1976 South Carolina Code of Laws
Updated through the end of the 2000 Session

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Title 38 - Insurance



SECTION 38-59-10. Proof of loss forms required to be furnished.

When an insurer under an insurance policy requires a written proof of loss after the notice of the loss has been given by the insured or beneficiary, the insurer or its representative shall furnish a blank to be used for that purpose. If the forms are not furnished within twenty days after the receipt of the notice, the claimant is considered to have complied with the requirements of the policy as to proof of loss upon submitting within the time fixed in the policy for filing proofs of loss written proof covering the occurrence, character, and extent of the loss for which claim is made. The twenty-day period after notice of loss to furnish forms applies to all types of insurance unless a lesser time period is specifically provided by law.

SECTION 38-59-20. Improper claim practices.

Any of the following acts by an insurer doing accident and health insurance, property insurance, casualty insurance, surety insurance, marine insurance, or title insurance business, if committed without just cause and performed with such frequency as to indicate a general business practice, constitutes improper claim practices:

(1) Knowingly misrepresenting to insureds or third-party claimants pertinent facts or policy provisions relating to coverages at issue or providing deceptive or misleading information with respect to coverages.

(2) Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies, including third-party claims arising under liability insurance policies.

(3) Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims, including third-party liability claims, arising under its policies.

(4) Not attempting in good faith to effect prompt, fair, and equitable settlement of claims, including third-party liability claims, submitted to it in which liability has become reasonably clear.

(5) Compelling policyholders or claimants, including third-party claimants under liability policies, to institute suits to recover amounts reasonably due or payable with respect to claims arising under its policies by offering substantially less than the amounts ultimately recovered through suits brought by the claimants or through settlements with their attorneys employed as the result of the inability of the claimants to effect reasonable settlements with the insurers.

(6) Offering to settle claims, including third-party liability claims, for an amount less than the amount otherwise reasonably due or payable based upon the possibility or probability that the policyholder or claimant would be required to incur attorneys' fees to recover the amount reasonably due or payable.

(7) Invoking or threatening to invoke policy defenses or to rescind the policy as of its inception, not in good faith and with a reasonable expectation of prevailing with respect to the policy defense or attempted rescission, but for the primary purpose of discouraging or reducing a claim, including a third-party liability claim.

(8) Any other practice which constitutes an unreasonable delay in paying or an unreasonable failure to pay or settle in full claims, including third-party liability claims, arising under coverages provided by its policies.

SECTION 38-37-1110 does not create a private cause of action for an insurer's bad faith actions against third party claimants under automobile liability insurance policies. Swinton v. Chubb & Son, Inc. (S.C.App. 1984) 283 S.C. 11, 320 S.E.2d 495.

Counsel fees should have been allowed insured for defense in declaratory judgment action brought by insurer to avoid coverage under policy where policy includes obligation to defend any suit against insured. Hegler v. Gulf Ins. Co. (S.C. 1978) 270 S.C. 548, 243 S.E.2d 443.

SECTION 38-59-30. Notice and hearing by director or designee; penalties.

If, after due notice and hearing, the director or his designee determines that the insurer has engaged in any of the improper claim practices defined in Section 38-59-20, he shall order the insurer to cease and desist from the practice and may impose a penalty as provided in Section 38-2-10. If the penalty is imposed, the penalty may not be considered a cost of the insurer for purposes of determining whether or not the rates of the insurer warrant adjustment.

SECTION 38-59-40. Liability for attorneys' fees where insurer has refused to pay claim.

(1) In the event of a claim, loss, or damage which is covered by a policy of insurance or a contract of a nonprofit hospital service plan or a medical service corporation and the refusal of the insurer, plan, or corporation to pay the claim within ninety days after a demand has been made by the holder of the policy or contract and a finding on suit of the contract made by the trial judge that the refusal was without reasonable cause or in bad faith, the insurer, plan, or corporation is liable to pay the holder, in addition to any sum or any amount otherwise recoverable, all reasonable attorneys' fees for the prosecution of the case against the insurer, plan, or corporation. The amount of reasonable attorneys' fees must be determined by the trial judge and the amount added to the judgment. The amount of the attorneys' fees may not exceed one-third of the amount of the judgment.

(2) If attorneys' fees are allowed and, on appeal by the defendant, the judgment is affirmed, the Supreme Court or the court of appeals shall allow to the respondent an additional sum as the court adjudges reasonable as attorneys' fees of the respondent on the appeal.

