Law gives plaintiffs right to know details of defendant’s insurance coverage

Attorney Jack Griffeth

The homepage of SC Lawyers Weekly today has an article relating to Collins & Lacy attorney Jack Griffeth's recent post about a little-known element of the newly-enacted South Carolina Fairness in Civil Justice Act of 2011, which became effective January 1, 2012.  It discusses how insurance companies must now, under certain conditions, disclose the automobile coverage limits to a plaintiff’s lawyer prior to the lawyer filing suit. To read Jack's original blog post click here. 

Here is the article by SC Lawyers Weekly that quotes Jack.  The hard copy version will be in mail boxes this week.  If you have any question about the law, please don't hesitate to call us.

Law gives plaintiffs right to know details of defendant’s insurance coverage

by Phillip Bantz

Published: January 20th, 2012

A provision tucked inside the S.C. Fairness in Civil Justice Act of 2011 quietly became law earlier this month, and is expected to reduce the number of personal injury lawsuits filed in the state’s courts.

The law took effect Jan. 1 as part of the tort reform bill and requires auto insurers that may be liable for any part of a claim to disclose coverage limits to plaintiffs prior to the filing of a lawsuit. Plaintiffs seeking the information must first file a certified written request that includes the accident report tied to their claims. Insurers have 30 days to reply.

North Carolina enacted a similar disclosure law in 2004, but it requires plaintiffs to jump through several more hoops than the South Carolina version of the law. For instance, in order to request coverage limits, an N.C. plaintiff must give the insurer access to all of their medical records for three years prior to the date of the claim, along with any medical records pertaining to the alleged injuries.

“I call it the hostage exchange. We give you the [records] release and you give us the policy limits information,” said Christopher R. Nichols, a personal injury lawyer at the Nichols Law Firm in Raleigh. “It sounds like South Carolina’s law is better than ours.”

Columbia plaintiffs’ lawyer Joseph “Pete” Strom Jr. was a chief negotiator in S.C.’s insurance disclosure legislation. By getting insurers to lay their cards on the table upfront, both sides will be more apt to negotiate and settle cases, he said.

“This is clearly a good thing for not only the plaintiffs but the court system,” he said. “If you represent a plaintiff in a case and there are serious injuries, you cannot fulfill your fiduciary duty to determine what is collectable in a civil action without knowing the amount of insurance coverage. With this new law, lawyers will now know on the front end what the coverage is and will be able to settle cases without having to file suit.”

Strom said segments of the insurance industry initially resisted the disclosure law, but in the end most agreed that it would promote quicker settlements and less litigation. He added that he and others in the plaintiffs’ bar wanted the bill to be expanded to include commercial, fleet and umbrella insurance policies.

“Hopefully, when the insurance companies see a positive outcome from this,” Strom said, “we’ll have an opportunity to revisit the commercial piece down the road.”

Defense litigator Jack D. Griffeth of Collins & Lacy in Greenville said the disclosure law is not particularly bad news for the insurers he often represents, as long as they stay in compliance with the new criteria.

The statute, Section 38-77-250 of the S.C. Code of Laws, requires an insurer’s corporate officer or claims manager to reply to a plaintiff’s coverage disclosure request under oath. The notarized statement must include the name of the insurer, name of each insured and limits of coverage – or the insurer can provide a copy of the policy declaration page.

“Providing this insurance information is not a waiver of any defense, whether that is a merits defense or defense that coverage doesn’t exist for some reason,” Griffeth said. “It’s putting out the basic information.”

If a plaintiff’s disclosure request is insufficient, the law still requires the insurer to issue a written response detailing the deficiencies in the request. Then the plaintiff can file an amended request.
Several personal injury lawyers raised questions about two confusing facets of the new law. It is silent about whether the insurer’s declaration page must be notarized like the statement in response to a disclosure request. And it is unclear about whether the law’s effective date applies to the date that an injury occurs or when the disclosure request is filed.

Regardless of the law’s ambiguity, Griffeth is advising insurers to err on the side of caution.

“The bottom line for any practitioner is to get a declaration page with an accompanying letter, at minimum, and preferably a declaration page with a notarized affidavit of coverage,” he said. “Then there isn’t any question about it.”

G.W. King Smith, a plaintiffs’ lawyer at Smith & Griffith in Anderson, said most of his colleagues would not settle a case without first acquiring at least a certified declaration page from the insurer if there was any question about coverage.  “I don’t know that it’s going to change much having a requirement to do it,” he said.

As for the effective date, Griffeth believes that it pertains to the date of a request, not of an auto accident. If an insurer received a disclosure request before the law took effect, he is advising that it is not obligated to provide a response.

“But if the lawyer filed a request in December and comes back in mid-January and says, ‘How come you didn’t answer my letter?” he added. “Well, then I think the insurance company has a duty to reply."