American Credit of Sumter, Inc. v. Nationwide Mutual Insurance Company, 378 S.C. 623

Summary

The South Carolina Supreme Court held that an insured's failure to use third-party liability insurance proceeds to repair a damaged automobile did not constitute conversion of the vehicle under the standard loss payable clause in the insurer's policy. Because the policy's conversion exception did not apply, the lienholder's protection remained effective. The court reversed the lower courts' directed verdict and affirmance in favor of Nationwide.

Holdings

1. The insured's failure to use the proceeds received from the at-fault driver's insurer to repair the damaged automobile was not a conversion of the automobile within the meaning of the policy's conversion exception.
2. The clause was a standard loss payable clause containing specified exceptions, and it protected American Credit's interest notwithstanding the insured's misconduct unless the insured's conduct constituted conversion, embezzlement, secretion, or willful damaging or destruction of the vehicle. Because the conduct was not conversion, the exclusion did not bar American Credit's claim.

Questions Presented

1. Whether the insured's failure to use liability-insurance proceeds received from another insurer to repair the damaged automobile constituted conversion of the automobile within the meaning of Nationwide's loss payable clause.
2. Whether the conversion exception in the loss payable clause barred American Credit's claim as lienholder.

Disposition

reversed