Helmbolt v. LeMars Mutual Insurance Co.

HELMBOLT, Merlin Ardis Olson and Olson, Appellees,

Eben Plaintiffs and

LeMARS MUTUAL INSURANCE

COMPANY, INC., Defendant Appellant.

Nos. 15292.

Supreme Court of South Dakota.

Argued Oct. 1986. April

Decided attempted Pieplow, vigorously to set-

chael $100,000. represented case tle the for $50,000 policy limit and of Helmbolt’s $50,000 through available Ol- additional coverage. underinsurance LeMars sons’ $50,000 to than without refused offer more rights a waiver of under their un- Olsons’ Vrooman, Falls, plain- V. Sioux for David nothing provision, claiming derinsurance appellees. tiffs and paid policy had to be on Olsons’ until a Moore, Timothy McGreevy J. of Rasmus- $50,000 judgment in excess of was entered Falls, sen, Kading for McGreevy, Sioux & against Helmbolt. appellant. and defendant trial, repre- At this initial Helmbolt was attorney by and also sented LeMars' MILLER, Judge. Circuit private counsel for the excess claim. judgment from a en- appeal This is an admitted and the case Helmbolt ap- which awarded tered on a verdict jury solely on the was submitted (Olsons) Ardis Eben Olson dam- pellees and damages. County jury of The issue Deuel ages against appellant LeMars Insurance $160,000 ($150,000 awarded (LeMars) in an action for failure Company Eben) $10,000 and in favor of Ardis good settlement attempt to make a faith against Olsons and Helmbolt. The court policy of a claim within limits. We affirm $1,239.70 against imposed also costs part. reverse in and thereafter, Helmbolt. Soon LeMars $50,- $50,000 policy, on Helmbolt’s Olsons FACTS costs, for policy, 000 on Olsons’ driven February In an automobile $101,239.70. left balance total of (Helmbolt) by Merlin Helmbolt crossed the $60,000 judgment. due of on the with a vehicle driv- center line and collided $100,000 requested partial satisfaction of Olson, causing per- her severe en Ardis Helmbolt, filed in favor of and accident, time injuries. sonal At the attorney complied. Olson’s and carried automo- both Helmbolt Olson trial, subsequent this initial Sometime policies with LeMars. bile $4,500, agreed pay Olsons and Helmbolt $50,000 policy provided bolt’s assign against Olsons his bad faith claim per covering accident. return, gave LeMars. In Olsons Helmbolt included Ardis and her husband Eben complete- judgment. Ol- $100,000 motorist cover- underinsured $55,500 of sons therefore received all but age1 required LeMars County rendered in Deuel insurance available difference between the present against bringing suit party, through negligent LeMars. $100,000. That in this case amount $50,000. equaled began February, Olsons this cur- In action behalf commenced suit rent assignee of Helmbolt. County, Dakota. Ardis themselves as Deuel South suffering, alleged throughout the suit sought pain They damages for Helmbolt, negoti- income, LeMars failed to personal injuries, and other lost good limits. sought damages for ate in within losses. Eben loss damages, $60,000 during They sought actual It clear consortium. became fees, damages, attorney’s negli- punitive discovery phase that Helmbolt had interest, LeMars denied the and costs. gently caused the accident. addition to road, against Helm- wrong counterclaimed being side of the he claim and bolt, claiming right to collect driving under the influence while counsel, in favor trial, Mi- entered Prior to alcohol. liability policies. SDCL coverage mandatory 58-11-9.4. in all automobile 1. Underinsurance begin premise LeMars asserted that a right through subrogation to Olsons’ act or deal in faith is found in all rights, by payment virtue of the insurance contracts. “A covenant is im- LeMars made to Olsons under the underin- plied in an insurance contract that neither provision surance pol- the LeMars/Olson anything injure will do rights icy. See SDCL 58-11-9.6. LeMars further receiving of the other in the benefits of the asserted that assigned since Helmbolt had agreement. This covenant includes a Olsons, his claim to were now Olsons sub- litigation settle claims without in appro- ject counterclaim, and priate cases.” v. Kooyman Farm Bureau by recovery by Olsons must be offset (Iowa Mut. 1982) Ins. amount. (citing 7C Appleman, J.A. Insurance Law Practice, (1976); Keeton, and Lia- § trial, Prior to the bad faith filed bility Insurance and Responsibility motion summary judgment on LeMars’ Settlement, 1136, 67 Harv.L.Rev. 1137-38 counterclaim, alleging partial that the satis- (1954); Neal v. Farmers Exchange, Ins. faction of filed in favor Helm- 910, Cal.Rptr. Cal.3d P.2d bolt included the in which LeMars (1978)). It finding is settled of bad subrogation right. now claimed a The trial may faith grounds be warranted on the denied court the motion and ruled that the that an company pursue insurance did not claim was viable negotiations settlement in- same modify LeMars was therefore allowed to tensity, good interest and faith it would the satisfaction to reflect that the policy have if there were limits. portion by of the claimed subro- Kunkel, supra. Kooyman, gation was unsatisfied. Olsons then filed complaint, an amended separated which Kunkel, As previously we in indicated assigned their claims by from those array there anis of factors to in consider bolt. No amended answer or counterclaim determining whether an insurer’s refusal (cid:127) by was filed LeMars. equivalent to settle is ato breach of its duty. These factors include: hearing The trial court the claim (1) strength injured LeMars directed out the the Helmbolt derived of the claimant’s at case on of liability claim the close of Olsons’ case. the issues and dam- This left (2) ages; only attempts by in- Olsons’ claim for bad faith the insurer to failure duce settle within the limits of the the insured to contribute to a settle- underinsu- ment; (3) policy. proper- rance failure of the insurer to The returned a verdict ly investigate favor of Olsons and the circumstances so as to LeMars in $55,500. in- the amount of ascertain the evidence the (4)

