Bertelsen v. Allstate Insurance Co.
833 N.W.2d 545
| S.D. | 2013Background
- Bertelsen sued Allstate for breach of contract and bad faith over failing to timely pay medical benefits under her Allstate Auto Policy after AIG denied workers’ compensation coverage.
- Bertelsen’s medical expenses exceeded $300,000; she pursued medical payments under Allstate’s policy and later settled with other insurers.
- Bertelsen had previously pursued Bertelsen I and Bertelsen II, where the court remanded for trial to address damages, intent, and punitive damages.
- Allstate initially denied timely payment, later became aware of AIG’s denial, and faced a June 2006 notification, with a disputed one-year gap before further communications.
- At trial, the circuit court awarded Bertelsen $33,000 contract damages, $150,000 compensatory, and $1.5 million punitive damages; the case was remanded for a new trial on contract damages, bad faith, and punitive damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the circuit court erred in denying judgment as a matter of law on bad faith and punitive damages | Bertelsen argues Allstate delayed payment with knowledge of no reasonable basis | Allstate argues evidence insufficient for bad faith and punitive malice | No; issues preserved; evidence supports bad faith and punitive damages; remand for new trial on punitive damages and bad faith due to evidentiary errors |
| Whether exclusion of AIG’s 2008 acceptance of workers’ compensation evidence was error | Exclusion prevented showing bad faith via later developments | Evidence of AIG acceptance not relevant to initial breach | Yes; exclusion was error; reversed and remanded for new trial |
| Whether attorney’s fees under SDCL 58-12-3 were properly awarded | Fees should reflect breach and bad faith; overall合理 | Fees improperly allocated or excessive | Waived; award affirmed to extent reasonable and tied to breach of contract and bad faith proceedings |
| Whether jury instructions adequately framed bad faith standard | Instruction 15 permitted awarding for negligent acts as bad faith | Bad faith requires intentional denial or reckless disregard | Instruction 15 to be rephrased to align with intentional/reckless disregard standard on retrial |
| Whether evidence of pre-accident bankruptcy and settlements were admissible | Evidence relevant to credibility and damages | Evidence prejudicial or irrelevant under Rule 408/SDCL 19-12-10 | Remanded for determination of relevancy and prejudice; admissibility to be reconsidered on retrial |
Key Cases Cited
- Bertelsen v. Allstate Insurance Co. (Bertelsen II), 796 N.W.2d 694 (2011 S.D. 13) (reaffirmed that bad faith requires more than debatable issues; remanded for new trial on contract damages, bad faith, and punitive damages)
- Bertelsen v. Allstate Insurance Co. (Bertelsen I), 764 N.W.2d 501 (2009 S.D. 21) (foundation: Allstate’s duty to pay medical benefits was not fairly debatable; factual issues on intent remained)
- Walz v. Fireman’s Fund Ins. Co., 556 N.W.2d 68 (1996 S.D. 135) (insurer cannot rely on claimant to supply controlling law; may be bound by statute/precedent)
- Dahl v. Sittner, 474 N.W.2d 897 (S.D. 1991) (complicity theory for punitive damages against a principal)
- Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752 (S.D. 1994) (defines malice for punitive damages; actual or presumed malice)
- Selle v. Tozser, 786 N.W.2d 748 (2010 S.D. 64) (standard for appellate review of verdict sufficiency and damages)
- Jacobs v. Dakota, Minn. & E. R.R. Corp., 806 N.W.2d 209 (2011 S.D. 68) (reviewing evidence in punitive/contract claims; defer to jury where reasonable minds could differ)
- Crisman v. Determan Chiropractic, Inc., 687 N.W.2d 507 (S.D. 2004) (factors for determining reasonableness of attorney’s fees under SDCL 58-12-3)
- Biegler v. Am. Family Mut. Ins. Co., 621 N.W.2d 592 (S.D. 2001) (standard for analyzing award of attorney’s fees against insurer)