MATTER is an appeal by the South Carolina Department of Motor Vehicles (the
“Department” or “Appellant”) from the Final Order and Decision by the South
Carolina Department of Motor Vehicles Hearings (the “DMVH”) issued in an
administrative hearing that was held June 25, 2007, pursuant to S.C. Code Ann.
§ 56-10-530 (2006). Appellant contends that the DMVH erred in rescinding the
suspension the license and registration of Kimberly Jennings Durst
(“Respondent”) based on her lack of knowledge that the liability carrier on her
Honda Pilot had cancelled her liability insurance policy thereon. The Administrative Law Court (“ALC”) has jurisdiction to hear this matter pursuant to S.C. Code
Ann. § 1-23-660 (Supp. 2006).
Department Hearing Officer (“DHO”) issued a Final Order and Decision on June
27, 2007, that held Respondent’s lack of knowledge of the cancellation of her
insurance policy was cause for rescission of the license and registration
did not appear at the hearing. Respondent was present, without counsel, and
with her husband James Peter Durst as her only witness.
Department argued in its brief on appeal that the suspension should be decided
based on whether Respondent was uninsured at the time of the accident, not
according to lack of knowledge of the cancellation. While the Department is
correct that lack of knowledge is the incorrect basis supporting cause for
rescinding Respondent’s suspension, the Court finds that the record supports a
finding that the suspension should not be enforced.
consideration of the record, the DMVH’s Order is SUSTAINED but on different
husband had been insured with State Farm for about twelve (12) years prior to
December 10, 2006. On December 10, 2006, he went to the office of State Farm to
pay the premium on the policy covering his work vehicle. At this time, he
inquired about the balances on their other policies and was told that there
were no other payments due.
days later, on December 17, 2006, Respondent, while driving her Honda Pilot,
rear-ended another vehicle owned by Cheryl Williams. Respondent presented her
insurance information to Officer McEvers at the scene of the accident and was
told that the police computer confirmed her status as insured. The day
following the accident, when Respondent’s husband presented the accident report
to the State Farm agency, he was told that the coverage on the Honda Pilot had
been cancelled for non payment of premium in July 2006, whereupon he
immediately purchased coverage for the Honda Pilot from State Farm.
the same time, Respondent’s husband asked the State Farm employee why the
Department had not been notified of the cancellation of the insurance on the
Honda Pilot. He was told, “Well, you’re lucky we didn’t notify the DMV because
your license would have been suspended.”
the twelve years that preceded the accident, the State Farm agency had always
phoned Respondent to warn of an impending lapse of coverage. Neither respondent
nor her husband received any such call about the coverage on the Honda Pilot.
husband indicated that an examination of his business records showed that the
non-payment was the result of a clerical error by his secretary. Hrg. Trans.
15:3-14. The payment was posted on the books, but there was no evidence that a
check was issued. He also acknowledged that the notification of the policy
cancellation, if sent, could have been misplaced through commingling with that
of another person who shared his mail box at his place of business where he received
his insurance bills. Hrg. Trans. 6:11-24.
the time of the accident, Respondent and her husband were unaware that in July
2006 their insurer, State Farm, had cancelled their motor vehicle liability
policy on the Honda Pilot pursuant to S.C Code Ann § 38-77-123(B) for failure
to pay the policy premium. For emphasis, both Respondent and her husband
testified under oath that neither had received any notification from State Farm
regarding the cancellation of their motor vehicle policy on the Honda Pilot.
There is no evidence in the record to show that any notice of cancellation,
written or otherwise, was provided to Respondent or her husband.
February 8, 2007, Nationwide Mutual Insurance Company (“Nationwide”) notified
Respondent that it was seeking reimbursement for the damage to Cheryl Williams
(“Williams”) vehicle that was paid by Williams’ uninsured motorist coverage.
On March 15, 2007, Nationwide informed Respondent that the matter had been
settled in full. Nationwide subrogation support technician, Jennifer Miner,
signed a notarized SCDMV Release of Financial Responsibility on April 2, 2007,
to certify that Respondent had satisfied the Department’s criteria for release
from her liability responsibility.
May 14, 2007, the Department mailed Respondent an official notice that her
driver’s license and registration were suspended under Section 56-10-530. The
notice required that Respondent pay a reinstatement fee of $550 and comply with
the terms set forth in the notice regarding financial responsibility.
Respondent timely filed a request for hearing pursuant to S.C. Code Ann. §
June 27, 2007, the DHO issued a Final Order and Decision rescinding the
suspension of Respondent’s driver’s license and registration. In support of
the rescission, the DHO found that Respondent’s lack of knowledge regarding the
cancellation of her insurance policy was good cause to support the rescission
of the suspension.
