Isaac v. State Farm Mutual Automobile Insurance Co.
522 N.W.2d 752
S.D.
1994
Check Treatment

*1 ISAAC, Appellee, Edel Plaintiff

STATE FARM MUTUAL AUTOMOBILE COMPANY,

INSURANCE Defendant Appellant. Nos. 18396. Supreme Court of South Dakota. May

Argued Sept. Decided *2 May Carpenter A.

Edward C. and William Porter, Hill, Costello, Heisterkamp and Bushnell, Rapid City, plaintiff appel- lee. Feist, Ireland, Rapid Suzanne M.

Curt Sidney, Henry City, A. Harmon of Grefe Moines, IA, appellant. Des for defendant SABERS, Justice. trial

Following jury which the of law as a matter court instructed provi- set-off that the worker’s against public policy, as sion was void amount of in the awarded Insured $325,- $445,000 $100,000 policy, under the — faith, $20,000 In- punitive. bad cross-appeals. We appeals. Insured surer part. part and reverse affirm

FACTS (Isaac) 11, 1986, Edel Isaac December

On Farm Mutu- purchased insurance from State (State Company Insurance al Automobile Farm) Dodge Omni. injury liability coverage bodily provided for $100,000 per per- in the amounts son/$300,000 per It accident. also motorist because she had received (UIM) coverage in uninsured motor vehicle worker’s benefits. required identical amounts as under SDCL 18, 1990, Attorney Ray Septembеr On De- 58-11-9. (DeGeest) Geest advised State Farm that he *3 12, 1987, Isaac was rear-ended On March Williams, appearing place was Isaac of by being by a driven Lisa Bordeaux vehicle who had moved. State DeGeest (Bordeaux). employed by Isaac was relating Farm with all medical information to State of South Dakota as a social worker. $37,- and a of the accident breakdown operating her vehicle in the course was She compensation 533.94 in worker’s benefits re- employment of her at the time of the acci- ceived Isaac as of that time. On October following called Farm the dent. She State 19, 1990, Ryno advised DeGeest that there 17, day report the accident and on March absolutely no was uninsured motorist cover- 1987, signed Report she an Automobile Claim age available to Isaac because she had re- indicating sprain. that she suffered neck ceived worker’s benefits. De- Although répeatedly Isaac informed State demanding sent a letter to Farm Geest State think Farm that she did not Bordeaux had 25, payment policy of the limits on October coverage, State Farm advised 1990. Isaac that the accident was Bordeaux’s re- 29, Complaint Isaac filed a on October sponsibility and that Isaac was not covered damages $100,000. 1990for in excess of Bor- for this accident. Farm failed to in- State deaux State Farm filed Motions to Dis- form Isaac she had uninsured motorist benefits, miss Isaac’s claim for uninsured coverage. arguing the action was barred filed a claim for compensa- Isaac worker’s three-year statute of limitations. Their mo- tion which included reimbursement for her granted. appealed tions were Isaac on the expenses. began medical She medical treat- basis that the uninsured motor vehicle injuries 19, May ment for her neck opposed awas contract as to a tort action 1, 1990, May having On she was evaluated as governed by six-year and therefore statute permanent disability per- a 20% of the whole of limitations. State Farm conceded and son as a of result the accident. stipulated appeal to a dismissal of the and a June, 1988, Isaac mentioned the acci- of remand the action to circuit court. Rasmussen, attorney, dent Jackie again payment DeGeest demanded consulting separate whom Isaac was on a 28, 29, May limits on March 1991 and matter. Rasmussen contacted the State time, ofAs State Farm had made Farm claim office but does not recall what no of offer settlement on Isaac’s claim de- approximately information she received. spite payment three poli- demands for December, 1989, Isaac discussed the accident cy Complaint limit. Issac filed an Amended attorney, with another Mike Williams alleging June bad faith. (Williams). Williams contacted the State By 1, 1991, letter dated November Farm claims office on March Farm offered to settle all claims for the sum spoke Ryno (Ryno), spe- with Karla a claims $100,000. offer, however, State Farm’s cialist According State Farm. was Williams, conditioned dismissal of Ryno Isaac’s bad advised him that faith (Seim) claim. Isaac Superintendent offered settle Claims Ronald Seim $100,000, claim leaving open UIM accept the bad process. could service of faith claim. State Farm continued to de- 12,1990, March On a Summons was served mand that all of Isaac’s claims be dismissed Isaac on Bordeaux and State exchange $100,000. payment through assigned Seim. Seim the claim to Ryno. Ryno April 29,1993. Williams and met on juryA trial commenced on March 8,1993, provided Ryno copy April 1990. Williams with a of On rendered a verdict Report signed by awаrding $445,000, $100,- the Automobile Claim Isaac packet reports. Ryno $325,000 Isaac and a policy, medical 000 under the for bad faith $20,000 punitive. advised Williams that Isaac had no Following separate uninsured $94,789.60 Coverage shall not attor- Uninsured Motorists hearing, Isaac was awarded interest, any $30,000 apply to insurer or self- fees, the benefit ney’s prejudgment worker’s, compensation appealed. under $16,542.70 insurer costs. disability of Review. benefits law or similar filed a Notice Isaac law_ Any payable amounts will be re- ISSUES (1) by: payment A duced made operator of the uninsured motor owner erred in rul- the trial court 1. Whether organization legal- be vehicle or ing that the worker’s (2) ly payment liable. A under the Liabili- provision in the Uninsured set-off (3) ty Coverage policy. payment A of this section Motor Vehicle payable made or amount because void as a matter *4 injury any compen- bodily under worker’s of law. disаbility sation law or benefits law or of a written contract Construction similar law. Valley law. Dirks v. question is a Sioux Ass’n, 426, 427-28 Empire Elec. 450 N.W.2d holding in support of our National Farm (S.D.1990). provisions of the uninsured The ers, Pennsylvania Supreme we cited to the liberally in are construed motorist statutes decision of Risks Ins. v. Court Selected Co, Regent coverage. v. Ins. favor of Clark (1989). Thompson, Pa. 552 A.2d 1382 520 (S.D.1978). 