Justia South Carolina Supreme Court Opinion Summaries

Articles Posted in Insurance Law

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Wadette Cothran incurred approximately $40,000 in medical expenses from injuries she received in an automobile accident. Her employer's workers' compensation carrier paid all of her medical expenses. She was also covered by her automobile insurance policy issued to her and her husband Chris by State Farm Mutual Automobile Insurance Company. The State Farm policy provided PIP coverage with a limit of $5,000. However, State Farm refused to pay her any PIP benefits for medical expenses based on a "Workers' Compensation Coordination" provision in the policy. This appeal requires presented for the South Carolina Supreme Court's consideration whether Section 38-77-144 of the South Carolina Code (2015) prohibited an automobile insurance carrier from reducing its obligation to pay PIP benefits to its insured by the amount of workers' compensation benefits the insured received for medical expenses. The Court held that it did: "[w]hen an insurer seeks to reduce its obligation to pay benefits based on a third party's previous payment for the same claim, it is a setoff. Because that is the precise effect of State Farm's "Coordination" provision, section 38-77-144 prohibits the provision from reducing State Farm's obligation to pay PIP benefits to the Cothrans." the Court reversed the court of appeals and reinstated the summary judgment in the Cothrans' favor. View "Cothran v. State Farm" on Justia Law

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The federal district court for the District of South Carolina certified a question of law to the South Carolina Supreme Court. The Supreme Court was asked to construe section 38-77-350(C) of the South Carolina Code (2015) and determine whether, under the facts presented, an insurance company was required to make a new offer of underinsured motorist (UIM) coverage when an additional named insured is added to an existing policy. In 2012, Wayne Reeves acquired an insurance policy from Progressive Direct Insurance Company (Progressive) covering his motorcycle. When the policy was issued, Wayne declined optional UIM coverage. In 2015, Wayne's wife (Jennifer) and son (Bryan) were added to the policy as "drivers and household residents," because they also drove motorcycles. In 2017, Bryan sold his motorcycle and purchased another motorcycle, a 2016 Harley Davidson, which was added to the policy. At the time, Wayne had Bryan added as named insured to the policy. Progressive did not offer Bryan any optional coverages. Later in 2017, Bryan was involved in an accident while driving his 2016 Harley Davidson. Bryan ultimately made a claim against Progressive to reform the policy to include UIM coverage based on Progressive's failure to offer him the optional coverage. Progressive contended that adding Bryan as a named insured was a change to an existing policy, and as a result, Progressive was not required to offer Bryan UIM coverage. Based on the undisputed facts, the parties filed cross motions for summary judgment. The Supreme Court concluded under South Carolina law, Progressive was not required to make an additional offer of UIM coverage to Bryan. View "Progressive Direct v. Reeves" on Justia Law

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In 2013, a bus driven by Defendant Asia Partman struck Respondent Andrew Neumayer while he was a pedestrian in Cayce, South Carolina. EMS transported Neumayer to Lexington Medical Center where he was diagnosed with a ruptured spleen, broken left ribs, left humerus fracture, left pneumothorax, and a punctured lung. After eight days in the hospital and medical costs of approximately $122,000, Neumayer was released. Partman worked for Defendant Primary Colors Child Care Center, and in November of 2013, Neumayer filed a lawsuit against both defendants, alleging negligence against Partman and Primary Colors. The defendants did not answer or respond in any fashion, and after a default judgment was entered, the court held a damages hearing, where it awarded Neumayer $622,500. Over eighteen months after the entry of default, Philadelphia Indemnity Insurance Co. (Philadelphia), Primary Colors' insurance carrier, received notice that its insured was involved in a lawsuit that culminated in a default judgment. While the record was unclear as to why it took eighteen months to notify Philadelphia, it ultimately received notice when Neumayer's counsel faxed documents seeking to collect $622,500. Philadelphia declined to pay that amount, instead asserting its indemnification obligation was limited to $25,000 because South Carolina jurisprudence required an insurer to pay only the minimum limits when it was substantially prejudiced by its insured's failure to provide notice of a lawsuit. Further, Philadelphia contended the failure to receive notice of the underlying lawsuit prevented an opportunity to investigate and defend. Neumayer filed this declaratory judgment action asking the court to require Philadelphia to pay the judgment in full. At issue before the South Carolina Supreme Court was whether notice clauses in automobile insurance policies were rendered meaningless by Section 38-77-142(C) of the South Carolina Code (2015) . The trial court found the clause in this policy void and accordingly required the insurance company to pay the full default judgment entered against its insured. The insurer appealed. The Supreme Court determined the circuit court erred in ruling that section 38-77-142(C) invalidated the standard notice clause contained in this insurance policy. “An insurer may continue to invoke notice clauses to deny coverage above the statutory limits, providing the insurer can prove that it was substantially prejudiced by its insured's failure to comply with the provision.” View "Neumayer v. Philadelphia Indemnity" on Justia Law