DMVH is authorized by law to determine contested cases arising from the
Department. See S.C. Code Ann. § 1-23-660 (Supp. 2006). Therefore, the
DMVH is an “agency” under the Administrative Procedures Act (“APA”). See S.C. Code Ann. § 1-23-310(2) (2005). As such, the APA’s standard of review
governs appeals from decisions of the DMVH. See S.C. Code Ann. §
1-23-380(A) (Supp. 2006); see also Byerly Hosp. v. S.C. State Health & Human Servs. Fin. Comm’n, 319 S.C. 225, 229, 460 S.E.2d 383, 385
(1995). The standard used by appellate bodies, including the ALC, to review
agency decisions is provided by S.C. Code Ann. §1-23-380(A)(5) (Supp. 2006). See S.C. Code Ann. § 1-23-380(B) (Supp. 2006) (directing Administrative Law Judges
to conduct appellate review in the same manner prescribed in Section 1-23-380(A)).
This section provides:
The court may not substitute its judgment
for the judgment of the agency as to the weight of the evidence on questions of
fact. The court may affirm the decision of the agency or remand the case for
further proceedings. The court may reverse or modify the decision [of the
agency] if substantial rights of the appellant have been prejudiced because the
administrative findings, inferences, conclusions, or decisions are:
(a) in violation
of constitutional or statutory provisions;
(b) in excess of
the statutory authority of the agency;
upon unlawful procedure;
(d) affected by other
error of law;
erroneous in view of the reliable, probative, and substantial evidence on the
whole record; or
or capricious or characterized by abuse of discretion or clearly unwarranted
exercise of discretion.
S.C. Code Ann. §
1-23-380(A)(5) (Supp. 2006).
decision is supported by “substantial evidence” when the record as a whole
allows reasonable minds to reach the same conclusion reached by the agency. Bilton
v. Best Western Royal Motor Lodge, 282 S.C. 634, 641, 321 S.E.2d 63, 68
(Ct. App. 1984). A decision will not be set aside simply because reasonable
minds may differ on the judgment. Lark, 276 S.C. at 136, 276 S.E.2d
304, 307. The fact that the record, when considered as a whole, presents the
possibility of drawing two inconsistent conclusions from the evidence does not
prevent the agency’s findings from being supported by substantial evidence. Waters
v. S.C. Land Resources Conservation Comm’n, 321 S.C. 219, 226, 467 S.E.2d
913, 917 (1996); Grant v. S.C. Coastal Council, 319 S.C. 348, 353, 461
S.E.2d 388, 391 (1995).
applying the substantial evidence rule, the factual findings of the administrative
agency are presumed to be correct. Rodney v. Michelin Tire Co., 320
S.C. 515, 519, 466 S.E.2d 357, 359 (1996) (citing Kearse v. State
Health and Human Servs. Fin. Comm’n, 318 S.C. 198, 200, 456 S.E.2d 892, 893
(1995)). The party challenging an agency action has the burden of proving
convincingly that the agency’s decision is unsupported by substantial
evidence. Waters, 321 S.C. at 226, 467 S.E.2d at 917.
Did the DMVH
Hearing Officer err in finding that Respondent’s lack of knowledge of the
cancellation of her motor vehicle liability policy was cause to rescind the
suspension of her driver’s license and registration?
South Carolina law governing motor vehicle liability insurance provides an insurer with the
authority to unilaterally cancel a policy under two specific instances: (1)
where a license to drive has been suspended or revoked, or (2) where the named
insured fails to pay the policy premium or any installment of the premium. S.C.
Code Ann. § 38-77-123(B) (2006); see also South Carolina Farm Bureau
Mutual Insurance Co. v. Courtney, 349 SC 366, 563 S.E.2d 648 (2002)
(finding that Section 38-77-123 limits unilateral cancellation by the insurer).
The circumstances surrounding the cancellation of Respondent’s policy fall
directly within the provisions of Section 38-77-123(B), and allowed State Farm
to unilaterally cancel coverage on the Honda Pilot because it is undisputed
that the premium payment that was due in May 2006 was not made.
despite State Farm’s authority to cancel the policy under Section
38-77-123(B)(2), that cancellation requires written notice to the insured under
S.C. Code Ann. § 38-77-120(a) (2006), as follows:
(a) “No cancellation
or refusal to renew by an insurer of a policy of automobile insurance is effective
unless the insurer delivers or mails to the named insured at the address
shown in the policy a written notice of the cancellation or refusal to
S.C. Code Ann. § 38-77-120(a) (2006) (emphasis added).
are two exceptions to the requirement of written notice set forth in §38-77-123(B),
neither of which are applicable here.
addition, S.C. Code Ann. § 56-10-40 (2006), requires insurers to notify the
Department of policy cancellation. Section 56-10-40 provides, in pertinent
writing automobile liability insurance in this State and every provider of
other security approved and accepted by the director¼shall notify the Department of Motor Vehicles in a
manner prescribed by regulation of the lapse or termination of any such
Upon receipt of any such notice of lapse
or termination the department shall make a reasonable effort to notify the
person that his certificate or registration and driving privileges have been
S.C. Code Ann. §
56-10-40 (2006) (emphasis added).
foregoing provision is supplemented by § 56-10-240 which provides:
“… Upon receiving information to the effect
that a policy is canceled or otherwise terminated on a motor vehicle registered
in South Carolina, the Department shall suspend the owner’s driving privileges,
license plate and registration certificate …”
S.C. Code Ann. §
as used in the preceding paragraph means “immediately” or “very soon after” or
“on the occasion of”. Dictionary.com Unabridged (v1.1) Based on random House
Unabridged Dictionary, Random House, Inc., 2006.
