What Constitutes a Bad Faith Action?
South Carolina Code Annotated Section 38-59-20 defines the actions that constitute bad faith by an insurer who offers property and casualty insurance, marine insurance, surety insurance, or title insurance. These actions can constitute improper claims practices:
- Failure to acknowledge, with reasonable promptness, important communications regarding any claims that arise under its policy, which includes third-party claims under liability policies.
- Knowingly misrepresenting to either insured or third-party claimants any pertinent facts or policy provisions that relate to coverage issues, or disseminating misleading or deceptive information in regard to the coverage under the policy.
- Not adopting or implementing reasonable standards for promptly investigating and settling claims, which includes third-party liability claims, as well.
- Offering to settle a claim, which can include a third-party liability claim, for less than what is reasonably due or payable based on a chance that the policyholder or claimant would be required to incur attorney fees in order to recover the amount reasonably payable or due.
- Compelling a policyholder or third-party claimant under a liability policy to initiate a lawsuit in order to recover money that is due or payable with respect to claims under its policies by offering an amount that is substantially less than what is ultimately recoverable through a lawsuit or settlement with an attorney.
- Threatening to invoke or invoking a policy defense, or rescinding the policy as of its inception, in bad faith, for the primary purpose of reducing or discouraging a claim, including third-party liability claims.
