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Vanderhall v. State Farm Mutual Automobile Insurance Co

United States District Court, District of South Carolina, Florence Division

March 30, 2015

Jefferey L. Vanderhall, as Assignee of Maurice Wilson and Preiscilla Ford, Plaintiff,
State Farm Mutual Automobile Insurance Company, Defendant.


Richard Mark Gergel, United States District Judge.

This matter comes before the Court on Defendant's motion for summary judgment. (Dkt. No. 61). Plaintiff has filed a memorandum in opposition and Defendant has filed a reply. (Dkt. Nos. 15, 76). As explained more fully below, Defendant's motion for summary judgment is granted.

Legal Standard

A party is entitled to summary judgment under Rule 56 of the Federal Rules of Civil Procedure "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." "Facts are 'material' when they might affect the outcome of the case, and a 'genuine issue' exists when the evidence would allow a reasonable jury to return a verdict for the nonmoving party." The News and Observer Publ 'g Co. v. Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). In ruling on a motion for summary judgment, "the nonmoving party's evidence is to be believed, and all justifiable inferences are to be drawn in that party's favor." Id.

Factual Background

On August 21, 2011, Jeffrey Vandenhall, then twenty-three years old and returning from his job at Homes Motor Lodge in Florence, South Carolina, was struck while riding his bicycle by a truck driven by Maurice Washington. (Dkt. No. 61-2 at 2; 75 at 3). Mr. Vanderhall suffered severe injuries as a result of this collision and was unconscious for approximately a week after the accident. (Dkt. No. 61-5 at 4). On August 23, 2011, Mr. Vanderhall's mother, Teresa Vanderhall, contacted the Hyman Law Firm and a member of the firm came to Mr. Vanderhall's hospital room. Mr. Vanderhall underwent surgery on August 23, 2011, and remained unconscious. (Id., Dkt. No. 61-2 at 3). The law firm took a picture of Mr. Vanderhall in his hospital bed to document "the severity of his injuries." (Id.). That same day, August 23, 2011, Teresa Vanderhall executed a retainer agreement with the Hyman Law Firm on behalf of Jeffrey Vanderhall, indicating that she was the "GAL for Jeffrey." (Dkt. No. 61-10). It is uncontested that at the time, Teresa Vanderhall had not been appointed the guardian ad litem for Jeffrey Vanderhall and that he, then being unconscious, was an incapacitated person under South Carolina law. (Dkt. No. 75 at 3).

One day later, on August 24, 2011, William Hatfield, an attorney with the Hyman Law Firm, wrote State Farm Insurance Company regarding Jefferey Vanderhall. Mr. Hatfield indicated that his firm "represents Jefferey L. Vanderhall" and that Mr. Vanderhall had suffered a severe spinal cord injury on August 21, 2011, as a result of being struck by a vehicle operated by Maurice Washington and owned by its insured, Priscilla J. Ford. The picture of Mr. Vanderhall lying in his hospital bed was included with the letter. Mr. Hatfield informed State Farm that he had made inquiry to a State Farm clerical employee named Veronica and she advised him that there was $25, 000 of liability coverage on the vehicle. (Dkt. No. 61-2).

Mr. Hatfield then stated in the August 24, 2011 letter to State Farm that he would give the carrier "one opportunity to settle this claim by tendering... liability limits in exchange for a Covenant Not to Execute provided that said tender is made in writing on or before Friday, September 2, 2011, at noon." (Id. at 3). Mr. Hatfield further explained that if State Farm refused to tender its limits by the stated deadline, the offer would be withdrawn and the Plaintiff would proceed to sue Maurice Washington for negligence and Priscilla Ford for negligent entrustment. (Id.). Mr. Hatfield, in a separate paragraph following the threat of a subsequent lawsuit, stated that should a jury return a verdict in excess of liability insurance limits, "we will seek to collect any judgment from the personal assets of Maurice Washington and Priscilla J. Ford." (Id.).

State Farm responded to Mr. Hatfield's August 24, 2011 letter on September 1, 2011, indicating that the carrier was "willing to settle your client's claim for $25, 000 in exchange for a covenant not to execute." The letter then stated: "This settlement is inclusive of all economic damages, known and unknown, and any liens, assignments or statutory rights of recovery." (Dkt. No. 61-3). It is uncontested that this proposed language is standard language in settlement agreements and covenants not to execute in South Carolina. (Dkt. No. 53-1 at 2, 6; 61-9 at 4-5).

Plaintiff asserted (and the Court concurs) that the additional language proposed constituted a counter offer and a rejection of Plaintiffs August 24, 2011 offer. Thereafter, Plaintiff entered into an agreement with Maurice Washington and Priscilla Ford that provided (1) a confession of judgment of $7 million; and (2) a covenant not execute against Mr. Washington and Ms. Ford beyond the policy limits, which also provided for protection of Washington and Ford against any liens or other claims by third parties. (Dkt. No. 1-1 at 11-13, 17-18, 22-24). Plaintiff, now as an assignee of Washington and Ford, filed suit in the Florence County Court of Common Pleas asserting claims against State Farm for breach of implied covenant of good faith and fair dealing, breach of contract, breach of fiduciary duty, judicial estoppel, and attorneys' fees. (Dkt. No. 1-1 at 3-10). Defendant thereafter timely removed the action to United States District Court and subsequently moved for summary judgment. (Dkt. No. 1, 61).


A. The settlement offer of August 24, 2011 was a legal nullity and cannot constitute a lawful basis of a bad faith claim.

Plaintiffs counsel asserts he was retained to represent Jefferey Vanderhall on August 23, 2011, when Plaintiff s mother Teresa Vanderhall executed a retainer agreement on behalf of her son. It is undisputed that the mother's representation that she was Jefferey Vanderhall's guardian ad litem was untrue and that no court had authorized her to act on behalf of her then unconscious and incapacitated son. Plaintiff responds that Mr. Vanderhall was "mildly retarded" and his mother "always acted as Jefferey's guardian and has always handled his finances." (Dkt. No. 75 at 3). Plaintiff further argues that Ms. Vanderhall essentially was an implied agent of her son and had the inherent authority to employ counsel and presumably make an offer of settlement of his legal claims. (Id. at 8).

Plaintiffs position ignores the well-settled law of South Carolina regarding court protection of incapacitated persons. Under South Carolina law, an "incapacitated person" includes "any person who is impaired by reason of physical illness or disability ... to the extent that he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his person or property." S.C. Code Ann. § 62-5-101. An attorney seeking to assist an incapacitated person may undertake "reasonably necessary protective action" on behalf of an incapacitated person that includes "seeking the appointment of a guardian ad litem, conservator or guardian." S.C. App. Court Rule 407, Rule 1, 14(b). Thus, a lawsuit brought on behalf of an incapacitated person is normally brought by a court-appointed representative, such as a guardian, guardian ad litem, or conservator, and a court is compelled to appoint a guardian ad litem for an incapacitated person if a lawsuit is brought without a court-appointed representative of the incapacitated person. See S.C. Code Ann. ...

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