Court affirms $20 million drowning verdict against Lack’s Beach Service

A South Carolina appeals court on July 16 affirmed a $20 million negligence verdict against Lack’s Beach Service, highlighting critical exposure for insurers and key considerations around liability coverage limits.

Cases like this are the kind insurers pay close attention to, as they underscore significant questions surrounding liability risk, training standards, and policy coverage adequacy.

The incident took place on Aug. 24, 2018, in Myrtle Beach, S.C. Zerihun Wolde was vacationing there with his fiancée, Meswaet Abel, and their four children. Around noon, Wolde and two of his children entered the ocean near Sea Crest Resort, close to lifeguard stand L-22 operated by Lack’s Beach Service. Lack’s was contracted by the City of Myrtle Beach to manage water safety services and rent beach gear.

While swimming, Wolde and his children became caught in a dangerous rip current. Trial testimony confirmed Wolde visibly struggled, repeatedly yelling for help and gasping for air over a period of ten to fifteen minutes. Despite multiple bystanders noticing Wolde’s distress, Lack’s lifeguards failed to promptly respond. Eventually, bystanders - not lifeguards - rescued Wolde from the water. Wolde was transported to a hospital, where he was pronounced dead from drowning shortly afterward.

During the trial, critical issues emerged regarding the lifeguarding practices of Lack’s Beach Service. Court testimony revealed lifeguards employed by Lack’s carried out dual roles, both monitoring swimmer safety and selling beach concessions like umbrellas and chairs. A key eyewitness specifically described seeing a lifeguard at stand L-22 seated facing away from the ocean, conversing with beachgoers shortly before the drowning occurred.

Evidence further indicated that Lack’s lifeguards were inadequately trained, failing to fulfill the required 40 hours of open-water lifesaving instruction stipulated in Lack’s franchise agreement with the city. The franchise agreement specifically required training consistent with standards of the United States Lifesaving Association (USLA). Lack’s also admitted at trial it was understaffed that day, falling short of the required ratio of mobile lifeguards. Furthermore, lifeguard stand L-21, the nearest stand to Wolde’s distress location, was completely unmanned during a lifeguard lunch break and displayed no flags to warn swimmers of the hazardous rip currents.

The jury awarded approximately $13.73 million in compensatory damages - $10 million for wrongful death damages and an additional $3.73 million specifically awarded for Wolde’s conscious pain and suffering prior to his death. Moreover, the jury found Lack’s Beach Service had acted recklessly, awarding an additional $7 million in punitive damages.

During the punitive damages phase of trial, Lack’s testified it held only $3 million in total liability insurance coverage. Lack’s also testified it had a negative net worth - roughly negative $473,350.51 - as of Dec. 31, 2021.

Although specific insurance policy clauses were not explicitly detailed in the appellate court’s opinion, the substantial size of the verdict presents significant issues for insurers. This case serves as a stark reminder to liability insurers about the importance of accurately underwriting risks, clearly communicating coverage limits, and carefully reviewing policy provisions regarding punitive damages and coverage adequacy.

The July 16 appellate decision is final at this court level, leaving Lack’s - and by extension, its insurer - responsible for addressing a judgment greatly exceeding available insurance coverage. It’s a critical development for insurers, emphasizing the essential need for proactive risk management, clear policy language, and thorough discussions about policy scope and limits.