As a personal injury lawyer in South Carolina, I would like to share with you the recent case summary of Nakatsu v. Encompass Indemnity Co. No 4748 (S.C. Ct. App. September 29th, 2010).
Underinsured motorist coverage (UIM) is coverage that you buy for yourself and your loved ones, in case someone else negligently hits you with their car and your injuries exceed the amount of liability coverage the at-fault driver carries. For example, you would probably recover from your underinsured motorist coverage if your injuries were bad enough to cause you to spend several nights in the hospital, but the at-fault driver carried only minimum limits insurance coverage. If your injuries from the car accident are severe enough, in some situations you may even be able to recover from multiple UIM policies, even from cars that had nothing to do with the collision. When you recover from multiple UIM policies, this is called “stacking”.
The general rule in South Carolina, prescribed by the statute S.C. Code Ann. section 38-77-160, says that when you meet the other requirements for stacking, you can “stack” up to the limits of the vehicle involved in the collision. For example, if you carried $25,000 in UIM coverage on the vehicle you were driving in the collision, and your spouse had $50,000 on their vehicle (that was not involved in the collision), you could recover up to $25,000 from your own UIM coverage and only up to $25,000 from your spouse’s UIM coverage. Remember that these coverages apply only after the at-fault driver’s liability insurance coverage has been exhausted.
In a recent case, the South Carolina Court of Appeals held that an insurance company could not limit this system of stacking as provided in the above statute. Nakatsu v. Encompass Indemnity Co., No. 4748 (S.C. Ct. App. Sept. 29, 2010). An insurance policy is essentially a contract between the insurance company and the insured, and many argue that two parties entering into a contract should be able to choose whatever terms of the contract they wish. However, in certain situations, the court system will not allow parties to enter into a contract that destroys a statutory scheme carefully laid out by the state legislature. The court in this case did exactly that: they declared a provision in the insurance policy invalid because the provision attempted to limit stacking of UIM coverage that is allowed by statute.
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