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The United States Court of Appeals for the Fourth Circuit certified a question of South Carolina law to the South Carolina Supreme Court. The underlying case was an insurance bad faith action against an insurance company for its failure to defend its insured in a construction defect action. The insured settled the construction defect action and brought a bad faith tort action. When the insurer asserted it acted in good faith in denying coverage, the insured sought to discover the reasons why the insurer denied coverage. According to the insurer, the discovery requests included communications protected by the attorney-client relationship. The federal district court reviewed the parties' respective positions, determined the insured had established a prima facie case of bad faith, and ordered the questioned documents to be submitted to the court for an in camera inspection. The insurer then sought a writ of mandamus from the Fourth Circuit to vacate the district court's order regarding the discovery dispute. In turn, the Fourth Circuit asked the South Carolina Supreme Court whether state law supported the application of the "at issue" exception to attorney-client privilege such that a party may waive the privilege by denying liability in its answer. The South Carolina Supreme Court found that the parties, especially the insured, contended the certified question did not accurately represent the correct posture of the case. In fact, the insured conceded the narrow question presented required an answer in the negative. The Supreme Court agreed, finding “little authority for the untenable proposition that the mere denial of liability in a pleading constitutes a waiver of the attorney-client privilege.” The Court elected to analyze the issue narrowly in the limited context of a bad faith action against an insurer, and felt constrained to answer the certified question as follows: "No, denying liability and/or asserting good faith in the answer does not, standing alone, place the privileged communications 'at issue' in the case." View "Mt. Hawley Insurance Company v. Contravest Construction" on Justia Law

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This appeal arose from fourteen lawsuits brought by various plaintiffs against (1) Laura Willis, an insurance agent; (2) Jesse Dantice, the insurance broker who hired Willis and made her the agent in charge of the insurance office; (3) their insurance agency, Southern Risk Insurance Services, LLC (Southern Risk), and (4) six insurance companies for which their office sold policies (the Insurers). The plaintiffs in the lawsuits were Willis's customers (the Insureds) and other insurance agents (the Agents) in competition with Willis and Southern Risk. The Insureds filed twelve of the lawsuits, asserting claims against Willis, Dantice, and Southern Risk for, inter alia, violations of the Unfair Trade Practices Act (UTPA), common law unfair trade practices, fraud, and conversion. They also named the Insurers as defendants on a respondeat superior theory of liability for failing to adequately supervise or audit Willis and Southern Risk. The question before the South Carolina Supreme Court was whether arbitration should have been enforced against nonsignatories to a contract containing an arbitration clause. The circuit court denied the motion to compel arbitration. The court of appeals reversed and remanded, holding equitable estoppel was applicable to enforce arbitration against the nonsignatories. The Supreme Court reversed and remanded, finding the circuit court properly denied the motion to compel arbitration. View "Wilson v. Willis" on Justia Law

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The underlying dispute arose following a deadly motor vehicle accident in Bamberg County, South Carolina in January 2008. At the time of the accident, decedent James Buchanan was driving a tractor trailer traveling northbound on U.S. Highway 321. Heading southbound on U.S. Highway 321 were three vehicles: a logging truck followed by two tractor trailers, one driven by Willie Pelote and the other by his brother Roger Pelote, both of whom were former parties to this action. As the vehicles converged, a set of tandem tires came loose from the logging truck and struck Buchanan's vehicle, breaking the front axle. As a result, Buchanan's truck crossed the center line and struck the second tractor trailer. Buchanan's tractor trailer caught fire, and he died at the scene. Respondents, as co-personal representatives of Buchanan's estate, filed a wrongful death claim against the driver of the logging truck; the owner of the logging truck; Strobel Tire Co., which performed tire maintenance work on the logging truck shortly before the accident; and the Pelotes. On certiorari, the South Carolina Property and Casualty Insurance Guaranty Association (the Guaranty) argued the court of appeals erred in construing the provisions of the South Carolina Property and Casualty Insurance Guaranty Association Act (the Act) and affirming the trial court's finding that the Guaranty's statutory offset of $376,622 should be deducted from the claimant's total amount of stipulated damages of $800,000 rather than the Association's mandatory statutory claim limit of $300,000. The South Carolina Supreme Court concluded the Act was ambiguous, and found the court of appeals correctly construed the Act to require that settlement amounts be offset from the total amount of an injured party's damages rather than from the $300,000 statutory cap. The Court therefore affirmed the court of appeals' decision as modified. View "Buchanan v. SC Property and Casualty Insurance" on Justia Law

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The South Carolina Supreme Court accepted two certified questions from the United States District Court for the District of South Carolina arising from a dispute over uninsured motorist (UM) coverage: (1) whether a police officer who conducts an investigation of an accident qualifies as a "witness" under Section 38-77-170 of the South Carolina Code; and (2) whether injuries suffered during a drive-by shooting "arise out of" the operation of the vehicle for insurance purposes. Because the Supreme Court answered the first question, "No," it declined to reach the second question. View "Silva v. Allstate" on Justia Law

