Tort/Negligence – Underinsured Motorist Action – Bad Faith Claim

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The only claims available to the insured under an insurance contract are contract and bad faith claims.

We affirmed the court of appeals’ decision.

In 2014, Therese Hood was in a three-car accident. In that accident, Hood was t-boned by Antonie Johnson, causing Hood to move into oncoming traffic and hit William and Mary Kuck head-on. As a result, three lawsuits began.

Hood brought this action against her underinsured motorist (UIM) carrier, United Services Automobile Association (USAA), asserting claims for both negligence and bad faith, among others. Following the jury’s verdict in favor of USAA on the bad faith claim and in favor of Hood on her negligence claim, the trial court granted USAA’s motion for JNOV on the negligence claim. Hood appealed to the court of appeals, which affirmed. We granted certiorari on two issues: (1) whether a first-party insured can bring both a negligence and bad faith claim against their UIM insurer; and (2) whether the court of appeals erred in holding USAA did not act in bad faith during settlement negotiations of Hood’s UIM claim or in taking a disparate position on a key factual issue in two underlying tort actions.

On appeal, Hood argued, among other things, that our courts have recognized a negligence claim distinct from bad faith, so the jury’s finding that USAA was negligent but did not act in bad faith should be upheld. We disagreed. All of Hood’s claims focus on how USAA represented Hood in the Kuck Action against Hood and how it represented its own interests against Hood in the UIM Action; how USAA’s representatives treated Hood during mediation of the UIM Action; and whether USAA breached its internal policies for litigation and mediation. All of these acts stem from the insurance contract. Thus, all these arguments fall under Hood’s contract’s scope and lead to one viable tort claim: bad faith. A negligence action would be entirely duplicative of that claim.

Hood also argued a negligence claim must be available within an insurance contract’s scope because those seeking insurance but not yet under contract have that protection. A negligent procurement case involves a separate and distinct duty of care from a bad faith claim, which is based on the duty of good faith and fair dealing. We did not disagree with Hood’s assertion that because “[t]he insurance business is affected with a public interest,” an insured party has to at least have the same level of protection as those seeking insurance. Nichols, 279 S.C. at 340, 306 S.E.2d at 619. However, insureds obtain that level of protection through a bad faith claim. Another claim covering those same actions would not provide more protections for those individuals. In sum, the only claims available to the insured under an insurance contract are contract and bad faith claims. Hood argued the court of appeals erred in holding as an additional sustaining ground that USAA did not act in bad faith. USAA acted within its rights under the UIM policy in not disclosing its reserves or authority and as any other party would be expected to act in the adversarial process. USAA had reason to dispute Hood’s claims. USAA had no duty to disclose its reserves and settlement authority to Hood or to offer $250,000 to settle the UIM action. Thus, the trial court did not err in holding as a matter of law that USAA’s conduct in mediation did not support a claim for bad faith, and the court of appeals did not err in finding no evidence of bad faith as an alternate sustaining ground.

South Carolina law does not require an insurance company to disclose and offer its full reserves or full authority when it has a valid defense and may defend its interest when stepping into a defendant’s shoes under a UIM policy. Thus, we affirmed the court of appeals’ alternative sustaining grounds.

Affirmed.

Hood v. United Services Auto Association (Lawyers’ Weekly No. 010-068-25, 14 pp.) (Letitia H. Verdin, J.) Appealed from Charleston County Circuit Court (Kristi F. Curtis, J.) Roy T. Willey, IV, Eric Marc Poulin, and Lane Douglas Jefferies, all of Poulin Willey Anastopoulo, LLC, of Charleston, for Petitioner; Robert William Whelan, of Whelan, Mellen & Norris, LLC, of Charleston, for Respondent. South Carolina Supreme Court