2013 SD 44
S.D.2013Background
- Bertelsen, insured under Allstate's auto policy, sought medical payments after a severe 2005 car accident and AIG denied workers' compensation coverage.
- Allstate initially raised a workers' compensation exclusion only in June 2006, after Bertelsen provided AIG denial information and proof of loss.
- Bertelsen sued for breach of contract and bad faith; on remand after Bertelsen II, the circuit court awarded $33,000 contract damages and the jury awarded $150,000 compensatory and $1,500,000 punitive damages for bad faith.
- This Court previously held in Bertelsen I/II that Allstate's duty to pay was not fairly debatable and remanded for trial on contract damages and Allstate's intent; evidentiary issues were identified for retrial.
- On remand, the circuit court excluded evidence that AIG accepted Bertelsen's workers' compensation claim in 2008 and excluded Bertelsen's settlements with other insurers; trial proceeded with a bad faith/punitive damages verdict and post-trial fee decision.
- The court ultimately supplemented the contract damages to reach the $100,000 policy limit, awarded attorney's fees, and this Court remands for a new trial due to evidentiary errors and related instructional issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bad faith and punitive damages JMOL were appropriate | Bertelsen argued ample evidence supported bad faith and malice. | Allstate contends insufficient evidence of bad faith and malice. | Affirmed on bad faith and punitive damages; remanded for other issues. |
| Whether excluding AIG's 2008 acceptance of the workers' compensation claim was error | Exclusion of AIG acceptance prevented full bad faith defense. | Evidence of AIG acceptance is irrelevant to the initial breach date. | Exclusion was error; reversed and remanded for a new trial. |
| Whether jury instructions improperly framed bad faith liability | Instruction 15 allowed damages for negligent or reckless acts beyond lack of reasonable basis. | Instructions accurately described bad faith as intentional or with knowledge/reckless disregard. | Instruction 15 required narrowing; retrial mandated with corrected instructions. |
| Whether attorney’s fees under SDCL 58-12-3 were proper | Fees were appropriately awarded for pursuing contract and related claims. | Fees should be limited and properly segregated to recoverable claims. | Attorneys' fees affirmed; award upheld with proportional allocation. |
Key Cases Cited
- Bertelsen v. Allstate Ins. Co., 2011 S.D. 13, 796 N.W.2d 685 (S.D. 2011) (reaffirmed contract/bad faith standards and guided remand for new trial)
- Bertelsen v. Allstate Ins. Co., 2009 S.D. 21, 764 N.W.2d 495 (S.D. 2009) (held duty to pay medical benefits was not fairly debatable; remanded for trial on damages and intent)
- Walz v. Fireman’s Fund Ins. Co., 556 N.W.2d 68 (S.D. 1996) (insurer cannot rely on claimants to supply controlling law)
- Selle v. Tozser, 786 N.W.2d 748 (S.D. 2010) (standard for resolving sufficiency of evidence in jury verdicts)
- Jacobs v. Dakota, Minn. & E. R.R. Corp., 806 N.W.2d 209 (S.D. 2011) (abuse-of-discretion standard for JMOL and evidence evaluation)
- Biegler v. Am. Family Mut. Ins. Co., 621 N.W.2d 592 (S.D. 2001) (standards for awarding attorney’s fees and reasonableness)
- Sawyer v. Farm Bureau Mut. Ins. Co., 619 N.W.2d 644 (S.D. 2000) (threshold for awarding attorney’s fees in insurer disputes)
- Dahl v. Sittner, 474 N.W.2d 897 (S.D. 1991) (adopts complicity rule for punitive damages against principal)
- Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752 (S.D. 1994) (malice standard for punitive damages in first-party bad faith)
- Crism an v. Determan Chiropractic, Inc., 687 N.W.2d 507 (S.D. 2004) (fee award factors and reasonableness considerations)