sured; rejection the ad- insurer’s DECISIONS agent; (5) attorney vice of its own failure of the insurer to inform the principal issue for us to deter offer; (6) compromise sured the mine is whether LeMars acted in bad faith amount financial risk to each by attempting to settle the within com exposed in the event of refusal bined limits of its two insureds. settle; (7) the fault of the insured past have the addressed the issue inducing rejection the insurer’s by whether an insurer acted bad faith by misleading compromise offer toas settling within limits. Crabb facts; (8) any the and other factors tend- National Indemnity Company, 87 S.D. ing negate to establish or bad faith 633; 205 N.W.2d 63 A.L.R.3d 715 of the insurer. (1973); Security Kunkel v. United Ins. Co. at 84 S.D. 168 N.W.2d at 727. 116, 168 Jersey, New 84 S.D. N.W.2d 723 of (1969). case, however, considering factors, presents foregoing to- unique gether overwhelming circumstances in neg that both the with evidence record, ligent party viewing his victims are in the covered contained company. light the same most favorable to evidence this time is LeMars verdict,2 easy judg- pay refusal at it is most to sustain from the That benefit arises Clearly Helmbolt was liable Mutual. ment below. being retain and use really company’s able to to Olsons for —this money. paid to If that were the medi- dispute. never in time, present they at could regarding injuries Ardis’ testimony cal they interest which will now expenses and loss make of medical 15% evidence losing will be sav- This unrebut- of income was unrebutted. ing. put (1) have us Ardis was se- ... would ted included: evidence [Y]ou refusing injured by negligent- position driver Catch-22 verely a drunk persons vehicle; (2) settle- Ardis was underinsured ly operating a motor limits, ment, (3) although you concede those orthopedic Ardis’ negligence; without any pay- make having you and then refuse to surgeon diagnosed her as 27.5% (4) under the terms of the Olson partial disability; medical ment permanent $18,000; limits have not (5) expert because the Helmbolt wit- bills exceeded This appears to evi- loss of future been exhausted. projected ness LeMars, Also, of faith on the of was not dence bad income. loss of consortium it an refusal of a liability was is effective seriously disclaimed and con- limits, is a it refusal to demand Finally, LeMars knew that Helm- ceded. requires litigation negotiate, and it be- the finances to cover not have bolt would your two of insureds for sole tween 205 judgment. an excess See company. of the benefit N.W.2d at 638. subsequent pretrial contains record to the above'evidence intro- addition parties, correspondence between the with Helmbolt, in the suit there duced continuing to demand Olsons’ counsel good of proof LeMars’ lack was other of refusing LeMars to offer he testified that faith. Olsons’ counsel $50,000, spite of the uncontro- more than case in excess of evaluated the damages evidence. liability and verted advised LeMars. Documents writ- so internal use indicated the ten for LeMars’ of agree observations Ol- the case to be itself evaluated ample evidence counsel. There was sons’ $60,000 $80,000. LeMars, spite worth of its LeMars’ faith and violation of investigation of internal and evaluation its relationship to or of its fiduciary one both case, merely to settle for offered “Equal was not consideration” insureds. $50,000, upon of Ol- conditioned a release of these insureds. given to the interests counsel, sons’ underinsured claim. conduct, Due to LeMars’ Olsons were to Le- Pieplow, responded by Mr. letter rigors to endure the uncertain- forced among proposition, stating, other trial, Mars’ potential of and Helmbolt faced ties things: judg- responsibility for an excess personal occurred. It seems ment—which fact acknowledge receipt your is duty good its ignored again clear LeMars you

