North Carolina Claims Involving South Carolina UIM Policies – Exhaustion Not Required

North Carolina adjusters who regularly handle automobile claims often work under the assumption that an injured claimant must exhaust liability coverage before pursuing underinsured motorist (“UIM”) benefits. While that assumption may be reasonable for North Carolina UIM policies, the same is not the case for a UIM policy issued in South Carolina.

A South Carolina Court of Appeals decision, Cobb v. Benjamin, holds that a claimant is not required to collect all available liability limits before pursuing UIM benefits. Instead, the UIM carrier receives a credit for the uncollected liability coverage. See Cobb v. Benjamin, 325 S.C. 573, 482 S.E.2d 589 (1997).

Note: A North Carolina court will generally interpret a South Carolina Underinsured Motorist Policy under South Carolina law because that is where the insurance contract was entered into.

The Facts in Cobb

In Cobb, the claimant was injured in a motor vehicle accident and settled with one liability carrier for its $15,000 limits. After the settlement, the claimant discovered an additional $15,000 liability policy applicable to the tortfeasor. The UIM carrier argued that UIM coverage was unavailable because all available liability coverage had not been exhausted.

The South Carolina Court of Appeals rejected that argument and held:

South Carolina's UIM statute does not require payment of all applicable liability policy limits as a prerequisite to recovering UIM benefits. Instead, the UIM carrier is entitled to a credit for any liability limits that were available but not collected.

The Holding

The court expressly stated:

Section 38-77-160 does not require payment of the applicable liability policy limits as a precondition to collecting UIM benefits, but the UIM carrier is entitled to a credit for any amount of liability insurance coverage not exhausted in a settlement with its insured.

This is an important distinction.

The claimant may still pursue UIM benefits even after accepting less than available liability limits. However, the claimant bears the economic consequence of that decision because the UIM carrier receives credit for the entire liability limit, not merely the amount actually collected.

Why This Matters for North Carolina Adjusters

Many North Carolina adjusters are accustomed to evaluating claims on the premise that liability limits must first be exhausted before UIM benefits become available. However, under South Carolina law, the key question is whether the claimant's damages exceed the available liability coverage and whether the UIM carrier receives the appropriate credit.

Questions? Contact Steven Lucente with TLG Law at slucente@tlg-law.com or (704) 626-6552.