Whitehead v. Travelers Indemnity Company of America, The et al

Filing 32

ORDER AND OPINION granting in part and denying in part 14 Motion for Summary Judgment. Plaintiff's claims of breach of contract, bad faith in refusal to pay UIM benefits, bad faith in handling Plaintiff's UIM claim, negligent misrepresentation, and fraudulent representation (ECF No. 1-1 at 7-17; ECF No. 26-1 at 10) are DISMISSED. Signed by Honorable J Michelle Childs on 9/27/2016.(asni, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
Jodi A. Whitehead

)
)
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Plaintiff,
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v.
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The Travelers Indemnity Company of
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America, Plaintiff’s UIM Insurance,
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Defendant.
)
____________________________________)

Civil Action No.: 3:15-cv-04200-JMC

ORDER AND OPINION

Plaintiff Jodi A. Whitehead (“Plaintiff”) filed this action alleging claims for breach of
contract, bad faith, and negligent misrepresentation, and other claims 1 against Defendant The
Travelers Indemnity Company of America (“Defendant”) 2 arising from Defendant’s refusal to pay
benefits under an underinsured motorist policy (“UIM”). (ECF No. 1-1 at 7-17.) This matter is
before the court on Defendant’s Motion for Summary Judgment (ECF No. 14). For the reasons
that follow, the court GRANTS IN PART and DENIES IN PART Defendant’s Motion for

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When Defendant removed the action to this court, it filed a copy of the complaint Plaintiff filed
in state court. That complaint contained four claims: (1) breach of contract; (2) bad faith for refusal
to pay UIM benefits; (3) bad faith in handling of the UIM claim; and (4) negligent
misrepresentation. (ECF No. 1-1 at 6-9.) The Defendant noted that pages 10-11 of the complaint,
which presumably listed more claims, appeared to be missing. (ECF No. 1 at 2.) Subsequently,
Plaintiff filed an amended complaint in state court that appears to contain the missing pages, which
include claims for fraudulent misrepresentation and violation of the South Carolina Unfair Trade
Practices Act, S.C. Code Ann. § 39-5-10, et seq. (2014). (See ECF No. 26-1.)
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Defense counsel has asserted that the correct name of the defendant in this matter is The Travelers
Indemnity Company of America (see, e.g., ECF No. 1 at 1), and Plaintiff has not disagreed.
Although the court retains that caption used in Plaintiff’s complaint, the court refers to The
Travelers Indemnity Company of America as the Defendant.
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Summary Judgment (ECF No. 14) and DISMISSES all claims in Plaintiff’s Complaint (ECF No.
1-1 at 7-17), save Plaintiff’s South Carolina Unfair Trade Practices Act (“SCUTPA”) claim.
I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
The material facts are not in dispute. On October 15, 2012, Plaintiff, while driving her
truck, was involved in a collision with a tractor-trailer operated by Rodney Jermain Dove.
Plaintiff’s truck was damaged, and Plaintiff incurred injuries, requiring medical treatment and
rehabilitation, and missed work between October 15, 2012, and December 5, 2012, causing her
lost wages.
Dove was insured by State Farm Insurance Companies (“State Farm”). On January 28,
2014, State Farm and Plaintiff entered a Covenant not to Execute (the “Covenant”). The Covenant
specified that Plaintiff retained “the right to bring suit against . . . Dove and prosecute [the suit] to
final judgment.” (ECF No. 23-5 at 3.) However, the Covenant stated that, in exchange for $25,000,
Plaintiff agreed to “not enforce against . . . Dove . . . any judgment” obtained through an action
based on the October 25, 2012, collision. (Id.) It further specified “that . . . Dove denies any liability
to [Plaintiff, ]that this agreement and payment is not intended as, nor should be construed as, an
admission of liability,” and that the “Covenant is not a release, nor shall it be construed as a release
. . . .” (Id. at 4-5.) The Covenant contemplates that Plaintiff would be able to seek any available
UIM benefits in litigation. (See id.)
At the time of the collision, Plaintiff had two automobile insurance policies with Defendant
that carried UIM coverage of $25,000. In July 2014, Plaintiff submitted letters to Defendant,
demanding payment of benefits under the UIM coverage. After settlement negotiations failed,
Defendant refused Plaintiff’s demands.

