Indicates Matter Stricken

Indicates New Matter

Committee Report

March 27, 2024

S. 87

Introduced by Senator Malloy

S. Printed 03/27/24--S.

Read the first time January 10, 2023

________

The committee on Senate Judiciary

To whom was referred a Bill (S. 87) to amend Section 15-78-120 of the South Carolina Code, relating to limitations on liability, so as to increase the limits from a loss to one person arising, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass with amendment:

    Amend the bill, as and if amended, by striking SECTION 2 and inserting:

SECTION 2.  Upon approval by the Governor, this act takes effect July 1, 2024, for causes of action with a date of loss arising on or after July 1, 2024.

Renumber sections to conform.

Amend title to conform.

LUKE RANKIN for Committee.

statement of estimated fiscal impact

Explanation of Fiscal Impact

State Expenditure

This bill increases the liability limits under the South Carolina Torts Claims Act to $500,000 for a single person and $1,000,000 total for a single occurrence, regardless of the number of agencies or subdivisions involved in the occurrence. Additionally, this bill allows a party who makes an offer of judgment that is not accepted, pursuant to  15-35-400, to recover of any administrative, filing, or other court costs and 8 percent interest computed on the amount of the verdict or award from the date of the offer, regardless of the liability limits.

Currently, the four liability limits under the South Carolina Torts Claims Act, in  15-78- 120(a)(1) through (4), are as follows:

$300,000 for a single person for a single occurrence, regardless of the number of agencies or subdivisions involved in the occurrence,

$600,000 total for a single occurrence, regardless of the number of agencies or subdivisions involved in the occurrence,

$1,200,000 per person, for a single occurrence arising from an incident with a doctor or dentist, regardless of the number of agencies or subdivisions involved in the occurrence, and

$1,200,000 total for a single occurrence arising from an incident with a doctor or dentist, regardless of the number of agencies or subdivisions involved in the occurrence.

This bill increases the limit per person from $300,000 to $500,000 and the total limit per occurrence from $600,000 to $1,000,000 and allows parties that make an offer of judgment to recover administrative costs or other court costs and 8 percent interest computed on the amount of the verdict or award, regardless of the liability limits, even if the recovery is above the newly increased limits.

As parties are not currently allowed to recover administrative costs under the South Carolina Tort Claims Act, there are no data to estimate the number of cases that may be impacted by the allowance of recovery of administrative costs. Therefore, Revenue and Fiscal Affairs (RFA) is unable to estimate the potential increase of expenditures for all agencies impacted by the Tort Claims Act from allowing a party to recover administrative or other court costs and 8 percent interest computed on the amount of the verdict or award, regardless of the liability limits when an offer of judgment is not accepted and the verdict exceeds the offer.

This bill will increase all state agencies' expenditures through an increase in premiums to cover the increased amount of losses paid for claims due to the increased limits.  The IRF, a division of SFAA, provides insurance coverage for these liabilities, among others.  The IRF insures all state agencies, including the Medical University of South Carolina (MUSC).  Counties, municipalities, political subdivisions, school districts, special purpose districts, and other governmental entities may also choose to purchase insurance from the IRF.  The IRF believes the general/tort liability, professional liability, commercial auto, and school bus liability policies will be most impacted by this bill.  An actuarial analysis was performed to determine the expenditure impact for these liability policies.  Based on the actuarial analysis, the IRF anticipates the increase in losses paid for claims brought against governmental entities to total $17,470,000.  The following is the increase in loss by insurance type:

General/Tort:  $9,835,000

Professional Medical Liability:  $3,561,000

Commercial Auto: $3,439,000

School Bus:  $635,000

Commercial Auto is fully reinsured, therefore the IRF anticipates the additional losses for claims brought under the commercial auto policy will be fully reimbursed by its reinsurer.  However, the premium price for the reinsurance will increase, and the IRF is unsure of the amount of the potential increase.  The estimated increase of commercial auto is calculated based on actuarial models and studies based on losses.  Therefore, the expenditure impact for the commercial auto may be different than the actuarial analysis due to reinsurance. 

In addition to the total $17,470,000 increase due to the amended tort liability limits, the IRF will have an increase in expenditures to modify policy coverages for certain insureds from a limit of $600,000 to $1,000,000.  Currently, the IRF offers insurance policies with limits of $600,000 or $1,000,000.  All agencies that currently have an insurance policy with a limit of $600,000 will have to change to a policy with a limit of $1,000,000.  The IRF estimates switching all insureds from a $600,000 policy to a $1,000,000 policy will result in an increase of expenditures by $11,283,000.  The following is the increase in premiums for the policy shift from $600,000 to $1,000,000:

General/Tort:  $4,115,000

Professional Medical Liability:  $2,154,000

Commercial Auto:  $4,446,000

School Bus:  $568,000

Overall, the expenditure impact to the IRF may be as much as $28,753,000 for the increase in losses paid across all liability policies impacted.  The following is the total increase in premiums by insurance type:

General/Tort:  $13,950,000

Professional Medical Liability:  $5,715,000

Commercial Auto: $7,885,000

School Bus:  $1,203,000

The estimated increase in losses is based upon historical data, specific loss data, and other relevant information to project potential risk of future loss.  However, the actuarial analysis did not capture the potential impact that the modified limits would have on behavioral effects such as the potential increase in frequency of claims filed, potential increased time for negotiation, and the potential increased number of claims going to trial rather than settling in negotiation.  Therefore, the actual impact of the modified liability limits may vary from the estimate.  Additionally, this estimate does not include the potential impact of the allowance for recovery of any administrative, filing, or other court costs and 8 percent interest computed on the amount of the verdict or award from the date of the offer, regardless of the liability limits.