Insurance Bad Faith in South Carolina: When Your Own Insurer Becomes the Adversary
South Carolina recognizes both first-party and third-party bad faith claims against insurers. Here is how Charleston policyholders push back.
When you buy an insurance policy, you are buying a promise: pay the premium, and the carrier will defend or indemnify you when a covered loss happens. South Carolina law treats that promise seriously. When an insurer unreasonably refuses to pay a valid claim, the policyholder may have a separate cause of action for bad faith — with damages that can dwarf the underlying claim.
First-Party Bad Faith
Under Nichols v. State Farm and the line of cases following Tadlock, an insured can sue a first-party insurer (one whose policy is meant to pay the insured directly — homeowners, UM/UIM, health, disability) for bad faith refusal to pay benefits. The insured must prove the existence of coverage, the insurer's refusal to pay, and that the refusal was without a reasonable basis.
Third-Party Bad Faith
When a liability insurer (like an auto carrier defending its insured) unreasonably refuses to settle a covered claim within policy limits and an excess judgment results, the insurer can be held liable for the entire judgment, not just the policy limit. That doctrine is what forces insurers to take serious settlement demands seriously.
Common Bad Faith Tactics
Tactics that have triggered bad faith claims in South Carolina include lowballing valid claims to leverage settlement, ignoring medical evidence, misrepresenting policy provisions, demanding unnecessary documentation, misclassifying claims to fit lower coverage, delaying decisions for months, and failing to communicate with the insured.
Damages for Bad Faith
A successful bad faith case can recover the policy benefits, consequential damages (like the cost of replacement insurance, lost business income, or emotional distress), and in egregious cases punitive damages. Attorney's fees may be recoverable when authorized by statute or contract.
Documenting the Carrier's Conduct
Charleston policyholders should put every important communication in writing, send claims and demands by certified mail when possible, record dates of calls and the names of adjusters, and keep copies of every document the carrier provides. That paper trail is what makes a bad faith case provable.
How Traywick Law Helps
Our office regularly represents clients across Charleston, Mount Pleasant, and the Lowcountry on issues like these. Learn more about our Charleston insurance disputes practice, or visit the main Traywick Legal Blog for additional case analysis.
Talk to a Charleston Attorney
If you have questions about how this issue affects your situation in Charleston, Mount Pleasant, or anywhere in the Lowcountry, contact Traywick Law Offices for a free consultation. Call (843) 343-5092.
Disclaimer: This article is provided for general informational purposes only and is not legal advice. Reading it does not create an attorney-client relationship. Every case is different — please consult an attorney about your specific situation.
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