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On August 27, 2015, Plaintiff commenced the instant action in state court by filing a
complaint against Defendant and a summons. The complaint contains claims for (1) breach of
contract for failure to pay the UIM benefits; (2) bad faith for refusal to pay the UIM benefits; (3)
bad faith for failure to handle Plaintiff’s claim for UIM benefits; and (4) negligent
misrepresentation in Defendant’s advertisements regarding its handling of insurance claims. A
later-filed amended complaint suggests additional claims of (5) fraudulent misrepresentation and
(6) violation of SCUTPA were also contained in the complaint. See supra note 1.
On December 21, 2015, Defendant filed the instant Motion for Summary Judgment. In the
motion, Defendant argues that the undisputed evidence shows that Plaintiff failed to comply with
S.C. Code Ann. § 38-77-160 (2015), which, in relevant part, reads: “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.” S.C. Code Ann. § 38-77-160. Defendant contends that, because Plaintiff never
commenced an action against Dove to establish his liability and therefore never served pleadings
of the action, she is barred from recovering under South Carolina’s UIM provisions. Moreover,
Defendant asserts that, because the statute-of-limitations period for Plaintiff’s UIM-related claims
has expired, Plaintiff is unable to cure the deficiency, and summary judgment is appropriate.
On January 27, 2016, Plaintiff claims that she filed a complaint against Dove and a
summons in state court and that these pleadings were served on Defendant. The complaint against
Dove is, in fact, an amended complaint that amends the complaint filed in the state proceedings
that were removed to this court. (Compare ECF No. 1-1, with ECF No. 26-1.) Although the
summons issued to Dove names him as a defendant in the caption, the amended complaint does
not name Dove as a defendant, does not refer to him as a liable party in any of the numbered causes

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of action, does not allege that Plaintiff incurred damages as a result of Dove’s conduct, and does
not seek any relief from Dove. (ECF No. 26-1.)
II. LEGAL STANDARDS AND ANALYSIS
Summary judgment is appropriate when the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show that “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “[I]n ruling on a motion for summary judgment, ‘the evidence of the
nonmovant is to be believed, and all justifiable inferences are to be drawn in [her] favor.’” Tolan
v. Cotton, ___ U.S. ___, 134 S. Ct. 1861, 1863 (2014) (per curiam) (brackets omitted) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
The party seeking summary judgment shoulders the initial burden of demonstrating to the
district court that there is no genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). Once the movant has made this threshold demonstration, the non-moving party,
to survive the motion for summary judgment, may not rest on the allegations averred in her
pleadings. Rather, the non-moving party must demonstrate that specific, material facts exist which
give rise to a genuine issue. See id. at 324. Under this standard, the existence of a mere scintilla of
evidence in support of the plaintiff's position is insufficient to withstand the summary judgment
motion. See Liberty Lobby, Inc., 477 U.S. at 252. A dispute is genuine “if the evidence is such that
a reasonable jury could return a verdict for the nonmoving party,” and a fact is material if it “might
affect the outcome of the suit under the governing law.” Id. at 248.
A. Claims for breach of contract and bad faith for refusal to pay UIM benefits
The facts of the instant case are almost identical to the facts in Williams v. Selective Ins.
Co. of the Se., 466 S.E.2d 402 (S.C. 1994). In that case,

