Tovares v. Gallagher Bassett Services, Inc. et al
Filing
87
ORDER granting in part and denying in part 62 Motion for Summary Judgment. Signed by Chief Judge Jeffrey L. Viken on 3/30/19. (SB) Modified on 4/1/2019 to change to an opinion (SKK).
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
CIV. 16-5051-JLV
ANNIE TOVARES,
Plaintiff,
ORDER
vs.
GALLAGHER BASSETT SERVICES,
INC., AND PRAETORIAN INSURANCE
COMPANY,
Defendants.
INTRODUCTION
Plaintiff Annie Tovares filed an action against the defendants Gallagher
Bassett Services, Inc., and Praetorian Insurance Company alleging bad faith
and misrepresentation in violation of South Dakota law.
(Docket 1).
Defendants filed separate answers to plaintiff’s complaint. 1
(Dockets 37 & 39).
Defendants filed a motion for summary judgment, together with a brief, an
affidavit with nine exhibits and defendants’ statement of undisputed material
facts.
(Dockets 62, 63, 64, 64-1 through 64-9 & 65).
Plaintiff filed a
responsive brief, together with plaintiff’s response to defendants’ statement of
undisputed facts with ten exhibits and plaintiff’s declaration in support of Fed.
1The
court granted defendants’ motion for leave to file amended answers.
(Docket 84). Defendants are required to file their amended answers within
seven days of the order. Id. at p. 11.
R. Civ. P. 56(d) discovery. 2
(Dockets 67, 67-1 through 67-10, 68 & 70).
Defendants filed a reply brief with one exhibit in support of their motion for
summary judgment.
(Dockets 72 & 72-1).
Plaintiff filed a motion seeking leave to file supplemental authority, a
supporting brief and one case.
(Dockets 78, 78-1 & 79).
brief in response to plaintiff’s motion.
Defendants filed a
(Docket 82).
For the reasons stated below, plaintiff’s motion to file supplemental
authority is granted, defendants’ motion for summary judgment is granted in
part and denied in part, and plaintiff’s motion for Rule 56(d) discovery is denied
as moot.
STANDARD OF REVIEW
Under Fed. R. Civ. P. 56(a), a movant is entitled to summary judgment if
the movant can “show that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). Once the moving party meets its burden, the nonmoving party may not
rest on the allegations or denials in the pleadings, but rather must produce
affirmative evidence setting forth specific facts showing that a genuine issue of
material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
2Plaintiff
did not file a separate motion seeking leave to conduct discovery
under Rule 56(d). See D.S.D. Civ. LR 7.1B. The court will treat plaintiff’s
declaration as a motion for purposes of resolving plaintiff’s request in this
order.
2
(1986). Only disputes over facts that might affect the outcome of the case
under the governing substantive law will properly preclude summary judgment.
Id. at p. 248. “[T]he mere existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material fact.”
Id. at 247-48 (emphasis in original).
If a dispute about a material fact is genuine, that is, if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party,
then summary judgment is not appropriate. Id. However, the moving party is
entitled to judgment as a matter of law if the nonmoving party failed to “make a
sufficient showing on an essential element of her case with respect to which
she has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). In such a case, “there can be ‘no genuine issue as to any material
fact,’ since a complete failure of proof concerning an essential element of the
nonmoving party’s case necessarily renders all other facts immaterial.” Id. at
p. 323.
In determining whether summary judgment should issue, the facts and
inferences from those facts must be viewed in the light most favorable to the
nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587-88 (1986). The key inquiry is “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so one-
3
sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at
pp. 251-52.
UNDISPUTED MATERIAL FACTS
The following recitation consists of the material facts developed from the
complaint (Docket 1), defendants’ answers (Dockets 37 & 39), 3 the parties’
statements of undisputed material facts (Dockets 65 & 67) and other evidence
where indicated. 4 Where a statement of fact is admitted by the opposing
party, the court will only reference the initiating document. These facts are
“viewed in the light most favorable to the [party] opposing the motion.”
Matsushita Elec. Indus. Co., 475 U.S. at 587. 5 The facts material to
defendant’s motion for summary judgment are as follows.