26, 29 270 N.W.2d According to Selected Risks: trial, requested Prior to The courts is varied rationale] these rule, validity of the trial court on the that the first, emerge, certain common themes but provision in compensation set-off worker’s by coverage paid is for uninsured motorist Motor Vehicle section of State the Uninsured give unin- separate premium, and to Following hearing, policy. Farm’s carrier a set-off based on sured motorist provision that the set-off was void court ruled the fortuitous existence of collateral against public рolicy. as and unenforceable result in a windfall to the source would The argues that this was error. second, carrier; uninsured motorist cover- provided part: policy any by statute and varia- age is mandated Liability Limits of statutory from that mandate should tions Coverage U third, legislature; from the work- come payable this cover- Any amount under a fraction men’s covers by any paid age shall be reduced amount cover, and a of what tort would payable to for the insured: or recognize does not dollar-for-dollar set-off compensation, c. worker’s under fourth, public reality; there is no benefits, disability law. or similar purchasing ad- policy against an individual Apply Coverage Do Not When U W coverage to ditional uninsured motorist THERE NO COVERAGE: IS family against and his protect himself depen- THE EXTENT IT BENEFITS: from a 3. TO which could result shortfall compensation. dency on workmen’s a. ANY COMPENSA- WORKER’S DISABILITY BENEFITS TION OR at 1388. 552 A.2d COMPANY. INSURANCE argues that if the worker’s recеntly legality addressed the This public policy, violates exclusion com- provisions for worker’s of UIM set-off only as to the minimum void voidable is pensation benefits in National Farmers Un- According coverages required statute. Bang, Property v. ion & Cas. Co. exceed policy limits where held that National Farmers 313 required statutory minimum provision purporting to reduce UIM policy “a law, responsibility state’s financial paid by compensation is benefits worker’s coverage liability to the is limited at public policy.” Id. void as a matter statute, $25,000. support required policy lan- The National Farmers’ 320-21. Cimarron Ins. position, State Farm cites provided: guage at issue (S.D. Croyle, remedy singular no under the scheme Co. N.W.2d 1992). insurance, liability mandatory the South legislature provide elected to for a Dakota policy lim Cimarron held that “where the coverage system dual of insurance and “it the insur minimum, statutory its exceed the coverage re legislature is for this reason that the made liability er’s is limited to the ” quired by responsibility financial coverage mandatory State’s ‍​‌​​​‌‌‌‌​‌‌​​‌‌​​​‌​‌‌‌​‌​‌‌​​‌​​​‌‌‌​‌‌​​​‌‌‌​‍uninsured motorist Cimar- at 885.1 statute. Unlike every in this automobile issued ron, however, around the this case revolves state.” 58-11-9, pro interpretation of (citation omitted)). Id. at 718 liability policy of vides that no motor vehicle Dakota be issued South policy provided bodily inju Isaac’s respect registered with motor vehicle $100,- liability ry coverage in the amount of principally garaged in this state unless person/$300,000 per per accident. coverage uninsured motorist statutorily required Isaac was bodily injury or therein “in limits death purchase motorist in the uninsured equal coverage provided by to the such $100,000 per person/$300,000 per amount of bodily injury and death [.] ”2 (Emphasis under accident SDCL 58-11-9. added) (As noted the district court equal limits here were did not exceеd but Co., Baker v. Continental Western Ins. *5 statutory required by the minimum SDCL (D.S.D.1990): F.Supp. 716 Having purchased 58-11-9. this amount of Dakota’s uninsured motorist statute South coverage, protec Isaac was to its full entitled in [] should be viewed the context of a against tion as the UIM insurer or carrier. public policy expanding nationwide the 62-4-40,4 and Under SDCL 62-4-393 SDCL coverage provided by insurance carriers. employer paid compen an who has worker’s coverage To effectuate for victims of finan- cially irresponsible subrogation. motorists thus left with sation benefits is to entitled Croyle, Any policy insuring government 1. "When Cimarron Ins. Co. v. 479 N.W.2d owned vehicles (S.D.1992) spoke against may required provide [house- out such not be to uninsured motor- exclusions, (as legislature hold] the the final arbi- coverage. ist public policy) quickly change ter of acted to result” and "amended South Dakota's financial provides: 3. SDCL 62-4-39 (SDCL 32-35-70) responsibility law to allow comрensation paid If has been awarded Brandenburg household exclusions.” v. Allstate employee under this title and the has recovered Co., (D.S.D.1993). F.Supp. Ins. damages person, employer from the hav- another provides ing paid compensation may 2. SDCL 58-11-9 in full: the recover from the employee equal insuring against resulting such an amount to the amount of policy No loss from liability imposed by bodily compensation paid by employer injury the law for or to the em- any person arising ployee, necessary death suffered out of the the less and reasonable ex- ownership, penses collecting maintenance or use of a motor vehi- the same. may delivery cle be delivered or issued for in this respect any registered state with to vehicle motor provides: 4. SDCL 62 4 40 garaged principally or in this state unless cover- title, compensation If is awarded under this age supplemental is or thereto therein employer having compensation, paid the the or bodily injury equal in limits for to or death the ' having become liable therefor collect in his coverage provided by policy bodily inju- such injured employee, own name or that of the or his death, ry protection persons in- deceased, personal representative, any if from legally sured thereunder who are re- entitled to person against legal liability other whom damages operators cover from owners or exists, damage liability the amount of such uninsured motor vehicles and hit-and-run motor injured employee shall hold for the benefit of the bodily injury, vehicles because of or sickness deceased, personal representative, or his disease, death, including resulting therefrom. However, amount of collected in excess coverage required by the' this section compensation paid employee amount of such may not exceed the limits of one thou- hundred representative, proportionate his less the bodily injury neces- sand dollars because of to or death sary expense collecting person subject reasonable of one in one accident and same, expenses may person, attorney’s the limit for one three include an hundred thousand bodily injury thirty-five per fee dollars because of to or death of not in excess of cent of dam- collected, accident, persons ages subject finally two or more one unless so and shall be requested by approval department. additional is insured. distinguishable A. Waiver. and State We find Cimarron merit. argument

