Settlement of $3,250,000.00 following the Carroll v Isle of Palms Pest Control, LLC and SPM Pest Management, Inc. Landmark Supreme Court Victory
The McKnight Law Firm, on behalf of Jimmy Carroll, the former Mayor of Isle of Palms, SC, agreed to a settlement for 3.25 million dollars ($3,250,000.00) with Isle of Palms Pest Control, Inc. (IOP) and SPM Management in relation to claims of termite damages to his former home on the Isle of Palms; as well as other consequential damages such as loss of use/rental value, destructive testing expenses, and the cost of home demolition. Jody McKnight filed suit on behalf of Mr. Carroll in October 2015.
To understand the significance of the final “landmark” decision, one must understand the facts of the case and related laws:
In This Article:
Termite Prevention Methods
The Exterra Bait Station product and application is an alternative method to prevent ground-based termites from entering a structure. The termite prevention company installs several approximately 8 inch deep, 5 inch wide “bait stations” around the perimeter of the property, depending on the size of the structure. Upon inspection, if the technician sees termites, he or she then applies a chemical that the termites take back to the ground-based termite colony, which kills the colony and prevents termites from entering the adjacent structure.
The other traditional method of termite prevention is the use of a “termiticide” chemical; the most popular trade name is Termidor; and likewise, Termidor requires specific methods, such as trenching and drilling around and through concrete slabs and piers, with specific numbers of gallons applied to protect a structure from termite infiltration.
Termite and other pest prevention companies are regulated by the South Carolina Department of Pesticide Regulation at Clemson University. Pesticide Regulations require termite prevention companies to follow the specific label instructions on whichever method they are using to protect homes and commercial buildings from termite intrusion.
Continue Reading: The Facts of the Case →
The Facts of the Case
Mr. Carroll initially contracted with Defendant IOP in 2003 by signing an Exterra Bait Station agreement that specifically stated that this system did not involve the use of termiticide. The owner of IOP abandoned bait station monitoring around 2005 without notifying Mr. Carroll; and applied termiticide in a manner not in accordance with label instructions. Both circumstances were violations of pesticide regulations. On yearly inspections from 2004 through 2011, IOP reported no termites being in the Carroll home.
In 2012, IOP changed dissolved that corporation and re-opened as SPM Management Company, with the same owner. IOP had an extensive history of violations between the late 1980’s and 2011. SPM reported no termites in 2011, 2012, or 2013.
In 2013, SPM entered into an “asset only” sale of his business to Terminix Services, Inc. Terminix did not assume existing liabilities. On first inspection in January 2014, Terminix found the Carroll home to be infested with termites; and further inspections revealed termite damage throughout the home.
The owner of IOP and SPM retired from the business and failed to respond to multiple requests for assistance from Terminix and Mr. Carroll; so Mr. Carroll was forced to hire the McKnight Law Firm, file suit, and move out of his home into a rental home he owned.
Continue Reading: The Litigation →
The Litigation
The McKnight Law Firm hired a Ph.D. Entomologist, Maxcy Nolan, to advise contractors on standards for “destructive testing,” the process of making tear outs to determine the full extent of damages. Once complete, the home was gutted down to framing materials; and exterior sheathing was removed. Once complete, we presented the insurance carriers for IOP and SPM with a $900,000.00 repair bill. They responded with an offer of $330,000.00, based on a differing scope of work they concluded, based on an argument that Carroll’s contractor made excessive tear outs.
Following extensive litigation involving multiple structural engineering, entomology and contractor experts on both sides, the parties and their respective attorneys were present and ready to start a two-week trial on February 19, 2019. Carroll was prepared at that time to present approximately 1.5 million dollars in economic losses, including a home re-build, loss of use/rental value on his family home and rental home he had to move into, destructive testing costs and other items.
Continue Reading: The Economic Loss Rule Motion →
The Economic Loss Rule Motion
Two weeks prior to trial, Defendant SPM filed a Motion to limit Mr. Carroll’s damages under the “economic loss rule” to $250,000.00, the amount set forth in the Exterra Bait Station Agreement (commonly known as a termite bond). Never in the State of South Carolina had any appellate court allowed for the economic loss rule to be applied in the context of a service contract. The economic loss rule has always been related to the sale of a product, where the only damage is to the product itself. But nevertheless, the trial court granted the Defense’s Motion and bound Carroll to the contractual remedy of $250,000.00.
Knowing this was wrong, and determined to prevail, the attorney Jody McKnight immediately filed a Notice of Appeal of the trial court’s order. Following pandemic delays and a loss in the S.C. Court of Appeals due to an incomplete analysis, Mr. Carroll ultimately prevailed in a landmark S.C. Supreme Court victory dated July 23, 2025. See Carroll v. Isle of Palms Pest Control, Inc. and SPM Management Co. Inc. 446 S.C. 177, 918 SE2d 532 (2025).
The Landmark Supreme Court Decision
The “landmark” significance of the 2025 Carroll Supreme Court decision is that it clarified the scope of the economic loss rule for service contracts in South Carolina. The Supreme Court identified eighteen (18) exceptions to the economic loss rule throughout United States, and ultimately decided to simplify matters and make clear that parties to a service contract will not be bound to contractual remedies based on that doctrine, like Supreme Court holdings in Florida and Tennessee.
Landmark Ruling: The Supreme Court made clear that parties to a service contract will not be bound to contractual remedies based on the economic loss rule doctrine, like Supreme Court holdings in Florida and Tennessee.
The court reiterated the longstanding rule of law that a party to any contract will not be bound to contractual terms where the party performing the contract engages in negligent activities outside of the activities reasonably contemplated in the contract, and that negligent “active malfeasance” causes damages. Therefore, in the Carroll case, because Defendant IOP went outside of the Exterra Bait Station contract and applied termiticide negligently, in violation of regulations and industry standards, in addition to abandoning the bait stations without telling Carroll, the court held that Carroll was entitled to all available remedies, including the cost of re-building of the home, loss of use/rental value, destructive testing costs, tear down costs, and other consequential damages.
Continue Reading: The Settlement →
The Settlement
A doctrine called the “collateral source rule” prevents a party who acts negligently and causes damages to benefit from third party payments. Therefore, even though Carroll sold the land in 2024 and made a substantial profit from the sale, those profits could not be used as an offset to damages. Therefore, introduction of the current re-build amount ($2,335,000.00) and loss of use/rental value ($1,000,000.00), would have been admissible at trial; and the defense may have been precluded from introducing evidence of Carroll’s profits from the sale of the land. Time and circumstance ultimately worked in Carroll’s favor, resulting in the final settlement for $3,250,000.00.
Our thanks go out to attorneys Robert T. Lyles, Jr. of Lyles and Associates, Charleston, SC; and Lee Anne Walters of Walters Law, Beaufort, SC, for their assistance on the appellate matters; and Katie McElveen of McElveen Law, LLC for her post-appellate assistance with legal research and strategy, leading up to this settlement. Large complex cases require a team with diverse talents. We are very grateful for their assistance on this landmark S.C. Supreme Court decision, and the fair settlement for Mr. Carroll that resulted from having all remedies available as a result.
Questions About Service Provider Negligence?
If you’ve suffered property damage due to a service provider’s negligence, McKnight Law Firm can help you understand your rights under South Carolina law.
