Bertelsen v. Allstate Insurance Co.
2011 SD 13
| S.D. | 2011Background
- Bonnie Bertelsen sustained severe injuries in a December 26, 2005 car crash; medical expenses totaled about $382,849.92 and she was out of work for eight months.
- Bonnie’s workers’ compensation claim for the injury was denied by AIG in February 2006, with notice sent to the SD Department of Labor.
- Bertelsens held a $100,000 Allstate medical payments coverage, which contains a workers’ compensation exclusion and a conformity-to-state-statutes provision.
- Allstate initially did not pay medical benefits, despite being informed of AIG’s denial; by spring 2006 it had Bonnie’s medical records and bills well over policy limits.
- In June 2006 Allstate asserted the workers’ compensation exclusion and stated it would exhaust all coverage before medical payments would be paid.
- Bonnie settled with AIG for workers’ compensation benefits in 2008 and the Bertelsens settled various other insurer claims; total recoveries approached $1.2 million with about $660,000 remaining after subrogation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to pay medical benefits after workers’ comp denial | Bertelsen: Allstate breached SDCL 62-1-1.3 and policy terms by not paying medical benefits when AIG denied workers’ compensation. | Allstate: Denial of benefits was properly tied to the workers’ compensation exclusion and investigation could be completed later. | Bertelsen v. Allstate duty to pay immediately; remand to determine contract damages. |
| Fairness of lack of summary judgment on breach and damages | Bertelsen: Bertelsen controls; trial should resolve contract damages amount. | Allstate: Summary judgment proper given the denial and policy language. | Remand for trial on contract damages; issue of damages linked to intent remains unresolved. |
| Jury instructions on breach and bad faith | Bertelsen requires instructions reflecting breach of duty to pay and not fairly debatable claims; improper instructions harmed Bertelsen. | Allstate: Instructions were permissible; Bertelsen mischaracterized the claims. | Instructions on breach and bad faith were improper; remand for new trial with correct guidance. |
| Punitive damages submission | Bertelsen: Malice or willful misconduct may support punitive damages if supported by evidence. | Allstate: No basis to submit punitive damages absent adequate evidence. | Remand to allow punitive damages issue to be submitted if a record shows a reasonable basis for punitive damages. |
| Attorney-client privilege in claims file | Bertelsen: Coverage opinions outside counsel should be discoverable. | Allstate: Coverage opinions were protected by attorney-client and work-product privileges. | Coverage opinions likely protected by attorney-client privilege; not addressed if waivable on remand; trial court to decide on repleading and evidence. |
Key Cases Cited
- Bertelsen v. Allstate Ins. Co., 2009 S.D. 21 (S.D. 2009) (SDCL 62-1-1.3 governs immediate payment of medical benefits when workers’ comp is denied)
- Crabb v. N. Dak. Ins. Co., 87 S.D. 222 (S.D. 1973) (bad faith standards and implied misconduct considerations)
- Hart v. State Farm Mut. Auto. Ins. Co., 248 N.W.2d 881 (S.D. 1976) (standard for good faith and damages in insurance disputes)
- Kappenman v. Stroh, 704 N.W.2d 36 (S.D. 2005) (statement of case guidance and standards for jury instructions)
- Riggs v. Syrovatka, 64 N.W.2d 297 (S.D. 1954) (settlement and instruction procedures in civil cases)
- DM&E v. Acuity, 771 N.W.2d 623 (S.D. 2009) (attorney-client privilege scope in bad-faith insurance cases; legal capacity exception)