Filed: Feb. 10, 2014
Latest Update: Mar. 02, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2256 LIBERTY MUTUAL FIRE INSURANCE COMPANY; EMPLOYERS INSURANCE OF WAUSAU, a mutual company, Plaintiffs - Appellees, v. JT WALKER INDUSTRIES, INC., f/k/a Metal Industries, Inc.; MI WINDOWS & DOORS, INC., f/k/a MI Home Products, Inc., f/k/a Metal Industries, Inc. of California, Defendants - Appellants. No. 12-2350 LIBERTY MUTUAL FIRE INSURANCE COMPANY; EMPLOYERS INSURANCE OF WAUSAU, a mutual company, now known as Employers I
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2256 LIBERTY MUTUAL FIRE INSURANCE COMPANY; EMPLOYERS INSURANCE OF WAUSAU, a mutual company, Plaintiffs - Appellees, v. JT WALKER INDUSTRIES, INC., f/k/a Metal Industries, Inc.; MI WINDOWS & DOORS, INC., f/k/a MI Home Products, Inc., f/k/a Metal Industries, Inc. of California, Defendants - Appellants. No. 12-2350 LIBERTY MUTUAL FIRE INSURANCE COMPANY; EMPLOYERS INSURANCE OF WAUSAU, a mutual company, now known as Employers In..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2256
LIBERTY MUTUAL FIRE INSURANCE COMPANY; EMPLOYERS INSURANCE
OF WAUSAU, a mutual company,
Plaintiffs - Appellees,
v.
JT WALKER INDUSTRIES, INC., f/k/a Metal Industries, Inc.; MI
WINDOWS & DOORS, INC., f/k/a MI Home Products, Inc., f/k/a
Metal Industries, Inc. of California,
Defendants - Appellants.
No. 12-2350
LIBERTY MUTUAL FIRE INSURANCE COMPANY; EMPLOYERS INSURANCE
OF WAUSAU, a mutual company, now known as Employers
Insurance Company of Wausau,
Plaintiffs - Appellants,
v.
JT WALKER INDUSTRIES, INC., f/k/a Metal Industries, Inc.; MI
WINDOWS & DOORS, INC., f/k/a MI Home Products, Inc., f/k/a
Metal Industries, Inc. of California,
Defendants - Appellees.
Appeals from the United States District Court for the District
of South Carolina, at Charleston. Margaret B. Seymour, Chief
District Judge. (2:08-cv-02043-MBS)
Argued: November 6, 2013 Decided: February 10, 2014
Before GREGORY, DAVIS, and THACKER, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished
opinion. Judge Gregory wrote the opinion, in which Judge Davis
and Judge Thacker joined. Judge Davis wrote a separate
concurring opinion.
ARGUED: Richard Hugh Lumpkin, VER PLOEG & LUMPKIN, P.A., Miami,
Florida, for Appellants/Cross-Appellees. Charles Mitchell
Brown, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Columbia, South
Carolina, for Appellees/Cross-Appellants. ON BRIEF: Meghan C.
Moore, W. Allen Bonner, VER PLOEG & LUMPKIN, P.A., Miami,
Florida; William K. Davis, Alan M. Ruley, BELL, DAVIS & PITT,
P.A., Winston-Salem, North Carolina, for Appellants/Cross-
Appellees. William C. Wood, Jr., NELSON MULLINS RILEY &
SCARBOROUGH LLP, Columbia, South Carolina; Morgan S. Templeton,
WALL TEMPLETON & HALDRUP, PA, Charleston, South Carolina; J.
Mark Langdon, ELMORE AND WALL, Raleigh, North Carolina, for
Appellees/Cross-Appellants.
Unpublished opinions are not binding precedent in this circuit.
2
GREGORY, Circuit Judge:
Liberty Mutual Fire Insurance Company (“Liberty”) filed an
action in the district court seeking reimbursement under its
insurance policies after settling five product defect lawsuits.
Liberty insured J.T. Walker Industries, Inc. and its subsidiary
MI Windows & Doors, Inc. (collectively, “MI”), named defendants
in the product defect actions. Despite MI’s insistence on
taking the cases to trial, Liberty settled all five cases within
the deductible limits of the applicable insurance policies. MI
refused to pay the costs of settlements it did not desire. When
Liberty sued for breach of contract, MI filed counterclaims
alleging that Liberty breached both the explicit terms of the
insurance policies and the implied covenant of good faith and
fair dealing.
A jury found both parties liable for contract damages and
also found Liberty liable for actual and punitive damages on
MI’s bad faith claim. The district court set aside the bad
faith damages, finding that MI failed to prove actual damages
and, as a result, was not entitled to punitive damages. The
district court affirmed the verdict as to the breaches of
contract, and refused to award litigation costs and prejudgment
interest. The parties now appeal the post-trial rulings and
evidentiary issues. For the reasons stated below, we affirm the
3
district court’s ruling on all issues except bad faith damages.
We vacate the ruling on punitive damages and remand.
I.
A.
MI has manufactured windows and doors for nearly sixty
years. Throughout that time, MI purchased various insurance
policies, providing general liability, umbrella, and excess
coverage. Between 1997 and 2003, Liberty insured MI under six
annual commercial general liability insurance policies (“the
Policies”). The Policies conferred upon Liberty the duty and
right to defend MI against lawsuits claiming property damage.
They also vested in Liberty the discretion to “investigate any
occurrence and settle any claim or suit that may result.”
Each policy contained a $2,000,000 aggregate limit, with a
limit of $1,000,000 per occurrence. The Policies also provided
for a $500,000 deductible, requiring MI to reimburse Liberty up
to that amount for any defense and indemnity costs incurred per
occurrence. The Policies established claim handling fees, with
charges ranging from $625 to $967 for each claim file Liberty
opened in relation to MI’s coverage.
B.
During the time period covered by the Policies, MI was a
named defendant in five property damage lawsuits in South
4
Carolina. Each suit alleged that, inter alia, defective
manufacturing and installation of MI windows and doors led to
progressive water damage in five condominium developments. The
plaintiffs in each suit were the individual homeowners and the
respective homeowners’ associations for each development. The
plaintiffs sued MI alongside other contractors and developers
involved in constructing the condominiums, alleging millions of
dollars in damages for each lawsuit. The five suits were:
Avian Forest, Tilghman Shores, Riverwalk, Magnolia North, and
Marais. 1
MI tendered each suit to Liberty, which agreed to defend MI
in all five cases. Liberty retained counsel to represent MI’s
interests in each of the underlying lawsuits. Finley Clarke
served as counsel in four cases, and Scott Taylor served as
counsel in Magnolia North due to Clarke’s conflict in that case.