letter ... concede wherein its inter- purpose protecting own limits, pay them for the Helmbolt but refuse to readily apparent this It also seems ground on it not be est. over that would conduct LeMars company[.’] It court that the fair to insured or our ‘our nothing me has the suit appears to that such decision gamesmanship. To a com- allow consequences your more than to both adverse posture LeMars assumed Helmbolt, pany take the Mr. because he will insureds: best, would, public policy at violate damages and a now be sued for excess Olsons, state, settled law to mention the damages; punitive claim company to requires an insurance they subjected to the which because are now negotiate faith. Fur- litigation for settle and risks and uncertainties of thermore, case was Thus, conduct ap- LeMars’ you have limits conceded. revocation unilateral pears only beneficiary of the tantamount 1986). (S.D. Home, See, e.g., Tufty N.W.2d v. Kostel Funeral Inc. Duke of mandatory coverage. termination County, Boehrs v. Dewey On its 74 S.D. face, is conduct in (1951). bad faith. N.W.2d we presume legislature should not intend argues that under SDCL 58-11- See, an ed absurd result. e.g., Metier v. 9.5 and -9.6 had to offer Olsons Cooper Co., Inc., Transport 378 N.W.2d their coverage prior underinsured motorist (Iowa 1985); Zieger Osteopathic Hos entry Inc., pital, Wayne v. County, 139 Mich. bolt. LeMars asserts its refusal to make App. 630, (1984); 363 N.W.2d 28 State an such offer in good therefore was faith. Sinica, 220 Neb. purchased At the time policy, their (1985). adopt To interpretation LeMars’ provided:3 SDCL 58-11-9.5 virtually statute would destroy the Subject to the terms conditions of long-established practice settling legit such coverage, underinsured motorist imate congesting cases to avoid the court company agrees its own system and to relieve insureds from the uncompensated insured for damages as expense, rigors and unknowns of To trial. may recover he on account of an automo- require any payment before bile accident recov- underinsured motorist claim ered the owner the other ve- would be holding tantamount to that such hicle exceeds the limits thereon. cases could never be settled before trial. Coverage shall be limited to the differ- proposition totally ludicrous. ence of the the vehicle of argues additionally party recovering poli- that the or such smaller lim- cy language unambiguously requires may as its he select less the amount the underinsured owner by the insurer reduce his party of the recov- against claim against. (Emphasis added.) underinsured ered tort-feasor judgment to a precedent as condition to provides: SDCL 58-11-9.6 payment of underinsured benefits. The The issuer of the underinsured motor- relevant provision states: ist subrogated any shall be to obligated shall not be to pays, amounts it so upon payment any payment make because in- bodily of assignment shall have an judg- jury to which applies this insurance ment other to ex- which arises of ownership, out main- money tent of pays. or tenance use of an high- underinsured Nothing in the above statutes re way vehicle until: quires an insured to reduce claim (a) of the limits all under bodi- judgment prior to payment tort-feasor to ly injury liability bonds or insurance poli- of underinsurance benefits. SDCL 58-11- applicable cies at the time of accident employs 9.5 the permissive word “may” have been payment exhausted of mandatory rather than word “shall.” settlements; judgment or Thus, the avenue for of settlement these (b) the insured has secured a Chap cases out of court is open an street. the owner of the underinsured ter 58-11 adopted of our code to was highway vehicle excess of such liabili- protection lessen the by requiring intended ty policy. (Emphasis bonds insurance purchase of underinsured motorist cov original.) erage. legislature Had the intended to re quire judgment prior payment to of This court pro must construe all coverage, underinsured policy together it would have and visions of the and ascertain could interpreting have said so. In legisla possible. the parties, the intention of if tion, this court Co., that Peterson v. Ins. language cannot add Great American 74 simply there. Petition is not Thompson Famous (1952); S.D. 52 N.W.2d 479 of Brands, Inc., Ass’n, (S.D.1984); v. State Automobile Ins. S.D. present purposes 3. For quoted the current version of enactment in the text. change the statute contains material from duty give to