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Williams was injured in an auto accident. She settled with the at-fault
driver’s liability insurance carrier for $25,000, the limit available under that
policy. In return, she agreed not to execute any judgment obtained against the
at-fault driver personally. After the settlement, Williams did not bring an action
against the at-fault driver but filed a claim for underinsured motorist benefits
under her policy with Insurer claiming her medical bills exceeded $25,000.
When Insurer refused to pay, Williams commenced this action [for breach of
contract and bad faith refusal to pay underinsured motorist benefits].
Insurer moved for summary judgment on the ground Williams failed to
pursue an action against the at-fault driver to establish liability and damages.
Further, since the statute of limitations to commence an action against the atfault driver had expired, no such action could ever be brought and Insurer was
entitled to judgment as a matter of law.
466 S.E.2d at 533-34 (parentheses omitted). In its brief analysis, the South Carolina Supreme Court
affirmed the grant of summary judgment to the defendant insurer:
Under [§ 38-77-160], summary judgment was properly granted Insurer
because Williams failed to comply with the requirement that she serve on
Insurer copies of pleadings in an action against the at-fault driver. Further, an
action against the at-fault driver can never be brought since the statute of
limitations has run on that cause of action. Since § 38-77-160 bars an action
for underinsured benefits absent compliance with the requirement that
pleadings in the action establishing liability be served on the underinsured
carrier, Williams cannot maintain her action against Insurer.
. . . [T]he intent of § 38-77-160 is to protect an insurance carrier’s right
to contest its liability for underinsured benefits. An insured must therefore
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. In the event the insured chooses to settle with the at-fault
party’s liability carrier, the underinsured carrier has the option to assume
control of the defense of the action as provided in § 38-77-160. In this case,
Williams’s failure to pursue an action against the at-fault driver resulted in a
total waiver of Insurer’s right to defend. The purpose of § 38-77-160 is to avoid
such a result.
Id. at 534-35.
As in Williams, Plaintiff here agreed not to execute any judgment against the putative atfault driver, Dove, in exchange for a payment from the putative at-fault driver’s insurer, State
Farm. As in Williams, Plaintiff did not commence an action against Dove but, instead filed breach5

of-contract and bad-faith refusal-to-pay UIM benefits claims against her insurer. And as in
Williams, the statute of limitations for commencing an action against Dove expired at the time
summary judgment was sought. See S.C. Code Ann. § 15-3-530(1) (2005) (setting a three-year
limitations period). As Williams explained, Plaintiff was required to preserve her right of action
against Dove by commencing suit against him and to serve the pleadings on Defendant before
commencing a suit against Defendant for breach and bad faith based on Defendant’s refusal to pay
UIM benefits. See Williams, 466 S.E.2d at 534-35; see also Ex parte Allstate Ins. Co., 528 S.E.2d
679, 680 (S.C. Ct. App. 2000) (“The requirement of service in [§ 38-77-160] is absolute.”); Louden
v. Moragne, 486 S.E.2d 525, 527 (S.C. Ct. App. 1997) (“[T]he insured must 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 benefits.”). Because Plaintiff failed to commence an action against
Dove before the limitations period for doing so expired, she cannot meet the § 38-77-160
requirement, and summary judgment for Defendant on the breach and bad faith claims is
appropriate.
Plaintiff’s attempts to distinguish the instant case from Williams are unpersuasive. First,
Plaintiff appears to argue that § 38-77-160’s service requirement applies only when a plaintiff is
seeking compensation from the other driver’s insurer, not from the plaintiff’s own insurer.
Williams contradicts this argument, and the court rejects it.
Second, Plaintiff contends that she sufficiently preserved her claims against Dove because
she obtained payment from Dove’s insurer under the Covenant, or, as she puts it, “[t]he fact, that
the at-fault motorist and the insurance carrier tendered for liability establishes the at-fault liability.”
(ECF No. 23 at 10.) The court rejects this argument because it reflects an incorrect understanding
of the effect of a covenant not to execute. By itself, a covenant not to execute is not sufficient to

