Insurance companies have two basic duties under standard insurance policies: 1) the duty to provide coverage as stated in the terms and conditions of the policy; and 2) the duty to defend the policyholder against claims covered by the policy. In order to meet these duties, an insurer has the duty to settle cases if it deems settling would be the reasonable thing to do. If the insurer fails to settle when reasonable, the Tyger River Doctrine provides that the insurer may be liable to both the insurer and the claimant for the amount over the policy that is recovered at trial. Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 170 S.E. 346 (1933), 163 S.C. 229, 161 S.E. 491 (1931).
For instance, if there is an existing policy for coverage for $100,000, and the claim is reasonably worth at least $100,000, the insurer has a duty to settle to the claim for the policy limits. According to the Tyger River doctrine, the insurer is “bound, under its contract of indemnity, and in good faith, to sacrifice its interests in favor of those of the [insured].” This, however, does not mean that an insured has a duty to settle to the policy limits any time that a demand is made, but only when it is reasonable.
So when is it appropriate to tender a Tyger River demand? The answer is whenever it seems reasonably certain that the value of the claim is in excess of the amount of the available coverage. That is not to say that a case that would likely receive a jury verdict of $5,000 should settle for the $100,000 policy limits. But, when reasonable, an insurer has a duty to settle because that is why the insured has coverage in the first place: to avoid personal liability beyond the scope of coverage. If the insured fails to settle for the amount available under the policy, and amount requested is reasonable, the insurance company is taking a big risk that it might have to pay the amount over the coverage limits out of pocket should the plaintiff receive a big jury verdict.
If you or someone you know is having a difficult time dealing with an insurer in a personal injury case, please contact one of our attorneys at Miller|Conway at +843.764.3334. We are a Charleston Area law firm located in Goose Creek handling personal injury cases throughout the Greater South Carolina area and we are here for you when you need us.