Recently, the United States District Court held a plaintiff can maintain a claim for bad faith handling of Uninsured Motorists Coverage (“UM”) in the District of South Carolina. In Tucker v. Peerless Insurance Company, the plaintiff insured sued his personal UM Carrier for bad faith refusal to pay UM benefits. The district court denied the Carrier’s motion to dismiss and allowed the bad faith UM claim proceed.
The insured Tucker was injured when his car struck a large metal box in the middle of the interstate. The box allegedly fell from a truck re-entering the interstate near a rest stop. As a result of the accident, Tucker suffered significant injuries. Tucker demanded the UM Carrier pay the policy limits of $100,000. The UM Carrier refused, and Tucker filed suit. Following a jury trial and appeal, Tucker ultimately recovered a judgment of $5,000,000. The UM Carrier tendered its policy limits of $100,000. Tucker initiated the bad faith lawsuit.
The UM Carrier moved to dismiss, arguing that no cause of action exists for UM bad faith. In denying the motion, the district court cited an older published decision from the District of South Carolina, Jefferson v. Allstate Ins. Co., for the proposition that “the fact that an insurance company and its insured hold adverse positions on the issue of liability ‘does not materially distinguish uninsured motorist insurance from first party insurance with respect to the existence of a duty on the part of the insurer to handle the insured’s claim fairly and in good faith.’” The district court also cited a 2010 case which held a bad faith UM claim exists under South Carolina law.
The UM carrier then argued that even if a cause of action exists in UM coverage cases, the allegations made in the complaint do not support such a cause of action. Specifically, the carrier argued that its duty to act in good faith and fair dealing was not triggered until after the judgment was obtained against the at-fault driver and affirmed in state court, and, therefore, Plaintiff’s allegations as to Defendant’s actions prior to that point should be dismissed.
Finding UM claims to be analogous to UIM claims, the district court noted that such an argument has previously been “expressly rejected” in Myers v. State Farm Mut. Auto. Ins. Co. The district court cited other district court cases that also relied on Myers and found “an insurer has a duty to act in good faith towards the insured once the insured files a claim against the at-fault driver.”
The UM carrier then argued the insured was not entitled to damages beyond the policy limits, asserting the Tyger River doctrine did not apply in the UM context. Relying on Snyder v. State Farm Mut. Auto. Ins. Co., the district court found “there could be a duty to settle, as outlined in Myers, where it was clear that the insured suffered damages greatly in excess of the liability limits of the at-fault party.” Then the district court, because the case was only at the dismissal stage, held it could draw “no conclusions as to the reasonableness of Defendant’s conduct as alleged by Plaintiff”. While the district court expressed some concern about how Tyger River applied to this case, that did not warrant dismissal of the plaintiff’s claims.
Tucker demonstrates that motor vehicle insurance carriers in South Carolina should address liability, UIM, and UM claims in the same manner and with the same good faith. The district courts are finding the claims analogous, with only the scope of damages being—perhaps—different under each claim.