Farm’s without correctly “The failure of a court to fully jury instruct the is not reviewable un Farmers, legis- if the As noted National objection exception less to the instruc grant carriеrs a lature had intended UIM identifying tion the defect therein with suffi compensation benefits re- set-off worker’s particularity cient was taken or a written insured, by the it could have statutori- ceived correctly stating instruction the law was re Farmers, ly provided one. National Billars, quested.” Wells v. at under this 320-21. 15-6-51(b). (S.D.1986); Isaac Farmers, court’s decision in National proposed following jury instruction: provision purporting policy to reduce You are instructed as matter of law paid by UIM benefits worker’s provision that the offset contained in the public policy. matter of National is void as a policy Farm auto for workmen’s Farmers, ruling at 320-21. The trial court’s contrary paid benefits is against provision that the set-off was void as public policy and statutes of the State public is affirmed. Dakota and is South. therefore void. response, argued: giv- trial court erred in 2. Whether the Well, pretty my position it’s obvious ing Instruction Nо. 20. argued this has been several different times, course, and the is entitled to Jury provided: Instruction No. 20 know that. You ruled as a law matter of are instructed as a matter of law You provision now that that provision that the offset contained void, prejudicial but to leave it at that is Farm auto for workmen’s you because don’t instruct the further *6 contrary compensation paid benefits is to liable, however, Farm that State is not public policy the and statutes of the State the to settle a claim where it’s due failure Dakota and interpretation coverage of South is therefore void. to an issue of previously which is not ruled the (cid:127) pro- that You are further instructed this Supreme give Dakota Court. To .South interpreted by vision has never been the worded, nothing this instruction as is more Supreme South Dakota Court and this is nothing less than a directed verdict. you may of in one the factors consider determining or not whether State Farm’s

position to this clause in insur- relative extremely prejudicial for this It would be fairly ance contract was debatable and rea- anticipate say to because we didn’t Court sonable under all of the circumstances. you might policy provision how rule on this negligent that Farm is as a matter State argues that the submission interpretation law in their of the jury this instruction was error because it testimony conceded when is “needlessly, erroneously, prejudicially Carpenter I’m sure Mr. that there was jury Judge’s advised the conclusion Supreme decision no South Dakota Court that this Court would invalidate the off-set concerning this precise question on this provisions policy relating of State Farm’s to provision policy, in Farm so the the State receipt compensa- an insured’s worker’s jury for the is whether or not State issue Farm, According tion benefits.” to State interpretation Farm took an unreasonable gave lip “Instruction No. 20 service to this provision handling of this case afterthought concept, critical but as an just question to tell which is a fact to its needless declaration the error you’re ruling provision them that now adjusters, supervisors, State Farm’s trial ex- was void is not sufficient. counsel, and, perts up to indeed trial the eve crippling unimagina- argument by A response of trial. more blow is to this State paragraph the second to ble.” Isaac counters that State Farm waived the trial added objection concerning the fact that jury to this instruction. Instruction No. 20 giving Instruction No. yet trial court erred had not decided the Supreme Court Additionally, circuit State Farm had filed validity provision. Then the prevent any into the the entire instruction In Limine to reference court read Motion replied, ruling “That would the set-off record and State the trial court’s to my objection.” Although Isaac being contrary pub- take care of to provision was void as waiver, this constitutes State now claims was denied. policy. Farm’s Motion lic State following instruc- proposed Farm then Therefore, shows Farm suf- the record tion: ficiently objected the instruction and “this Beyer v. provi- of invited error.” Isaac’s auto contains is not a case Edel Cordell, 77 providing in effect that the