412, 18 (1945); to well-established Hemmer-Miller siveness its N.W.2d 286 an insured’s equal consideration to ... Ins. Co. Development Co. v. Hudson of meaning- to would tend become York, 238 N.W. 342 terests 59 S.D. New supra). (quoting Lange, less.” Id. at (1931). SDCL 58-11-39. Obvi See also concept applies equal force to an with subject ously, an must be purchaser underin- duty to the of insurer’s interpretation and not one ato reasonable short, In we find the verdict surance. absurdity. E.g., an amounts to which appropriate amount be Johnson, 352 Mut. Ins. Co. v. North Star light all the facts and awarded (Minn.App.1984); Olguin v. N.W.2d 791 present. circumstances 71 Wis.2d Allstate Ins. (1976); Appleman 13 J.A. & J. N.W.2d 694 argues it entitled to Lastly, LeMars Law and Practice Appleman, Insurance reduced have the verdict above, (1976). explained under As § subrogation interests in the its be absurd the facts this case would right judgment against mandatory prior was rule that in LeMars’ counterclaim was asserted Olsons’ underin- to LeMars’ argued LeMars that Ol- Olsons. coverage. sured subject offset as Helm- sons were above, assignees. As noted bolt’s argues ir additionally on the coun- summary moved its respective any breach grounds portion terclaim the duty, judgment must set aside since judgment against Helmbolt in prove damages did not as asserted interest In of LeMars’ failure settle.4 result by the was satisfied Kunkel, supra, supra, and request. judgment entered at LeMars’ equal approved awards court response argument, LeMars moved against the amount the taken modify judg- the court the satisfaction policy limits. In Kunkel insured exceeded ment to reflect that the Crabb, however, the insured was the denied satisfied. The trial court either sued his insurance tort-feasor who granted summary judgment, Lé- motion assigned his company or cause of action modify the satisfaction of Mars’ motion injured party. justifica to the The do so claim judgment, and ruled upon imposing liability the insur tion for against Helmbolt. How- was still viable equal in company to the amount which ance ever, not the trial court would allow judgment exceeded was assignment from jury to consider the company’s faith failure to claim Helmbolt as an offset to Olsons’ being subject in its insured settle resulted appeal Olsons also on LeMars. Crabb, this excess amount. for review, by way argu- this of notice issue (quoting Lange 205 N.W.2d at 638 Fidel summary ing judgment for their motion York, Casualty Company New ity & improperly denied. was (1971)). 290 See Minn. agrees court with LeMars 300 also v. Travelers Ins. Strand provide (1974). in fact 58-11-9.6 does 219 622 the SDCL Minn. N.W.2d motorist insurer case, is victims who are the underinsured present the tort rights subrogated to the of its The suing company. own insurance will be their pays. insurer for amount the assessing for sured justification same However, question that Lemars is no not there equal the excess does exist $101,293.70 partial satisfaction filed a plaintiffs are not sub insured Olsons. received from judgment judgment in How ject to a that amount. discharge the ever, purported to that if satisfaction this court also stated judgment portion of the Olsons’ required company an insurance were LeMars claimed in which “respon- against Helmbolt liability amount its the excess judgment, less the 000 excess It how the reached its verdict. is obvious $60,- subsequent to trial. equivalent is awarded right. The issue thus becomes judgment whether aspects entered will be in all partial prevented satisfaction the sub- affirmed. rogation, or was whether it modifiable as

