What Is The Time for Responding to a Defense Tender?
Insurers must acknowledge with reasonable promptness pertinent communications with respect to claims. S.C. Code § 38-59-20(2). There are no cases, regulations or statutes that further define “reasonable promptness.”
Does Reserving Rights Create a Conflict of Interest?
A reservation of rights contesting coverage of certain claims but not other claims does not automatically trigger a conflict of interest entitling the insured to choose its own counsel and have the insurance company pay counsel fees. Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 372 (4th Cir. 2005) (predicting South Carolina law).
Does a Reservation of Rights Create Additional Duties?
An insurer, operating under a reservation of rights has the right and the duty to control the defense until such time as it is determined that it had no liability insurance coverage. See, e.g., Allstate Ins. Co. v. Wilson, 193 S.E.2d 527, 530 (S.C. 1972).
What Must Be Done If A Conflict of Interest Exists?
If the insured does not consent to counsel selected by the insurer, the insured may refuse the defense and pay for its own defense. Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 372 (4th Cir. 2005) (predicting South Carolina law).
Who Is Responsible for Fees of Independent Counsel?
The insured. See above.
What Are Independent Counsel’s Obligations?
No conflict. See above.
What Settlement Duties Exist?
An insurer has a duty to exercise reasonable diligence in the settlement of claims against its policyholders within policy limits. Tyger River Pine Company v. Maryland Casualty Company, 170 S.E. 346, 349 (S.C. 1933).
What Actions May Result in a Claim for Bad Faith?
An insured can recover consequential damages in a tort action if the insured can show bad faith or unreasonable action by the insurer in processing a claim. Nichols v. State Farm Mutual Auto. Ins. Co., 306 S.E.2d 616, 619 (S.C. 1983).
An insurer’s unreasonable refusal to settle within policy limits subjects the insurer to tort liability. Tyger River Pine Co. v. Maryland Casualty Co., 170 S.E. 346, 349 (S.C. 1933).
In South Carolina, bad faith may exist independently of an insurer’s contractual obligations under a policy, allowing an insured to file a claim for damages arising from unfair claims handling, even if the insurer was ultimately correct in its determination that its loss was not covered. Tadlock Painting Co. v. Maryland Casualty Co., 473 S.E.2d 53, 54-55 (S.C. 1996).
South Carolina’s Improper Claims Practices Act does not create a private right of action for insureds against insurers. Masterclean, Inc. v. Star Ins. Co., 556 S.E.2d 371, 377 (S.C. 2001), (third parties); Ocean Winds Council of Co-Owners, Inc. v. Auto-Owners Ins. Co., 241 F.Supp.2d 572 (D.S.C. 2002)(predicting South Carolina law) (first parties).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Attorney’s fees are recoverable if the insurer fails to pay a covered claim and the refusal to pay was without reasonable cause or in bad faith. S.C. Code § 38-59-40. This statute applies only to breach of contract causes of action, not to tort causes of action. Nichols v. State Farm Mut. Auto. Ins. Co., 306 S.E.2d 616, 620 (1983).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
An insured can recover punitive damages if the insured can show that the insurer acted willfully or in reckless disregard of the insured’s rights. Nichols v. State Farm Mutual Auto Ins. Co., 306 S.E.2d 616 (S.C. 1983).
Alternative Coverage Options
An insurer may bring a declaratory judgment action while simultaneously defending the insured under a reservation of rights. Hegler v. Gulf Ins. Co., 243 S.E.2d 443, 444. (S.C. 1978).
Declaratory Judgment – S.C. Code § 15-53-20.
“Courts of record within their respective jurisdictions shall have power to declare rights, status, and other legal relations, whether or not further relief is or could be claimed. No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect. Such declarations shall have the force and effect of a final judgment or decree.”
Consumer Protection Act – S.C. Code § 39-5-10.
Improper Claim Practices Act – S.C. Code § 38-59-20.