sion (“U” motorist claim cov- for an uninsured There was no waiver. by any erage) reduced amount shall be as error. B. Instruction No. 20 insured, Isaac,

paid Edel under to the jury benefits or similar question worker’s The undisput- law. In this case the evidence faith in Farm acted in bad whether State coverage at applicable ed that the “U” relying set-off its worker’s $100,000; of the accident was time denying coverage. an provision Whether Isaac had received worker’s Edel company actеd in bad faith is a compensation benefits from the State of question jury or other trier of of fact for the $38,- totaling approximately Co., South Dakota Security Kunkel v. Ins. fact. United (S.D.1969) at the when Farm offered time (stating that the 168 N.W.2d 723 $100,000 all to settle claims. The issue question good faith is a fact issue fact). is whether State Farm acted rea- jury should or other trier of sonably considering provi- said set-off question the bad faith based on determine sion at the time it extended the Farm at the facts and law available limits, for a dismissal of all claims. deny time it made its decision to covera ruling ge.5 the trial court’s later response inquiry by the court re- provision was void as a mat that the set-off instruction, garding proposed public policy ter of was not material rele ‘Well, already replied: you ruled as a Farm was vant to the issue of whether State just proposing of law and I’m that to matter acting in faith at the time it denied bad my protect record.” Isaac and State Farm coverage. Accordingly, it was error for the preserve continued to the record as their *7 jury ruling. trial court to advise the of its objections respective to Instruction No. 20 Whether this error constitutes reversible er during settling final instructions. question. ror next Court, please simply I Isaac: If it will ask for record I made morn- the same this C. Reversible error. ing paragraph on 2. Paragraph 2 which came from Court: provided by protection In addition to the Ireland, I Mr. believe. 2 paragraph of Instruction No. Yes, nothing I

Isaac: Your Honor. have precluded arguing Farm not from that at was else to add. they the time that relied the set-off Well, course, provision, on pre- there was no South Dakota case State Farm: we will fact, point. during closing argument, In disagree serve our record that we with the argued: Farm finding compen- State Cоurt that the workmen’s provision is under sation off-set void South you Judge given has an instruc- Grosshans object Dakota law and so to the instruction it’s void under Dakota law. tion that South on that basis. You, also, know, That’s his instruction. however, a pre- This record indicates that that there’s never been Su- decision, good regard preme in its claim that Court so at least one served its record Champion Fidelity alleged pay generally bad faith failure to 5. See v. United States cases Co., (S.D. Guaranty A discussion of 323-24 workers’ carrier. 1987) adopted two-prong appears test in this case in Issues 3 4. which Savio 759 that, guess, I thing of this trial is that 23 because the last sentence out resulted contradictory jury Although instruction. finally that will be determined is an issue appears last sentence somewhat contradicto- Supreme by our Dakota State South ry as claimed it is more do know that when we were Court. We fact, prejudicial. redundаnt than In the in- considering provision, there was a def- basically negligence struction indicates that policy provision provided inite contributory fault be a factor or the benefits. reduction of circumstance for the to consider in de- termining added.) bad faith. Additionally, Jury (Emphasis In- part: struction No. 14 Jury instructions are considered as a whole and will not be deemed erroneous if concerning this test bad faith [U]nder they sufficiently correctly appli ‍​‌​​​‌‌‌‌​‌‌​​‌‌​​​‌​‌‌‌​‌​‌‌​​‌​​​‌‌‌​‌‌​​​‌‌‌​‍ state the claims, you are further instructed that Co, Wegman law. cable Holmes v. Oil 492 company may challenge claims N.W.2d parties Both fairly which are debatable and can be held rely upon Kelly v. State Farm Mut. Auto. only intentionally hable where has (S.D.Iowa Co., 1991) F.Supp. Ins. recklessly pay denied or failed to a claim support, party claiming neither that the without a reasonable basis. law, Kelly, as stated in is incorrect. Kelly, plaintiffs alleged In detеrmining “In whether instruction duty good breached its faith and fair deal- error, prejudicial resulted the instructions ing. response, plead compar- Beyer, are reviewed as a whole.” fault ative as an affirmative defense. The Viewing at 770. these instructions N.W.2d contributory District Court held that fault is considering fact as a whole and action, not a defense the bad faith cause of precluded arguing State Farm was not from noting plaintiffs “[a] breach of obli- adjusters that it was not for its bad faith gations under the insurance contract does reasonably provision believe that the set-off duty good not excuse the from insurer was valid and effective at the time dealing.” faith and fair denied, State Farm has not shown that 20-9-2, contributory Under SDCL the trial court error in committed reversible negligence plaintiff is a defense giving Instruction No. 20. “in brought actions to recover injuries person property to a or to his caused giv- the trial court Whether erred negligence another.” SDCL 20-9- ing Instruction No. 23. actions, however, pred Bad faith must be negligence icated more than the of anoth Jury provided: Instruction No. 23 er. Negligence part on the of Plaintiffs former Champion Fidelity v. United States attorneys, any, does not excuse Defen- (S.D. Co., Guaranty *8 Company Farm dant State Insurance from 1987), adopted we the Travelers Ins. Co. v. duty good dealing. of faith and fair Savio, (Colo.1985), 706 P.2d 1258 two- However, whether or not Plaintiffs former pronged original test “for bad faith forth set attorneys deny caused State Farm to Co, ly in Anderson v. Continental Ins. 85 (1978)[.]” delay payment is a circum- benefits 271 368 The Wis.2d N.W.2d “requires plaintiff you may test a to demonstrate ‘an determining stance consider in absence of a reasonable basis for denial of whether or not State Farm had a reason- knowledge or reck benefits and the denying delay- able basis for her claim or disregаrd less of a reasonable basis for a ing payment Contributory benefits. denial,’ provides and which that an insurance is not a bad fault defense Plaintiff’s company only it will be held liable when cause action. faith * * * ‘intentionally a claim a denies without ” added.) argues (Emphasis Simpkins basis.’ v. Great reasonable West Cir.1987). Co, (8th giving Be- the trial court erred Instruction No. Cos. 831 F.2d 792 760 disputed that the must establish faith is an intentional tort of bad