MI involved its national outside counsel, Paul Gary, in each
case. Defense counsel in the underlying cases prepared and
1
Avian Forest Homeowners’ Ass’n v. MI Windows & Doors, Inc.
et al., CA No. 02–CP–22–0687, Horry County, South Carolina;
Tilghman Shores Homeowners’ Ass’n v. MI Windows, et al., CA No
03–CP–26–4021, Horry County, South Carolina; Riverwalk at
Arrowhead Country Club Prop. Owners’ Ass’n, Inc. v. MI Home
Products, et al., CA No. 03–CP–26–7169, Horry County, South
Carolina; Magnolia N. Homeowners Ass’n v. MI Windows, et al., CA
No. 05–CP–26–0044, Horry County, South Carolina; Marais Prop.
Owners’ Ass’n v. MI Windows, et al., CA No. 05–CP–10–1140,
Charleston County, South Carolina.
5
presented reports for Liberty, MI, and Gary. During the
underlying litigation, MI expressed its position, through Gary,
that it desired to defend the reputation of its products and
avoid settling meritless cases, lest it become an easy target
for suits related to other buildings or developments.
After receiving the cases, Liberty set a reserve for each
case -- an estimate of losses due to MI’s potential exposure.
Liberty set the reserves based upon the facts of each claim and
adjusted the amounts to reflect any new information it received.
Liberty used these figures to inform an evaluation of whether a
given case should be tried or settled. The aggregate reserve
total amounted to $475,000. Liberty also estimated costs of
defending each case through trial, eventually allocating
$769,310 for defense costs. Based on the evidence, these
estimates, the nature of the claims, and the potential for joint
and several liability, Liberty settled each of the five
underlying lawsuits, despite MI’s desire to proceed to trial on
four of them.
Avian Forest settled first. Liberty set the Avian Forest
reserve at $300,000 and estimated $96,250 in defense costs.
Clarke estimated the potential liability to be between $3
million and $7 million. Clarke expressed confidence that
summary judgment would not resolve the case. The plaintiffs in
the case retained three sets of experts prepared to fault MI for
6
the property damages based on the quality of its windows. Being
that the jury verdict would turn on whichever set of experts the
jury found more credible, Clarke considered MI’s likelihood of a
favorable jury verdict to be no better than fifty percent.
Approximately one week before trial was to commence, MI
learned that the claims adjuster authorized Liberty to settle
MI’s portion of the Avian Forest claims. MI objected to
settlement, stating its intent to reject Liberty’s defense and
assume control of the defense through trial. In response,
Liberty offered MI an opportunity to withdraw the claim for
coverage, whereupon Liberty would cede full control of the
defense to MI. Doing so would have released Liberty from any
liability and caused MI to assume the risk of a verdict greater
than the settlement amount. MI refused to release Liberty from
its coverage obligations. Liberty settled Avian Forest one day
later for $72,300. 2
In Tilghman Shores, Liberty set a reserve of $75,000 and
estimated $65,000 for defense costs. Clarke estimated potential
liability in the vicinity of $6 million, not including punitive
damages. He estimated settlement would cost between $300,000
and $500,000. Just as with Avian Forest, Clarke found no
2
The developer in Avian Forest proceeded to trial, where a
jury returned a verdict in the plaintiffs’ favor and awarded
$2.2 million in damages. (J.A. 771, 2125.)
7
possibility of a favorable summary judgment resolution and
estimated no more than a fifty percent chance for a favorable
jury verdict. Liberty settled Tilghman Shores for $75,000.
The next two cases, Riverwalk and Magnolia North, settled
simultaneously for $400,000. For Riverwalk, Liberty estimated
defense costs at $125,000 but set the reserve at $0. Clarke
expressed concern that an adverse verdict in Riverwalk could
result in joint and several liability between $7 million to $10
million. He doubted the possibility of a favorable summary
judgment disposition, and estimated no better than a fifty
percent chance of a favorable jury verdict. He also expressed
concern that MI’s windows in nine of the Riverwalk buildings
would not meet applicable building codes. Liberty settled
Riverwalk for $200,000.
In Magnolia North, Liberty estimated defense costs at
$192,000 and set a reserve of $50,000. Taylor estimated damages
upwards of $10 million, with an additional $3.8 million for the
individual homeowners’ loss-of-use claims. He was certain the
conflicting expert reports would preclude summary judgment.
Taylor also believed MI held a fifty percent chance of a
favorable verdict if the developer remained a co-defendant. He
held no expectation that the developer, who suffered a multi-
million dollar liability in the Avian Forest trial, would settle
8
prior to trial in Magnolia North. 3 Liberty settled Magnolia
North at the same time as Riverwalk and for the same amount --
$200,000.
The final case, Marais, was the only one for which MI
expressed a desire to settle. Upon defense counsel’s advice,
Liberty estimated $291,000 for defense costs and set a reserve
of $50,000. MI accepted some level of responsibility for damage
due to its failure to remedy an improper installation. MI
sought a $150,000 settlement. According to Clarke, the
plaintiffs sought more than $20 million from all defendants.
The mediator in the case estimated settlement would require
between $7 million and $10 million. Liberty settled MI’s
portion of the Marais case for $500,000. Liberty paid $210,000
of that amount and allocated the remaining $290,000 to Zurich,
MI’s succeeding insurance carrier.
Being that each claim settled for no more than $500,000,
Liberty sought reimbursement from MI for the full settlement
amounts in accordance with the deductible under the Policies.
Liberty also requested fees for opening twenty-six processing
claims in connection with the lawsuits. Having intended to go
3
The same developer was also found liable for $4.3 million
in damages in a suit with another condominium development.
(J.A. 771-78, 2125-26.)
9
to trial and exonerate its products, MI refused to submit the
requested amounts.
C.
Liberty filed this diversity action in the United States
District Court for the District of South Carolina. Liberty
sought declaratory relief concerning the trigger of insurance
coverage, allocation, and the right to refuse and control
settlement. Liberty also sought damages for breach of contract,
seeking the settlement amounts and processing fees incurred in
resolving the underlying lawsuits. MI countersued for contrary
declarations and for damages for breach of contract and bad
faith.
In ruling on the parties’ summary judgment motions, the
district court held that Liberty retained sole discretion to
settle the underlying cases. As a result, the district court
held that MI lacked the authority to approve settlement
decisions. The district court also denied Liberty’s motion for
summary judgment on the bad faith claims for two reasons.
