## Facts

- In 1976, Richard Shumpert bought a health insurance policy from Time Insurance Company that contained no subrogation clause.
- In July 1991, Shumpert was seriously injured in an automobile accident caused by a third party.
- Time paid $18,818.76 in medical expenses under the policy.
- The Shumperts sued the at-fault driver and later settled the tort claim for $75,000.
- Time repeatedly asserted a subrogation lien and claimed an “equitable right of subrogation” under South Carolina law.
- A legal assistant in the Shumperts’ lawyer’s office initially wrote that the firm would “honor your right of subrogation,” but later the Shumperts disputed any subrogation right because the policy lacked a subrogation provision.
- The Shumperts filed a declaratory-judgment action seeking a ruling that Time had no subrogation interest and also asserted bad faith based on Time’s subrogation demands.
- Time counterclaimed, seeking a declaration recognizing subrogation and asserting bad faith by the Shumperts.

## Issues

1. Whether a health insurer may obtain equitable subrogation from an insured’s third-party tort recovery when the policy contains no express subrogation clause, in light of S.C. Code Ann. § 38-71-190.
2. Whether the insurer acted in bad faith by asserting a subrogation claim without a contractual subrogation provision.

## Decision

- The Court of Appeals reversed the summary judgment recognizing Time’s subrogation right.
- The court held Time was not entitled to equitable subrogation against the tort settlement because the policy lacked an express subrogation provision.
- The court affirmed the denial of the Shumperts’ bad-faith claim, concluding Time’s position presented a legitimate legal question and did not amount to bad faith.
- The court affirmed the denial of Time’s bad-faith counterclaim.

## Legal Principles

- Health-insurance subrogation in South Carolina must be grounded in an express policy provision consistent with S.C. Code Ann. § 38-71-190; absent such a clause, a health insurer cannot recover from the insured’s third-party tort proceeds through equitable subrogation alone.
- Equity will not be used to supply a subrogation term omitted from the parties’ health-insurance contract, particularly where the legislature has addressed subrogation through a statute contemplating contractual inclusion.
- A party’s pursuit of an unsettled, colorable legal theory through ordinary litigation channels, even if ultimately rejected, does not by itself establish insurer bad faith.
- An attorney-office communication indicating a willingness to “honor” a claimed subrogation right does not create subrogation rights where none exist by contract or law.

## Conclusion

The court held a health insurer has no subrogation interest in an insured’s tort recovery without an express subrogation clause in the health policy, but it also held the insurer did not act in bad faith by litigating an unsettled equitable-subrogation theory.


Shumpert v. Time Ins. Co., 329 S.C. 605, 496 S.E.2d 653 (Ct. App. 1998)