A Red Light, Two Claimants, and a Ten-Day Demand
At a rain-slicked intersection on US-17, your insured ran a red light and struck a sedan. The sedan's driver was traveling 15 mph over the posted limit. Your insured carries 25/50/25 liability limits, South Carolina's minimum. Driver A's medical bills and lost wages total $45,000. Her passenger, B, has $18,000 in bills and no attorney. A's attorney demands the $50,000 per-accident limit within ten days and threatens a bad faith action if the limits are not tendered. Investigation supports assigning 80% of the fault to your insured and 20% to A.
1. How does South Carolina's negligence law change the value of A's claim, and what number should you actually evaluate?
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South Carolina follows modified comparative negligence: a claimant whose own negligence is 50% or less may recover, but the recovery is reduced by the claimant's percentage of fault. A claimant more than 50% at fault is barred. South Carolina has abolished joint and several liability, so a defendant is responsible for its own share.
A's gross damages: $45,000. Fault allocation: 20% to A. Reduction: $45,000 x 0.20 = $9,000. Net value of A's claim against the insured: $36,000.
Two things follow. First, A's 20% does not bar her claim, so the file cannot be closed on comparative fault. Second, the evaluation number for settlement purposes is $36,000, not $45,000, and not the $50,000 demanded. The demand figure is a negotiation position, not a valuation. Document the fault evidence (scene photos, traffic signal timing, speed reconstruction, witness statements) because the 80/20 split will be tested if the case is litigated or if a bad faith claim is later filed.
2. How should the $50,000 per-accident limit be allocated between A and B, and what are the risks of tendering the limits to A alone?
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The policy provides $25,000 per person and $50,000 per accident.
- A's net damages are $36,000, but the per-person limit caps her at $25,000 under the policy. The remaining $11,000 is the insured's personal exposure.
- B's damages are $18,000 with no comparative fault, so B is entitled to up to $18,000, subject to the per-person limit.
- Combined: $25,000 + $18,000 = $43,000, which fits within the $50,000 per-accident limit with $7,000 unused.
Risk of tendering to A alone: B has an independent claim against the same insured and the same limits. Paying A the full per-accident limit while B's claim is open could leave B with nothing and expose the insurer to a claim that it failed to give B's interest fair consideration. A ten-day demand does not by itself create a duty to pay; the duty to settle arises when a reasonable insurer would have accepted a demand within limits, considering all claimants.
Practical options: obtain a release from A within the per-person limit while preserving funds for B; seek a global settlement within $50,000; or, if the claimants cannot agree, consider an interpleader so a court allocates the fund. Any payment should be conditioned on a full release of the insured and documented with the fault and damages analysis that supports the allocation.
3. What must the file show to defend the insurer against a bad faith allegation arising from the ten-day demand?
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The file must show a timely, reasoned, good faith evaluation rather than silence or a reflex rejection.
- Prompt response: acknowledge the demand in writing within the ten days, even if the evaluation is not final, and state what is being reviewed.
- Investigation: liability and damages evidence, the 80/20 fault analysis, medical records supporting A's $45,000, and B's $18,000 in bills.
- Reasoned evaluation: the net $36,000 figure, the $25,000 per-person cap, and the existence of a competing claimant whose rights must be considered.
- Consideration of the insured's exposure: the insured faces roughly $11,000 personally on A's claim; explain that to the insured in writing and advise the insured of the right to retain personal counsel.
- No unreasonable delay: if the evaluation supports tendering limits, do it promptly and obtain releases; if it does not, state the reasons in the file.
- Consistency: do not tell A one thing and the insured another. The insured should receive copies of material communications.
A demand with a short deadline is not bad faith by itself. The exposure is created by unexplained delay, an unsupported valuation, or disregard of a co-claimant's interest. The adjuster's notes are the evidence.