UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 08-2242

PAUL POTYLICKI,

Plaintiff - Appellant,

v.

ALLSTATE INSURANCE COMPANY,

Defendant - Appellee.

Appeal from the United States District Court for the District of 

South Carolina, at Columbia. Cameron McGowan Currie, District 

Judge. (3:07-cv-03468-CMC)

Argued: March 23, 2010 Decided: June 30, 2010

Before DUNCAN and DAVIS, Circuit Judges, and Joseph R. GOODWIN, 

Chief United States District Judge for the Southern District of 

West Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

Robert Bert Ransom, LEVENTIS & RANSOM, Columbia, South Carolina, 

for Appellant. William Clyde Barnes, Jr., TURNER, PADGET, 

GRAHAM & LANEY, PA, Florence, South Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
2

PER CURIAM:

This appeal requires us to interpret the South Carolina law 

on Underinsured Motorist coverage (“UIM”). After a motor vehicle 

accident, Appellant Paul Potylicki (“Potylicki”) and the atfault motorist James Bridgett (“Bridgett”), together with the 

latter’s liability insurer, Nationwide Insurance Company 

(“Nationwide”), entered into binding arbitration to resolve the 

ensuing claims by Potylicki. The arbitrator made an award in 

favor of Potylicki. Potylicki then sought to recover additional 

compensation from his UIM insurer, Appellee Allstate Insurance 

Company (“Allstate”). When Allstate denied Potylicki’s claim, he 

brought suit against Allstate in state court, alleging a breach 

of the implied covenant of good faith and fair dealing. After 

removal of the case to federal court, the district court 

dismissed the case without prejudice, ruling that Potylicki’s 

claim was premature because he failed to bring suit against 

Bridgett and serve same on Allstate as required by S.C. Code 

Ann. § 38-77-160 (2002) (“Section 38-77-160”). We affirm. 

I.

On August 22, 2006, Potylicki failed to come to a complete 

stop at a three-way intersection while riding his bicycle on a 

military facility in Columbia, South Carolina. Bridgett’s motor 

vehicle struck Potylicki as he made a left turn, directly into 
3

Potylicki’s path. As a result of the accident, Potylicki 

suffered a fracture of his right femur, requiring the insertion 

of plates and screws to stabilize the bone. Bridgett’s insurance 

coverage with Nationwide provided for a $50,000 per-person 

personal injury limit, while Potylicki had $15,000 in coverage 

under his parents’ UIM coverage with Allstate. Immediately 

following the accident, Bridgett, Potylicki, and the four 

witnesses to the collision provided sworn statements to the 

Military Police, for compilation in the Military Police Report 

(“MPR”).1

After providing Allstate with prompt notification of the 

accident and at Nationwide’s invitation, Potylicki, Bridgett, 

and Nationwide agreed to submit both the personal injury and 

property damage claims to binding arbitration. Although 

Potylicki asked Allstate to participate in the arbitration, 

Allstate declined. 

At the conclusion of the May 23, 2007, arbitration

proceeding, the arbitrator assessed the parties’ liability to be 

Potylicki, 30% at-fault, and Bridgett, 70% at-fault. After 

 1 In the MPR, Potylicki admitted that he had failed to come 

to a complete stop. Bridgett reported that, although he had come 

to a complete stop, he had not seen Potylicki prior to 

proceeding through the intersection. Allstate later based its 

denial of Potylicki’s claim on the MPR, asserting that Potylicki 

was over 50% at-fault for the accident.
4

reducing Potylicki’s damages to account for comparative 

negligence, the arbitrator awarded $97,759.45 to Potylicki for 

both bodily injury and property damage. Thereafter, Nationwide 

paid Potylicki $50,000, the maximum amount of coverage provided 

under Bridgett’s policy, in exchange for a Covenant Not to 

Execute.2

Thereafter, Potylicki filed suit against Allstate in the 

Court of Common Pleas for Richland County, South Carolina, 

alleging breach of contract and breach of the implied covenant 

of good faith and fair dealing. Allstate removed the case to the 

United States District Court for the District of South Carolina 

pursuant to 28 U.S.C. § 1332 (2006). 

Potylicki then submitted a claim to Allstate for the 

maximum amount provided under his UIM coverage. On June 14, 

2007, an Allstate claims adjuster rejected Potylicki’s request 

for compensation stating, “[b]ased upon the information that I 

have at this time, the underinsured motorist coverage for this 

loss is not applicable because Mr. Potylicki is the proximate 

cause of this accident.” J.A. 367.

