Therese Hood v. USAA

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Therese Hood, Appellant,

v.

United Services Automobile Association, Respondent.

Appellate Case No. 2019-001943

Appeal From Charleston, Jasper County
Kristi F. Curtis, Circuit Court Judge

Unpublished Opinion No. 2023-UP-011
Heard November 17, 2022 – Filed January 11, 2023

AFFIRMED

Eric Marc Poulin, Angeline M. Larrivee, and Roy T.
Willey, IV, of Anastopoulo Law Firm, LLC, of
Charleston; and Alexis Wimberly McCumber, of Athens,
Georgia, all for Appellant.

Robert William Whelan, of Whelan Mellen & Norris,
LLC, of Charleston, for Respondent.

PER CURIAM: Therese Hood appeals a circuit court order granting a judgment
notwithstanding the verdict (JNOV) to her automobile insurer, United Services
Automobile Association (USAA). This bad faith case against USAA arises out of
Hood's claim for underinsured motorist (UIM) benefits.

Hood was in a three-car wreck. Antoine Johnson t-boned Hood's car and caused her
to cross a median and collide head-on with William and Mary Kuck's car. Several
lawsuits followed. Hood sued Johnson. The Kucks filed suits against Hood and
Johnson.

A key factual dispute—if not the key factual dispute—in these cases was visibility
at the time of the wreck and whether Hood's headlights had been on. Hood
maintained she used her car's automatic light setting and that this would have
ensured her lights were on at the time of the wreck.

USAA provided Hood with counsel to defend the claims the Kucks brought against
her. Hood's lawyer defended her position that her car's headlights had been on. At
some point, he had an expert conduct a lamp filament analysis on Hood's car. This
analysis suggested Hood's high beams had been on.

Hood's suit against Johnson (from here on, the UIM suit) went to trial, but that was
after Johnson's insurance carrier tendered its $25,000 liability limits. USAA stepped
into Johnson's shoes and defended the suit per the UIM statute. See S.C. Code Ann.
§ 38-77-160 (2015). There, USAA—defending in Johnson's name—took the
position Hood's headlights had been off. Even though there was an expert report
(mentioned above) suggesting Hood's high beams had been illuminated at the time
of the wreck, four eyewitnesses had given statements that Hood's lights were off,
and the responding officer's incident report stated Hood's car was still running and
her lights were off when he arrived at the scene. The expert's report was also hard
to reconcile with Hood's explanation about using her vehicle's automatic light
setting, which would not have illuminated her high beams.

Hood prevailed in the UIM case. It was nearly a defense verdict rather than a verdict
in Hood's favor: the jury attributed 49% of the fault to Hood and found $2.5 million
in damages. Still, even after the verdict was adjusted for Hood's share of the
comparative fault, the verdict exceeded Hood's $1 million UIM policy limits.

All of that background brings us to this bad faith case. Hood's main theory of bad
faith is tied to the dispute about her headlights. She argues USAA committed bad
faith when it argued in the UIM case that her lights were off at the same time the
lawyer USAA hired to defend her from the Kucks was arguing her headlights had
been on. A lot of the argument in the bad faith trial was that USAA supposedly took
inconsistent positions and "lied." Yet, there is no denying the existence of a genuine
factual dispute about whether Hood's lights had been on or off.

Hood's other bad faith allegation came out of mediation in the UIM claim. USAA
authorized the lawyer defending the claim to offer up to $250,000 to settle the case.
That was also the amount USAA set aside as its reserve for the claim. USAA's
highest offer during the mediation was $200,000. Hood's lowest offer was $650,000
(though her lawyer informally floated that the case could settle between $300,000
and $400,000). Hood claims it was bad faith for USAA to not offer the full amount
of its authority and reserve.

The case was tried to a jury. The verdict form asked the jury two questions. The
first was whether USAA breached the duty of good faith and fair dealing. The
second was whether USAA had been negligent. The jury found USAA did not
breach the covenant good faith and fair dealing but that USAA had been negligent.