the lower court ruled.5 HENDERSON, J., concurs. necessary “it is ac- first note WUEST, C.J., FOSHEIM, Retired unsatisfied,

tion that it be Justice, concur result. may and an action not be maintained satisfied, particu- which has been J., MORGAN, concurs in result larly appears the satisfaction where part and part. dissents in Judgments record.” Am.Jur.2d § (1969) added) omitted). (emphasis (footnotes MILLER, Judge, Circuit provides: SDCL 15-16-16 SABERS, J., (Prior disqualified. to his Any partial any judg- satisfaction of appointment Supreme aas Court ment rendered docketed in the circuit Justice, Robert A. Miller was may courts of this state be made and appointed in his capacity as a circuit manner; upon noted the records like judge court place to serve in the thereupon all judgments and liens matter, Justice Sabers created, thereby must be ... canceled record will reflect participated that he discharged to the extent the en- judge.) as a circuit court upon tries so made dock- added.) (Emphasis

et and more. WUEST, Chief (concurring Justice in the result). required A judge trial to exer deciding cise sound discretion whether result, I concur in the but not in the equitable altering relief of following language opinion the majority granted. should be appears to hold bad faith as a matter Mfg. Thompson, Plano Co. v. 21 S.D. of law: (1907). Furthermore, “[n]eg- N.W. 149 ignored It seems clear LeMars its ligence in making gener mistake ... will purpose protect- ally equitable in a result denial of relief.” ing its own interest. It also seems readi- Mistake, 54 Am.Jur.2d Accident or Sur ly apparent to this court that the conduct (footnote

prise (1971) omitted). See § of LeMars to the suit Pomeroy, Equity Jurisprudence also J. nothing gamesman- bolt more was than (5th 1941); ed. Equity 27 Am.Jur.2d § ship. To allow a to take the (1966). 34§ posture assumed, would at best only neg- Since LeMars and LeMars state, public policy violate of this ligent filing partial satisfaction, in the requires to mention the settled law which as this “mistake” was left unattended nego- an insurance to settle and nearly years, judge three the trial should in tiate faith. Le- granted summary have the motion for in Mars’ conduct this case was tanta- as matter of and ruled law that mount to a revocation or termi- unilateral subrogation inappropri- LeMars’ claim was coverage. mandatory nation of On its ate. face, that is conduct in bad faith. However,

We have reviewed the other issues raised my opinion in suffi- there was appeal on and find them to be without jury cient evidence for the to find bad faith. merit. I am authorized to state that FOSHEIM, Justice,

Although joins we the reverse trial court on Retired in summary issue, the the final in this concurrence result. point challenge