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satisfy § 38-77-160’s requirement that a plaintiff preserve her right of action against the putative
at-fault driver. See Williams, 446 S.E.2d at 533-34 (concluding that “summary judgment was
properly granted” even though plaintiff “settled with the at-fault driver’s liability insurance carrier
. . . [and] [i]n return, . . . agreed not to execute any judgment obtained against the at-fault driver
personally.”) “A covenant not to execute is treated differently than a settlement agreement which
is a release.” Cobb v. Benjamin, 482 S.E.2d 589, 591 (S.C. Ct. App. 1997) (citing Ackerman v.
Travelers Indem. Co., 456 S.E.2d 408 (S.C. Ct. App. 1995)). Where an agreement reserves a
party’s right to obtain a judgment against a putative at-fault driver, prevents that party from
executing any such judgment, and contemplates that the party may recover any available UIM
benefits, the agreement is a covenant not to execute. See Id.; Ackerman, 456 S.E.2d at 413. Here,
the Covenant states it is not a release, reserves Plaintiff’s right to obtain a judgment against Dove,
prevents Plaintiff from executing any such judgment against Dove, and contemplates that Plaintiff
is able to seek any available UIM benefits. Accordingly the Covenant is a covenant not to execute
and, alone, is not sufficient to satisfy the § 38-77-160 requirement.
Third, Plaintiff argues that her January 27, 2016 filing and service of the amended
complaint and summons satisfies the § 38-77-160 requirement. The court disagrees. Plaintiff
attempted to commence an action against Dove by filing an amended complaint in state court and
issuing a summons in the same action that was removed to this court. The court concludes,
however, that the amended complaint and summons are ineffective to commence an action against
Dove because Plaintiff failed to amend the complaint in this court. The federal removal statute
states that, once removal has been perfected, “the State court shall proceed no further unless and
until the case is remanded.” 28 U.S.C. § 1446(d). The Fourth Circuit has interpreted this language
to mean that a state court “loses all jurisdiction to proceed immediately upon the [perfection of

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removal]. . . . [A]ny proceedings in the state court after [removal] and prior to a federal remand
order are absolutely void . . . .” South Carolina v. Moore, 447 F.2d 1067, 1073 (4th Cir. 1971).
Under this interpretation, the state court has no authority to entertain a motion to amend a
complaint in a case that has been removed to the federal court, and an attempt to amend the
pleadings in state court is wholly ineffectual. See Mid S. Carbon Corp. v. TriCamp Capital, LLC,
622 F. App’x 223, 225 (4th Cir. 2015) (“[O]nce [defendant] removed [plaintiff]’s case to federal
court, [plaintiff] lost the ability to cure the defect in its pleading because the state court lost
jurisdiction over the case.”); Holmes v. AC & S, Inc., 388 F. Supp. 2d 663, 667 (E.D. Va. 2004)
(“[B]ecause removal to federal court suspends any subsequent state court proceedings, the plaintiff
could not even have acted to perfect an appeal in the state system.”). Thus, Plaintiff’s attempt to
commence an action against Dove by filing a motion to amend her already-removed complaint is
without any effect, and the amended complaint and summons are treated as if they were never
filed. Accordingly, Plaintiff is in the exact same position as the plaintiff in Williams, who did not
commence an action at all against the putative at-fault driver. Thus, Plaintiff’s belated attempt to
amend her complaint does not distinguish her circumstances from those in Williams. 3
In sum, Plaintiff’s claims of breach of contract and bad faith based on Defendant’s refusal
to pay UIM benefits fit will within the circumstances outlined in Williams. Because Plaintiff failed
to preserve her right of action against Dove and cannot cure this deficiency, as the limitations