cause Instruc- prejudicial. Id. instructions were predicat- not tort, one which is and therefore light 17 must be examined tion No. of con- negligence, the defense on mere ed jury instructions. Id. other available to tributory negligence was not Kelly, F.Supp. at 1340 764 Farm. See provided: Jury No. 14 Instruction (“[Ujnless specifically pro- legislature law, otherwise, may comparative fault statute bad faith South Dakota vides Under showing by prepon- where the a a apply to causes of action be established does not that: negligence as of the evidence recognize derance common law does not defense.”). above, State In view of the a (1) a That there was an absence of rea- Holmes, 492 error. Farm failed to show for the denial of sonable basis at 113. N.W.2d benefits; and (2) knowledge disregard of reckless giv- erred in the trial court 4. Whether basis for denial. reasonable failing ing No. 17 and Instruction Knowledge lack of a reasonable of a proposed give In- imput- may be inferred or basis for denial 2 No. and No. structions company where there ed to the insurance provided: 17 “In con- Jury Instruction No. to facts or to is a reckless indifference company act- sidering an insurance whether proofs the insured. submitted faith, may charac- you consider the ed in bad However, concerning under this test bad any negligence and extent of ter claims, you faith are further instructed arguеs company.” State may challenge company that an insurance “[wjhile ‘accurate,’ it is this instruction is fairly can claims which are debatable and misleading. fatally incomplete and thus only where it has intentional- be held hable qualification this con- the further Without ly recklessly pay a denied or failed to requested cept, in Defendant’s as embodied claim without reasonable basis.7 invited No. and was Instructions solely by faith issue to determine the bad While Instruction No. itself negligence.”6 reference to Defendant’s misleading, In- incomplete and have been accurately Da-

struction No. 14 stated South above, jury As noted instructions regarding faith as set-forth in kota law bad (S.D.1987) a whole and are not erroneous Champion, are viewed as Is- N.W.2d they correctly the law and inform the “that state sue 3. The was not instructed Co, jury. Cody negligence D. Jones & factor for a Edward could be the sole (citаtions (S.D.1993) faith,” rather, omit bad but determination of ted). party seeking company that an insurance “can be As the to set aside advised instructions, intentionally or held hable where it has verdict because of erroneous reasonably prudent pro- proposed No. 2 fails to conduct itself as a 6. State Farm's Instruction would under the same or similar circum- insurer vided: Rather, to breach its stances. for its conduct the South Dakota law You are instructed that faith, duly good an insurer must act intention- company provides not also that an insurance is, ally. knowledge act with That must liable for the failure to settle a claim where the disregard basis reckless that it lacks reasonable judgment or is due to a mere error of refusal for its actions. "Intentional" means company’s part, or mistake on the insurance injury defendant wanted to cause or knew that *9 coverage question which has where there is a injury substantially certain to from its occur interpreted by the South Dakota Su- never been disregard” conduct. "Reckless means that the interpretation upon preme relied Court and the deliberately disregarded high degree defendant by company was not unreasonable. the insurance probability injury would occur from its provid- proposed Instruction No. 9 conduct. ed: duty good Additionally, defi- An insurer does not breach its Instruction No. 15 simply it a mistake or acts for "intentional” and "reckless disre- faith because makes nitions gard." negligently. negligently An acts when it insurer

761 245, recklessly pay Keyes, denied or failed to a claim Gamble v. 43 S.D. 178 N.W. (1920). 870, Presumed, malice, legal (cid:127)without a reasonable basis.” State has 872 ‍​‌​​​‌‌‌‌​‌‌​​‌‌​​​‌​‌‌‌​‌​‌‌​​‌​​​‌‌‌​‌‌​​​‌‌‌​‍instructions, hand, that the on the other is failed demonstrate malice which the law whole, imputes were erroneous. infers from taken as a or to certain acts. Noah, 296, 303,