5. At did Olsons the motion ified or vacated a court other than the one partial jurisdictional on in which entered the referred to the grounds. We therefore do not reach the issue satisfaction. judgment may whether a satisfaction be mod- Any settle- majority ignores. MORGAN, (concurring in result which the Justice policy automati- at under dissenting part). in ment arrived part, subrogation claim for Le- cally creates of the first issue in the result I concur by the lan- against Helmbolt clear Mars (the first two issues faith regarding bad provisions by the guage of the brief) and I dissent raised in LeMars’ 58-11-9.6, “The provides: of SDCL which subrogation the regarding the second issue motorist cover- issuer of the underinsured in LeMars’ (the issues rights last two any to subrogated amounts age shall be brief). upon payment shall have pays, and so language exception to the First I take judgment against the assignment of the LeMars’ opinion that states majority the money it extent of the other Helmbolt would have knowledge “that added.) hardly (Emphasis pays.” judgment” an excess to cover the finances comports to defend with LeMars’ determining considered is a factor be liability coverage. his Un- under of LeMars. on the bad faith I find as fact situation would der this issue, as faith denominated the bad On existed. no bad faith matter law that I in the majority opinion, concur by the exceeded the The fact that the verdict majority opinion the only. my In result is immaterial. limits combined ignore simple fact that this chooses to memos referred The LeMars internal distinct separate and involves two $80,- lawsuit damages only in sums Rather, the two of insurance. contracts resultant duties are contracts and their Nevertheless, pointed I having out what yolks eggs together like the two mixed grounds adequate to reverse believe be eggs. plate While the in a of scrambled majority in judgment, join I in the must extemporizes “catch-22” majority affirming posture letter, attorney’s language is LeMars raises no appeal. case on this degree slightest in the appreciate fails attacking the trial appeal in this sues by LeMars. the dilemma faced rulings. evidentiary instructions court’s Thus, rulings, be discussed instruc The first that should under our case,* afforded the law of the tions become case, agree disputes under the I would factual Under the facts decided compelled to probably guilty of I am therefore instructions. that LeMars would result. they opportunity if had an concur liability cov- limits of the offer the issue, deals with On the which second and had failed to erage in full settlement rights, respectfully dissent. I scenario that is not the factual do so. But Le- ruled before trial The trial court did offer the in this case. LeMars $50,- to a set-off of Mars was entitled settlement, the offer was in full but my opin- policy. paid under Olsons’ It demands of Olsons’ at- rejected. is the under the terms ruling correct ion this was relies, majority torney upon which the provision statutory attorney. The record Helmbolt’s satisfac- quoted I above. indeed attorney did reflects that Olsons’ relies, I majority as upon tion effect that Le- demand make some re- understand, given Olsons with limits of the combined settle for the Mars Helmbolt, spect to a Helmbolt, nor his at- coverages. Neither party. This not a LeMars was which action standing urge payment torney, have action, is a lawsuit, the so-called bad policy limits of any coverage beyond the in- and lies between lawsuit different liability policy. rely The insureds the insurer. sureds and faith, provisions show respect to the cov- With underinsurance rely be able insurer should I erage policy, their afforded Olsons under policies those same facing provisions point out the dilemma now * Chamberlain, (S.D. 1985). City Byre v. statutory

show the contractual rights. under the policies limits of the two plus represent- Both Helmbolt were paid by Helmbolt and another by their counsel ed own and there is no on the in this case. It is a fact of showing in this record that LeMars had life many that there are occasions where anything to do preparation injuries exceed the cover- Finally, satisfaction. the trial court age afforded insurance. That does not made no record of its for reneging reason make the insurers automatic insurers of ruling. on its earlier that excess. I would reverse the decision of the trial

court on this issue remand with judgment setting

structions to enter new

off the claim which Olsons as-

signed accepting pay- provisions policy.

ment under the of their

Thus, will have the

Case Details

Case Name: Helmbolt v. LeMars Mutual Insurance Co.

Court Name: South Dakota Supreme Court

Date Published: Apr 15, 1987

Citation: 404 N.W.2d 55

Docket Number: 15290, 15292

Court Abbreviation: S.D.