When facing a general verdict against an insured that includes both covered and non-covered damages, courts in many jurisdictions place the burden on the insurer to take steps to seek an allocation of that verdict. If the insurer fails to do so, it does so at its own peril. In-State Farm Fire & Cas. Co. v. Blanton, the court shifted its focus from the conduct of the insurer to the conduct of the insured. Notably, the court recognized the insurer’s efforts and refused to penalize the insurer when the insured engaged in conduct that thwarted the insurer’s efforts to participate in the litigation against the insured for the purpose of allocating the damages.
In Blanton, the District of South Carolina found that the insurer was not liable for bad faith for its alleged failure to explain the dangers of a general verdict, where the insured took affirmative steps to preclude the insurer’s submission of special interrogatories in the underlying case. The court also ruled that the two-issue rule pertaining to general verdicts did not preclude a trial in a declaratory judgment action where factual issues existed.
Please contact Andy Watson in our Charlotte office (admitted in South Carolina), Kathy Maus in our Tallahassee office, or John Weihmuller in our Tampa office to discuss the potential impact of this opinion going forward.
Synopsis: On December 17, 2015, the District of South Carolina ruled that in the context of a declaratory judgment action to determine coverage, South Carolina’s two-issue rule pertaining to general verdicts does not preclude a trial on factual issues which are not resolved by looking to the general verdict. In addressing the defendant’s counterclaim for bad faith, the court found that because the defendant opposed the insurer’s attempted intervention in the underlying action to submit special interrogatories to the jury, that there was no merit to defendant’s contention that the insurer failed to warn its insured of the dangers of a general verdict.
In the underlying suit, the plaintiff alleged two causes of action, one for negligence and recklessness and the other for assault and battery. The dispute arose out of an altercation that took place on a golf course. Both claims were submitted to the jury. The jury returned a general verdict in favor of the plaintiff in the amount of $400,000 in actual damages in $100,000 in punitive damages. The general verdict did not indicate whether the jury found for the plaintiff on the negligence and recklessness count, or on the assault and battery count.
During the pendency of the underlying suit, State Farm had filed a declaratory judgment action against both parties to that action in order to seek a coverage determination under the underlying defendant’s homeowner’s policy. Allgire, the plaintiff in the underlying suit, moved for summary judgment on the basis that South Carolina’s two-issue rule, which provides that courts cannot go behind a general verdict when two or more causes of action are submitted to the jury, precluded a trial on any factual issues pertaining to coverage. The court, recognizing that the two-issue rule was not determinative of the coverage issues and relying on Board of County Supervisors of Prince William County, Va. v. Scottish & York Ins. Services, Inc., 763 F.2d 176 (4th Cir. 1985), denied summary judgment and ordered a bench trial to resolve the factual issues pertaining to whether coverage was available.
Blanton, the defendant in the underlying suit, filed counterclaims against State Farm for breach of contract and bad faith, alleging amongst other things that State Farm failed to advise Blanton of the need for an allocated verdict. Despite the court’s denial of State Farm’s motion to dismiss the counterclaims or in the alternative for judgment on the pleadings, the court granted summary judgment in favor of State Farm as to its alleged failure to warn Blanton of the dangers of a general verdict. The court, taking notice of the fact that Blanton opposed State Farm’s attempted intervention into the underlying action to submit special interrogatories, reasoned that “Blanton cannot have it both ways. He cannot “have his cake and eat it, too.”