THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.
THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Norman C. Hartsel, as Personal Representative of the Estate of Bennett W. Hartsel, Norman C. Hartsel, as Personal Representative of the Estate of Mary E. Hartsel, and Norman C. Hartsel, Individually, Appellants,
Selective Insurance Company of South Carolina, Respondent.
Appeal From Charleston County
R. Markley Dennis, Jr., Circuit Court Judge
Unpublished Opinion No. 2011-UP-226
Heard October 5, 2010 – Filed May 18, 2011
Michael S. Seekings, of Charleston, for Appellants.
William L. Howard and Russell G. Hines, both of Charleston, for Respondent.
FEW, C.J.: The plaintiff filed this lawsuit against Selective Insurance Company in three separate capacities alleging the violation of three distinct duties in five different causes of action. We agree with the circuit court that none of them are actionable in this case as a matter of law. We affirm the circuit court's order granting the motion to dismiss.
I. Facts and Procedural History
Bennett Hartsel ("Bennett") and Brett Jones ("Jones") were tragically killed in a one-car accident. The families were uncertain initially as to which of the young men was driving, and each estate filed a lawsuit against the other for wrongful death and survival. The car was insured by Selective Insurance Company. Selective hired an engineer who concluded that Jones was driving. Selective settled the lawsuit by Jones' estate against Bennett's estate ("the Jones action") for $185,000.00. The parties reached a high/low settlement agreement on Bennett's estate's claim against Jones' estate ("Bennett's action"), and the case proceeded to trial. The jury returned a verdict for $50,000.00.
Bennett's father Norman C. Hartsel ("Norman") filed this lawsuit against Selective ("the Selective action") in three capacities: (1) as personal representative of Bennett's estate, (2) as personal representative of the estate of Mary E. Hartsel, who died after the accident for unrelated reasons, and (3) in his individual capacity. Norman filed an amended complaint in which he alleged the violation of the duty to defend, the duty to indemnify and the duty of good faith and fair dealing in causes of action for breach of contract, breach of fiduciary duty, bad faith, improper claims practices, and negligence.
The duties of an insurance company arising out of a liability policy in any particular situation are governed primarily by two factors: (1) the nature of the underlying litigation, and (2) the identity of the parties to the insurance contract. We discuss each of those as a backdrop for our conclusion as a matter of law that Selective cannot be liable to Norman in any of the capacities in which he brought this lawsuit on any of the theories of recovery asserted.
a. The Nature of the Underlying Litigation
We first discuss the Jones action. Jones alleged that Bennett was the driver of the car, and that Bennett's negligence caused damages associated with the death of Jones. Because Selective insured the car, Bennett's estate is insured under the policy. See S.C. Code Ann. § 38-77-30(7) (2002) ("Insured" includes "any person who uses with the consent, expressed or implied, of the named insured the motor vehicle to which the policy applies . . . or the personal representative . . . ."). Selective therefore had a duty to defend Bennett's estate, and a duty to indemnify Bennett's estate for any judgment Jones' estate may obtain up to the limits of liability set forth in the policy. Sloan Const. Co. v. Central Nat. Ins. Co. of Omaha, 269 S.C. 183, 186, 236 S.E.2d 818, 820 (1977) (recognizing duty to defend and duty indemnify as "two insuring provisions of major significance"); Nationwide Mut. Ins. Co. v. Tate, 313 S.C. 444, 447, 438 S.E.2d 266, 268 (Ct. App. 1993) (recognizing duty to defend and indemnify). Norman was the personal representative of Bennett's estate. Therefore, Selective's two duties in the Jones action were owed to Norman in his capacity as personal representative of Bennett's estate.
No other person or entity connected with the Selective action stood to gain or to lose in the Jones action. From Norman's standpoint, the only way in which he could be affected by the Jones action was in his capacity defending the Jones action as personal representative of Bennett's estate. Mary was even farther removed from the Jones action. Neither Norman nor Mary could ever be called upon to pay any judgment imposed on Bennett's estate as a result of the Jones action. Therefore, the only duties owed by Selective arising out of the Jones action were the duty to defend and to indemnify Bennett's estate, acting through Norman as its personal representative.