First, the district court held that MI’s inability to approve of
settlements would not preclude a finding that Liberty acted in
bad faith in settling the claims. This was because bad faith
extends to unreasonableness in paying a claim as well as the
manner in which a claim is processed. Second, the district
10
court held that the settlement amounts provided sufficient
evidence for MI to take its bad faith claim to a jury.
The district court held a jury trial on the breach of
contract and bad faith claims. The district court granted
Liberty’s motion in limine to exclude any evidence that Liberty
never defended or settled a case against MI, aside from those at
issue, for an amount exceeding the $500,000 deductible. During
MI’s case-in-chief, the district court sustained Liberty’s
objection to MI evidence related to Liberty’s motive in reaching
the final settlement amounts, finding this motive evidence
irrelevant and unduly prejudicial. 4
The evidence adduced at trial tracked the aforementioned
facts. MI offered evidence that Liberty failed to disclose
certain portions of settlement discussions, including the timing
of the Avian Forest and Marais settlements. MI’s evidence also
suggested that Liberty’s claims expert failed to closely review
the reserves. Don Langro, a Liberty claims adjuster who
negotiated the settlements, admitted that he was unaware of MI’s
financial stake at the time of his negotiations. MI presented
evidence of its intent to defend its reputation and protect
itself from being an easy target for future products defect
4
MI sought introduction of a de bene esse deposition of an
underwriting expert as evidence of Liberty’s financial self-
interest.
11
lawsuits, in which other plaintiffs might sue in hopes of
obtaining a settlement payout. This included testimony by Gary
regarding his evaluation of the claims and settlements, and his
belief that Liberty should have taken the underlying lawsuits to
trial.
Conflicting testimony arose as to the processing claims
files. The evidence demonstrated that Liberty opened twenty-six
claims related to the underlying lawsuits. According to Langro,
Liberty typically opened one claim file per lawsuit per year of
coverage. Another Liberty witness noted that a single
occurrence of injury or damage could give rise to multiple
processing claims. Additional witnesses suggested that each of
the five underlying cases were actually two lawsuits -- one
involving the homeowners association and one involving the
individual homeowners -- thus requiring multiple claims per
suit.
After MI’s case-in-chief, Liberty moved for a directed
verdict. Liberty averred, inter alia, that MI failed to prove
bad faith damages. Specifically, Liberty’s counsel argued that
MI’s only evidence on damages were the settlement amounts --
which MI had not paid -- and these amounts could not undergird a
bad faith action because MI failed to provide evidence of
causation. The district court denied this motion and the
parties’ other Rule 50 motions.
12
The jury returned a verdict in favor of both parties. The
jury ruled in Liberty’s favor on its breach of contract claim,
thereby holding MI liable for $894,416.01 -- the amount billed
by Liberty to MI for the settlements. The jury also ruled in
MI’s favor on its breach of contract claim, awarding MI $18,290
-- the amount of excess processing fees. On MI’s bad faith
claim, the jury ruled in MI’s favor and found Liberty liable for
consequential damages of $684,416.01. The jury also awarded MI
$12.5 million in bad faith punitive damages.
The parties filed numerous post-trial motions. Liberty
sought judgment notwithstanding the verdict (JNOV) on the bad
faith claim, a new trial based on improper jury instructions,
reduction of punitive damages, and an award of prejudgment
interests and costs. MI sought judgment as a matter of law
(JMOL) as to a portion of Liberty’s contract damages, and for
attorney’s fees and costs.
The district court disposed of most of the post-trial
motions on August 10, 2012, leaving prejudgment interest and
costs for later resolution. The district court granted
Liberty’s motion for JNOV on the grounds that MI failed to prove
damages flowing from any bad faith. The district court held
that the jury had sufficient evidence to find the settlement
amounts unreasonably high, based on the reserve amounts, alleged
unpreparedness of defense counsel to conduct a trial, and
13
disputes between the parties as to whether Liberty should have
taken the underlying cases to trial. However, the district
court held that MI failed to prove that absent bad faith, MI
would have spent less than the settlement amounts on defense
costs and, in the event of an adverse verdict, damages. With MI
having failed to prove actual or consequential damages, the
district court found that MI was not entitled to punitive
damages.
The district court granted in part MI’s JMOL on the basis
that Liberty was not entitled to the $290,000 of the Marais
settlement allocated to Zurich. Having construed MI’s motion as
including a request for remittitur, the court reduced Liberty’s
contract damages to $684,416.01. The district court denied
Liberty’s motion for a new trial and MI’s motion for attorney’s
fees. Subsequent to this order, after Liberty notified the
district court it would accept remittitur in lieu of a new trial
on the contract claims, the district court denied Liberty’s
motion for prejudgment interest and costs.
The parties timely appealed the post-trial rulings, and MI
also appealed the district court’s evidentiary rulings. We have
jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.
The parties raise a host of issues arising from the
district court’s disposal of the case, virtually all of which
track the parties’ post-trial motions. They concern (1) bad
14
faith liability and damages, (2) breach of contract damages, (3)
prejudgment interest, (4) litigation costs, and (5) jury
instructions and evidentiary rulings. We discuss each of these
in turn.
II.
The central issue on appeal concerns the district court’s
granting in part of Liberty’s motion for JNOV. In doing so, the
court set aside the damages for Liberty’s breach of the duty of
good faith and fair dealing. We review de novo the grant or
denial of a motion for judgment as a matter of law. Anderson v.
Russell, 247 F.3d 125, 129 (4th Cir. 2001). We “accord the
utmost respect to jury verdicts and tread gingerly in reviewing
them.” Price v. City of Charlotte, N.C.,
93 F.3d 1241, 1250
(4th Cir. 1996). Where the district court rules contrary to the
jury’s findings, we reverse such a decision, thereby affirming
the jury’s conclusions, where “substantial evidence” supports
the jury verdict.
Anderson, 247 F.3d at 129; see also First
Union Commercial Corp. v. GATX Cap. Corp.,
411 F.3d 551, 556
(4th Cir. 2005).
The parties dispute whether Liberty waived its challenge on
the damages evidence, as well as the district court’s
substantive rulings on liability, damages, and attorney’s fees.
15
A.
As an initial matter, MI argues that Liberty waived its
right to argue causation of bad faith damages in its motion for
JNOV. MI claims that Liberty’s motion for directed verdict, by
failing to make the specific arguments in the motion for JNOV,
waived any challenge on those grounds asserted post-trial. We
disagree and find that Liberty sufficiently preserved the issue.
