In late July, the South Carolina Supreme Court handed down a helpful ruling for insurers when it held that, if an insured fails to give notice to his automobile insurer of a pending claim, the insurer may deny coverage above statutory limits upon a showing that it was substantially prejudiced by its insured's failure to comply with the standard notice clause in the policy. Neumayer v. Philadelphia Indem. Ins. Co., S.E.2d , 2019 S.C. LEXIS 67, at *17 (S.C. July 24, 2019).
The case involved a motor vehicle accident where a pedestrian, Andrew Neumayer, was struck by a bus driver, suffering severe injuries. Neumayer filed suit against the bus driver who then failed to answer the complaint, and after eighteen months, the clerk entered a default in the amount of $622,500. Upon discovery of the existence of the lawsuit, the bus driver's insurance company, Philadelphia Indemnity Insurance Company, refused to pay the default, instead arguing that its liability was limited to the statutory financial responsibility limit of $25,000 because it was substantially prejudiced by its insured's failure to notify it of the suit.
Neumayer sought, and received, a declaratory judgment awarding him the entire amount of the default. He relied on South Carolina Code Ann. § 38-77-142(C), which provides that "[a]ny endorsement, provision, or rider attached to or included in any policy of insurance which purports or seeks to limit or reduce the coverage afforded by the provisions required by this section is void." § 38-77-142(C). Neumayer argued this provision invalidated the notice clause in the insurer's policy which stated:
Duties in the Event of Accident, Claim, Suit or Loss
We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:
In the event of "accident", claim, "suit" or "loss", you must give us or our authorized representative prompt notice of the "accident" or "loss." . . .
Additionally, you and any other involved "insured" must: . . .
Immediately send us copies of any request, demand, order, notice, summons or legal paper received concerning the claim or "suit"
The insurer appealed the ruling, arguing that Neumayer's interpretation of the Code's section...