Williams v. GEICO – Auto Insurance Step-Down Provisions Challenged
Florida is one of a handful of states that recognize family “step down provisions” in auto insurance policies. These provisions are frequently challenged because they purport that certain injured parties, by virtue of their relationship to the negligent party, should receive less. Specifically, these clauses target those with familial ties with the insured.
So, for example, if a child is seriously injured in a vehicle driven negligently by his or her insured parent, the child is insured – but only for the statutory minimum amount, a “step down” from the actual limits of liability stated in the parent’s insurance policy. The same could be applied to spouses or anyone living under the same roof.
A handful of other states do still enforce these provisions, but the precedent set in the Williams case reflects an important shift in judicial perspective on the matter. Although the court recognized the authority of the insurer to limit liability under certain conditions, doing so solely on the basis of the injured party’s relationship to the insured was unfair.
According to court records, the Williams case began with a double-fatal crash involving a young married couple in rural South Carolina. The pair was struck by a train while in a vehicle for which they were both insured. The wreckage was so mangled, investigators were unable to tell who was behind the wheel. However, that didn’t matter for insurance purposes, as both were listed as insured on the joint policy, which had a liability limit of $100,000 per person. Because at least one party was negligent, the insurance company would reasonably only pay for the wrongful death of the other.
A personal representative was appointed to each estate, and each sought equal division of the insurance liability limit. However, the insurer argued that per a family step-down provision in the policy, the most the company would pay was the statutory minimum – $15,000 total. (The statutory minimum in South Carolina has since been increased to $25,000, but this is still a fraction of the coverage for which most responsible insureds pay.)
The personal representatives sued, and the trial court ruled in favor of the insurer, finding the language in the policy was not ambiguous and did not run contrary to public policy.
Upon review from the South Carolina Supreme Court, justices agreed the policy was not ambiguous. Although the language is “not artfully worded,” the policy providers were clear in what they were trying to accomplish. However, the end result, the court found, was not in line with public policy. The freedom of contract is not absolute. Further, state statute specifically indicates that all South Carolina insurance policies need to insure the named insureds against liability for death or injury and, more importantly, insurers can’t limit or reduce coverage, or it will be void against public policy.
The court noted there is a “wide divergence of authority in this area” nationwide. However, this court sided with the logic set forth in the 1996 Kentucky case of Lewis v. West American Insurance Co., in which the court ruled family exclusions are injuries to a substantial number of citizens, as they deny injured persons the ability to rely on insurance coverage purchased by the policy holder.
“Almost every member of the public is potentially a member of this excluded class,” the court wrote in Lewis. “The exclusion is overly-broad, based on surmise and against the public good.”
The South Carolina Supreme Court concurred, adopting the same reasoning in reversing the earlier ruling in Williams.
How We Can Help
If you, a friend or a family member find themselves in a situation such as this, please call the Law Office of Scott A. Ferris, P.A. at 305 670-3330 right away. Scott A. Ferris, Esq. is a licensed civil law attorney who has been practicing law since 1987. He is available whenever you need him to pursue your rights. Please learn about our firm at www.FerrisLawFirm.com.