A trial court may entertain a motion for judgment as a
matter of law any time before the case has been submitted to the
jury and after a party has been fully heard on a claim or an
issue. Fed. R. Civ. P. 50(a). The court may grant the motion
if the evidence could not provide a legally sufficient basis for
a reasonable jury to find for the nonmoving party. Fed. R. Civ.
P. 50(a)(1). “The motion must specify the judgment sought and
the law and facts that entitle the movant to the judgment.”
Fed. R. Civ. P. 50(a)(2).
Rule 50(b) permits a party to renew its Rule 50(a) motion
post-trial, asserting the same grounds initially raised in the
prior motion. Fed. R. Civ. P. 50(b); see also Price, 93 F.3d at
1248-49. In considering a challenge based on a lack of
specificity in the Rule 50(a) motion, we remain mindful that the
Federal Rules are to be construed liberally, and consider
whether the motion provides the court and the nonmoving party
sufficient notice of any alleged deficiencies in evidence.
16
Singer v. Dungan, 45 F.3d 823, 829 (4th Cir. 1995) (citations
omitted).
We find that Liberty preserved its Rule 50(b) arguments.
In its Rule 50(a) motion, Liberty plainly stated, albeit
briefly, that the settlement amounts alone were insufficient to
demonstrate what damages resulted from any alleged bad faith.
Having identified a perceived deficiency in damages and
causation, Liberty sufficiently preserved this issue for post-
trial review. 5 See Price, 93 F.3d at 1249. The fact that a
party expands its reasoning and offers more specificity in its
post-trial motion does not run afoul of the Federal Rules, so
long as the legal and factual basis for the renewed motion
mirrors that presented in the Rule 50(a) motion. See Wallace v.
Poulos,
861 F. Supp. 2d 587, 595-96 (D. Md. 2012) (Rule 50(b)
motion was properly preserved where a less detailed Rule 50(a)
motion set forth the same basic facts, thus providing adequate
notice of perceived deficiencies). In both motions, Liberty
focused on the failure to demonstrate damages actually caused by
bad faith, and that MI’s mere reliance on the settlement amounts
5
This Court has found issues sufficiently preserved where
the Rule 50(a) motion contained nonspecific explanations or was
otherwise improper yet placed the court and nonmoving party on
notice of the alleged defects. See Singer, 45 F.3d at 829; Fed.
Savings & Loan Ins. Corp. v. Reeves,
816 F.2d 130 (4th Cir.
1987); Miller v. Premier Corp.,
608 F.2d 973 (4th Cir. 1979).
17
could not prove harm. Thus, Liberty did not waive its post-
trial challenge to the bad faith consequential damages award.
B.
The substantive challenges to the district court’s ruling
on bad faith concern the legal standard applied by the court,
sufficiency of evidence on actual or consequential damages, the
availability of nominal and punitive damages, and an award of
attorney’s fees either as damages or by statutory provision.
1.
South Carolina recognizes a common law tort action for an
insurer’s bad faith in exercising duties owed to policyholders.
Charleston Cnty. Sch. Dist. v. State Budget & Ctrl. Bd., 437
S.E.2d 6, 7-8 (S.C. 1993); Nichols v. State Farm Mut. Auto. Ins.
Co.,
306 S.E.2d 616, 619 (S.C. 1983). Bad faith claims subject
insurers to tort liability where the insurer unreasonably
refuses to settle within policy limits, Tyger River Pine Co. v.
Maryland Cas. Co.,
170 S.E. 346 (S.C. 1933), and where an
insured demonstrates “bad faith or unreasonable action by the
insurer in processing a claim,”
Nichols, 306 S.E.2d at 619.
This tort is rooted in the implied covenant of good faith and
fair dealing in every insurance contract.
Id. at 618.
Where an insurer refuses to provide benefits under a
mutually binding insurance contract, the insured may prevail on
a bad faith action by proving “the insurer’s bad faith or
18
unreasonable action in breach of an implied covenant of good
faith and fair dealing arising on the contract,” and damages
stemming from that breach. See Crossley v. State Farm Mut.
Auto. Ins. Co., 415 S.E.2d 393, 396-97 (S.C. 1992); Peterson v.
W. Am. Ins. Co.,
518 S.E.2d 608, 614-15 (S.C. Ct. App. 1999).
“An insurer acts in bad faith where there is no reasonable basis
to support the insurer’s decision.” Doe v. S.C. Med.
Malpractice Liability Joint Underwriting Ass’n,
557 S.E.2d 670,
674 (S.C. 2001) (internal quotation marks and citations
omitted). The parties dispute the presence of both a bad faith
breach and resulting damages.
2.
MI contends that the district court applied an incorrect
legal standard for what comprises bad faith. 6 In its JNOV order,
6
Liberty alternatively proposes two bad faith liability
standards, in the event we are inclined to reverse the district
court’s ruling on bad faith conduct. The first is that a
settlement within policy limits cannot be unreasonably high.
The second is that express discretionary authority to settle
cannot give rise to bad faith absent an abuse of discretion.
Neither proposal appears sustainable under South Carolina law.
See Doe, 557 S.E.2d at 675-76 (discretion to settle is a
significant factor in assessing reasonableness of a settlement
decision, but not a bar to bad faith liability); Tadlock
Painting Co. v. Md. Cas. Co.,
473 S.E.2d 52, 54 (S.C. 1996)
(“The fact that the claims were ultimately settled for an amount
less than the applicable deductible . . . is irrelevant to
whether the insurer performed its duties in good faith.”); Tiger
River Pine Co. v. Maryland Cas. Co.,
161 S.E. 491, 493 (S.C.
1931) (exclusive control of and right to settle a suit does not
eliminate the insurer’s duty to avoid bad faith).
19
the district court determined that there was sufficient evidence
introduced at trial to support the jury’s finding that the
settlement amounts were unreasonably high. In addition to
evidence of unreasonably high settlement amounts, MI contends
that the district court should have also considered evidence as
to Liberty’s bad faith processing of MI’s claims. On these
facts, we disagree.
Evidence regarding processing fees did not inform the
jury’s bad faith finding. The verdict form provided space to
write in the damage amount for each claim. These amounts
provided insight into the usually unascertainable thoughts of
the jury, to the extent that we know that the jury considered
the processing fees under MI’s breach of contract claim. For
MI’s contract claim, the jury entered $18,290 -- the amount of
the wrongfully charged processing fees. For bad faith damages,
the jury awarded an amount equal to the total owed to Liberty
for the settlements. The jury’s award thus suggests that it
found bad faith in the settlements, not any aspect of
processing. See Dowling v. Home Buyers Warranty Corp., II, 428
S.E.2d 709, 711 (S.C. 1993) (no bad faith damages where the
verdict form permitted separate entries for contract and bad
faith damages and “[t]he jury returned its verdict with a slash
drawn through the space where it could have awarded actual
damages on the bad faith cause of action”). Had the jury found
20
bad faith in the overcharging of claims fees, it presumably
would have added another $18,290 in bad faith damages. 7 Thus,
the jury’s verdict demonstrates that the district court properly
limited its bad faith examination to the unreasonableness of the
settlement amounts.