Posted in: Insurance Law

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The United States District Court for the District of South Carolina certified a question of law to the South Carolina Supreme Court. Jack Poole and his wife, Jennifer, were riding in a vehicle owned by Doris Knight, Jennifer's mother, when a drunk driver crossed the center line and struck them. The Pooles were both seriously injured in the collision; although Jack survived, Jennifer's catastrophic injuries resulted in her death several days later. In contrast with the substantial bodily injuries, the Pooles sustained minimal property damage because they did not own the vehicle. The at-fault driver's liability carrier tendered its policy limits. Farm Bureau, the insurer on Knight's vehicle, then tendered its underinsured motorist (UIM) policy limits for bodily injury to Jack individually and to Jack as the representative of Jennifer's estate. The Pooles then sought recovery from their own insurer, Government Employees Insurance Company (GEICO), which provided them a split limits UIM policy with bodily injury coverage of up to $100,000 per person and $50,000 for property damage. GEICO tendered the UIM bodily injury limits of $100,000 each for Jack and Jennifer's estate. The Pooles requested another $50,000 from the UIM policy's property damage coverage in anticipation of a large punitive damages award, but GEICO refused. GEICO then initiated a declaratory judgment action with the federal district court to establish that it was not liable to pay any amounts for punitive damages under the property damage provision of the UIM policy because the source of the Pooles' UIM damages was traceable only to bodily injury. The federal court asked the South Carolina Supreme Court whether, under South Carolina law, when an insured seeks coverage under an automobile insurance policy, must punitive damages be apportioned pro rata between those sustained for bodily injury and those sustained for property damage where the insurance policy is a split limits policy? The Supreme Court answered the question, "No." View "Government Employees Insurance Company v. Poole" on Justia Law

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Sentry Select Insurance Company brought a legal malpractice lawsuit in federal district court against the lawyer it hired to defend its insured in an automobile accident case. The federal court certified two questions of South Carolina law to the South Carolina Supreme Court pertaining to: (1) whether an insurer may maintain a direct malpractice action against counsel hired to represent its insured where the insurance company has a duty to defend; and (2) whether a legal malpractice claim may be assigned to a third-party who was responsible for payment of legal fees and any judgment incurred as a result of the litigation in which the alleged malpractice arose. The South Carolina Court answered the first question "yes:" "However, we will not place an attorney in a conflict between his client's interests and the interests of the insurer. Thus, the insurer may recover only for the attorney's breach of his duty to his client, when the insurer proves the breach is the proximate cause of damages to the insurer. If the interests of the client are the slightest bit inconsistent with the insurer's interests, there can be no liability of the attorney to the insurer, for we will not permit the attorney's duty to the client to be affected by the interests of the insurance company. Whether there is any inconsistency between the client's and the insurer's interests in the circumstances of an individual case is a question of law to be answered by the trial court." As to question two, the Supreme Court declined to answer the question: "We are satisfied that our answer to question one renders the second question not 'determinative of the cause then pending in the certifying court,' and thus it is not necessary for us to answer question two." View "Sentry Select Insurance v. Maybank Law Firm" on Justia Law

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The Riverwalk at Arrowhead Country Club and Magnolia North Horizontal Property Regime developments were constructed between 1997 and 2000. After construction was complete and the units were sold, the purchasers became aware of significant construction problems, including building code violations, structural deficiencies, and significant water-intrusion problems. In 2003, the purchasers filed suit to recover damages for necessary repairs to their homes. Lawsuits were filed by the respective property owners' associations (POAs), which sought actual and punitive damages for the extensive construction defects under theories of negligent construction, breach of fiduciary duty, and breach of warranty. As to the Riverwalk development, individual homeowners also filed a class action to recover damages for the loss of use of their property during the repair period. The defendants in the underlying suits were the related corporate entities that developed and constructed the condominium complexes: Heritage Communities, Inc. (the parent development company), Heritage Magnolia North, Inc. and Heritage Riverwalk, Inc. (the project-specific subsidiary companies for each separate development), and Buildstar Corporation (the general contracting subsidiary that oversaw construction of all Heritage development projects), referred to collectively as "Heritage." The issues presented to the Supreme Court by these cases came from cross-appeals of declaratory judgment actions to determine coverage under Commercial General Liability (CGL) insurance policies issued by Harleysville Group Insurance. The cases arose from separate actions, but were addressed in a single opinion because they involved virtually identical issues regarding insurance coverage for damages. The Special Referee found coverage under the policies was triggered and calculated Harleysville's pro rata portion of the progressive damages based on its time on the risk. After review of the arguments on appeal, the Supreme Court affirmed the findings of the Special Referee in the Magnolia North matter, and affirmed as modified in the Riverwalk matter. View "Harleysville Group Ins. v. Heritage Communities, Inc." on Justia Law