(3) Nothing in this section may be construed to alter or affect the Tyger River Pine Co. v. Maryland Casualty Co., 161 SE 491, 163 SC 229, doctrine.

(4) This section applies to cases filed or removed to federal court and cases appealed in the federal court system.

SECTION 38-9-320 does not require payment of attorney's fees in every contested case won by insured; attorney's fees will not be allowed where case involves legal principles of novel impression. Nelson v. United Fire Ins. Co. of New York (S.C. 1980) 275 S.C. 92, 267 S.E.2d 604.

The payment of attorney's fees is not required in every contested case won by the insured; under this section, such fees should be awarded only when a company's refusal to pay is "without reasonable cause or in bad faith." Madden v. Pilot Life Ins. Co. (S.C. 1979) 272 S.C. 264, 251 S.E.2d 196.

Plaintiff entitled to attorneys' fees where, after full review of record, Supreme Court could not say judge erred in finding insurers did in fact unreasonably refuse to pay insured's claims. Hutson v. Continental Assur. Co. (S.C. 1977) 269 S.C. 322, 237 S.E.2d 375.

Where trial judge erroneously determined that attorneys' fees could not be awarded because insurance company had made sufficient tender, case will be remanded to trial judge for determination whether insurance company refused payment without reasonable cause or in bad faith. Cook v. Government Emp. Ins. Co. (S.C. 1976) 266 S.C. 309, 223 S.E.2d 33.

Rationale of subdivision (1) of 1962 Code Section 37-167 [1976 Code Section 38-9-320], with regard to attorneys' fees, is that no award of fees would be proper until the trial judge had made the determination that the refusal of the insurer to pay the claim was without reasonable cause or in bad faith; hence, where trial judge determined that insurer had not refused to pay claim, and therefore did not make award, Supreme Court may not make such award. Cook v. Government Emp. Ins. Co. (S.C. 1976) 266 S.C. 309, 223 S.E.2d 33.

The determination of an insurer's liability under statute providing for attorney's fees, on the grounds of wrongful refusal to pay a claim for benefits, is a matter for decision by the judge who tries the case. Coker v. Pilot Life Ins. Co. (S.C. 1975) 265 S.C. 260, 217 S.E.2d 784.

In determining an issue as to attorneys' fees allegedly due upon a bad faith refusal to pay insurance benefits, the court should consider any relevant evidence adduced upon trial of the main issue, and any other competent evidence relevant to whether or not there was lack of reasonable cause or bad faith on the part of the insurer in refusing to pay. Coker v. Pilot Life Ins. Co. (S.C. 1975) 265 S.C. 260, 217 S.E.2d 784.

8. --Particular cases

In an action for recovery of insurance benefits under a theft provision of a homeowner's policy, plaintiff could recover punitive damages for the wilful or reckless failure to settle or investigate his claim where the evidence indicated that there was virtually no effort on the part of the insurer to investigate plaintiff's claim; further, plaintiff would be entitled to attorney fees, under Section 38-9-320, since defendant's failure to adequately investigate plaintiff's claim supported a determination that the subsequent refusal to pay was without reasonable cause. Trimper v. Nationwide Ins. Co. (D.C.S.C. 1982) 540 F.Supp. 1188.

An insurer did not as a matter of law act unreasonably, fraudulently, or in bad faith in exercising its right to litigate its alleged liability under its policy, in view of the unsettled state of the law on the legal issue whether the words "loss of income due to disability" in the personal injury protection endorsement on the plaintiff's automobile liability insurance policy meant that the plaintiff should be paid for loss of time from work while visiting his doctor; accordingly, the plaintiff's recovery would not extend to attorney's fees under Section 38-9-320 or punitive damages and was necessarily limited to any loss of income to the plaintiff due to disability resulting from his accident, where the insurer's actions were not unreasonable, fraudulent or in bad faith. Wiggins v. Travelers Ins. Co. (D.C.S.C. 1979) 498 F.Supp. 211, affirmed 636 F.2d 1215.

Attorney fees were improperly awarded pursuant to Section 38-9-320 in a successful action to collect the proceeds of a life insurance policy, where the insurance company's conduct in letting the case go to trial did not demonstrate bad faith or lack of just cause since the company sought to determine whether or not the deceased had knowledge at the time the insurance contract was executed that he was "under the care of a doctor" for cancer or knew he had cancer. Strickland v. Prudential Ins. Co. of America (S.C. 1982) 278 S.C. 82, 292 S.E.2d 301.

