Decision Date31 December 2001
Docket NumberNo. 25394.,25394.
Citation347 S.C. 642,557 S.E.2d 670
CourtSouth Carolina Supreme Court

Harold W. Jacobs, of Nexsen Pruet Jacobs & Pollard, L.L.P., of Columbia, for appellant/respondent.

Ray P. McClain, of Charleston, for respondent/appellant.

James B. Richardson, Jr., of Richardson & Birdsong, of Columbia for amici curiae, South Carolina College of Emergency Physicians, American College of Emergency Physicians, and South Carolina Medical Association.


Appellant/Respondent South Carolina Medical Malpractice Liability Joint Underwriting Association ("JUA") appeals the circuit court's decision prohibiting JUA from apportioning any part of a settled claim against the liability policy of Respondent/Appellant John Doe, M.D. ("Doe"). Doe appeals the circuit court's denial of attorney's fees. We reverse the trial court's decision enjoining JUA from including Doe in the settlement apportionment and affirm the trial court's denial of attorney's fees.


Doe captioned his complaint as a declaratory judgment action. In his initial prayer for relief he sought a permanent injunction against JUA and a declaration that JUA committed breach of contract. "A suit for declaratory judgment is neither legal nor equitable, but is determined by the nature of the underlying issue." Felts v. Richland County, 303 S.C. 354, 356, 400 S.E.2d 781, 782 (1991). "Actions for injunctive relief are equitable in nature. In equitable actions, the appellate court may review the record and make findings of fact in accordance with its own view of a preponderance of the evidence." Wiedemann v. Town of Hilton Head Island, 344 S.C. 233, 236, 542 S.E.2d 752, 753 (Ct.App.2001) (internal citations omitted).

Pursuant to the "main purpose rule," in actions praying for both money damages and equitable relief, "characterization of the action as equitable or legal depends on the plaintiff's `main purpose' in bringing the action." Floyd v. Floyd, 306 S.C. 376, 380, 412 S.E.2d 397, 399 (1991). Doe's main purpose in instituting this action was to enjoin JUA from charging any of the settlement against his policy.1 Thus, the "main purpose" of Doe's action was equitable in nature. Accordingly, the factual findings of the trial court are not binding on this Court, and we may take our own view of the facts. Wiedemann, supra.


Doe filed suit against his professional liability insurance carrier, JUA, following settlement of a medical malpractice lawsuit against Doe and a number of other defendants, and JUA's decision to charge a portion of the settlement to Doe's policy. Although the record does not indicate that JUA's decision had any direct adverse financial consequences to Doe, the record does reveal that as a result of its decision to charge Doe's policy, JUA reported Doe to the National Practitioner Data Bank as required by federal law.2 Doe testified that being reported to the National Practitioner Data Bank has adverse effects on a healthcare professional's ability to participate in certain healthcare organizations and to practice in certain areas.

Doe sought a declaration "that [JUA's] duty to its insured requires that it have a fair procedure, in cases involving many providers all insured by JUA, to enable a physician to challenge [JUA's] decision to charge a portion of [any] settlement to the physician's policy." In addition, he sought damages for breach of contract and attorney's fees incurred in prosecuting the action.

Doe's complaints grew out of a medical malpractice action brought against him and several co-defendants following the death of Louise Stanton ("Stanton"). While a patient in the intensive care unit at Bon Secours St. Francis Xavier Hospital in Charleston, Stanton experienced respiratory distress, and a doctor Mayday was sounded. Doe, at the time on duty in the hospital's emergency department, and several other healthcare professionals responded to the Mayday. Among those responding to the Mayday was Dr. Ball ("Ball"). When the Mayday sounded, Ball was in the hospital visiting another patient. He was not otherwise "on duty" at Bon Secours at the time.

Eventually, the doctors and nurses who responded to the Mayday determined that the cause of Stanton's distress was an improperly placed endotracheal tube. The tube had been inserted to assist Stanton's breathing. After the tube was removed and replaced, Stanton's respiratory distress subsided. Unfortunately, by the time the tube was replaced, Stanton had been deprived of oxygen for twelve minutes and was brain dead. She died two days later.