 2 The Covenant Not to Execute provides that Potylicki will 

not execute upon any claim obtained against Nationwide and 

Bridgett arising out of the events of August 22, 2006, and 

further that, if he obtains compensation under his UIM coverage, 

he will request the marking of any judgment entered against 

Nationwide and Bridgett as satisfied. 
5

After conducting discovery, the parties filed cross-motions 

for summary judgment. The district court denied Potylicki’s 

motion and granted Allstate’s motion, stating that the 

appropriate relief was dismissal without prejudice because 

Potylicki’s claims were “premature” due to his failure to comply 

with S.C. Code Ann. § 38-77-160 (2002). Potylicki v. Allstate 

Ins. Co., No. 3:07-3468-CMC, 2008 WL 4412286 (D.S.C. Sept. 23, 

2008). Potylicki timely appeals, and we have jurisdiction 

pursuant to 28 U.S.C. § 1291 (2006).

II.

South Carolina law expressly provides that when an insured 

seeks compensation under an Underinsured Motorist provision, the 

insured must serve copies of pleadings against the at-fault

motorist prior to commencing any action against the UIM insurer. 

Section 38-77-160 of the South Carolina Code states, in part:

No action may be brought under the underinsured 

motorist provision unless copies of the pleadings in 

the action establishing liability are served in the 

manner provided by law upon the insurer writing the 

underinsured motorist provision. The insurer has the 

right to appear and defend in the name of the 

underinsured motorist in any action which may affect 

its liability . . . . In the event the automobile 

insurance insurer for the putative at-fault insured 

chooses to settle in part the claims against its 

insured by payment of its applicable liability limits 

on behalf of its insured, the underinsured motorist 

insurer may assume control of the defense of action 

for its own benefit.
6

S.C. Code Ann. § 38-77-160 (2002) (emphasis added). The South 

Carolina Supreme Court addressed this statute in Williams v. 

Selective Ins. Co. of the Southeast, 315 S.C. 532 (1994). The 

court affirmed the trial court’s grant of summary judgment to 

the insurer, stating that “Williams's failure to pursue an 

action against the at-fault driver resulted in a total waiver of 

Insurer's right to defend,” which Section 38-77-160 was designed 

to prevent. Id. at 534–35. In Williams, the insured had 

instituted suit based on claims of bad faith and breach of 

contract against the insurer prior to commencing an action 

against the at-fault motorist, but after engaging in binding 

arbitration with both the motorist and his insurance company. 

Id. at 533. In reaching its decision, the South Carolina Supreme 

Court explained that the purpose of Section 38-77-160 is “to 

protect an insurance carrier’s right to contest its liability 

for underinsured benefits,” thus requiring that the insured 

“preserve the right of action against an at-fault driver so long 

as the underinsured carrier has not agreed to the amount and 

payment of underinsured motorist benefits.” Id. at 534-35.

In a case decided shortly after Williams, the state supreme 

court clarified that, where the insured had served the insurer 

with pleadings, the insurer could be held liable despite the 

fact that the insured had not yet obtained a judgment “in excess 

of the at-fault driver’s liability limits.” Graham v. State Farm 
7

Mut. Auto. Ins. Co., 319 S.C. 69, 71–72 (1995). Nevertheless, 

the court has not veered from its statutory interpretation set 

forth in Williams. See Ex Parte Allstate Ins. Co., 339 S.C. 202, 

205 (2000) (holding that under Section 38-77-160 the insured 

could not recover where the insurer was served with pleadings 

after the jury had reached a verdict against the motorist); see 

also Halmon v. Am. Int’l Group, Inc. Ins. Co., 586 F. Supp. 2d 

401, 408 (D.S.C. 2007) (finding insured failed to comply with 

Section 38-77-60 where he filed a bad faith claim against the 

insurer and the alleged at-fault-driver on the same day); Myers 

v. State Farm Mut. Auto. Ins. Co., 950 F. Supp. 148, 150 (D.S.C. 

1997) (holding that the insured was not required to obtain a 

final judgment against the at-fault motorist prior to commencing 

a bad faith action against the insurer; service of pleadings 

against the insurer was sufficient).

The district court correctly concluded that the dismissal 

of the instant case is consonant with South Carolina law. Prior 

to commencing this suit, Potylicki failed to serve Allstate with 

pleadings because he had not yet initiated a case against 

Bridgett.3

 3 We were advised at oral argument that Potylicki has now

filed suit against Bridgett in an effort to satisfy the 

statutory precondition to suit against Allstate.

Like the district court, we reject Potylicki’s attempt 

to evade the statute by labeling his claim as one for violation 
8

of the implied covenant of good faith and fair dealing (which 

might support an award of punitive damages under state law) 

rather than what it is in substance: a claim for breach of 

contract for failure to pay uninsured motorist benefits.4 Because 

South Carolina law explicitly requires that an insured serve his 

UIM insurer with pleadings filed in a suit against the at-fault 

motorist prior to commencing any action, the district court 

properly granted Allstate’s motion for summary judgment and 

denied Potylicki’s motion.

III.

For the foregoing reasons, the district court’s order 

granting summary judgment to Allstate, dismissing this case 

without prejudice, is

AFFIRMED.

 4 It was only because of the ostensible claim for 

unspecified punitive damages that this case found its way into 

federal court under the diversity statute.