In Bennett's action, Bennett alleged Jones was the driver, and his negligence caused damages associated with Bennett's death. Selective insured the car, and Jones was a permissive driver. Therefore, Selective owed a duty to defend Jones' estate and to indemnify it for any judgment Bennett's estate may obtain up to the policy limits. See S.C. Code Ann. § 38-77-30(7). Just as above, no other person connected with Bennett's action stood to gain or to lose in Bennett's action. While Norman and Mary are wrongful death beneficiaries and beneficiaries of Bennett's estate, and in those capacities might stand to gain indirectly from a favorable outcome of Bennett's action, the actual right to recover in those actions belongs exclusively to the personal representative, not to Norman and Mary. See Hopkins v. Fidelity Ins. Co., 240 S.C. 230, 233, 125 S.E.2d 468, 469 (1962) (holding for wrongful death or survival, a parent's "entitlement to compensation was not in her own right, but as beneficiary of the statutory cause of action"); S.C. Code Ann. § 15-5-90 (2005) ("Causes of action for and in respect to . . . any and all injuries to the person . . . shall survive both to and against the personal or real representative . . . of a deceased person . . . any law or rule to the contrary notwithstanding."). Therefore, neither Norman nor Mary had any stake in Bennett's action except in their deriviative capacities as beneficiaries under the wrongful death statute and as beneficiaries of Bennett's estate.
In summary, as to both the Jones action and Bennett's action, the only person or entity involved in the Selective action who stood to gain or lose was Norman, but only in his capacity as personal representative of Bennett's estate.
b. The Parties to the Insurance Contract
The insurance policy lists four named insureds: (1) Reserve Associates Limited, (2) CB Reserve Homeowners Association, (3) Mary E. Hartsel, and (4) Norman C. Hartsel, LPA. Reserve Associates Limited and CB Reserve Homeowners Association are apparently entirely unrelated to the Jones and Bennett actions, and the record contains no information about them.
Mary is a party to the insurance contract. Selective owed her duties arising out of the contract, including the duty of good faith and fair dealing. Doe v. South Carolina Med. Mal. Liab. Joint Underwriting Assoc., 347 S.C. 642, 649, 557 S.E.2d 670, 674 (2001) ("there is an implied covenant of good faith and fair dealing in every insurance contract 'that neither party will do anything to impair the other's rights to receive benefits under the contract'"); Tadlock Painting Co. v. Maryland Cas. Co., 322 S.C. 498, 501, 473 S.E.2d 52, 54 (1996) ("Implicit . . . is the extension of a duty of good faith and fair dealing in the performance of all obligations undertaken by the insurer for the insured."). As explained above, however, Mary does not stand to gain or lose in respect to either the Jones action or Bennett's action, and thus Selective had no occasion to act upon its duties to her. Because Selective had no duty to Mary in connection with either the Jones action or Bennett's action, Selective cannot be liable to Norman acting as her personal representative.
Norman C. Hartsell, LPA, ("the LPA") is also a party to the insurance contract. However, the LPA is even farther removed from the Jones action and Bennett's action than Mary. The LPA does not have any interest whatsoever, not even a derivative interest, in either of the underlying lawsuits. Because the LPA has no personal interest in the lawsuit, it has no claim for a violation of any duty Selective owed arising out of the lawsuit.
Norman in his individual capacity claims that he is party to the insurance contract. While the policy provides that members and partners of corporate named insureds such as the LPA are also insureds, that provision applies "only with respect to the conduct of your business." The Amended Complaint does not allege any connection between the accident and the conduct of the LPA's business, nor is there any allegation that Norman is conducting business in his capacity as personal representative of his son's estate. Therefore, Norman is not a party to the insurance contract in connection with the Selective action.
c. Summary of the Parties
None of the parties to the Selective policy have any involvement in either of the underlying lawsuits, and none of the participants in the underlying lawsuits have any relationship to the Selective policy. Therefore, as explained below, there can be no liability by Selective to Norman for any of the theories of recovery asserted in this litigation.
III. Breach of Contract
Because Norman is not a party to the insurance contract in his capacity as personal representative of Bennett's estate or in his individual capacity in connection with the underlying lawsuits, he has no claim for breach of contract in those capacities. In his capacity as personal representative of Mary's estate, he does represent a party to the contract. However, Mary has no individual interest in the Jones action or Bennett's action. Therefore she has no claim for breach of contract. The circuit court was correct to dismiss the breach of contract cause of action.
IV. Breach of Fiduciary Duty
The amended complaint alleges the existence of a fiduciary duty under the insurance contract. However, an insurance relationship does not ordinarily give rise to a fiduciary duty. Pitts v. Jackson Nat'l Life Ins. Co., 352 S.C. 319, 331, 574 S.E.2d 502, 508 (Ct. App. 2002). Other than the conclusory allegation that Selective "was in a superior position with superior knowledge" and the plaintiffs "were at all times in a position to rely on the insurance contracts," the plaintiffs do not allege any special circumstances which might give rise to a fiduciary duty. See Pitts, 352 S.C. at 330-33, 574 S.E.2d at 507-09 (court examined the relationship to determine whether special circumstances existed to support the allegation of a fiduciary duty). Because no fiduciary duty existed between any of the parties, the circuit court was correct to dismiss the breach of fiduciary cause of action.
