INSURANCE BAD FAITH

The bad faith claim in South Carolina

In Nichols v. State Farm Mutual Automobile Insurance Co., 279 S.C. 336, 306 S.E.2d 616 (1983), the South Carolina Supreme Court recognized a tort action for an insurer’s bad faith refusal to pay first-party benefits. A first-party claim is one you make on your own policy, such as a homeowners or commercial property claim.

Attorney fees under S.C. Code § 38-59-40

If an insurer refuses to pay within 90 days after a demand, and the trial judge finds the refusal was without reasonable cause or in bad faith, the court may award reasonable attorney fees, up to one-third of the judgment. The statute also covers fees on appeal and applies to cases filed in or removed to federal court.

Improper claim practices

S.C. Code § 38-59-20 lists improper claim practices by insurers when done without just cause and often enough to show a general business practice. They include:

• Not attempting in good faith to settle a claim once liability is reasonably clear.
• Forcing policyholders to sue by offering substantially less than they later recover.
• Offering less because the policyholder would have to pay attorney fees to recover more.
• Unreasonable delay or failure to pay.

These practices are enforced by the South Carolina Department of Insurance, which can order an insurer to stop and impose penalties (§ 38-59-30).

Signs of a bad faith problem

• No decision months after you gave notice and documentation.
• A denial that does not cite the policy language it relies on.
• An offer far below repair estimates with no explanation.
• Repeated requests for the same documents.

What to keep

Keep the policy, every letter and email, the adjuster’s estimate, your contractor’s estimate, photos, and a log of calls with dates and names. See denied claims and claim deadlines.

Breach of contract and bad faith are different claims

A breach of contract claim asks the court to make the insurer pay what the policy owes. A bad faith claim under Nichols is a tort claim about how the insurer handled the claim, such as refusing to pay without a reasonable basis. The two are often brought together. A bad faith claim depends on the insurer’s conduct, so documents and timelines matter.

First-party and third-party claims

A first-party claim is on your own property policy. A third-party claim is someone else’s claim against a person the insurer covers, such as a liability claim. S.C. Code § 38-59-40(3) preserves the Tyger River doctrine, which concerns an insurer’s handling of liability claims. This page is about first-party property claims.

Complaints are not the same as a lawsuit

A complaint to the Department of Insurance can prompt an insurer to respond, and the Department can act against improper claim practices. A complaint does not award money for your loss. In 2025 the Department received 1,101 homeowners complaints and confirmed 141. See our claim guides for complaint data by insurer.

How we handle bad faith cases

• We read the full policy and the claim file.
• We build a timeline of every notice, request and response.
• We send a written demand that starts the 90-day period under § 38-59-40.
• If the insurer does not pay, we file suit in the Court of Common Pleas or federal court.

Property claims we handle

Homeowners, commercial and industrial property, business interruption and condo and HOA associations.

Questions about a claim? Call 843-284-5790 or request a case review.

This page is general information about South Carolina law, not legal advice. Reading it does not create an attorney-client relationship. Every claim depends on its own policy and facts.