“In the absence of
evidence to the contrary, the law assumes that public officials have performed
their duties properly, unless the official act in question appears irregular on
its face.” 29 Am. Jur. 2d Evidence § 203 (1994).
Court assumes that if the insurance company ever notified the Department, such
notice immediately preceded the suspension letter of May 14, 2007 as a result
of which the Department issued the letter of May 14 (i.e., if the Department
had received notice sooner, it would be presumed that it would have done its
duty properly and “immediately or very soon after” or “on the occasion of”
suspended Respondent’s privilege to drive and registration). Indeed, the notice
of cancellation may never have been given to the Department because the
suspension letter of May 14, 2007, appears to have been issued under §
56-10-530 as the result of the report of an accident by an uninsured vehicle.
is no evidence in the record that a notice of cancellation was ever delivered
or mailed by State Farm to the insured as required by law. Nor was there
evidence to suggest otherwise than that the insurer failed to notify the
Department of the cancellation until approximately eleven (11) months after the
cancellation (cancellation July, 2006, accident December 17, 2006 and notice of
cancellation May 14, 2007). A preponderance of the evidence in the record
suggests that State Farm failed to carry out its duty to provide written notice
of the cancellation to the insured.
following contribute to that preponderance:
1.) The forthright
statement of respondent’s husband that there was a possibility that the written
notice, if mailed, could have been lost when commingled with the mail of
another person who used the same mail box. This indicates honest objectivity on
the part of the witness and bolsters the truthfulness of his other testimony.
2.) The fact that
the police computer confirmed coverage in effect on the Honda Pilot at the scene
of the accident, thus evidencing the fact that the Department had not been
notified of the cancellation which had taken place about five (5) months
3.) The fact that
the State Farm employee acknowledged to Respondent’s husband on the day after
the accident that the Department had not been notified of the cancellation as
required thus increasing the likelihood that State farm had also failed to give
written notice of the cancellation to the insured.
uncontroverted testimony of Respondent and her husband is that neither received
any written notice of the cancellation.
5.) The fact that
Respondent and her husband had been maintained insurance coverage with State
Farm for twelve (12) years prior to the accident.
6.) The fact that
the Department did not give notice of suspension to Respondent until almost
five months after the accident (and ten months after the cancellation) thus
indicating that it did not receive notice of the cancellation at the time it
was asserted to have taken place.
should be noted that Regulation 63-449, which required notice of cancellation
by the insurer to the Department within ten (10) days of the cancellation, was
repealed in 1998. Evidently, it was not replaced. Suffice it to say that a
delay of approximately eleven (11) months, or more, in reporting the
cancellation is unreasonable.
the DHO rescinded Respondent’s suspension based on a lack of knowledge rather
than lack of notice by the insurer, the Court is not precluded from affirming
the disposition. See State v. Goodstein, 278 S.C. 125, 292
S.E.2d 791, 793 (1982) (finding that “an appellate court...is not, as a general
rule, bound by the reasoning adopted below if the record discloses a correct
result.”). Because the evidence in the record discloses a correct result, the
Court may sustain the DHO’s decision despite the fact that it was based upon
the wrong ground. Goodstein, 292 S.E.2d at 793.
This approach is
in keeping with the view, as expressed in Rule 220(c),
SCACR, that an appellate court may affirm
the lower court's judgment for
any reason appearing in the record on appeal. An affirmance promotes judicial
economy and finality in private and public affairs, which are important public
I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 420-21, 526 S.E.2d 716, 723 (2000)
(emphasis in original); see also Kreutner v. David, 320 S.C. 283, 465 S.E.2d 88
(1995) (appellate court may affirm for any reason appearing in the
record); State v. Johnson, 278 S.C. 668, 301 S.E.2d 138
summary, the failure of the Department to receive notice which it should have
received much sooner coupled with the testimony of Respondent and her husband
that they did not receive any written notice of cancellation, lead to the
conclusion that no such notice was mailed or otherwise delivered to them and
that the cancellation was thus ineffective under the unambiguous terms of §
IT IS THEREFORE
ORDERED, that the Order of the DHO is SUSTAINED and the suspension
of Respondent’s driving license and registration is rescinded.
D. McLeod, Judge
Administrative Law Court
April 10, 2008