V. Bad Faith
An insurance company's duty of good faith arises out of the insurance contract. Under the Tyger River doctrine, the insurance company owes a duty of good faith to satisfy its duties to defend and indemnify within policy limits. Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 170 S.E. 346, 348 (1933) (cause of action recognized for bad faith failure to pay benefits to the insured). Only a policy holder may bring a cause of action for bad faith refusal to pay benefits under an insurance policy. See Kleckley v. Northwestern Nat'l Cas. Co., 338 S.C. 131, 134, 526 S.E.2d 218, 219 (2000) ("A tort action for an insurer's bad faith refusal to pay benefits does not extend to third parties who are not named insureds."); Cock-n-Bull Steak House, Inc. v. Generali Ins. Co., 321 S.C. 1, 6, 466 S.E.2d 727, 730 (1996) ("The elements of an action for bad faith refusal to pay benefits under an insurance contract include (1) the existence of a mutually binding contract of insurance between the plaintiff and the defendant . . . ."). Even when the supreme court extended the bad faith doctrine to claims by "an insured against his or her insurer for consequential damages allegedly suffered because of the insurer's bad faith handling of third party claims," the court stressed the duty of good faith is grounded in the insurance contract. Tadlock Painting, 322 S.C. at 504, 473 S.E.2d at 55 (1996) ("[T]he insured also is entitled to receive the additional security of knowing that she will be dealt with fairly and in good faith. That security comes not from the express contractual terms, but from the implied covenant of good faith and fair dealing." 322 S.C. at 502, 473 S.E.2d at 54 (quoting Deese v. State Farm Mut. Auto. Ins. Co., 838 P.2d 1265, 1269 (Ariz. 1992) (emphasis omitted))).
If the plaintiff in a bad faith action is not a party to the insurance contract, there can be no action for bad faith. Because Norman is not a party to the insurance contract, Selective does not owe him a duty of good faith. He cannot recover as a matter of law. Mary is a party to the contract, and for that reason Selective does owe her a duty of good faith. However, because Mary had no interest in the Jones action or Bennett's action, the duty of good faith was not implicated.
Norman argues in his brief that "this is a case of first impression under S.C. law." We disagree. The absolute prerequisite to an action for bad faith is the existence of a duty of good faith. As that duty arises only pursuant to an insurance contract, a non-party to a contract will never be allowed to assert a claim for bad faith. The circuit court was correct to dismiss the bad faith cause of action.
VI. Improper Claims Practices
"Third parties do not have a private right of action [for improper claims practices.]" Master Clean, Inc. v. Star Ins. Co., 347 S.C. 405, 415, 556 S.E.2d 371, 377 (2001). Mary is the only plaintiff who is party to the insurance contract. Because Mary does not have any interest in either of the underlying lawsuits, nor any potential liability, she also does not have a claim for improper claims practices. The circuit court was correct to dismiss the improper claims practices cause of action.
Norman cannot recover from Selective for negligence in any of the capacities in which he sues. An insurance company owes no duty of due care to a non-insured making a claim against the insurer. See Kleckley v. Northwestern Nat'l Cas. Co., 330 S.C. 277, 286, 498 S.E.2d 669, 674 (Ct. App. 1998) ("[t]he duty of the insurance company to use ordinary care . . . arises out of the . . . contract or policy of insurance . . . ."). Further, no right of recovery exists in negligence by an insured. Kennedy v. Henderson, 289 S.C. 393, 397, 346 S.E.2d 526, 528 (1986) ("[n]o cause of action exists against an insurer for negligence in failing to determine coverage or adjust a third party claim against the insured under an insurance policy."). Because Selective owes no duty of due care to Norman in any of the capacities in which he sued, the circuit court was correct to dismiss the negligence cause of action.
The circuit court was correct to dismiss the complaint because it failed to state any cause of action.
HUFF, J., concurs.
GEATHERS, J., concurs in result only.
 The high/low settlement agreement provided that Selective would pay on behalf of the Jones estate to the Hartsel estate a minimum of $200,000.00 and a maximum of $1,000,000.00.
 S.C. Code Ann. § 15-51-20 (2005 & Supp. 2009).