In a successful action by the owner of an automobile destroyed by fire to recover on the policy insuring the vehicle, the award of a fee to the owner's attorney on the ground that the insurance company's refusal to settle had been without reasonable cause and in bad faith would be vacated where the verdict of $3,950 was only slightly more than the company's pretrial offer of $3,800, where the parties had reached a settlement before the owner retained the attorney who had sharply escalated his demands to as much as $5,400, and where there had been no unreasonable delay in the company's failure to retain the services of an independent appraiser until 18 months after the loss since the company had been under no duty to retain an appraiser in the first place. Brown v. State Farm Mut. Ins. Co. (S.C. 1980) 275 S.C. 276, 269 S.E.2d 769.

Interpretation of section of Automobile Reparation Reform Act of 1974 was sufficiently questionable so as to justify insurer's refusal to pay the coverage provided under a policy, and did not render insurer liable for insured's attorney's fees. Belk v. Nationwide Mut. Ins. Co. (S.C. 1978) 271 S.C. 24, 244 S.E.2d 744.

Court erred in awarding attorneys' fees to plaintiff in action to recover on insurance policy where the insurance company was justified in defending on the ground that the policy was voidable due to plaintiff's omission and concealment on application of previous visits to doctor. Baker v. Pilot Life Ins. Co. (S.C. 1977) 268 S.C. 609, 235 S.E.2d 300.

Award of attorneys fees is required by 1962 Code Section 37-167.1 [1976 Code Section 38-9-320] despite tender by insurance company of insured's out-of-pocket medical expenses, since tender must include everything to which insured is entitled, and insured was entitled to cost of medical care rendered him by United States because of his military status; fact that United States as third party beneficiary is entitled to portion of proceeds does not alter the fact that insured was the "holder" of the policy as required by the statute. Cook v. Government Emp. Ins. Co. (S.C. 1976) 266 S.C. 309, 223 S.E.2d 33.

Statute providing for attorneys' fees where an insurer refuses "without reasonable cause or in bad faith" to pay a claim, would justify such an award, where policy of insurance was issued by insurance carrier with full knowledge that the insured was a member of the Armed Forces, a full premium for medical payments coverage was collected, the amount of the claim was not in dispute, and there had been a finding that refusal to pay the claim was without reasonable cause. Blackburn v. Government Employees Ins. Co. (S.C. 1975) 264 S.C. 535, 216 S.E.2d 192.

9. Refusal to defend insured

Although the legislature did not intend that attorney fees should be paid in every contested case won by an insured, such fees were properly awarded where an insurer's refusal to defend its insured was without reasonable cause. Boggs v. Aetna Cas. and Sur. Co. (S.C. 1979) 272 S.C. 460, 252 S.E.2d 565.

When insurer refuses to defend insured under liability insurance contract and insured is compelled to conduct own defense, insured may recover from insurer reasonable expenses of litigation, including costs and attorneys fees. Sloan Const. Co., Inc. v. Central Nat. Ins. Co. of Omaha (S.C. 1977) 269 S.C. 183, 236 S.E.2d 818.

Insured has no action against defaulting insurance company where two companies insure identical risk, both policies provide for furnishing insured with defense, and one company denies liability and refuses to defend, even if insured nominally bears cost of defense, where burden is actually born by nondefaulting insurer, through guise of loan receipt, in absence of any damage flowing to insured as result of defaulting insurers refusal to defend. Sloan Const. Co., Inc. v. Central Nat. Ins. Co. of Omaha (S.C. 1977) 269 S.C. 183, 236 S.E.2d 818.

Where two companies insure identical risk and both policies provide for furnishing insured with defense, neither company, absent contractual relationship, can require contribution from other for expenses of defense where one denies liability and refuses to defend, since duty to defend is personal to both insurers and neither is entitled to divide duty. Sloan Const. Co., Inc. v. Central Nat. Ins. Co. of Omaha (S.C. 1977) 269 S.C. 183, 236 S.E.2d 818.

SECTION 38-59-50. Payment or settlement of benefits in merchandise or services prohibited.

It is unlawful for an insurer to make payment or settlement of benefits arising under life, endowment, accident, health, or hospitalization policies written by the insurer in merchandise, services rendered or agreed to be rendered, or to issue a policy which provides for settlement in merchandise or services rendered or to be rendered.

An insurer violating this section pays a penalty of ten times the amount of the policy, certificate, or other evidence of insurance to be collected in a suit by the policyholder or his legal representatives or beneficiary. An officer, agent, or servant of an insurer who violates this section is guilty of a misdemeanor and, upon conviction, must be fined in the discretion of the court or imprisoned not more than three years, or both.

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