The South Carolina Supreme Court held that a violation of a notice of suit provision in an automobile policy can void the portion of coverage only above the minimum statutory limits. Neumayer v. Phila. Indem. Ins. Co., 831 S.E.2d 406 (July 24, 2019).
An insured struck a pedestrian while operating an insured vehicle. The insured was subsequently sued but failed to answer or provide notice of the lawsuit to its insurer for roughly 18 months, resulting in a default judgment being entered against the insured. The insured sued its auto insurer seeking a declaration that it was obligated to pay the default judgment. The trial court held that South Carolina law prevents an automobile insurer from relying on a breach of a notice of suit clause to reduce the amount of available coverage under an automobile policy.
On appeal, the South Carolina Supreme Court disagreed. It noted that South Carolina law regulating mandatory automobile insurance was designed to insure the availability of mandatory minimum limits. Thus, it held that while the breach of a notice provision could not reduce the available limits in an automobile policy below the statutory minimums, a breach of notice provision can be used to void coverage above the statutory limits, assuming substantial prejudice is met.