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The court notes that Plaintiff has failed to seek an amendment in accordance with the procedures
applicable in this court. See Fed. R. Civ. P. 15(a). The court also notes that the amended complaint
cannot be read to state any cause of action against Dove or to otherwise seek a ruling that Dove
was liable for the collision at issue. Therefore, even if the amended complaint was not void, it
likely would not satisfy the requirements of § 38-77-160. See S.C. Code Ann. § 38-77-160 (“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.” (emphasis added)).
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period for filing such an action has expired, Defendant is entitled to summary judgment on the
claims.
B. Claims of bad faith in handling UIM claim, negligent misrepresentation, and fraudulent
misrepresentation
Plaintiff’s complaint also contains claims of bad faith in handling Plaintiff’s claims for
UIM benefits, negligent misrepresentation, and fraudulent misrepresentation. 4 The court must
decide whether summary judgment is also appropriate for these claims, which all sound in tort.
Although South Carolina law is clear that failure to comply with § 38-77-160’s requirement
bars claims for breach of contract and bad faith based on an insurer’s refusal to pay UIM benefits,
it is less clear how that provision applies to related claims, such as those sounding in tort. See
Halmon v. Am. Int’l Grp., Inc. Ins. Co., 586 F. Supp. 2d 401, 405 (D.S.C. 2007). The court
determines that, as a general matter, the case law supports the conclusion that § 38-77-160 presents
a bar to tort claims that are grounded upon an insurer’s refusal to pay UIM benefits. See Williams,
466 S.E.2d at 533-35 (affirming grant of summary judgment on claim of bad faith refusal to pay
UIM benefits); see also Booth v. Allstate Ins. Co., 334 F. Supp. 2d 880, 882, 885 (D.S.C. 2004)
(dismissing allegation of “bad faith insurance settlement practices” because, where insurer has
reasonable grounds to deny claim, plaintiff cannot sustain a bad faith claim). This rule applies not
only to direct claims of bad-faith refusal-to-pay, but also to other tort claims that rely on the
insurer’s obligation to pay. See Potylicki v. Allstate Ins. Co., 386 F. App’x 435, 438 (4th Cir. 2010)
(“[W]e reject [plaintiff]’s attempt to evade the statute by labeling his claim as one for violation of

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Because the court can dispose of Plaintiff’s claims on grounds discussed below, the court declines
to consider, at this stage, whether her claims for fraudulent misrepresentation and SCUTPA
violation should be disposed on the basis that they were not contained in the initial complaint, see
supra note 1, and that Plaintiff has not sought in this court to amend her complaint to include the
two missing claims. For purposes of disposing the summary judgment motion, the court assumes,
without conclusively deciding, that the two claims were alleged in the complaint.
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the implied covenant of good faith and fair dealing . . . rather than what it is in substance: a claim
for breach of contract for failure to pay uninsured motorist benefits.”); id. at 438-39 (emphasizing
that “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”); Adcock v. Allstate
Ins. Co., No. 90-2216, 936 F.2d 567, at *1 (4th Cir. 1991) (unpublished table decision) (explaining
that claims that rely on insurer’s obligation to pay benefits are properly subject to summary
judgment if plaintiff fails to meet statutory pre-requisites for establishing obligation to pay);
Martin v. Bristol W. Ins. Co., No. 4:15-cv-04134-RBH, 2016 WL 4455157, at *3 (D.S.C. Aug. 24,
2016) “[D]ecisions within this district . . . recognize that if a plaintiff fails to serve upon the UIM
insurer copies of the pleadings from the action establishing the . . . at-fault driver's[] liability, the
failure to serve constitutes a procedural bar to an action brought against the UIM insurer; this bar
applies to both contract and tort claims asserted against the UIM insurer.”); id. (collecting cases);
Myers v. State Farm Auto Ins. Co., 950 F. Supp. 148, 150 (D.S.C. 1997) (“Williams[] and § 38–
77–160 . . . establish that the carrier’s duty to act in good faith regarding underinsured benefits
arises after the insured brings suit against the at-fault driver and serves the carrier with process.”).
Based on the weight of authority, the court concludes that tort claims relying on the insurer’s
obligation to pay UIM benefits are subject to § 38-77-160’s requirement and should be dismissed
if there is no genuine dispute that the plaintiff insured cannot satisfy that requirement.
Here, each of Plaintiff’s tort claims rely on Defendant’s obligation to pay UIM benefits.
With respect to her claim of bad faith in Defendant’s handling of the UIM claim, Plaintiff alleges
that Defendant “acted in bad faith by failing to properly investigate and evaluate the Plaintiffs claim
for UIM benefits” and “acted in bad faith by failing to communicate in good faith with the Plaintiff
about [its] investigation and evaluation of the Plaintiffs claim.” (ECF No. 1-1 at 13.) These actions,
Plaintiff alleges, resulted in “[Defendant]’s bad faith refusal to pay the appropriate compensation,” and

