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I’ve Been Sued, Now What? Insured’s Rights Under South Carolina Law

You may be reading this because you have been sued, perhaps in a lawsuit filed by one of our attorneys, and you are wondering what to do next.  The purpose of this post is to provide answers to some of the more frequently asked questions in this situation.

What do I do with the papers I received from the person who is suing me?

Immediately give them to your insurance agent or insurance company, or both.  There will typically be a specific time period that you have to respond to the paperwork you have received, and any delay in providing the paperwork to the insurance company may result in a denial of insurance coverage, which will put personal assets at risk. It is imperative that you provide the paperwork to the insurance company immediately and ask for confirmation that they received the paperwork and that they are going to protect you.

What does insurance do for me in this situation?

You have paid premiums, maybe your whole life, for the insurance company to protect you in the event that you were sued, and now it is the insurance company’s time to step up and do its job.  The insurance company to whom you paid insurance premiums for liability insurance coverage should hire an attorney to defend you and should pay any settlement or judgment in the case up to the insurance limits.  If the carrier fails to protect you for some reason, you may need to file a declaratory judgment action to determine coverage and/or sue your insurance company for bad faith.  This is discussed more later.

If I want this lawsuit to be over sooner, how do I get the insurance company to do that? 

Many insurance companies for the most part are for-profit enterprises who unfortunately prioritize saving their own money over their insured’s interests, so a typical insurance company will look for any opportunity to save its money or delay paying its money under most circumstances.  That obviously does not help get a lawsuit resolved faster, but as an insured you have the right to demand that the insurance company settle the case within its limits, in writing, from the first time that you communicate with them about the lawsuit.  It is usually a good idea for an insured to hire personal counsel to make sure the insurance company is doing what it is supposed to do to protect you, and you have a right to seek your own personal counsel as an insured in South Carolina who can make sure that your rights are protected. Under Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 170 S.E. 346 (1933), insurers have a duty to the insured to settle a claim within policy limits when it is the reasonable thing to do. In addition to Tyger River-related obligations, carriers owe to insureds in South Carolina a “duty of good faith and fair dealing in the performance of all obligations undertaken by the insurer for the insured.” Carolina Bank and Trust Co. v. St. Paul Fire and Marine Co., 310 S.E.2d 163, 279 S.C. 576 (S.C. App. 1983) [emphasis added]. Accordingly, there is a cause of action in South Carolina for an “insurer’s bad faith handling of third party claims.” Tadlock Painting Co. v. Maryland Cas. Co., 322 S.C. 498, 473 S.E.2d 52 (S.C. 1996) (“Furthermore, we decline to make breach of an express contractual provision a prerequisite to bringing the action.”).  Accordingly, you have the right as an insured under South Carolina law to demand that the insurance company settle the case to protect you and to reduce the impact on your life of a pending lawsuit. 

What happens if I don’t want the insurance company to settle the case and I tell them that?

This is probably the worst thing an insured can do when they are facing a lawsuit, because it will typically at a minimum result in delayed resolution of the case, and potentially could result in you being personally responsible for any excess judgment.  You are typically only insured up to the policy limits.  For example, a standard minimum limits policy in South Carolina provides $25,000.00 in bodily injury coverage.  If you tell the insurance company not to pay, and there is a jury verdict for more than $25,000.00, you may be personally responsible for the amount above the policy limits.  While the general public was deceived by insurance company propaganda into believing that lawsuits are wrong (a practice exposed in depth by the Hot Coffee documentary), lawsuits are the only way we have in this country to settle disputes that aren’t suited for criminal court.  If a crime is committed, the accused is prosecuted and may face prison time or some other criminal penalty, which gives the victim justice.  If someone negligently hurts someone, the victim’s only way to obtain justice is to make an insurance claim or file a lawsuit, and this right was so important that the Founding Fathers made it the Seventh Amendment to the United States Constitution, and is guaranteed by Article 1 Section 14 of the South Carolina Constitution.  There is nothing shameful about pursuing civil justice, and it is the insurance company’s job to protect you when someone makes a claim for civil compensation as to your insurance policy.  

