This blog follows up on my previous post, Insurance Bad Faith in South Carolina: Part 1.

There are several categories of damages available to an insured for a first-party property insurance bad faith claim in South Carolina. Today’s blog will cover attorney’s fees.

S.C. Stat. § 38-59-40 provides:

In the event of a claim, loss, or damage which is covered by a policy of insurance . . . and the refusal of the insurer, plan, or corporation to pay the claim within ninety days after a demand has been made. . . and a finding. . .by the trial judge that the refusal was without reasonable cause or in bad faith, the insurer … is liable to pay the holder … all reasonable attorneys’ fees for the prosecution of the case against the insurer …. 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.1

This statute reflects that the “the determination of an insurer’s liability for attorneys’ fees is a matter of decision by the judge who tries the case.”2 Section 38-59-40 does not require that a bad faith verdict actually be rendered—only that the court, post-verdict, enter a finding that the insurer’s conduct was either “without reasonable cause” or “in bad faith.”3

The statute permits the recovery of attorneys’ fees for not only patently unreasonable or bad faith conduct, but also for an insurer’s negligent actions, those actions that may not rise to the level of bad faith, but lack “reasonable cause.”4

Section 38-59-40 also applies to an insurer that unreasonably refuses to pay a claim.5

Be on the lookout for Part 3 where I will address an additional category of bad faith damages in South Carolina.
1 Emphasis added.
2 Coker v. Pilot Life Ins. Co., 217 S.E.2d 784, 787 (S.C. 1975).
3 Id.
4 Strickland v. Prudential Ins. Co. of Am., 292 S.E.2d 301 (S.C. 1982).
5 Sciarrone v. Life Ins. Co. of Virginia, 313 S.E.2d 322 (S.C. App. 1984).