Hannahs v. 83 S.D. 158 properly 678, the trial (1968); 5. Whether 2,§ N.W.2d 682 52 Am.Jur.2d punitive the issue of dam- Thus, submitted person may P 163. while the not act ages jury. to the ill-will, may out of hatred or malice never- imputed person theless be the acts will- 10, 1992, April On the trial court held an fully wantonly injury to the of the other. evidentiary hearing punitive damages un- context, however, In this we have said: der SDCL 21-1-4.1. The trial court issued Findings of Fact and Conclusions of Law and Malice exemplary as used reference to that, convincing concluded based on clear and damages simply doing is not of an evidence, there was reasonable basis to act, injurious implies unlawful or willful, guilty believe that State Farm was complained the act of was conceived in required by wanton or malicious conduct as spirit of mischief or of criminal indif- pro- 21-1-4.1.8 Isaac was allowed to obligations. ference to civil discovery. ceed with (S.D. Sittner, 897, Dahl v. 474 N.W.2d 900 21-1-4.1, ap- Under SDCL the trial court 1991) Hannahs, (citing 83 S.D. at plies 682). prеsumed at “A claim N.W.2d mal convincing a clear and evidence standard by demonstrating ice can be shown a disre determine, any may Case, gard before such claim rights of others.” discovery jury, Flockhart, submitted to or to (citing be at 891 N.W.2d 467 N.W.2d 475). whether there is a reasonable basis to at willful, wanton, believe there has been [] State Farm claims the trial court part or malicious conduct on the denying erred its Motion to Dismiss the party against. claimed This statute mere- punitive damage claim because there nowas ly requires convincing clear and evidence presumed evidence of actual or malice. The to show a reasonable basis. Flockhart v. trial court’s determination that there was a (S.D.1991). Wyant, 467 N.W.2d puni reasonable basis to submit the issue of Thus, proponents’ prelimi- is a burden tive to the will not be dis nary, proof quantum lower-order than showing absent a turbed court’s proof must be established at trial. Such Case, findings clearly of fact are erroneous. prima punitive damages. facie case for (citation omitted). 488 N.W.2d at 891 S.D., Vreugdenhil v. First Bank supporting There tri is evidence (S.D. Murdock,

Case v. position al court’s that State Farm acted in 1992). disregard rights reckless of Isaac. Malice is essential element a claim Included in the actions taken however, punitive damages, evidencing disregard malice suf- this reckless is the fact support exemplary damages may ficient to that when State Farm did offer their actual, fact, $100,000, pre- be either malice limits of the offer was conditioned sumed, legal any malice. Actual malice is a on a release Isaac of bad faith claim mind, positive may respect state of evidenced that she have with to State injure positive handling desire and an- Farm’s intention of the claim. Clear and other, convincing actuated hatred or ill-will to- evidence existed to form a reason person. present punitive wards that Malice is so defined able basis to the issue of find, provides: hearing 8. SDCL 21-1-4.1 shall after a and based clear evidence, convincing that there is a reason- alleging punitive exemplary claim willful, damages, any discovery relating able basis believe there has been before thereto part may be commenced and such wanton or malicious conduct on the party before claim fact, against. be submitted to the finder of the court claimed *10 purchaser jury. spoke not Farm with the of the the The trial court was State damages to any damage bump- to the rear regarding Id. car clearly erroneous.9 purchase of the at the time of as least er car 5, early photo- 1993. Initial as as March in de- the trial court erred 6. Whether that time graphs were taken at and on proof. nying Farm’s State offer 12,1993, adjuster the took addi- about March pictures bumper of the tional car. At argues trial the State time, adjuster bumper had the allowing a later the in not Farm to court erred State bring removed to trial as exhibit. to was no visible introduce evidence there bumper or Isaac’s damage to the rear end of proof, In offer of denying State Farm’s the Farm, According to State this was rele car. a trial that this was crucial issue court noted impact on the force which vant evidence duty update had a State Farm credibility also went to the of Isaac. interrogatories discovery. pretrial to the prior had the evidence confer- majority allows a SDCL 15-6-83 divulge the yet ence and failed to names of circuit to make and judges each court at the the or the evidence time of governing practice inconsis- witnesses amend rules not conferenсe, the or even within reasonable Chapter rules contained in 15- tent with the 15-6-83, prior time trial. State Farm has failed to pursuant demonstrate an abuse of discretion on the adopted Judicial Circuit has the Seventh part of trial court. requiring litigants exchange civil local rule pretrial days conference two be- checklists pretrial The

fore the scheduled conference. trial court Whether erred requires parties checklist to disclose their attorney’s awarding fees, pre- Isaac witnesses, testimony, the nature their interest, judgment and costs. trial exhibits. and a list of objected to the award of attor- Following proof, offer of interest, ney’s fees, prejudgment and costs. that at trial court found the time of the conference, 1993, pretrial March Attorney’s A. fees. any of proposed Farm did not list wit- though nesses or exhibits at issue their even rule, general attorney may only “As а fees identity bumper and the was known was specifically be awarded contract when fact, possession. pro- State Farm’s City authorized statute.” Sioux Falls posed evidence and its was made existence (S.D.1994) (ci- Kelley, 513 N.W.2d court and than known to the trial Isaac less omitted). tation trial court awarded days three before the trial was to com- attorney’s Isaac fees under SDCL 58-12-3 mence. provides proceed- which all actions or ings against compa- an insurance commenced evidentiary rulings pre “A trial court’s are ny type or certificate of sumptively reviewing correct. the trial insurance, appears kind of if it from the ruling, court’s we must if the trial determine company evidence has Opp its discretion.” that such refused to court abused v. Nieuws loss, ma, pay the full amount of such A re transcript of offer such or without view of the State Farm’s refusal vexatious reasоn- cause, adjuster appellate that a able proof indicates claims the trial and the court argues specifically Findings 9. State Farm further that it "is not clear court concluded in its distinguished that the trial from the record Fact of Law that: and Conclusions "Based on standards, being one for bad faith evidence, convincing clear there is a reason- case, Champion two-part test from the and the Defendant, able basis to believe that the punitive damages re- other standard willful, guilty wanton or malicious presumed quires showing of actual or malice.” required by conduct SDCL 21-1-4.1.” as argument We find this without The trial merit.