Furthermore, MI’s contention that charging excessive fees
supports bad faith is beyond the bounds of South Carolina law in
this context. The bad faith tort rests upon the special
characteristics of the insurance relationship and the concern
that, in the absence of potential tort liability, an insurer
could “delay and deny a claim with virtual impunity” and pay
only the contractual limits. Masterclean, Inc. v. Star Ins.
Co., 556 S.E.2d 371, 374-75 (S.C. 2001). Hence, bad faith
processing liability has typically involved a delay in providing
or refusal to provide benefits. See Tadlock Painting Co. v. Md.
Cas. Co.,
473 S.E.2d 52, 53 (S.C. 1996) (insurer refused to
continue settlement negotiations until insured agreed to
insurer’s interpretation of deductible provision); Cock-N-Bull
Steak House, Inc. v. Generali Ins. Co.,
466 S.E.2d 727, 730
(S.C. 1996) (insurer failed to provide reasonable basis for
7
Awarding the fee amounts under both bad faith and contract
damages would have, in any event, resulted in an impermissible
double recovery. See Braswell Shipyards, Inc. v. Beazer East,
Inc., 2 F.3d 1331, 1338 (4th Cir. 1993) (citing Taylor v.
Hoppin’ Johns, Inc.,
405 S.E.2d 410, 412 (S.C. Ct. App. 1991)).
21
excluding certain eligible items from coverage); Nichols, 306
S.E.2d at 339 (insurer’s refusal to pay for damage incurred by
auto theft loss resulted in seven-month delay in car repair);
see also Ocean Winds Council of Co-Owners, Inc. v. Auto-Owners
Ins. Co.,
241 F. Supp. 2d 572, 576-77 (D.S.C. 2002) (question of
fact for jury where insurer delayed resolution by failing to
deny the claim, provide reasons for denial, or respond to
insured attorney’s correspondence).
Liberty did not delay or deny coverage. It promptly
defended and settled claims, and in the process charged a number
of fees based on a disputed interpretation of the contract.
Charging excessive fees might constitute bad faith when used to
delay or deny coverage, or as leverage to pressure an insured
into making certain concessions. Liberty engaged in no such
use. The district court found the processing fees excessive
only because two reasonable interpretations of policy language
required a construction against Liberty, as the drafter, and
favorable to MI. Judicial interpretation and contract damages
adequately resolve the excessive fee dispute, rendering an
extra-contractual remedy unnecessary here. The excess charges
are not the sort of bad faith processing of Nichols and its
progeny.
For these reasons, we find no error in the bad faith legal
standard applied by district court.
22
3.
The district court set aside the jury’s award of actual or
consequential bad faith damages, finding that MI failed to
provide sufficient evidence of ascertainable loss. The district
court held that without any evidence of what MI would have spent
on trial and potential liability absent any bad faith, the jury
lacked a legally sufficient basis for determining the actual
damages caused by Liberty’s actions. MI argues that the
district court erred in requiring such evidence. 8 We disagree.
A policyholder may receive actual or consequential damages
in a bad faith action. Nichols, 306 S.E.2d at 619. “To recover
damages, the evidence must enable the jury to determine the
amount of damages with reasonable certainty or accuracy.”
Magnolia N. Prop. Owners Ass’n, Inc. v. Heritage Communities,
Inc.,
725 S.E.2d 112, 126 (S.C. Ct. App. 2012); Pope v. Heritage
Communities, Inc.,
717 S.E.2d 765, 781 (S.C. Ct. App. 2011).
Although damages need not be proven with mathematical certainty,
a close estimate of the loss is necessary, even if the damages
8
MI also contends that the district court’s post-trial
order contradicted its denial of summary judgment. On the
contrary, finding a genuine issue of material fact for the jury
did not relieve MI of the burden to prove causation. If, for
example, the jury found that MI was not contractually liable for
the settlement amounts, the deductible amounts could have, in
theory, represented actual damages. Because the jury found MI
liable for the deductible amount under the Policies, additional
evidence of causation was required.
23
calculation depends upon contingent events. Magnolia North, 725
S.E.2d at 126 (citations omitted). Damages left to conjecture,
guess, or speculation will not enable recovery. Piggy Park
Enters., Inc. v. Schofield,
162 S.E.2d 705, 708 (S.C. 1968); see
also Eastman Kodak Co. of N.Y. v. S. Photo Materials Co.,
273
U.S. 359, 379 (1927) (damages must be based on evidence
demonstrating an ascertainable loss amount, not guess or
speculation).
To the extent it is not speculative, MI’s damages evidence
undermines its argument by demonstrating an absence of damages.
MI relies upon the estimated trial costs, reserves, and
settlement amounts for each case. Considering all five
underlying claims, the total estimate to defend the cases was
$769,310 and the reserves, estimating MI’s exposure, totaled
$475,000. The total settlement amount was $1,047,300 --
$197,010 less than the combined estimated defense costs and
reserves. Using these figures, no actual damage occurred. Cf.
Tyger River, 170 S.E. at 347 (actual damages shown where the
adverse jury verdict awarded an amount greater that the rejected
settlement). If, for example, Liberty settled all claims for
$1,000,000 and defense and liability estimates totaled $500,000,
then we would be considering a very different situation, wherein
MI could reasonably claim $500,000 in actual or consequential
damages.
24
Further, MI failed to present evidence calling these
estimates, upon which they now heavily rely, into question. MI
offered no evidence that the defense costs were overstated, nor
did it provide substantial evidence that it would have prevailed
had it proceeded to trial in the underlying cases. In
addressing the jury, MI’s trial counsel referred to Marais in
closing argument as “catastrophically difficult.” The jury also
heard testimony that the developer in Avian Forest and Magnolia
North suffered adverse verdicts in Avian Forest and at least one
other lawsuit. One adverse verdict, subject to joint and
several liability, in any of the five underlying claims could
have exceeded the total settlement amounts here. Without
substantial evidence supporting a finding that it would have
either prevailed in the underlying lawsuits or spent less than
the settlement amounts on defense and liability, MI failed to
show that it suffered any damages due to Liberty’s decision to
settle.