What happens if I tell the insurance company to settle the case?

This is the situation where the insurance company has the most pressure to end the lawsuit as quickly as possible, and the situation in which you are most protected.  Even if you doubt the merits of the lawsuit, you want the insurance company to gamble with its money if it decides not to pay, instead of gambling with your money.  If there is a standard minimum limits auto policy of $25,000.00 and you tell the insurance company to pay, and they don’t, if there is an excess judgment at trial, the insurance company will likely be on the hook for the entire judgment. So when and how should you tell them to pay?  Early and often and in writing is the answer.  From the first time you pass the paperwork to the insurance company, you should tell them in writing something like: “I want you to settle this lawsuit as soon as possible to protect my personal assets and to end this litigation as soon as possible.”  If the Plaintiff sends a demand letter, you should tell the insurance company: “I want you to fully comply with this demand to protect my personal assets and end this litigation as soon as possible.”  If you are in the lawsuit and mediation is approaching, you should tell the insurance company: “I want you to settle this lawsuit to protect my personal assets and end this litigation as soon as possible.”  If the insurance company refuses to settle the case, you should tell them: “Since you have decided not to settle the case, will you guarantee me that you will pay the judgment, even if it is above the policy limits?”  This type of guarantee from the insurance company is what is referred to as a “Blue Sky letter.” If you do this, it will significantly improve your chances of the lawsuit ending sooner and your personal assets being protected.  And it is always a good idea to hire personal counsel for you who can handle these communications for you. 

I have a judgment against me, now what?

The first thing to do is consult with your own personal counsel to make sure you are protected if you do not have personal counsel involved already.  But generally, you should demand in writing that the insurance company pay the judgment, and if they refuse to pay the judgment, you should ask for a written explanation of why they refuse to pay the judgment.  If you told the insurance company not to pay during the litigation, and they refused to pay and you now have a judgment that exceeds the limits of insurance, you may be able to protect yourself by giving the Plaintiff an assignment of your bad faith rights against the insurance carrier.  It is important to have personal counsel involved to handle that for you.

What questions should I ask the insurance company and/or the defense lawyer?

There are many questions that you should demand answers to if you are a defendant in a lawsuit.  Some of these questions can be answered by the lawyer the insurance company hired for you, and some of them cannot be because the insurance defense lawyer cannot get into coverage issues typically.  But some of the questions you should ask:

  • How much insurance coverage is available here?
  • Am I going to have to pay for a verdict that exceeds the limits?
  • Will my assets be exposed if there is an excess verdict?
  • Are any of the Plaintiff’s claims not covered?
  • What happens if the Plaintiff wins at trial on a non-covered claim?
  • Are punitive damages covered by my insurance policy?
  • Will you guarantee me in writing that the insurance company will pay the verdict even if it exceeds the policy limits and even it is on one of the non-covered claims?

You have the right to be fully informed on these issues, and if the insurance company will not give straight answers to these questions, it is important that you seek your own personal counsel to make sure you are protected.

Why do I need a personal lawyer if the insurance company already hired me one?

The lawyer the insurance company hired to defend the lawsuit is likely very capable and competent, but it is important to understand that while the lawyer represents you in this case, the lawyer typically receives a large volume of cases from the insurance company, and it is typically very important for that lawyer to keep the insurance company happy.  And while the defense lawyer owes duties to you as your lawyer, the insurance company is paying for the legal services and directing some or all of the decisions in the case.  In short, the lawyer hired by the insurance company will try to reduce the total exposure of everyone as much as possible, but that lawyer cannot get involved with coverage issues or any disputes between you and the insurance carrier.  And as you can see from the above in this post, there are a lot of important communications and decisions that need to be made to protect you personally that the insurance defense lawyer cannot get involved with.  So one of the most important things you can do as a civil defendant is hire your own personal counsel.

Does WDW Law firm represent insureds as personal counsel?

Yes, we do this frequently, and if it is a case where we cannot do it for conflict or other reasons, we can refer you to someone experienced in this area.