3The
only difference between defendants’ answers and amended answers
is the inclusion of three affirmative defenses. Compare Dockets 36 & 39 with
61-1 & 61-2. Because the parties addressed the affirmative defenses in
briefing, references to defendants’ responses to allegations in the complaint will
be to the answers. (Dockets 37 & 39). Because the admissions in each
answer are identical, the court will only reference the answer of Defendant
Gallagher Bassett Services, Inc., unless otherwise indicated. (Docket 37).
4The
court references the parties’ submissions without quotation marks,
unless indicated.
5Plaintiff
statement of material facts on which there exists a genuine
material fact are not contained in a separate filing but rather are laced
throughout plaintiff’s brief in opposition to defendants’ motion for summary
judgment. See Docket 70 at pp. 4-13. The court will not reject the materials
to plaintiff’s detriment or sanction plaintiff’s counsel in this case. In the
future, counsel must file a separate document containing plaintiff’s statement
of contested material facts. D.S.D. Civ. LR 56.1B.
4
Plaintiff Annie Tovares works at Menards in Rapid City, South Dakota.
(Docket 67-1 ¶ 1).
On Wednesday, March 19, 2014, she fell at work.
Id. ¶ 3.
One of Menards’ surveillance cameras recorded her fall. 6 Ms. Tovares did not
hit her head, but she immediately felt dazed, disoriented and like her brain got
jarred.
Id.¶ 4. It took a few minutes to collect herself. Id. ¶ 5.
The following Tuesday, Ms. Tovares had a bloody nose at work and that
night she had blurry vision and a sharp ringing in her ears.
Docket 67-2 at p. 4.
Id. ¶ 6; see also
At work the following morning the lights hurt Ms.
Tovares’ eyes and head.
(Docket 67-1 ¶ 7).
She felt dizzy and was worried
something serious happened because of her fall.
Id.
She spoke to her
supervisor and went to the emergency room at the Rapid City Regional Hospital
in Rapid City, South Dakota.
Id.; see also Docket 67-2 at p. 4.
After visiting
the ER, Ms. Tovares went to see her ophthalmologist at Wright Vision Center.
Id. ¶ 9; see also Docket 65 ¶ 29.
As instructed by the ER physician, Ms.
Tovares took a couple of days off work.
(Docket 67-1 ¶ 14; see also Docket 65
¶ 30).
Ms. Tovares’ bill for the hospital services, CT scan and ER activities
totaled $2,513.
(Dockets 67-2 at p. 71; 67-3 at p. 4).
Vision Clinic was $185.
Tovares $165.
6See
(Docket 67-3 at p. 6).
The bill from Wright
Dakota Radiology billed Ms.
Id. at p. 3. Ms. Tovares borrowed money to pay the medical
Docket 47-6 (DVD in Clerk of Court file).
5
bills and submitted a worker’s compensation claim for these expenses.
(Docket 67-1 ¶ 15).
Defendant Praetorian Insurance Company (“Praetorian”) issued a policy
of worker’s compensation insurance to Ms. Tovares’ employer, Menards, Inc.
(Docket 1 ¶ 6).
Gallagher Bassett Services, Inc. (“GBS”) is the claim
administrator which handled Ms. Tovares’ claim for Praetorian.
(Docket 67-1
at p. 8).
Christina Manwaring was the adjustor assigned by GBS to handle Ms.
Tovares’ workers’ compensation claim.
(Docket 67-2).
Ms. Manwaring’s notes
of her telephone contact with Ms. Tovares on March 31, 2014, contain
plaintiff’s description of her incident at Menards: 7
She ws done, pulling a box off the cart, next she new she was on the
floor. She’s not sure how it happened. Thinks L. foot slipped, hit
L. hip, L. underarm struck the box she was handling, and it was
scraped and bruised. Initially she was in so much pain she
couldn’t believe it. The impact of her body hitting the concrete,
maybe the weight of the box made her fall even harder. She did not
strike her head, however once she stood up, he whole body was
vibrating. She knows she jarred her brain. She just stood there
to try and re-gain her “marbles” says she was in shock. Once the
pain subsided, she felt fine. She didn’t have any broken bones.
Physically she feels fine. A week later, she began experiencing
lightheadedness and dizziness. Equilibrium was off. Numerous
time of ringing in her head. Went to doctor on 3/26, and doctor
asked which ear was ringing, she couldn’t tell. Vision is slightly
blurry and pain in her head. She’s been better the last few days.
