South Carolina gives policyholders a bad-faith remedy and, in some cases, attorney fees when an insurer refuses to pay without a reasonable basis. Here's the plain-English version.
South Carolina policyholders have two overlapping protections when an insurer mishandles a claim: a statutory improper-claim-practices framework and a common-law bad-faith cause of action. Both aim at the same problem, a carrier that refuses to pay a valid claim without a good reason.
The statute: Title 38, Chapter 59
South Carolina’s improper-claim-practices provisions live in S.C. Code Title 38, Chapter 59. Section § 38-59-20 describes practices considered improper, including failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims, or failing to attempt a good-faith, prompt, and equitable settlement when liability is reasonably clear.
The piece policyholders care about most is the fee-shifting provision at § 38-59-40. In general terms, when an insurer refuses to pay a claim within a defined period and that refusal is found to be without reasonable cause or in bad faith, the statute allows a court to award reasonable attorney fees on top of the amount due, subject to the statute’s caps and conditions. Read the section for the exact limits, because they matter.
The common-law claim
Separately, South Carolina recognizes a common-law bad-faith claim: when an insurer refuses to pay benefits under a policy without a reasonable basis, the insured may recover consequential damages, and in some cases punitive damages, beyond the policy amount. The statutory and common-law paths can apply to the same facts but have different elements and remedies.
What “bad faith” is not
Bad faith is not simply losing a coverage dispute. An insurer is allowed to disagree and to investigate. The line is reasonableness: a genuine, documented dispute over coverage is different from a refusal with no reasonable basis. That distinction is fact-specific and is why these cases turn on the claim file.
Practical takeaways
- Keep a paper trail. What the carrier asked for, what you sent, and how it responded is the evidence a bad-faith analysis turns on.
- Fees can change the math. Because § 38-59-40 can shift fees in the right case, a claim that seems too small to fight may look different, the opposite of Florida, which repealed its one-way fee statute.
- Coverage first, conduct second. Bad faith usually rides on top of a coverage dispute; start by nailing down your coverage and the loss, then the claims options.
A licensed public adjuster (regulated under South Carolina’s Title 38 provisions) can help measure the loss; see the public-adjuster directory, and our tools help you track deadlines.
This is general information about South Carolina law, not legal advice. The statute’s caps, deadlines, and conditions control, and they are fact-specific; confirm the current statute and how it applies with a licensed South Carolina attorney.
General information, not legal advice, laws and policies vary and change. Confirm current statutes and your own dates with a licensed attorney before acting.