§ 12.5 Intervention

• Library: Guide to South Carolina Liability and Property Insurance Law (SCBar) (2019 Ed.)

§ 12.5 Intervention

In coverage matters, issues related to intervention typically involve the insurer attempting to intervene in the underlying lawsuit. South Carolina Rule of Civil Procedure 24 governs the procedure for intervention and allows intervention of right and permissive intervention and is modeled after Federal Rule of Civil Procedure 24. Rule 24 provides, in pertinent part, as follows:

(a) Intervention of Right. Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute confers an unconditional right to intervene; or (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.
(b) Permissive Intervention. Upon timely application anyone may be permitted to intervene in an action: (1) when a statute confers a conditional right to intervene; and (2) when an applicant's claim or defense and the main action have a question of law or fact in common.. ..In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.

The rule "permit[s] liberal intervention particularly where [], judicial economy will be promoted by the declaration of the rights of all parties who may be affected."²⁸ A movant making an application to intervene of right under Rule 24(a)(2) must meet the following requirements:

(1) establish timely application; (2) assert an interest relating to the property or transaction which is the subject of the action; (3) demonstrate that it is in a position such that without intervention, disposition of the action may impair or impede its ability to protect that interest; and (4) demonstrate that its interest is inadequately represented by other parties.²⁹

"'A party moving for intervention under 24(a) bears the burden of establishing a right to intervene, and must do so by satisfying all four requirements.'"³⁰ "Failure to satisfy even one of these requirements is sufficient to warrant denial of a motion to intervene as a matter of right."³¹

With regard to permissive intervention, the United States Supreme Court has explained that this provision "dispenses with any requirement that the intervenor shall have a direct personal or pecuniary interest in the subject of the litigation."³² Courts consider the following in determining whether a motion to intervene under Rule 24(b) may be granted:

(1) the motion to intervene must be timely, (2) an applicant's claim or defense and the main action have a question of law or fact in common, and (3) in its discretion, the court shall determine that the intervention will not unduly delay or prejudice the adjudication of the rights of the original parties.³³

Further, "[w]hen there is a common question of fact, the court may allow intervention in the interest of judicial economy."³⁴ Also, courts are to be "mindful that the purpose of Rule 24 — to prevent multiplicity of suits involving common questions of law or fact — should not be ignored."³⁵ Courts have broad discretion in granting permissive intervention.³⁶

South Carolina courts will also consider timeliness in considering whether the party seeking to intervene will be allowed to do so. The Fourth Circuit has established the following factors to consider when determining whether a motion to intervene is timely: "how far the suit has progressed, the prejudice that delay might cause other parties, and the reason for the tardiness in moving to intervene."³⁷ "If a motion to intervene is untimely, it 'must be denied.'"³⁸ For example the Fourth Circuit has determined that while entry of a final judgment in a matter is not an absolute bar to filing a motion to intervene, the filing a motion to intervene more than 60 days after the entry of a final judgment when "there was no pending litigation in which [the claimant] could intervene" the motion was untimely.³⁹

However, the Fourth Circuit has also explained that "[w]here intervention is of right, 'the timeliness requirement of Rule 24 should not be as strictly enforced as in a case where intervention is only permissive.'"⁴⁰ In addition, "timeliness is not an absolute [and i]t should be evaluated in light of all the circumstances."⁴¹

The United States District Court for the District of South Carolina determined that the insurer was not allowed to intervene in the underlying lawsuit in Lewis v. Excel Mechanical, LLC.⁴² The insurer provided a defense to the insureds in the maritime tort lawsuit under a reservation of rights. After the insureds filed their answer in the case, the insurer moved to intervene, which motion was opposed by both the plaintiff and the insureds, who argued that the insurer did not have a direct, substantial, and legally protectable interest in the subject matter of the lawsuit to intervene as of right. The court agreed and denied the motion to intervene.⁴³

In denying the motion, the court reasoned that the insurer could not intervene as a matter of right and explained that "'a party will not be permitted to intervene as a matter of right unless it has a direct, substantial, and legally protectable interest in the action.'"⁴⁴ The court further explained that "[t]he term 'interest' in this context defies a simple definition" and must be "'significantly protectable'" and "must not be remote or contingent."⁴⁵ The court reasoned:

Penn National contends that because it "would be required to fund at least part of Plaintiff's recovery if coverage under the Policy exists . . . [it] is the real party in interest and thus has an interest in the subject matter of this action." [] By this very statement, however, Penn National acknowledges that it has nothing more than a contingent interest in the present action as there has yet to be an adverse coverage determination by this Court in the declaratory judgment action filed by Penn National on April 8, 2013.⁴⁶ [] Penn National does not have an interest in the subject matter of this action, that is, Mr. Lewis's allegedly negligent operation of the Boat that, in turn, led to Mrs. Lewis's tort claim for damages against Defendants. Instead, Penn National's interest is the amount it may have to pay Defendant Excel (i.e., Mr. Lewis) if Plaintiff wins. Stated differently, Penn National interest is in how much of any future award may be attributable to damages contemplated by the

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