A certified registered nurse anesthetist ("CRNA"), Geri Wern Wood ("Wood"), was among those responding to the Mayday. Wood testified in a deposition that upon arriving at Stanton's bedside, she listened for breath sounds from the patient. She heard breath sounds in the stomach, suggesting the endotracheal tube might be misplaced, and asked Doe to listen. According to Wood, Doe listened and appeared to be confused by what he heard. Wood announced her opinion to all present in the hospital room that the tube was not in the proper position, and that she thought Stanton should be reintubated. Finally, Wood testified that some ten minutes later, the responding physicians determined Stanton should be reintubated.

JUA insured all co-defendants in the malpractice action. It hired separate counsel to defend Doe. After discovery had commenced, JUA and Stanton's estate settled the claims against all defendants for $500,000. After the case settled, Doe and Ball approached JUA and requested that no portion of the settlement be charged against their respective policies. Both doctors claimed they were immune from liability pursuant to the Good Samaritan statute, S.C.Code Ann. § 15-1-310 (1977).3 JUA's manager, Calvin Stewart ("Stewart") testified that when settling a case involving multiple defendants, it was JUA's policy not to charge the policy of any defendant who, as a matter of law, could prevail at trial.

In response to the doctors' requests JUA sought a legal opinion from attorney William L. Pope ("Pope") whether § 15-1-310 would apply to Doe. In Pope's opinion Doe's § 15-1-310 immunity could not be established as a matter of law, but was a question of fact. Pope further posited that Ball had a better argument than Doe that § 15-1-310 shielded him from liability. However, Pope stopped short of saying, as a matter of law, that even Ball came within the ambit of § 15-1-310. Pope explained that he distinguished between Doe and Ball, and the relative strength of their § 15-1-310 defenses, because Doe was being "paid by the hospital to be present at the hospital when he responded to the [Mayday]."

Relying on Pope's legal opinion, JUA did not charge any portion of the settlement against Ball's policy. JUA did charge one-seventh of the $500,000 against Doe's policy.4 After JUA declined Doe's request to reconsider its decision, he instituted this action.

The trial court found that JUA breached the covenant of good faith and fair dealing by failing to utilize a fair procedure by which the interests of an insured physician can be considered when his policy is to be charged in a settlement, and by failing to treat each physician equally when exercising its discretion in determining liability for doctors under settlement agreements. The court further concluded there was no evidentiary basis for JUA's conclusion that Doe's circumstances were "significantly different" from those of Ball, and therefore, JUA breached "its duties to Dr. Doe when it charged a portion of the settlement to Dr. Doe's liability policy without affording Dr. Doe the same discretionary benefit that it had provided [Ball]." The court denied Doe's request for attorney's fees.

From this order, both parties appealed.

Did the trial court err in concluding JUA breached its covenant of good faith and fair dealing by including Doe in the settlement apportionment?

JUA argues the trial court erred when it determined JUA breached its covenant of good faith and fair dealing. We agree.

We have held that

there is an implied covenant of good faith and fair dealing in every insurance contract `that neither party will do anything to impair the other's rights to receive benefits under the contract.' ... [I]f an insured can demonstrate bad faith or unreasonable action by the insurer in processing a claim under their mutually binding insurance contract, he can recover consequential damages in a tort action.... `Implicit in the holding is the extension of a duty of good faith and fair dealing in the performance of all obligations undertaken by the insurer for the insured.'

Tadlock Painting Co. v. Maryland Cas. Co., 322 S.C. 498, 500-01, 473 S.E.2d 52, 53 (1996) (internal citations omitted).

"Bad faith is a knowing failure on the part of the insurer to exercise an honest and informed judgment in processing a claim.... [A]n insurer acts in bad faith where there is no reasonable basis to support the insurer's decision." American Fire & Cas. Co. v. Johnson, 332 S.C. 307, 311, 504 S.E.2d 356, 358 (Ct.App.1998); see also Cock-N-Bull Steak House v. Generali Ins. Co., 321 S.C. 1, 466 S.E.2d 727 (1996).

Furthermore, "a liability insurer owes its insured a duty to settle a personal injury claim covered by the policy, if settlement is the reasonable thing to do." Trotter v. State Farm Mut. Auto. Ins. Co., 297 S.C. 465, 475, 377 S.E.2d 343, 349 (Ct.App.1988). An insurer who unreasonably refuses or fails to settle a covered claim within the policy limits is liable to the insured for the entire amount of the judgment obtained against the insured regardless of the limits contained in the policy. Id.

The contract of insurance between Doe and JUA provides in part that JUA ...

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