H 4733 — Bad faith presumption in insurance settlements

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17, 2025) - South Carolina Legislature Online South Carolina General Assembly126th Session, 2025-2026Bill 4733Indicates Matter StrickenIndicates New Matter(Text matches printed bills.

Document has been reformatted to meet World Wide Web specifications.)                 A bill   TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY ENACTING THE "BAD FAITH PRESUMPTION IN INSURANCE SETTLEMENT OFFER ACT" BY ADDING SECTION 38-59-60 SO AS TO PROVIDE A REBUTTABLE PRESUMPTION OF BAD FAITH BY AN INSURER IN CERTAIN CIRCUMSTANCES INVOLVING INSURANCE SETTLEMENT AGREEMENTS, TO DEFINE NECESSARY TERMS, TO PROVIDE THE PRESUMPTION IS REBUTTABLE, AND TO PROVIDE THE ADMISSIBILITY OF SETTLEMENT AGREEMENTS IN SUBSEQUENT BAD FAITH ACTIONS, AMONG OTHER THINGS.

  Whereas, the South Carolina General Assembly finds that insureds, claimants and defendants often reach a mutual agreement to settle a claim within the available liability coverage limits of an insurance policy;

and   Whereas, when the insurance company or its adjuster refuses to settle within the policy limits despite the agreement of the insured, defendant, and claimant, the insured is exposed to the risk of a judgment in excess of coverage, even though settlement was available within policy limits;

and   Whereas, the failure to accept a settlement within policy limits under such circumstances undermines the purpose of liability insurance, increases costs to the civil justice system, and may constitute bad faith by the insurer;

and   Whereas, in order to protect insureds and promote settlement within policy limits, this act creates a rebuttable presumption of bad-faith conduct by the insurer when certain conditions are met.

Now, therefore,   Be it enacted by the General Assembly of the State of South Carolina:

  SECTION 1.  This act may be cited as the "Bad Faith Presumption in Insurance Settlement Offer Act."   SECTION 2.  Article 1, Chapter 59, Title 38 of the S.C.

Code is amended by adding:

      Section 38-59-60.  (A) For purposes of this section:

       (1) "Bad faith" means the insurer's unreasonable refusal to settle within policy limits when liability is reasonably clear and an offer within limits is available and accepted by the claimant and defendant, such that the insurer's conduct falls outside of the standards of good faith and fair dealing.

       (2) "Claimant" means the person or entity asserting a compensation claim against the insured under the subject policy.

       (3) "Defendant" means the insured or other party covered under the liability policy that is being defended by the insurer against the claimant's claim.

       (4) "Insurer" means the liability insurance company that issued the policy and is responsible for handling and settling claims under the policy.

       (5) "Policy limits" means the maximum amount of liability coverage available under the insurance policy, including any applicable umbrella or excess coverage, at the time the settlement offer is made.

       (6) "Settlement agreement" means a written agreement signed by the claimant, the defendant, and counsel for each of those parties, specifying resolution of the claim for the policy limits and designated as confidential under Rule 43(k), South Carolina Rules of Civil Procedure.

    (B)(1) A rebuttable presumption of bad faith by the insurer shall arise if all of the following conditions are satisfied:

           (a) a settlement agreement has been executed by the claimant, the defendant, and their respective counsel, in which the claimant agrees to resolve the claim within the available policy limits, and the defendant and counsel join in that agreement;

           (b) the insurer, after being timely notified of the settlement agreement and given a reasonable opportunity to accept and execute it, refuses or fails to accept the settlement agreement and effectuate payment within the policy limits;

and            (c) the case thereafter proceeds to trial, and a final judgment or binding arbitration award is entered in favor of the claimant in an amount that exceeds the insurer's policy limits.

       (2) The insurer may rebut this presumption by presenting evidence that the refusal to settle was reasonable under the circumstances including, but not limited to:

           (a) existence of a material factual or legal defense;

           (b) exposure to greater liability than reasonably anticipated at the time of the Settlement Agreement;

or            (c) information not reasonably available to the insurer at the time the Settlement Agreement was proposed.

       (3) If the presumption is not rebutted, the insurer may be liable for such additional damages, interest, and attorney's fees as provided under existing bad-faith law in this State.

    (C) A settlement agreement as provided in subsection (B) must be admissible in any subsequent bad-faith action against the insurer solely for the purpose of establishing the presumption referenced in that section.

The settlement agreement may not be used in the underlying liability action or for any other purpose, except as otherwise agreed by the parties or ordered by a court for good cause shown.

    (D) Nothing in this section may affect the underlying rights or defenses of the insurer, insured, claimant, or defendant with respect to coverage, policy interpretation, liability, contributory negligence, comparative fault, or other matters in the underlying liability action, except as specifically provided in this section.

  SECTION 3.  If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.

  SECTION 4.  This act takes effect upon approval by the Governor.

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