Governmental insurance pools or quasi-governmental entities offering insurance are often treated differently than typical private insurance companies. Since many of these insurance entities are set up to provide insurance to other governmental entities, especially municipalities and local school districts, it is important to recognize that state laws often treat these entities different than private insurers.
Governmental insurance pools and entities may have different statute of limitations and be immune from extra-contractual or bad faith lawsuits. It is critical to examine the statutory implications whenever dealing with these entities. We have found that some quasi-governmental pools and leagues treat their member or subscribing policyholders much worse than typical insurance companies when it comes to property insurance claims while still providing excellent service reading liability claims. Municipalities, school districts, and other local governmental entities should be as concerned with the quality of prompt and full payment of property insurance losses as much as any premium savings.
Let me provide a South Carolina example of how these governmental insuring entities are treated differently. South Carolina Code § 15-78-40 states that the State and associated government entities remain liable for any tort action in the same manner and extent as individuals under the same circumstances. However, this statute also places limitations on any recovery for liability and damages; specifically, S.C. Code § 15-78-120(a)(2) states:
Except as provided in Section 15-78-120(a)(4), the total sum recovered hereunder arising out of a single occurrence shall not exceed six hundred thousand dollars regardless of the number of agencies or political subdivisions or claims or actions involved.
Further, S.C. Code § 15-78-120(b) sates that punitive, exemplary, and pre-judgment interest are not available.
In Reeves v. South Carolina Municipal Insurance and Risk Financing Fund,1 the South Carolina Supreme Court directly addressed the status of the policyholder and the applicability of the Tort Claims Act to the accompanying bad faith claim. The South Carolina Supreme Court found that the SCMIRF is a ‘political subdivision’ as defined in the Torts Claim Act, stating:
SCMIRF is a voluntary self-insurance pool created by municipalities of the state under the authorization of the State Constitution and the Act. The Act and the South Carolina Constitution authorize municipalities and other political subdivisions to establish pooled self-insurance liability funds. It would be an absurd result for the legislature to create a scheme in which a municipality loses its status as a political subdivision under the Act—and, thus, loses the protection of the Act—when it joins together with other municipalities for the purpose of complying with statutory obligations.
Also in Reeves, the insured argued that regardless of whether SCMIRF was a political subdivision, the Tort Claims Act had no impact on liability for a breach of contract claim; however, here, the court disagreed and found that the limitations in the Tort Claims Act did apply based on the specific facts of the case, namely that the parties stipulated to only litigating cover amount and applicability of the Tort Claim Act for a bad faith claim against SCMIRF, not breach of contract.
Further, the Statue of Limitations for a tort claim under South Carolina Tort Claim Act is two years.2 So, if the insurance pool is acting in bad faith, the time to file that lawsuit is at least one year less than the normal statute of limitations and the governmental policyholder is limited to the damages much more so than if it were a private insurance company.
Thought For The Day
From my very first day in the Mayor’s office, I have worked closely with the Council members who share our vision of a city hall that really protects taxpayers and cares… yes… about the little things that make a big difference in people’s lives.
—Laura Miller
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1 Reeves ex rel. Estate of Reeves v. S.C. Mun. Ins. & Risk Fin. Fund [Scmirf], 427 S.C. 613, 832 S.E.2d 312 (S.C. App. 2019) .
2 S.C. Code § 15-78-110.
