E. Damages
Where the plaintiff insured pleads and proves the elements of the action the remedy is not limited to the face amount of the contract.49 The insured may recover consequential damages without regard to the policy limits.50 To be awarded consequential damages plaintiff must prove bad faith or unreasonable action by the insurer.51 Consequential damages are recoverable if a reasonable person in insurer's position with its knowledge could reasonably have foreseen the additional damages resulting from refusal to pay a claim.52 The plaintiff must specially plead and prove consequential losses flowing from the insurer's breach.53 Punitive damages54 may be awarded if the insured can demonstrate the insurer's actions were willful or in reckless disregard of the insured's rights.55 There must be actual damages before punitive damages may be recovered.56
A statute provides for attorney's fees in bad faith actions:
In the event of a claim, loss, or damage which is covered by a policy of insurance ... and the refusal of the insurer ... to pay the claim within ninety days after a demand has been made by the holder of the policy or contract and a finding on suit of the contract made by the trial judge that the refusal was without reasonable cause or in bad faith, the insurer ... is liable to pay the holder, in addition to any sum or any amount otherwise recoverable, all reasonable attorneys' fees ... The amount of the attorneys' fees may not exceed one-third of the amount of the judgment.57
--------
Notes:
[49] Bartlett v. Nationwide Mutual Fire Insurance Co., 290 S.C. 154, 348 S.E.2d 530 (Ct. App. 1986).
[50] In re Mt. Hawley Ins. Co., 427 S.C. 159, 169, 829 S.E.2d 707, 713 (S.C. 2019) (if insured can demonstrate bad faith or unreasonable action by insurer in processing claim under their mutually binding insurance contract, he or she can recover consequential damages in tort action); Brown v. South Carolina Insurance Co., 284 S.C. 47, 324 S.E.2d 641, 645 (Ct. App. 1984), cert. dis., 290 S.C. 154, 348 S.E.2d 530 (1985). See also Univ. Med. Assocs. of the Med. Univ. of S.C. v. Unum Provident Corp., 333 F. Supp. 2d 479 (D.S.C. 2004) (where insurer admits liability under policy, insured cannot recover future benefits due under contract in form of consequential damages; Fourth Circuit has implicitly recognized that emotional distress damages related to failure to pay are recoverable).
[51] Nichols v. State Farm Mutual Automobile Insurance Co., 279 S.C. 336, 306 S.E.2d 616 (1983). See also Duncan v. Provident Mutual Life Insurance Co. of Philadelphia, 310 S.C. 465, 427 S.E.2d 657 (1993).
[52] Brown v. South Carolina Insurance Co., 284 S.C. 47, 324 S.E.2d 641, 646-7 (Ct. App. 1984), cert. dismissed, 290 S.C. 154, 348 S.E.2d 530 (1985).
[53] Brown v. South Carolina Insurance Co., 284 S.C. 47, 324 S.E.2d 641, 647 (Ct. App. 1984), cert. dismissed, 290...
