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Cothran v. State Farm Mutual Automobile Insurance Co.

Court of Appeals of South Carolina

November 22, 2017

Wadette Cothran and Chris Cothran, Respondents,
v.
State Farm Mutual Automobile Insurance Company and Robert Tucker, Defendants, Of which State Farm Mutual Automobile Insurance Company is the Appellant. Appellate Case No. 2016-000177

          Heard September 8, 2017

         Appeal From Spartanburg County L. Casey Manning, Circuit Court Judge

          Charles R. Norris and Robert W. Whelan, of Nelson Mullins Riley & Scarborough LLP, of Charleston, for Appellant.

          Charles Logan Rollins, II, of The Hawkins Law Firm, of Spartanburg, for Respondents.

          THOMAS, J.

         Appellant State Farm Mutual Automobile Insurance Company (State Farm) appeals the circuit court's grant of summary judgment to Respondents Wadette and Chris Cothran. The Cothrans brought this action against State Farm alleging breach of an insurance contract and breach of the duty of good faith and fair dealing. State Farm argues the circuit court erred by granting summary judgment in the Cothrans' favor because our supreme court's precedent was controlling and by holding public policy prohibited insurers offering personal injury protection (PIP) benefits from reducing those benefits by the amount an insured receives from a workers' compensation policy. We reverse.

         FACTS/PROCEDURAL HISTORY

         The Cothrans filed this action in April 2015, alleging bad faith refusal to pay insurance benefits and breach of contract. In August 2015, the parties entered a stipulation of facts. Wadette Cothran was injured in a motor vehicle accident and incurred medical expenses in excess of $5, 000. Wadette's employer's workers' compensation carrier paid her medical expenses in full. Wadette was also covered by her automobile policy issued by State Farm (the Policy), which provided PIP coverage with a limit of $5, 000. State Farm paid $991 to the Cothrans for a portion of Wadette's lost wages but denied payment of the remaining PIP coverage because a provision (Excess Provision) in the Policy provided its PIP coverage was excess to any benefits the policyholder recovered under workers' compensation law. The Cothrans claimed the Excess Provision violated section 38-77-144 of the South Carolina Code (2015)[1] and they should recover the PIP benefits in addition to the workers' compensation benefits. Both parties moved for summary judgment and agreed there were no material facts in dispute. The sole matter before the circuit court was whether the Excess Provision violated section 38-77-144.

         The Policy in its entirety is included in the record on appeal and was presented to the circuit court. The Excess Provision stated, "Any [PIP] Coverage provided by [the Policy] applies as excess over any benefits recovered under any workers' compensation law or any other similar law."

         State Farm argued our supreme court essentially decided this issue in Richardson[2]by finding section 38-77-144's prohibition against setoffs applied only to a possible setoff for a tortfeasor's liability. It claimed it was entitled to summary judgment because section 38-77-144 did not apply to the situation in this case. Alternatively, the Cothrans argued the plain meaning of section 38-77-144 did not allow a setoff of PIP benefits. They also argued Richardson did not address this situation and was only meant to prevent a liability carrier from receiving a windfall. Finally, the Cothrans asserted allowing a setoff of PIP benefits under these circumstances would violate public policy because a workers' compensation carrier would be prevented from claiming an equitable interest in the PIP benefits.

         The circuit court granted summary judgment in favor of the Cothrans. The circuit court found the Excess Provision constituted a setoff under South Carolina law. The court then found the Excess Provision violated the plain meaning of section 38-77-144. With regard to Richardson, the circuit court determined it "addresse[d] only stacking of coverage, " rather than a setoff provision. Further, the circuit court found if State Farm's argument was correct "there would be no bar to the PIP carrier alleging a setoff based on payments made by the health insurance carrier, the liability insurance carrier, or, for that matter, the injured party's Aunt Ethel and Uncle Fred who broke their piggy bank to pay for her hospital bill." The circuit court believed an interpretation permitting such a finding would lead to an "absurd result." Finally, the circuit court declared public policy would not allow a setoff under these circumstances because it would prevent the workers' compensation carrier from claiming an equitable interest in the PIP benefits. Subsequently, the circuit court denied State Farm's motion to reconsider. This appeal followed.

         ISSUES ON APPEAL

1. Did the circuit court err by finding section 38-77-144 invalidates the Excess Provision?
2. Did the circuit court err by finding public policy prohibits a setoff of PIP benefits because it prevents workers' compensation carriers from asserting an ...

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