Paul Potylicki v. Allstate Insurance Company

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-2242
PAUL POTYLICKI,
Plaintiff - Appellant,
v.
ALLSTATE INSURANCE COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Columbia. Cameron McGowan Currie, District
Judge. (3:07-cv-03468-CMC)
Argued: March 23, 2010 Decided: June 30, 2010
Before DUNCAN and DAVIS, Circuit Judges, and Joseph R. GOODWIN,
Chief United States District Judge for the Southern District of
West Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
Robert Bert Ransom, LEVENTIS & RANSOM, Columbia, South Carolina,
for Appellant. William Clyde Barnes, Jr., TURNER, PADGET,
GRAHAM & LANEY, PA, Florence, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:
This appeal requires us to interpret the South Carolina law
on Underinsured Motorist coverage (“UIM”). After a motor vehicle
accident, Appellant Paul Potylicki (“Potylicki”) and the at-
fault motorist James Bridgett (“Bridgett”), together with the
latter’s liability insurer, Nationwide Insurance Company
(“Nationwide”), entered into binding arbitration to resolve the
ensuing claims by Potylicki. The arbitrator made an award in
favor of Potylicki. Potylicki then sought to recover additional
compensation from his UIM insurer, Appellee Allstate Insurance
Company (“Allstate”). When Allstate denied Potylicki’s claim, he
brought suit against Allstate in state court, alleging a breach
of the implied covenant of good faith and fair dealing. After
removal of the case to federal court, the district court
dismissed the case without prejudice, ruling that Potylicki’s
claim was premature because he failed to bring suit against
Bridgett and serve same on Allstate as required by S.C. Code
Ann. § 38-77-160 (2002) (“Section 38-77-160”). We affirm.
I.
On August 22, 2006, Potylicki failed to come to a complete
stop at a three-way intersection while riding his bicycle on a
military facility in Columbia, South Carolina. Bridgett’s motor
vehicle struck Potylicki as he made a left turn, directly into

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Potylicki’s path. As a result of the accident, Potylicki
suffered a fracture of his right femur, requiring the insertion
of plates and screws to stabilize the bone. Bridgett’s insurance
coverage with Nationwide provided for a $50,000 per-person
personal injury limit, while Potylicki had $15,000 in coverage
under his parents’ UIM coverage with Allstate. Immediately
following the accident, Bridgett, Potylicki, and the four
witnesses to the collision provided sworn statements to the
Military Police, for compilation in the Military Police Report
(“MPR”).1
After providing Allstate with prompt notification of the
accident and at Nationwide’s invitation, Potylicki, Bridgett,
and Nationwide agreed to submit both the personal injury and
property damage claims to binding arbitration. Although
Potylicki asked Allstate to participate in the arbitration,
Allstate declined.
At the conclusion of the May 23, 2007, arbitration
proceeding, the arbitrator assessed the parties’ liability to be
Potylicki, 30% at-fault, and Bridgett, 70% at-fault. After
1 In the MPR, Potylicki admitted that he had failed to come
to a complete stop. Bridgett reported that, although he had come
to a complete stop, he had not seen Potylicki prior to
proceeding through the intersection. Allstate later based its
denial of Potylicki’s claim on the MPR, asserting that Potylicki
was over 50% at-fault for the accident.

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reducing Potylicki’s damages to account for comparative
negligence, the arbitrator awarded $97,759.45 to Potylicki for
both bodily injury and property damage. Thereafter, Nationwide
paid Potylicki $50,000, the maximum amount of coverage provided
under Bridgett’s policy, in exchange for a Covenant Not to
Execute.2
Thereafter, Potylicki filed suit against Allstate in the
Court of Common Pleas for Richland County, South Carolina,
alleging breach of contract and breach of the implied covenant
of good faith and fair dealing. Allstate removed the case to the
United States District Court for the District of South Carolina
pursuant to 28 U.S.C. § 1332 (2006).
Potylicki then submitted a claim to Allstate for the
maximum amount provided under his UIM coverage. On June 14,
2007, an Allstate claims adjuster rejected Potylicki’s request
for compensation stating, “[b]ased upon the information that I
have at this time, the underinsured motorist coverage for this
loss is not applicable because Mr. Potylicki is the proximate
cause of this accident.” J.A. 367.
2 The Covenant Not to Execute provides that Potylicki will
not execute upon any claim obtained against Nationwide and
Bridgett arising out of the events of August 22, 2006, and
further that, if he obtains compensation under his UIM coverage,
he will request the marking of any judgment entered against
Nationwide and Bridgett as satisfied.