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thus, “Plaintiff suffered loss and is entitled to damages.” (Id. at 13-14.) Therefore, based on Plaintiff’s
own allegations, the only injury she sustained as a result of Defendant’s bad-faith handling of her claim
was the loss of UIM benefits, and, thus, the claim relies on Defendant’s obligation to pay her UIM
benefits.
With respect to her claim of negligent misrepresentation, Plaintiff alleges that Defendant,
through advertisement, represented that it would fairly handle her claims and that these representations
were false because Defendant “breached its duty to properly compensate Plaintiff for her accident.”
(Id. at 14.) Thus, based on her own allegations, Plaintiff’s claim of negligent misrepresentation relies
on Defendant’s obligation to pay her UIM benefits. Plaintiff’s claim of fraudulent misrepresentation
restates the same allegations as her claim for negligent misrepresentation but includes an additional
allegation that the misrepresentation was knowing and intentional. (ECF No. 26-1 at 10.) Thus, the
claim for fraudulent misrepresentation also relies on Defendant’s obligation to pay UIM benefits.
Because these tort claims that are set forth in Plaintiff’s complaint all rely on Defendant’s
obligation to pay UIM benefits, they are subject to § 38-77-160’s requirement that Plaintiff preserve

her right of action against Dove by commencing an action against him within the limitations period
for doing so and by serving the pleadings of that action on Defendant. Because Plaintiff failed to
preserve her right of action against Dove and cannot cure this deficiency, Defendant is entitled to
summary judgment on the related tort claims.
C. Claim of SCUTPA violation
Although there is ample case law for the court to determine whether the claims discussed
above are barred by § 38-77-160’s requirement, Defendant has pointed to no authority addressing
whether a SCUTPA violation claim is likewise barred, and the court’s own research has revealed

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none. 5 Moreover, Defendant has offered no ground, other than the § 38-77-160 requirement, for
granting summary judgment. Accordingly, the court concludes that Defendant has not shown that
it is entitled to summary judgment on the SCUTPA violation claim as a matter of law, see Fed. R.
Civ. P. 56(a) (“The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
(emphasis added)), and the motion must be denied with respect to that claim.
III. CONCLUSION
Upon careful consideration of the entire record, Defendants’ Motion for Summary
Judgement (ECF No. 14) is hereby GRANTED IN PART and DENIED IN PART. Plaintiff’s
claims of breach of contract, bad faith in refusal to pay UIM benefits, bad faith in handling
Plaintiff’s UIM claim, negligent misrepresentation, and fraudulent representation (ECF No. 1-1 at
7-17; ECF No. 26-1 at 10) are DISMISSED.
IT IS SO ORDERED.

United States District Court Judge
September 27, 2016
Columbia, South Carolina

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The reason for a dearth of authority on this issue is because SCUTPA does not apply to the trade
practices at issue in this case. See Lewis v. Omni Indem. Co., 970 F. Supp. 2d 437, 451-52 (D.S.C.
2013) (citing S.C. Code Ann. § 39–5–40 (2016); Trs. of Grace Reformed Episcopal Church v.
Charleston Ins. Co., 868 F. Supp. 128, 132 (D.S.C. 1994)). By a separate order to show cause, the
court will sua sponte act to consider whether to grant summary judgment to Defendant regarding
the SCUTPA violation claim on this ground. See Fed. R. Civ. P. 56(f)(2).
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