Went to ER on 3/26/2013 b/c that morning when she went to work
the bright lights in the building hurt her head and eyes. While she
7All
notes, correspondence and medical records are reported verbatim
without correction or clarification.
6
was at ER, the did a CT scan. They said everything was negative.
But she was highly disappointed in the hospital staff. Never asked
to see her bruises, no x-rays of her body were done. She felt like
they didn’t believe what happened to her. Up until that day, she
had had a sharp ringing in her head, then went away. That night
she had some minor ringing in head, so she knows she jarred her
brain and she knows that can cause problems down the road. She
had a minor cold about a month ago. Does not suffer from
allergies/sinus issues. She did receive a call the next day to see
how she was feeling. FU with optimologist [sic] on 3/26/2014 and
told her everything looked fine. She was concerned about the lens
being dislodged.
(Docket 67-2 at p. 10; see also Docket 65 ¶ ¶ 3-7.).
ER records obtained by GBS contain the following history of Ms. Tovares
present illness:
Patient is a 64-year-old female who presents with blurred vision.
She states that a week ago she fell and landed on her left hip and
left elbow. She denies shooting her head at that time. Over the
past week since the fall she has had intermittent blurred vision and
ringing in her years. She has also had an intermittent sharp
headache but has not required medication as the heading duration
he was very brief. She denies numbness, tingling, or weakness.
No vertigo or lightheadedness. She denies pain otherwise. A
month ago she saw ophthalmology and they stented her left tear
duct for dry eye.
(Docket 67-2 at p. 57; see also Docket 65 ¶¶ 9-10).
head reported “[v]entricles and sulci are normal.
hemorrhage or mass.
p. 58).
¶ 28.
A CT scan of Ms. Tovares’
There is no intracranial
No bony abnormality identified.”
The CT report concluded “[n]ormal CT head.”
(Docket 67-2 at
Id.; see also Docket 65
ER physician Dr. Donald Neilson charted “[t]he most likely cause of her
symptoms is that they are related to a head injury.
She is comfortable with
discharge and will follow up with her primary physician.”
7
(Docket 67-2 at
p. 59).
A Registered Nurse signed an “Excused Absence from Work and
School,” excusing Ms. Tovares from work for two days.
Id. at p. 47.
An instruction sheet given to Ms. Tovares at discharge from the ER
contained the following caution:
You have had a head injury which does not appear serious at this
time. A concussion is a state of changed mental ability, usually
from a blow to the head. You should take clear liquids for the rest
of the day and then resume your regular diet. You should not take
sedatives or alcoholic beverages for 48 hours after discharge. After
injuries such as yours, most problems occur within the first 24
hours.
Id. at p. 45 (emphasis in original).
The “minor symptoms” which may occur
included “dizziness,” “headaches” and “double vision.” Id. (capitalization
omitted).
Under “Home Care Instructions,” the instruction sheet stated “[s]ide
effects may occur up to 7-10 days following the injury. It is important
for you to carefully monitor your condition and contact your caregiver or
seek immediate medical attention if there is a change in your condition.”
Id.
(bold and capitalization omitted).
On April 10, 2014, Ms. Manwaring noted in the claim file that the
“[r]eserves are appropriate for probable ultimate cost.
warranted at this time.
No changes are
Claimant has not lost anytime from work and medical
reserves reflect conservative care.” 8
(Docket 67-2 at p. 15).
Regarding
resolution and closure of the claim file, Ms. Manwaring noted “[o]nce claimant
8The
financial reserves made in this claim file are not in the record.
8
is placed at MMI [maximum medical improvement], file can be prepared for
closure as no permanency is anticipated. File closure may be viable within 90
days if claimant reaches MMI in the near future.”
Id.
Her recommendations
for management of the claim file included the following:
1.
Build rapport with claimant to avoid litigation.
2.
Obtain updated medical reports and outline recommended
treatment plan in the file. Push for eventual MMI release.
3.
Document completion and submission of all state forms and
filings.
4.
Complete initial investigation and document compensability
decision in the file notes in 010 note.
5.
Complete updated POA no later than 5/6/14.
Id.
