883 N.W.2d 511
S.D.2016Background
- In 2005 Kern was rear-ended; tortfeasor insured by Geico ($25,000 liability). Kern's Progressive policy provided $5,000 medical payments and $100,000 UIM coverage.
- Kern accepted $5,000 medical payments; later settled with Geico for $20,000 (Geico paid $5,000 subrogation to Progressive). Kern then sought UIM benefits from Progressive.
- Progressive retained Dr. Segal for an IME who concluded the crash was low-velocity and did not causally produce a left-shoulder injury; no photos of the tortfeasor’s vehicle were provided to the IME.
- Progressive made settlement offers (final pre-suit offer $12,500 over prior payments; pre-trial offer $45,000). Kern rejected offers and sued Progressive in 2009 for unpaid UIM benefits and bad faith refusal to settle.
- At trial (March 2015) the jury awarded Kern $43,649.97 in gross damages, reduced by $25,000 previously received, resulting in $18,649.97 UIM recovery; the jury found no bad faith. Post-trial motions (JNOV/new trial and attorney’s fees under SDCL 58-12-3) were denied.
- Kern appealed six evidentiary and procedural rulings (verdict form credit, exclusion of counsel letter, exclusion of other-acts evidence, quashing subpoenas, denial of attorney fees, denial of JML/new trial); the Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Verdict form subtraction of $25,000 | Only $20,000 from Geico should be deducted; $5,000 paid to Progressive in subrogation was improper | Jury should subtract total prior recoveries (including $5,000 Progressive paid) to avoid double recovery | Affirmed: court properly instructed jury to subtract $25,000 (prior receipts) from gross damages |
| Exclusion of letter from plaintiff’s counsel responding to IME | Letter showed Progressive ignored objections to IME and demonstrated bad faith; letter admitted only for non‑hearsay purpose | Letter would make plaintiff’s counsel a witness and improperly inject attorney opinion into evidence; prejudicial | Affirmed: exclusion proper under rules barring advocate-witness and because evidence was cumulative of testimony already elicited |
| Exclusion of other-acts evidence (Bjornestad) | Prior case involving same adjusters showed intentional undervaluation; probative of absence of mistake | Prior case had different outcome and would cause mini-trials, confuse jury, and waste time | Affirmed: trial court did not abuse discretion; limited probative value outweighed by prejudice and risk of confusion |
| Quashing subpoenas for out-of-state Progressive employees | SDCL 58-6-39 makes insurer subject to service; employees could be compelled | Statute applies to insurers, not individual employees; court lacked personal jurisdiction over nonresident employees | Affirmed: subpoena quashed because court lacked personal jurisdiction over nonresident employees |
| Award of attorney’s fees under SDCL 58-12-3 | Progressive’s offers and conduct showed the denial was vexatious and without reasonable cause | Progressive never denied coverage, made a substantial pretrial offer exceeding verdict, and had reasonable basis (IME) for its positions | Affirmed: trial court’s factual finding that conduct was not vexatious or without reasonable cause was not clearly erroneous |
| Judgment as a matter of law / new trial | Errors asserted elsewhere warranted JML or new trial | Arguments restate other issues and were waived or unsupported | Affirmed: no new arguments; motion properly denied |
Key Cases Cited
- Zahn v. Musick, 605 N.W.2d 823 (S.D. 2000) (special verdict forms are within trial court discretion)
- Diggs v. Tillman, 985 So. 2d 767 (La. Ct. App. 2008) (UM carrier entitled to credit for medical payments to avoid double recovery)
- Tripp v. Western Nat. Mut. Ins. Co., 664 F.3d 1200 (8th Cir. 2011) (distinguishing bad faith and statutory vexatiousness/SDCL 58-12-3 analysis)
- Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752 (S.D. 1994) (finding bad faith does not automatically satisfy SDCL 58-12-3)
- Crabb v. National Indemnity Co., 205 N.W.2d 633 (S.D. 1973) (same principle on separate statutory analysis)
- Lien v. Lien, 674 N.W.2d 816 (S.D. 2004) (review of subpoena quash/discovery rulings for abuse of discretion)
- Phipps Bros., Inc. v. Nelson’s Oil & Gas, Inc., 508 N.W.2d 885 (S.D. 1993) (trial court granted broad discretion on evidentiary/subpoena rulings)
- Mitzel v. Employers Ins. of Wausau, 878 F.2d 233 (8th Cir. 1989) (affirming subpoena quash under South Dakota law absent abuse of discretion)
- Royal Bahamian Ass’n, Inc. v. QBE Ins. Corp., 745 F. Supp. 2d 1380 (S.D. Fla. 2010) (prior-claims evidence probative value outweighed by prejudice and risk of mini-trials)