USAA subsequently moved for JNOV, arguing (as it had throughout the case) that
there was no tort of negligence separate from bad faith. After conducting a hearing,
the circuit court agreed and granted JNOV.

JNOV

Hood argues JNOV was improper because South Carolina recognizes a cause of
action for negligence that is separate from a cause of action for bad faith against an
insurer. We respectfully disagree.

Hood directs us to precedent discussing bad faith or unreasonable action by the
insurer. See Nichols v. State Farm Mut. Auto. Ins. Co., 279 S.C. 336, 340, 306
S.E.2d 616, 619 (1983) ("[I]f an insured can demonstrate bad faith or unreasonable
action by the insurer in processing a claim under their mutually binding insurance
contract, he can recover consequential damages in a tort action."), superseded on
other grounds by statute, Employee Retirement Income Security Act of 1974,
§ 514(a), 29 U.S.C. § 1144(a), (b)(2)(A), as recognized in Duncan v. Provident Mut.
Life Ins. Co. of Phila., 310 S.C. 465, 427 S.E.2d 657 (1993). As we read Nichols, it
recognizes a single tort encompassing bad faith and negligence, not separately viable
claims for bad faith and negligence. The claim in these cases is that the insurance
company has breached the covenant of good faith and fair dealing that is implied in
every insurance contract. See Tadlock Painting Co. v. Md. Cas. Co., 322 S.C. 498,
504, 473 S.E.2d 52, 55 (1996) (stating that proposition). Indeed, precedent explains
an insurance company commits "bad faith" when (among other elements) there is
"bad faith or unreasonable action in breach of an implied covenant of good faith and
fair dealing arising on the contract." Crossley v. State Farm Mut. Auto. Ins. Co., 307
S.C. 354, 359, 415 S.E.2d 393, 396-97 (1992) (emphasis added).

Federal cases support this position. See Skinner v. Horace Mann Ins. Co., 369 F.
Supp. 3d 649, 654 (D.S.C. 2019) (finding an insured's negligence claim was
duplicative of her bad faith claim, and explaining that freestanding negligence claims
against insurers are generally improper in the District of South Carolina); Kraemer
v. Mass. Mut. Life Ins. Co., No. 2:15-04571-CWH, 2017 WL 5635469, at *6 (D.S.C.
Apr. 28, 2017) (relying on the South Carolina elements of bad faith and an
unpublished federal case stating no authority supports a freestanding negligence
claim separate from a bad faith claim). Though these federal cases are not
dispositive, we believe their general reasoning on this point is correct.

To be sure, it is appropriate for a jury to consider an insurance company's negligence
when deciding whether the insurer breached its duty of good faith and fair dealing
and thereby acted in bad faith. See BMW of N. Am., LLC v. Complete Auto Recon
Servs., Inc., 399 S.C. 444, 453-54, 731 S.E.2d 902, 907-08 (Ct. App. 2012) (stating
an insured can demonstrate bad faith by showing her insurer acted unreasonably
because no reasonable basis supported withholding payment and finding the circuit
court did not err in granting the insurer's motion for summary judgment because it
had reasonable grounds upon which to contest the insured's claim); Cock-N-Bull
Steak House, Inc. v. Generali Ins. Co., 321 S.C. 1, 7, 466 S.E.2d 727, 730 (1996)
(finding the circuit court did not err in granting an insured's directed verdict motion
on its bad faith claim because no reasonable basis supported the insurer's denial of
benefits). Indeed, Nichols held the jury was entitled to consider negligence by the
insurance company in deciding whether the insurance company breached the
covenant of good faith and fair dealing. 279 S.C. at 342, 306 S.E.2d at 620. The
circuit court's bad faith charge correctly presented these principles to the jury. The
decision to grant JNOV was also correct. In this context, there is no tort against an
insurance company for negligence that does not also cross the threshold of breaching
the duty of good faith and fair dealing arising out of the insurance contract.