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After conducting discovery, the parties filed cross-motions
for summary judgment. The district court denied Potylicki’s
motion and granted Allstate’s motion, stating that the
appropriate relief was dismissal without prejudice because
Potylicki’s claims were “premature” due to his failure to comply
with S.C. Code Ann. § 38-77-160 (2002). Potylicki v. Allstate
Ins. Co., No. 3:07-3468-CMC, 2008 WL 4412286 (D.S.C. Sept. 23,
2008). Potylicki timely appeals, and we have jurisdiction
pursuant to 28 U.S.C. § 1291 (2006).
II.
South Carolina law expressly provides that when an insured
seeks compensation under an Underinsured Motorist provision, the
insured must serve copies of pleadings against the at-fault
motorist prior to commencing any action against the UIM insurer.
Section 38-77-160 of the South Carolina Code states, in part:
No action may be brought under the underinsured
motorist provision unless copies of the pleadings in
the action establishing liability are served in the
manner provided by law upon the insurer writing the
underinsured motorist provision. The insurer has the
right to appear and defend in the name of the
underinsured motorist in any action which may affect
its liability . . . . In the event the automobile
insurance insurer for the putative at-fault insured
chooses to settle in part the claims against its
insured by payment of its applicable liability limits
on behalf of its insured, the underinsured motorist
insurer may assume control of the defense of action
for its own benefit.

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S.C. Code Ann. § 38-77-160 (2002) (emphasis added). The South
Carolina Supreme Court addressed this statute in Williams v.
Selective Ins. Co. of the Southeast, 315 S.C. 532 (1994). The
court affirmed the trial court’s grant of summary judgment to
the insurer, stating that “Williams's failure to pursue an
action against the at-fault driver resulted in a total waiver of
Insurer's right to defend,” which Section 38-77-160 was designed
to prevent. Id. at 534–35. In Williams, the insured had
instituted suit based on claims of bad faith and breach of
contract against the insurer prior to commencing an action
against the at-fault motorist, but after engaging in binding
arbitration with both the motorist and his insurance company.
Id. at 533. In reaching its decision, the South Carolina Supreme
Court explained that the purpose of Section 38-77-160 is “to
protect an insurance carrier’s right to contest its liability
for underinsured benefits,” thus requiring that the insured
“preserve the right of action against an at-fault driver so long
as the underinsured carrier has not agreed to the amount and
payment of underinsured motorist benefits.” Id. at 534-35.
In a case decided shortly after Williams, the state supreme
court clarified that, where the insured had served the insurer
with pleadings, the insurer could be held liable despite the
fact that the insured had not yet obtained a judgment “in excess
of the at-fault driver’s liability limits.” Graham v. State Farm

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Mut. Auto. Ins. Co., 319 S.C. 69, 71–72 (1995). Nevertheless,
the court has not veered from its statutory interpretation set
forth in Williams. See Ex Parte Allstate Ins. Co., 339 S.C. 202,
205 (2000) (holding that under Section 38-77-160 the insured
could not recover where the insurer was served with pleadings
after the jury had reached a verdict against the motorist); see
also Halmon v. Am. Int’l Group, Inc. Ins. Co., 586 F. Supp. 2d
401, 408 (D.S.C. 2007) (finding insured failed to comply with
Section 38-77-60 where he filed a bad faith claim against the
insurer and the alleged at-fault-driver on the same day); Myers
v. State Farm Mut. Auto. Ins. Co., 950 F. Supp. 148, 150 (D.S.C.
1997) (holding that the insured was not required to obtain a
final judgment against the at-fault motorist prior to commencing
a bad faith action against the insurer; service of pleadings
against the insurer was sufficient).
The district court correctly concluded that the dismissal
of the instant case is consonant with South Carolina law. Prior
to commencing this suit, Potylicki failed to serve Allstate with
pleadings because he had not yet initiated a case against
Bridgett.3
3 We were advised at oral argument that Potylicki has now
filed suit against Bridgett in an effort to satisfy the
statutory precondition to suit against Allstate.
Like the district court, we reject Potylicki’s attempt
to evade the statute by labeling his claim as one for violation

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of the implied covenant of good faith and fair dealing (which
might support an award of punitive damages under state law)
rather than what it is in substance: a claim for breach of
contract for failure to pay uninsured motorist benefits.4 Because
South Carolina law explicitly requires that an insured serve his
UIM insurer with pleadings filed in a suit against the at-fault
motorist prior to commencing any action, the district court
properly granted Allstate’s motion for summary judgment and
denied Potylicki’s motion.
III.
For the foregoing reasons, the district court’s order
granting summary judgment to Allstate, dismissing this case
without prejudice, is
AFFIRMED.
4 It was only because of the ostensible claim for
unspecified punitive damages that this case found its way into
federal court under the diversity statute.

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