763 shall, judgment by Eighth is rendered As if an award noted Circuit Court of Co., plaintiff, plaintiff Appeals allow the a reasonable in v. American Cas. Kirchoff (8th attorney’s Cir.1993), sum as an fee to be recovered and 997 F.2d 401 Dakota “South part question collected as a of the costs. SDCL 58- law on this is clear.” Id. at 406 Crabb, 639). (citing 12-3. 205 N.W.2d at A bad i.e., faith claim “is in tortious nature argues that the trial wrongful policy refusal to settle within the incorrectly attorney’s un court awarded fees insured,” limits its and not an action According der SDCL 58-12-3. to State against an company policy insurance on a finding company “a that an insurance contemplation insurance within the of SDCL good ipso faith does not lacked mean facto Crabb, 58-12-3. 205 N.W.2d at 639. There that its conduct was vexatious without fore, portion attorney’s fees related to reasonable cause.” claim, opposed the bad faith as to the con claim, tractual should have been excluded. agree we with State Farm While We reverse and remand for a redetermina finding part that a of bad faith on the of an attorney’s tion of in fees accordance with this company “ipso insurance does not mean fac- decision.11 to” that its conduсt vexatious or without cause,10 reasonable whether Prejudgment B. interest. conduct was vexatious or without reasonable fact, question cause is a reviewed this policy Isaac was awarded the limit of clearly court under the erroneous standard. $100,000 damages personal injuries. Kneen, North Inc. Star Mut. Co. v. 484 The trial court prejudgment awarded inter N.W.2d est from the date Isaac first demanded the Hearing found at the on Taxation of Costs argues limit. State Farm this delayed investigation, “State Farm part was error on the trial court. years. They settlement and evaluation for provides: 21-1-11 SDCL finally unconditionally pay refused Every person who is entitled to recover owing amounts due and under the damages certain, capable being made without dismissal of the bad faith claim and calculation, right certain and the clearly this conduct falls within “without recover which is in him vested reasonable causе and vexatious standard’ of particular day, is entitled also to recover us,' 58-12-3.” Under the record before we day, except interest thereon from that dur- say finding part cannot on the ing prevented such time as the debtor is clearly trial court was erronéous. Id. Cf. law, creditor, byor the act of the from (S.D.1973) Crabb, (noting 205 N.W.2d at 639 paying the debt. Tracy the situation Crabb was unlike ‍​‌​​​‌‌‌‌​‌‌​​‌‌​​​‌​‌‌‌​‌​‌‌​​‌​​​‌‌‌​‌‌​​​‌‌‌​‍21-1-11, Under SDCL Isaac is entitled to al., v. T B& Const. Co. et 85 S.D. prejudgment only damages interest if are (1970) N.W.2d where the trial court ex capable being certain or made certain. pressly pay found the insurer’s refusal La., City Testing Engineering Twin Inc. cause). vexatious and without reasonable Smith, (S.D.1986) (cita- 393 N.W.2d 456 omitted). argues “Prejudgment State Farm further that un tions not interest is Crabb, attorney’s only der can fees be recov to be awarded are uncertain against ered the contractual claim until determined the trier of fact.” Id. (citations omitted). company on a of insurance. Co., Indemnity Appel- In Crabb v. National 11. Isaac filed a Award of has Motion for (S.D.1973) Attorney’s provides this court noted that late Fees. 58-12-3 fees, finding good appellate attorney’s "a that an insurer lacked faith does but extent signify not conduct was ‘vexatious or without the fees are for work done on the contractual cause,’ Crabb, merely reasonable as a matter of law. It 205 N.W.2d at claim. discharge granted means the insurer failed to its flducia- Isaac’s motion is to the extent the fees ty obligation good conformity to act in faith in the defense are in 7(A). with our decision on Issue remand, against and settlement of a claim the insured.” On the trial court shall make this Id. at 639. determination. *12 2-14-24). a Com- Isaac filed 25, 199Ó, (citing SDCL date Isaac As of October 29, 15-17-37 plaint on October 1990. SDCL the uninsured full amount of demanded the became effective benefits, in 1992 and incurred was enacted Therefore, 1, this case being July because capable of made certain or Isaac were fact, of Ryno prior Isaac’s to the enactment when valued commenced certain. was 1991, 15-17-37, court’s taxation dated October she “[t]he claim in a memo SDCL attempt to and recommended State of disbursements policy limit of in expert claim for the witnesses excess expenses settle Isaac’s of $100,000. Ryno to make and re- statutory records used fee is reversed The witness available in with were the same records for retaxation accordance the valuation manded year earlier. view Nat’l Bank to Farm over 19-5-1.” Id. See First State SDCL of Ranch, Inc., this, show that Farm has failed to Kehn Minneapolis of v. (S.D.1986).12 determining damages in the trial court erred capable being made cer- of were certain policy limit of in

