Sweeny, Wingate & Barrow, P.A saved a client from a $3.5 million dollar verdict for bad faith. On May 12, 2008, before a new business owner procured liability insurance, an employee killed an elderly woman in an automobile accident. For several reasons, he should not have been driving. After the jury returned a verdict against the at-fault driver, the decedent’s personal representative brought an action against an insurance carrier for bad faith failure to pay pursuant to its insurance policy.
In an abundance of caution, the insurance company initiated a declaratory action to establish that the driver was not covered under the policy because the driver was not an employee. The court considered faxes from the local insurance agent to the insurer’s agent stating that “[the named insured] is no longer the owner of this company,” and requesting coverage beginning May 23, 2008. The trial court held that the insurer was equitably estopped – by its silence – from denying that the policy was transferred from the named insured to the new proprietorship. This ruling was immediately appealed.
Mark Barrow presented oral argument before the Fourth Circuit Court of Appeals on behalf of First Financial Insurance Company. Applying South Carolina law, the Appeals Court held in favor of the insurer, holding that the insurer could rely on the terms of its policy. Fourth Circuit Opinion No.12-2452.
The result is that estoppel cannot be used to create insurance coverage; equity was not served by requiring the insurer to provide coverage which was not contemplated at the inception of the contract and for which no premium was paid; and the personal representative could not claim to have been misled because she and the agent had the means to learn the truth. Thus, the verdict from the bad faith action could not be satisfied by the proceeds from the insurance policy.