DIRECTED VERDICTS AND SUMMARY JUDGMENTS

Hood also appeals various rulings the circuit court made at the summary judgment
and directed verdict stages. These arguments are not properly before us. Hood did
not present any of these arguments to the circuit court in her posttrial motions or in
her motion for the court to reconsider its JNOV ruling. That omission waives her
right to argue them on appeal. See Gordon v. Rothberg, 213 S.C. 492, 505, 50 S.E.2d
202, 208 (1948) (refusing to consider "matters complained of [that] were not
included in the appellants' ground on motion for new trial" because the circuit court
"ha[d] not been given an opportunity of passing on same").

Even if we looked past waiver, our decision to affirm would be the same. We see
no way a reasonable jury could find USAA acted in bad faith. "If there is a
reasonable ground for contesting a claim, there is no bad faith." Snyder v. State
Farm Mut. Auto. Ins. Co., 586 F. Supp. 2d 453, 458 (D.S.C. 2008) (quoting Crossley,
307 S.C. at 360, 415 S.E.2d at 397); see also Collins v. Auto-Owners Ins. Co., 759
F. Supp. 2d 728, 740 (D.S.C. 2010) ("[I]f there is a reasonable ground for offering
less than the full amount demanded on a claim, then there is no bad faith in
negotiations."). There is no reasonable doubt that USAA had a defense to the UIM
claim. The record contained ample evidence of Hood's comparative negligence.
This was not a situation in which there was no colorable defense to liability or
damages. See Orangeburg Sausage Co. v. Cincinnati Ins. Co., 316 S.C. 331, 342-
43, 450 S.E.2d 66, 72-73 (Ct. App. 1994) (finding an insurer acts unreasonably by
failing to offer damages when the damages are not disputed); Cock-N-Bull, 321 S.C.
at 7, 466 S.E.2d at 730 (directing a verdict against an insurer that had no reasonable
basis for denying benefits).

We are not aware of any authority supporting the proposition that an insurance
company acts in bad faith by not offering to settle the case for the full amount of its
authority or reserve. See Snyder, 586 F. Supp. 2d at 460 (holding the insurer did not
act in bad faith in making a settlement offer based on its estimate of the value of the
insured's claim because no evidence indicated the estimate was unreasonable);
Collins, 759 F. Supp. 2d at 741-42 (holding the insurer acted reasonably, and
therefore not in bad faith, in offering less than the insured's demand because the
value of the insured's claim could reasonably be debated considering there were
issues of liability and whether damages were attributable to preexisting conditions
instead of the accident). We reject the suggestion that USAA's internal valuation of
the case constitutes an "undisputed" sum owed to Hood. It may be that USAA had
a duty to answer truthfully if asked whether it was offering the maximum amount of
its authority, but that question was not asked here and is not before us.

Hood argues USAA acted in bad faith or unreasonably by taking disparate positions
about her headlights in different cases. Again, we respectfully disagree. The UIM
statute entitled USAA to defend the UIM case "for its own benefit." S.C. Code Ann.
§ 38-77-160. USAA did precisely that. It bears mentioning that "USAA" did not
take disparate positions. USAA was not a party to the cases the Kucks brought
against Hood. USAA obtained counsel to represent Hood. In the UIM case, USAA
stepped into Johnson's shoes, defended its own interest as allowed by statute, and
justifiably relied on several pieces of evidence suggesting Hood's lights had not been
on. It is true that Hood had the support of an expert, but there were problems with
that evidence too. As we already mentioned, the report suggested Hood's high beams
had been on, but none of the witnesses—not even Hood—said that had been the
case. There was a reasonable ground for USAA to assert in the UIM suit that Hood's
headlights were off. Thus, USAA did not act in bad faith in taking that position. See
Snyder, 586 F. Supp. 2d at 458 ("If there is a reasonable ground for contesting a
claim, there is no bad faith." (quoting Crossley, 307 S.C. at 360, 415 S.E.2d at 397)).

CONCLUSION

For these reasons, the circuit court's order is

AFFIRMED.

KONDUROS, HEWITT, and VINSON, JJ., concur.