MI contends that the jury was within its power to reject
the defense costs and award the full settlement amounts. We
find this position specious for two reasons. First, no
reasonable factfinder could conclude that MI could have
proceeded to trial without incurring any defense costs. MI’s
argument that the jury was within its power to discount the
prospective trial costs defies common sense. Proceeding to
25
trial would have certainly cost some amount, arguably a
significant figure due to the complexity of construction defect
cases and the need for expert testimony on claims seeking
multimillion dollar damages.
Second, to the extent MI relies on testimony that some of
the plaintiffs “might” have walked away from their claims at any
moment, it presented nothing more than speculative testimony on
this point. No facts indicated that any of the underlying
plaintiffs considered abandoning their claims. Clarke
repeatedly noted that resolution would only occur through either
settlement or trial. MI fails to demonstrate where in the
record the evidence indicates that any of the underlying
plaintiffs actually wavered on their commitment to litigate
their claims. Indeed, at least two sets of plaintiffs -- those
in Avian Forest and Magnolia North -- proceeded to trial against
other defendants. Thus, the jury was not free to reject the
possibility of incurring any defense costs.
MI also urges that we impose upon Liberty, as the insurer,
the burden of proving damages in instances of bad faith refusal
to settle cases. Relying on Washington law, MI argues that in
the insurance context, the insurer stands in a much better
position of knowing the costs of litigation and thus being able
to prove what would have happened absent bad faith. Mut. of
Enumclaw Ins. Co. v. Dan Paulson Constr., Inc., 196 P.3d 1, 11
26
(Wash. 2007). It further maintains that such a burden is
appropriate in order to prevent Liberty from benefiting from its
misconduct. See Champion v. Whaley, 311 S.E.2d 404, 406 (S.C.
Ct. App. 1984) (once a plaintiff shows that defendant’s actions
“substantially contributed” to the nonoccurrence of a
contractual condition, burden shifts to defendant to show that
condition would not have occurred regardless of prevention).
We decline to adopt MI’s burden shifting argument. MI’s
reliance on Champion is “seriously misplaced,” as the “doctrine
of prevention has yet to be applied as a substitute for proof of
damages” in the insurance context. Royal Ins. Co. of Am. v.
Reliance Ins. Co., 140 F. Supp. 2d 609, 621 (D.S.C. 2001).
Without guidance from South Carolina courts, we decline to make
such extension here. Similarly, we decline to follow Washington
state law, notwithstanding that court’s thorough consideration
of the issue, without guidance from the South Carolina courts.
For these reasons, we affirm the district court’s ruling
that MI failed to prove direct or indirect damages.
4.
We reverse the district court’s ruling that absent actual
or consequential damages, MI cannot receive punitive damages.
An absence of ascertainable damages does not necessarily
preclude nominal or punitive damages where, as here, the jury
finds a party liable for punitive damages.
27
A court may award punitive damages in bad faith tort
actions for conduct willful, wanton, or reckless in disregarding
a plaintiff’s rights. Nichols, 306 S.E.2d at 619. Generally,
punitive damages are only awarded where a court also awards
actual or nominal damages. McGee v. Bruce Hosp. Sys.,
545
S.E.2d 286, 288 (S.C. 2001) (citing Cook v. Atl. Coast Line.
R.R. Co.,
190 S.E. 923 (S.C. 1937)). Nominal damages need not
be specifically pleaded where a party alleges a claim for
general damages; the general damage allegation sufficiently
encompasses nominal damages. Ins. Servs. of Beaufort, Inc. v.
Aetna Cas. & Sur. Co.,
966 F.2d 847, 853 (4th Cir. 1992).
Furthermore, where pleadings allege and evidence proves a
willful invasion or infringement of a right, courts presume
nominal damages, even if exact measurement of actual damages is
not possible.
Cook, 190 S.E. at 924.
The rule requiring actual or nominal damages as a
prerequisite to punitive damages “is premised on the fact that
liability must be established before a plaintiff can seek
punitive damages.” McGee, 545 S.E.2d at 288. Thus, a plaintiff
is entitled to a jury determination on punitive damages
liability even in the absence of ascertainable loss.
Id. at
288-89; cf.
Aetna, 966 F.2d at 853 (“The recovery of nominal
damages is particularly appropriate to vindicate the violation
of a right . . . where injury is shown but damages cannot be
28
proven.”). Where a jury finds a willful or reckless invasion of
a legal right, a court presumes that nominal actual damages are
merged into a punitive damage award. Hinson v. A. T. Sistare
Constr. Co., 113 S.E.2d 341, 345 (S.C. 1960) (citing
Cook, 190
S.E. at 924).
Despite its inability to demonstrate direct or indirect
damages, MI was entitled to, and did receive, the opportunity to
have the jury consider punitive damages liability. The court
properly instructed the jury as to the punitive damages
standard. In awarding punitive damages, the jury found
Liberty’s actions willful, wanton, or reckless. As a result, MI
is not prohibited from receiving punitive damages. See McGee,
545 S.E.2d at 288-89.
The district court’s sole basis for setting aside the
jury’s punitive damages award was MI’s failure to prove
ascertainable damages of Liberty’s bad faith. Having already
applied the preponderance of evidence standard to find bad
faith, the district court should have further considered whether
MI “might be entitled to nominal damages . . . even [though]
actual damages cannot be precisely ascertained.” Aetna, 966
F.2d at 853. The district court’s opinion does not speak to
whether it found that the evidence supported the jury’s finding
that Liberty acted willfully, wantonly, or recklessly. If the
court finds the evidence sufficient, then nominal damages may be
29
presumed, Cook, 190 S.E. at 924, and the court must consider
whether punitive damages are appropriate and whether the jury’s
award was excessive.
Accordingly, we vacate the district court’s ruling on
punitive damages. On remand, the district court must consider
whether the evidence supported the jury’s finding that Liberty
engaged in willful, wanton, or reckless conduct. If so, MI is
entitled to nominal damages, and then the court must consider
Liberty’s challenge to the amount of the punitive damages award.
C.
MI argues that it was entitled to attorney’s fees either as
consequential damages or pursuant to S.C. Code § 38-59-40.
Neither argument carries the day.
1.
MI first claims attorney’s fees as consequential damages in
bad faith claims. This theory relies on MI’s assumption that
South Carolina follows California on issues concerning bad faith
insurer actions. Because California recognizes attorney’s fees
as damages in bad faith claims to a certain extent, see Brandt
v. Super. Ct. of San Diego Cnty., 693 P.2d 796 (Cal. 1985), MI
contends South Carolina implicitly recognizes attorney’s fees as
consequential damages.
