Andrew P. Neumayer, Respondent,
Philadelphia Indemnity Insurance Company, Primary Colors Child Care Center, Jocelyn Knox DeMartelare, and Asia N. Partman, Defendants, Of Whom Philadelphia Indemnity Insurance Company is the Appellant. Appellate Case No. 2016-001710
March 5, 2019
from Richland County L. Casey Manning, Circuit Court Judge.
Phillip E. Reeves, of Gallivan, White & Boyd, PA, of
Greenville, Curtis W. Dowling and Matthew G. Gerrald, both of
Barnes, Alford, Stork & Johnson, LLP, of Columbia, for
A. Hewitt, of Bluestein Thompson Sullivan LLC, and Gerald
Eugene Reardon, both of Columbia, for Respondent.
case, we decide whether notice clauses in automobile
insurance policies are rendered meaningless by Section
38-77-142(C) of the South Carolina Code (2015). The trial court
found the clause in this policy void and accordingly required the
insurance company to pay the full default judgment entered
against its insured. The insurer appealed, and we now
January 25, 2013, a bus driven by Defendant Asia Partman
struck Respondent Andrew Neumayer while he was a pedestrian
in Cayce, South Carolina. EMS transported Neumayer to
Lexington Medical Center where he was diagnosed with a
ruptured spleen, broken left ribs, left humerus fracture,
left pneumothorax, and a punctured lung. After eight days in
the hospital and medical costs of approximately $122, 000,
Neumayer was released.
worked for Defendant Primary Colors Child Care Center, and in
November of 2013, Neumayer filed a lawsuit against both
defendants, alleging negligence against Partman and Primary
Colors. The defendants did not answer or respond in any
fashion, and after a default judgment was entered, the court
held a damages hearing, where it awarded Neumayer $622, 500.
eighteen months after the entry of default, Philadelphia
Indemnity Insurance Co. (Philadelphia), Primary Colors'
insurance carrier, received notice that its insured was
involved in a lawsuit that culminated in a default judgment.
While the record is unclear as to why it took eighteen months
to notify Philadelphia, it ultimately received notice when
Neumayer's counsel faxed documents seeking to collect
$622, 500. Philadelphia declined to pay that amount, instead
asserting its indemnification obligation was limited to $25,
000 because South Carolina jurisprudence requires an insurer
to pay only the minimum limits when it is substantially
prejudiced by its insured's failure to provide notice of
a lawsuit. Further, Philadelphia contended the failure to
receive notice of the underlying lawsuit prevented an
opportunity to investigate and defend.
Neumayer filed this declaratory judgment action asking the
court to require Philadelphia to pay the judgment in full.
Philadelphia answered and asserted a counterclaim against
Neumayer and cross-claims against officials at Primary
Colors, arguing that its indemnity obligation was limited to
$25, 000. Both parties moved for summary judgment, and after
a hearing, the court found in favor of Neumayer. The circuit
court framed the issue as "whether or not Philadelphia
can properly reduce the available coverage to the statutory
minimum through a cooperation provision in the Policy."
Relying on section 38-77-142(C), the court held an
insured's breach of a notice clause cannot reduce the
amount of available coverage. Further, the court cited to
this Court's decision in Williams, where we held
a family step-down provision was void under section
38-77-142(C) because it purported to reduce coverage from the
policy's liability limits to the minimum amounts
prescribed in section 38-77-140. Philadelphia appealed to the
court of appeals, and we certified the case pursuant to Rule
circuit court err in finding section 38-77-142(C) invalidated
the notice and cooperation clause in a policy providing
higher limits than statutorily required?