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Davis Adv. Sh. No. 30
S.E. 2d

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

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

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.

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