Joint and Several Liability: Should a Party Who is 1 Percent Responsible Pay 100 Percent of a Settlement?

Articles, News | April 26th, 2018

Marking the one-year anniversary of SC Supreme Court ruling in the case Smith v. Tiffany.

Today, April 26, 2018, marks the one-year anniversary of a South Carolina Supreme Court case that could put SC businesses at risk for being unfairly targeted in lawsuits.

The Court’s majority decision in Smith v. Tiffany is a giant step backwards for our state’s legal climate. South Carolina previously had moved away from the “pure joint and several liability” rule and toward a modified rule in 2005. The Smith v. Tiffany decision significantly changes the 2005 reforms’ intended outcome. The majority of the Court felt it had no choice in its decision because of language conflicts in the law.

The result of Smith v. Tiffany and the changes it brings to the interpretation of SC’s apportionment of fault statute enables plaintiffs to decide who to sue in cases where multiple parties are responsible for an accident, injury, or other types of damages. A person or entity chosen to be sued may be on the hook for the total amount of damages, even if they were least responsible among all the parties.

In addition, it means that if a plaintiff signs and accepts a settlement and signs an agreement not to sue with the other party or parties who may be primarily responsible, the judge or jury cannot apportion fault to that person or entity. Parties who have settled beforehand are immune from being sued and cannot be added to a suit and then apportioned any fault by the judge or jury. Furthermore, after the case is over, the defendant or defendants cannot try to recover their overpayment of damages from the parties who settled earlier and escaped having to pay their fair share.

This scenario could leave a defendant who is minimally at fault, but who has deep pockets or adequate insurance coverage, paying 100 percent of a judgement.

The net effect is that lawyers basically are encouraged to sue everyone and settle with those who have minimal insurance coverage or lack insurance, leaving any solvent bystander at risk for bearing the entire judgement. That’s a real problem because businesses, municipalities and other organizations could face skyrocketing legal and insurance costs.

The case:

Smith v. Tiffany is a perfect example of what happens under pure joint and several liability. The plaintiff, Smith, was injured when his vehicle was hit by another vehicle as it pulled out of a gas station. Smith settled with the other driver for the other driver’s $25,000 minimum coverage policy limit. At the time of the accident, there also was a semi-truck with mechanical problems parked on the side of the road near the station. Smith sued that truck’s driver and the trucking company, saying they were at fault for blocking the other driver’s view. The SC Supreme Court’s decision allowed the trucking company to face 100 percent liability even though its percentage of fault was small.

In its Smith v. Tiffany decision, the SC Supreme Court ruled that language in Act 27 (H.3008), passed by the state legislature in 2005, was ambiguous in certain places. Most supporters agreed Act 27 had established South Carolina as a “modified joint and several liability” state, meaning every party in a damages case would be apportioned fault and would pay their fair share of damages based on their percentage of fault. Only if other parties were unable to pay or settle could a party (as long as they are determined by the court to be greater than 50 percent at fault) be forced to pay 100 percent of the damages.

The legislature must now intervene to clarify the language of Act 27 or South Carolina will remain essentially a pure joint and several liability state, which can harm our businesses.

Trouble for businesses if South Carolina follows the pure joint and several liability model:

  • Parties with deep pockets are exposed to huge risks because injured parties are more likely to go after those with substantial assets, even if their percentage of fault is small.
  • Anyone who is adequately insured or has substantial assets becomes a target, regardless of fault.
  • If one party is uninsured or insolvent, the risks unfairly shift to the others.
  • Businesses in SC, especially small ones, could be one lawsuit away from going out of business.
  • Insurance costs will rise making it hard to get or afford liability coverage.

The SC Civil Justice Coalition believes South Carolina must return to a modified joint and several liability rule. We believe in proportionate assignment of liability based on actual fault and that defendants should only pay their fair share. In other words, if you are five percent responsible for an accident, you should pay five percent of the damages. That is not only fair, but it’s also the way it’s done in most other states. It is the model we need to follow in South Carolina.

To find out more, go to the Smith v. Tiffany SC Supreme Court decision.

Another look at Smith v. Tiffany from law firm Smith Moore Leatherwood: http://www.smithmoorelaw.com/transportation-industry-newsletter-5

The South Carolina Civil Justice Coalition (SCCJC) serves as the united voice for the business community on tort and workers' compensation issues; coordinating lobbying, legal, grassroots and public relations activities.