Court Opinion

ID: 149818
Source: CourtListenerOpinion
Date Created: 2010-06-30 18:03:51+00
Date Added: 2024-06-11T15:01:10.922392
License: Public Domain

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.
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   at-

fault 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

                                          2
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.

                                                3
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 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.

        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).

        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.

                                            4
      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.

                                             5
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

                                          6
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 Like the district court, we reject Potylicki’s attempt

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

     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.

                                       7
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.

                                            8