tain the amount review. 8. Notice of Therefore, $100,000. trial court’s award gen- herein and a In view of our decisions interest is affirmed. prejudgment of merit, not reach the issue eral lack of we do failing in to of whether the trial court erred Expert fees as costs. witness C. ques- on the in Isaac’s favor direct verdict argues that the trial court Nelson, Secondly, liability. at 908. tion of awarding expert fees as in witness erred arrangement “may although contingent fee 15-17-37, provides: costs under SDCL perfectly proper as between an be valid and in action or prevailing party a civil client, attorney his it does not necessari- and expendi- proceeding may recover special to ly that such fee is a reasonable fee follow gathering in and necessarily incurred tures City taxed” under SDCL 58-12-3. be of bringing procuring evidence or the matter Kelley, Sioux Falls include costs expenditures trial. Such Law, (S.D.1994); Couch, Cyclopedia of Ins. hearings, telephoto of telephоnic costs § 58:147. witnesses, charges, interpret- or fax fees 7(A) part in part, reversed and Affirmed officers, ers, translators, printers, service 7(C) and remanded. telephone process, filing, expenses from calls, copies copying, original and costs C.J., WUEST, J., MILLER, and transcripts reporter’s attendance Justice, HENDERSON, concur. Retired fees, appointed experts and other charges. expenses and These ex- similar J., AMUNDSON, specially. concurs are “disbursements” penditures termed 15-6-54(d). § pursuant are taxed KONENKAMP, J., having not been a time this ease member of the Court at.the expert fees This court addressed witness Court, submitted to the did not v. Nelson 15-17-37 in Nelson under SDCL (S.D.1994). participate. Company, 513 N.W.2d 900 Cattle Nelson, According 15-17-37 does SDCL AMUNDSON, (concurring special- Justice taxation of the not “the allow ly). expenses expert witnesses excess of initially position statutory provided in took witness fees SDCL Nelson, covеrage under her also stat- Isaac had no 19-5-1.” at 908. Nelson ed, however, regards to the Bordeaux accident. She was 15-17-37 “does not SDCL any recovery to look to Bordeaux for any intent to be retroactive.” Id. advised express indicates no retroactive intent. "It is settled law in this state SDCL 15-17-35 12. Under Kehn: operate retroactively that a statute will not the unless Accordingly, that the Kehn we must conclude clearly expresses legislative act an intent against 1983 is not af- lawsuit filed Milbank in Also, 2-14-24, operate. under no it so subsequently enacted in fected a statute present code civil action commenced before 1984.” provisions. laws took effect is affected notwithstanding mandatory agree uninsured I giving that the of Instruc- error, motorist contained in the she tion 14No. was but for the reasons set above, purchased from Farm. forth prejudicial was not to this case. taking coverage pоsition, After the no Farm when contacted Isaac’s attor-

ney, persisted attempting totally deny *13 position

the claim. This is shown Exhibit 14, an internal memorandum from Karla Ryno, representative, a State Farm claims supervisor part: her which stated conversation, per attempting As our I was Attorney regarding to feel DeGeest out the Lynn Joseph EAGLE, TWO Petitioner denial of the claim based workmen’s Appellant, compensation. v. expert gave opinion Isaac’s in front of jury that there was no reasonable basis LEAPLEY, Walter Warden of the South a denial of State Penitentiary, Appellee. Dakota doing same constituted bad faith in this mat No. 18500. expert ter. State Farm’s testified coverage position no taken Farm in Supreme Court of South Dakota. wrong strong case was and a indicia of However, bad faith. expert further May Considered on Briefs opined reviewing picture when the total Decided Oct. processed, of how claim State Farm’s conduct in this case did not constitute bad handling

faith of Isaac’s claim. Based on conflicting opinions, these as the weight, fact-finder any, had to decide the given expert opinions. be to these Centu ry Realty Hoffman, 21 Associated

N.W.2d 861 jury subsequently general returned a verdict for Isaac. When such a verdict is appealed,

returned and Supreme Court light will view the evidence in a most favor jury’s able to sustain the verdict. Brandriet Dakota, N.A., v. Norwest ‍​‌​​​‌‌‌‌​‌‌​​‌‌​​​‌​‌‌‌​‌​‌‌​​‌​​​‌‌‌​‌‌​​​‌‌‌​‍Bank South (S.D.1993). Moreover, N.W.2d 613 if the susceptible verdict is to more than one con struction, Supreme applies Court upholds

construction which the verdict. BankWest, Valentine, Inc. v. 451 N.W.2d 732

(S.D.1990). Applying precedent such to this case, it is obvious that the could have found that Farm’s total denial of cover

age initially part. constituted faith on its bad found, Having so it is immaterial to the ease whether or not believed its coverage. for a reduction of coverage posi

Farm’s set-off or reduction of tion came position. after the total denial