On July 30, 2015, the South Carolina federal district court entered an order requiring Nationwide to pay $1.1 million—the difference between the coverage provided under an automobile policy and the amount of the judgment entered against its insured—after Nationwide failed to comply with a time-limit demand by a single business day. Urena v. Nationwide Ins. Co. of Am., 2:13-cv-03544-DCN (D.S.C. Jul. 30, 2015).
The underlying facts are as follows: Nationwide’s insured was allegedly traveling at an excessive rate of speed and DUI when he struck and severely injured Emilio Urena. The resulting injuries to Urena significantly exceeded the $25,000 minimum limits policy issued by Nationwide. Adjusters’ notes made clear the claim was treated as a limits claim from the outset and that Nationwide agreed to tender its coverage limits on both bodily injury and property damage. On February 16, Urena’s attorney sent Nationwide the following time-limit demand: “[I]f we have not received the settlement checks by the close of business tomorrow, or the funds are not wired directly to my trust account, I will advise my client to reject any forthcoming receipt of the policy limits as being untimely.” This demand followed counsel’s February 15 provision of requested photographs from the MVA.
Nationwide’s adjuster admittedly failed to read the paragraph containing the time-limit demand and mailed the settlement checks via US Mail on Friday, February 17—the deadline for receipt under the time-limit demand. As Monday was a federal holiday, the checks were received by Urena’s counsel on Tuesday, February 21, rejected as untimely and returned to Nationwide. Urena obtained a $1.15 million jury verdict against and an assignment from Nationwide’s insured. The court, citing the seminal case of Tyger River Pine Co. v. Maryland Cas. Co., 170 S.C. 286, 170 S.E. 346 (1933), held that “an insurer against liability for accidents which assumes the duty of defending a claim owes the assured the duty of settling the claim if that is the reasonable thing to do.” “[T]he covenant of good faith and fair dealing extends not just to the payment of a legitimate claim, but also to the manner in which it is processed.” Mixson, Inc. v. American Loyalty Ins. Co., 349 S.C. 394, 562 S.E.2d 659 (Ct. App. 2002). “[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.” Tadlock Painting Co. v. Maryland Cas. Co., 322 S.C. 498, 473 S.E.2d 52 (1996)
The court found that Nationwide’s conduct in processing the claim constituted negligence in that its adjuster received a time-limit demand yet failed to read the entirety of the letter, and failed to tender payment in a timely manner despite the fact that she could have and would have sent the payment as requested had she read the demand. Therefore, Nationwide breached its duty to its insured and did not adhere to the standard of care in processing the claim, thereby subjecting its insured to a substantial verdict in excess of policy limits. Accordingly, Nationwide was ordered to pay the difference between the coverage provided and the amount of the verdict — $1.1 million.