate subrogation and assignment of additional
uninsured as well as underinsured motorist benefits.
p. 5