Courts applying South Carolina bad faith law have not
awarded attorney’s fees as consequential damages in tort
30
actions. MI acknowledges that in Andrews v. Central Surety
Insurance Company, 271 F. Supp. 814 (D.S.C. 1967), the court
held that a plaintiff could not recover attorney’s fees incurred
in prosecuting a bad faith insurance claim.
Id. at 821. No
other South Carolina court speaks directly to this issue.
For additional reasons, we do not find that California’s
rule on attorney’s fees applies here. MI’s inference that South
Carolina strictly follows California law on bad faith insurance
issues is dubious. South Carolina does not look explicitly to
California law in the bad faith context, and will consider
California’s principles equally with those of other states.
See, e.g., Boldt Co. v. Thomason Elec. & Am. Contractors Indem.
Co., 820 F. Supp. 2d 703, 705 (D.S.C. 2007). Nichols, which
preceded Brandt, only recognized that the general principle
supporting the bad faith processing tort was first noted in a
1973 California case and later in other
jurisdictions. 306
S.E.2d at 618. MI does not cite any published South Carolina
decision explicitly stating that South Carolina has faithfully
adhered to California law in this context. Until the South
Carolina courts advance MI’s position, we decline to do so.
31
Thus, attorney’s fees are unavailable to MI as consequential
damages. 9
2.
Alternatively, MI seeks attorney’s fees pursuant to S.C.
Code § 38-59-40. This statute provides for an attorney’s fees
award where an insurer refuses to defend or pay a claim without
reasonable cause. Mixson, Inc. v. Am. Loyalty Ins. Co., 562
S.E.2d 659, 663 (S.C. Ct. App. 2002); see also Boggs v. Aetna
Cas. & Sur. Co.,
252 S.E.2d 565, 568 (S.C. 1979) (applying a
predecessor of the current statute). MI advances the novel
argument that Liberty’s disregard of MI’s intentions effectively
amounts to a refusal to defend.
MI’s construction crumbles upon the slightest of
examinations. The South Carolina statute “did not intend . . .
that attorneys’ fees should be paid in every contested case won
by the insured.” Boggs, 252 S.E.2d at 465. Its title,
“Liability for attorneys’ fees where insurer has refused to pay
claim,” proves as much. We refrain from reading the statute as
applicable to anything beyond a refusal to defend, a situation
9
MI also notes, albeit briefly, that South Carolina
recognizes an exception to the unavailability of attorney’s fees
where indemnification is at issue. See Addy v. Bolton, 183
S.E.2d 708 (S.C. 1971). However, one element of this exception
is that the defendant’s tortious conduct give rise to the
plaintiff’s dispute with a third party,
id. at 709-10, which is
not the case here.
32
that did not arise on these facts. The evidence at trial runs
counter to the argument that Liberty refused to defend MI. A
bad faith settlement is still a settlement, and in this case,
was a timely one. Liberty’s settlements do not equate to a
failure to defend or refusal to pay that leaves a policyholder
to fend for itself in the underlying dispute. The district
court did not err in denying MI’s request for attorney’s fees
under S.C. Code § 38-59-40.
III.
MI also appeals the district court’s order denying MI’s
challenge to Liberty’s breach of contract damages. MI argues
that the district court should not have allowed Liberty to
recover damages for liabilities incurred in bad faith.
Essentially, MI contends, the breach of the covenant of good
faith was unlawful and thus placed the settlements, and MI’s
obligation to pay the deductible amounts, beyond the bounds of
its contractual duties. See Wachovia Bank, N.A. v. Coffey, 698
S.E.2d 244 (S.C. Ct. App. 2010) (lender’s unauthorized practice
of law precludes recovery for the consequences of that act);
Jackson v. Bi-Lo Stores, Inc.,
437 S.E.2d 168 (S.C. Ct. App.
1993) (no contract damages where bribery activities rendered
contract illegal).
33
To the extent it rests on pillars of the illegality
doctrine, MI’s argument fails. See Bi-Lo, 437 S.E.2d at 170
(courts will not aid plaintiffs guilty of illegal act); see also
McMullen v. Hoffman,
174 U.S. 639 (1899) (“[N]o court will lend
its assistance in any way towards carrying out the terms of an
illegal contract . . . nor will [courts] enforce any alleged
rights directly springing from such a contract.”). The
illegality doctrine, prominent in Coffey and Bi-Lo, does not
preclude recovery under valid agreements. See Graham v. Graham,
278 S.E.2d 345, 347 (S.C. 1981) (“[T]he ground of illegality
. . . was unavailable to the valid, separate agreement allegedly
breached.”). The validity of the Policies is undisputed. MI’s
attempt to analogize Liberty’s settlements to criminal activity
or unenforceable agreements is simply overreaching.
The Policies obligated MI to reimburse Liberty up to
$500,000 in indemnity and defense costs per occurrence. Each
settlement fell within this limit. MI attempts to circumvent
this obligation by saying that they are only “contractually
bound to reimburse Liberty for payments that were properly
incurred under the policies,” and should not reimburse Liberty
for expenditures MI did not wish to incur. However, Liberty
retained the right to settle cases at its discretion. Promptly
defending, investigating, and settling the underlying suits was
the very purpose of the Policies. Liberty’s settlement
34
decisions were at odds with MI’s assessments of the cases, not
any contractual duties or obligations. MI remained obligated to
reimburse Liberty up to $500,000 spent per occurrence defending
MI. Accordingly, we affirm the district court’s order awarding
$684,416.01 in contract damages to Liberty.
IV.
Liberty appeals the district court’s orders denying
prejudgment interests and costs. We affirm.
A.
Liberty argues that it is entitled to prejudgment interest
under the terms of the Policies. State law governs prejudgment
interest awards in diversity cases. Hitachi Credit Am. Corp. v.
Signet Bank, 166 F.3d 614, 632-33 (4th Cir. 1999). Prejudgment
interest awards lie within the discretion of the trial court.
Jacobs v. Am. Mut. Fire Ins. Co. of Charleston,
340 S.E.2d 142,
143 (S.C. 1986). The district court held that the interest
amount due was incapable of being readily ascertained at the
time Liberty’s contract claim arose.
“In all cases of accounts stated and in all cases wherein
any sum or sums of money shall be ascertained and, being due,
shall draw interest according to law, the legal interest shall
be at the rate of eight and three-fourths percent per annum.”
