In Palmetto Pointe at Peas Island Condo. Prop. Owners Ass’n, Inc. v. Island Pointe, LLC, 445 S.C. 543, 915 S.E.2d 501 (2025), the Supreme Court of South Carolina addressed the proper application of the state’s setoff doctrine when multiple defendants are found jointly and severally liable for the same injury in a construction defect case. The Court considered whether a non-settling defendant was entitled to reduce its liability by the full amount of a covenant not to execute settlement paid by a co-defendant’s insurer.

The dispute arose from alleged construction defects at the Palmetto Pointe condominiums.  The Palmetto Pointe Condominium Property Owners Association and an individual unit owner brought suit against multiple defendants involved in the construction of a condominium project, including the general contractor and Tri-County Roofing (“TCR”) alleging negligence, gross negligence, and breach of warranty. Before trial, the general contractor’s insurer paid $1,000,000.00 in exchange for a covenant not to execute against the general contractor. A joint and several verdicts was returned against the general contractor and TCR. TCR then sought to reduce its liability by setting off the payment made by the general contractor’s insurer.

The trial court denied TCR’s request for full setoff of the $1,000,000.00. The South Carolina Supreme Court reversed this decision and held TCR was entitled to setoff the entire $1,000,000.00 payment from the general contractor’s insurer.

The Court emphasized that South Carolina’s setoff principles aim to prevent a plaintiff from obtaining double recovery. Since the covenant not to execute was given in exchange for the $1,000,000.00 payment and related directly to the same indivisible injury for which TCR was found liable, the entire amount should offset the verdict. The Court rejected arguments to limit the setoff, holding that such limitations would undermine the purpose of the doctrine.

In South Carolina, when multiple defendants are alleged to have contributed to a single, indivisible injury, any pretrial settlement by co-defendants will reduce the exposure of remaining defendants through setoff. Plaintiff attempted to sidestep this doctrine by accepting payment in return for a covenant not to execute, rather than a release.