YOUNG LAWYERS Inc., 320 S.C. 49, 54–55, 463 S.E.2d 85, 88 (1995)). Notwithstanding the economic loss rule, a key consideration in this case was the duty of good faith and fair dealing, which arises by operation of law due to the rela-tionship between an insurer and an in-sured. This duty permits an insured to bring a tort claim for bad faith against their insurer. Under South Carolina law, an in-sured can recover consequential damages for an insurer’s “bad faith or unreasonable action by the insurer in processing a claim” and punitive damages by showing “the insurer's actions were willful or in reckless disregard of the insured's rights. Id. at 8, 910 S.E.2d at 771. Tyger River Pine Co. v. Maryland Casu-alty Co. laid the foundation for bad faith claims, particularly in third-party insur-ance contexts. In that case, the insurer’s refusal to settle within policy limits led to liability when the insured faced an excess judgment. 170 S.C. 286, 170 S.E. 346 (1933). The Court clarified that although Tyger River mentioned negligence, the claim at issue was actually bad faith, not a separate negligence action. See Hood, 445 S.C. at 8, 910 S.E.2d at 771 (citing Tyger River Pine Co., 170 S.C. at 294, 170 S.E. at 349). This principle was later extended to first-party insurance disputes in Nichols v. State Farm Mut. Auto. Ins., which established that bad faith is the insured’s sole tort claim against an insurer for refusal to pay benefits. Nich-ols further held that while negligence may serve as evidence of bad faith, it does not constitute a standalone cause of action. 279 S.C. 336, 340-42, 306 S.E.2d 616, 619-20 (1983). The Court further noted subsequent case law has consistently upheld the frame-work established in Nichols, reinforcing that bad faith remains the primary vehi-cle for addressing insurer misconduct. See Hood, 445 S.C. at 9, 910 S.E.2d at 771 (cit-ing Charleston Cnty. Sch. Dist. v. State Bud-get & Control Bd., 313 S.C. 1, 437 S.E.2d 6 (1993); then Howard v. State Farm Mut. Auto. Ins., 316 S.C. 445, 450 S.E.2d 582, 586 (1994); then Kleckley v. Nw. Nat'l Cas. Co., 338 S.C. 131, 526 S.E.2d 218 (2000); then Mixson, Inc. v. American Loyalty Ins., 349 S.C. 394, 562 S.E.2d 659 (2002); and then In re Mt. Hawley Ins., 427 S.C. 159, 169, 829 S.E.2d 707, 713 (2019)). Moreover, courts have declined to recognize a separate neg-ligence cause of action in this context, citing its duplicative nature to the basic ele-ments of bad faith. Federal district courts in South Carolina have also rejected free-standing negligence claims against insur-ers, reinforcing the notion that such claims are subsumed within bad faith actions. Skinner v. Horace Mann Ins., 369 F. Supp. 3d 649, 654 (D.S.C. 2019). The Court found that Hood failed to identify any duty owed by USAA beyond those imposed by contract or the duty of good faith and fair dealing. As a result, the Court held that her negligence claim was duplicative of her bad faith claim and could not stand independently. South Car-olina jurisprudence consistently treats neg-ligence as merely evidentiary in bad faith disputes, not as a separate basis for recov-ery. Notably, the Court took “[the] oppor-tunity to clarify what was already clear: the only claims available to the insured under an insurance contract are contract and bad faith claims.” Hood, 445 S.C. at 11-12, 910 S.E.2d at 772-73. Bad Faith as an Additional Sustaining Ground Hood also argued that the South Car-olina Court of Appeals erred in affirm-ing the trial court’s ruling that USAA did not act in bad faith based on its failure to extend full settlement reserves despite receiving a demand. Hood alleged a jury could have found that USAA misrepre-sented its reserves during mediation and contradicted itself on the headlight issue. Id. at 12, 910 S.E.2d at 773. The Court explained that Hood provided no legal sup-port for these claims. Specifically, South Carolina law does not obligate insurers to disclose reserves or settlement authority, and long held precedent confirms that an insurer may defend itself in a UIM action without being bound by prior representa-tions in unrelated cases. See id. at 12-13, 15-16, 910 S.E.2d at 773-775 (2025). (“In contrast, our bad faith precedent has never required an insurance company to dis-close or offer its reserves or full settlement authority to an insured, only that the insur-ance company act in good faith in paying an uncontested claim and in claim pro-cessing.”). The Court noted other jurisdic-tions also hold that reserves do not equate to an admission of a claim’s value, and that USAA had legitimate reasons to dis-pute Hood’s claims based on the evidence presented. See id. The Court ultimately affirmed the Court of Appeals’ decision, finding no evidence of bad faith, as USAA was not a party to the Kuck Action, had a statutory right to defend its interests in the UIM action, and reasonably argued that Hood’s headlights were off based on the facts at issue. Id. at 16, 910 S.E.2d at 775. Conclusion Ultimately, the Court’s decision reaf-firms that in South Carolina, the only claims available to an insured under an insurance contract are contract and bad faith claims. While negligence may be con-sidered as evidence of bad faith, it does not give rise to an independent cause of action. Moreover, an insurer’s failure to exhaust its reserves is not automatic grounds for a bad faith claim, especially when it has a valid defense based on the evidence pre-sented and given its right to defend its interest when stepping into a defendant's shoes under a UIM policy. The Court reminded attorneys that while they “may have ‘an obligation to provide zealous rep-resentation’ to their client,” [omitted] they also have ‘a corresponding obligation to opposing parties, the public, [their] pro-fession, the courts, and others to behave in a civilized and professional manner in discharging [their] obligations to [their] client[s]. We granted certiorari to say, in the strongest terms, that bringing a mer-itless claim fails to meet this obligation.” Id. at 16-17, 910 S.E.2d at 775 (citing In re White, 391 S.C. 581, 589, 707 S.E.2d 411, 415 (2011)). For The Defense ■ May 2025 ■ 13
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