S.C. Code Ann. § 34-31-20(A). South Carolina permits
35
prejudgment interest “on obligations to pay money from the time
when, either by agreement of the parties or operation of law,
the payment is demandable, if the sum due is certain or capable
of being reduced to certainty.” APAC Carolina, Inc. v. Town of
Allendale, S.C., 41 F.3d 157, 165 (4th Cir. 1994) (quoting Babb
v. Rothrock,
426 S.E.2d 789, 791 (S.C. 1993)); see also GTR
Rental, LLC v. DalCanton, 547 F. Supp. 2d 510, 524 (D.S.C.
2008). In determining whether the sum may be ascertained,
courts consider “whether the measure of recovery, not
necessarily the amount of damages, is fixed by conditions
existing at the time the claim arose.” Butler Contracting, Inc.
v. Court Street, LLC,
631 S.E.2d 252, 259 (S.C. 2006). A claim
will not be considered unliquidated for purposes of prejudgment
interest solely due to a dispute as to the sum due.
Babb, 426
S.E.2d at 791. A damages dispute hinging on uncertainty of
contractual terms renders the sum due unascertainable. Vaughn
Dev., Inc. v. Westvaco Dev. Corp.,
642 S.E.2d 757, 759-60 (S.C.
Ct. App. 2007).
The district court could not determine the sum due Liberty
until it resolved a contractual dispute regarding the parties’
rights. This contractual uncertainty could be enough to
preclude a prejudgment interest award. Westvaco, 642 S.E.2d at
759-60. In addition, we do not find that the measure of
recovery was fixed at the time Liberty’s claim arose. Liberty
36
identified two different owed sums in its First Amended
Complaint. Liberty does not explain any mathematical equation
for ascertaining its damages or how a fixed measure of recovery
caused it to reference two different damages amounts in the same
paragraph. Thus, we find that Liberty’s damages were not fixed
at the time the claim arose.
B.
Liberty argues that the district court erred in denying its
request for costs. We review a denial of costs for abuse of
discretion. Teague v. Bakker, 35 F.3d 978, 996 (4th Cir. 1994).
A prevailing party is presumptively entitled to receive costs.
Id. at 995-96; see also Fed. R. Civ. P. 54(d)(1). Departure
from this presumption requires “some good reason for doing so.”
Teague, 35 F.3d at 996.
The district court did not abuse its discretion. The
district court cited the closeness of the issues, which required
sifting through novel and difficult questions, including one
certified to the Supreme Court of South Carolina. The district
court further noted that in addition to complexity, the fact
that both parties were prevailing parties as a result of the
other’s breach of duties suggested hesitancy in shifting costs
onto either party. This conclusion is well within the
discretion of the court.
37
V.
The parties further appeal evidentiary and jury instruction
issues. In light of our aforementioned conclusions, these
issues are moot.
VI.
We affirm the district court’s ruling in all respects
except for bad faith damages. We agree that without proof of
expenditures absent bad faith, MI failed to demonstrate direct
or indirect damages resulting from Liberty’s bad faith conduct.
However, we vacate the ruling on punitive damages and remand
with instructions to determine whether MI is entitled to nominal
and punitive damages under South Carolina law. If the court
finds that the evidence supports the jury’s conclusion that
Liberty acted willfully, wantonly, or recklessly, MI is entitled
to nominal damages, and the court must consider Liberty’s
challenge to the amount of punitive damages. For these reasons,
the judgment of the district court is
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED.
38
DAVIS, Circuit Judge, concurring:
I concur fully in the majority opinion, but not without a
measure of discomfort regarding our remand of the case to permit
the district court to examine the record and determine the
propriety of a punitive damages award.
To be sure, it appears that South Carolina has something of
a unique jurisprudence surrounding the availability of punitive
damages. See, e.g., Gamble v. Stevenson, 406 S.E.2d 350 (S.C.
1991)(punitive damages allowed against a utility company for
personal injuries resulting from a motor vehicle collision in an
intersection where employees of the utility negligently took
down a stop sign during maintenance work in the street). One is
moved to observe that South Carolina seems to have an endearing
affinity for making available punitive damages in routine tort
claims.
Id.
In this case, the majority reasons as follows, in part:
Punitive damages are available only where a court
also awards actual or nominal damages. Nominal damages
are presumed where pleadings allege and evidence
proves a willful invasion or infringement of a right,
even if an exact measurement of actual damages is not
possible.
The rule requiring actual or nominal damages as a
predicate for punitive damages “is premised on the
fact that liability must be established before a
plaintiff can seek punitive damages.” Thus, a
plaintiff is entitled to a jury determination on
punitive damages liability even in the absence of
ascertainable loss. [Ins. Servs. of Beaufort, Inc. v.
Aetna Cas. & Sur. Co., 966 F.2d 847, 853 (4th Cir.
1992)] (“The recovery of nominal damages is
39
particularly appropriate to vindicate the violation of
a right . . . where injury is shown but damages cannot
be proven.”). Where a jury finds a willful or reckless
invasion of a legal right, a court presumes that
nominal actual damages are merged into a punitive
damage award.
Ante, at 28-29 (citations and footnote omitted). I am dubitante.
This case is truly sui generis: bad faith counts against an
insurer based on property damage claims settled for less than
policy limits, with little showing that if the insured had had
its way and taken the cases to trial, it would have been out-of-
pocket by a lesser amount than it was required to pay to settle
the claims within its bargained-for deductible.
In short, I lack any certainty that the Supreme Court of
South Carolina would reach the result we reach on the record
before us. That is, I question whether the kind of pecuniary
“injury” Liberty has ostensibly inflicted in this case, an
injury for which there is no proof of actual damage or loss,
supports a claim for nominal damages sufficient to serve as a
predicate for an award of punitive damages. Nevertheless, I
believe the majority opinion’s valiant effort to harmonize South
Carolina’s “bad faith” case law and its damages principles is as
well thought out as the law of the state allows. * I further
*
Compare Daniels v. Coleman, 253 S.E.2d 593, 597-98 (S.C.
1969)("In contradistinction with trespass and other direct
injuries for which the complainant is awarded nominal damages if
he should fail to plead and prove actual damage, deceit belongs
(Continued)
40
understand that the district court is authorized to exercise its
good judgment in its exploration of this issue upon the remand.
We should not be surprised if the district court concludes, at
the end of the day, that this is a bridge too far.
All that said, I concur fully in the majority opinion.
to that class of tort of which pecuniary loss generally
constitutes part of the cause of action.") with Gignilliat v.
Gignilliat, Savitz & Bettis, L.L.P., 684 S.E.2d 756, 762 n.4
(S.C. 2009)(finding a presumption of nominal damages as it would
be "illogical to conclude that a tort can exist without any
potential for compensation under any circumstances").
41
