Dispute Regarding Self-Insured Pool for Workers’ Compensation Liability Was at Least Partially Derivative Under South Carolina Law

Under the law of South Carolina, employers who do business in the state must provide a way for injured employees to receive the benefits to which they are entitled upon the filing of a South Carolina workers’ compensation claim.

There are generally two ways in which this can be accomplished. The employer may purchase a workers’ compensation liability insurance policy or it may qualify as a “self-insured” employer. With regard to the self-insured option, two or more employers in businesses of a similar nature may be allowed to enter into an agreement to pool their workers’ compensation liabilities for the purpose of qualifying as self-insurers.

Facts of the Case

In a case originating in the Richland County Circuit Court, the plaintiffs were members of a home builders’ association that, some years prior, had created a self-insurers’ fund  in order to fulfill their obligations under the law. After the defendant board of trustees announced their intent to wind down the fund and set up a new mutual insurance company, the plaintiffs filed a lawsuit seeking to challenge the board’s authority to use the fund’s assets in that manner.

The circuit court dismissed the suit, holding that it was a shareholder derivative action and not comply with the applicable pleading requirements of South Carolina Rules of Civil Procedure 23(b)(1).

The South Carolina Court of Appeals affirmed, agreeing that the fund was not a trust, the plaintiffs’ claims were derivative in nature, and the plaintiffs’ complaint did not allege a pre-suit demand as required under Rule 23(b)(1).

Decision of the Court

The State of South Carolina Supreme Court reversed and remanded the case for further proceedings, holding that it was error for the trial court to hold that the plaintiffs had failed to comply with Rule 23(b)(1). In so holding, the court noted that the plaintiffs had, in fact, sent a pre-suit demand letter to the defendants. Although the letter was not expressly incorporated into the plaintiffs’ complaint, the letter did constitute an adequate demand in the case. The trial court had held that it was precluded from looking at the letter to determine whether sufficient details were contained therein, but the appellate court disagreed with this ruling, observing that the trial court had been willing to consider multiple documents that were outside the “four corners” of the plaintiffs’ formal complaint and thus should have considered the pre-suit demand letter, as well.

The appeals court further held that, regardless of whether the defendant fund was a “trust,” because the action was at least partially derivative in nature, the pre-suit demand requirement of Rule 23(b)(1) was triggered.

Contact a South Carolina Injury Lawyer

There are many rules, regulations, and statutes that must be taken into consideration during the litigation of a South Carolina workers’ compensation case. If you or a loved one has been hurt and needs reliable legal advice concerning your claim, call the Patrick E. Knie Law Offices at 864-582-5118. We have offices in both Greenville and Spartanburg, and we offer a free case evaluation, so no money is required in order to get your case started.

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