On April 23, 2014, Ms. Manwaring sought permission to deny Ms.
Tovares’ claim.
In that request, she stated in part the following:
The claimant maintains she did NOT hit her head when she fell.
The ER notes indicate her complaints are likely from a head injury.
Claimant was referred to eye doctor for FU due to blurred vision.
These notes have also been received and indicate the claimant had
had her tear ducts stinted one month prior as well as previous
cataract surgery.
There were no issued found.
Requesting
authority to deny file based on claimant’s treatment appearing to
have no relation to her work incident.
Id. at p. 17 (capitalization in original); see also Docket 65 ¶ 12).
Manwaring’s supervisor, Angela Smith, agreed.
Ms.
“Reviewed the file with
adjuster and agree with recommendation for denial due to the head complaints
not being related to her work incident. . . . Review and approval of the denial
9
sent to ABM [Assistant Branch Manager], Dorothy Stolle this date.”
67-2 at pp. 17-18).
(Docket
On April 29, 2014, Ms. Stolle authorized closing the file.
“Agree with denial of file at this time as medical diagnosis does not relate to
work injury.”
Id. at pp. 18-19.
On April 30, 2014, Ms. Manwaring sent Ms. Tovares a letter on GBS
letterhead.
(Docket 67-2 at p. 63).
The letter stated in part: “We have
investigated this claim and found no evidence to support your claim for
benefits under South Dakota Workers’ Compensation provisions.
therefore, accordingly deny your claim.”
We must,
Id.
On May 16, 2014, Attorney Michael Simpson advised Ms. Manwaring he
was representing Ms. Tovares on her claim.
Docket 65 ¶ 15).
2014.
(Docket 67-2 at p. 84; see also
Ms. Manwaring responded to Attorney Simpson on May 28,
(Docket 67-2 at p. 85).
She provided him with the medical records
which GBS obtained and advised him “[a]s the surveillance video is property of
Menard, Inc., a subpoena will be required in order to release the information to
you.”
Id.
She also wrote: “[p]lease note, your client acknowledges she did not
strike her head in her fall.
She presented to the ER on week later at which
time a CT scan was obtained and negative for a head injury. She was
diagnosed with blurred vision and headache and referred to her optometrist for
FU.”
Id.
On September 17, 2014, Ms. Manwaring sent a follow-up letter to
Attorney Simpson.
Id. at p. 77. In part, her letter asked, “[t]o date we have
10
received no further response from you.
Can you please verify whether or not
you still represent Ms. Tovares, and, if so, where you are with your
investigation of her claim?”
Id.; see also Docket 65 ¶¶ 16-17.
On October 9, 2014, Attorney Simpson wrote Ms. Manwaring.
67-2 at pp. 78-79).
(Docket
After summarizing the content of their previous
correspondence, he wrote:
In addition, you do not mention in your May 28th letter my request
for a recorded statement of Ms. Tovares or other recorded
statements or other information which supports your denial.
Clearly, the video tape is discoverable and I need this information in
order to represent Ms. Tovares and give her good legal advice about
whether or not her medical bills should be paid by workers’
compensation. In addition, her recorded statement and any other
recorded statements are relevant to this question as well.
If you do not provide me with the video tape and the recorded
statement or statements, then I am forced to file a petition for
hearing with the state Department of Labor in order that I can get
this information.
I am going to calendar this for seven (7) days or until Thursday,
October 16, 2014. If you do not provide me with the video and the
recorded statement or statements by that time, I will be forced to file
a petition for hearing with the state Department of Labor in order to
get this information and in order to challenge your denial.
Please be advised that if I have to do this, I will be asking the
Department of Labor for my attorney fees, as I believe it is
unreasonable for you to withhold important information and force
the Claimant to file a petition for hearing.
As I am sure you are aware, this claim only concerns medical bills
and therefore it is very difficult for people such as Ms. Tavares to get
lawyers to take on these claims, as it is financially difficult to do so.
By withholding important evidence, you force Ms. Tovares to take
legal action, which makes it very difficult for her (and other people
11
like her) to simply get the evidence needed to determine whether
their claim is valid.
I do not want to waste the Department of Labor’s time with a formal
petition if I do not have to. Please reconsider your decision to not
provide me with important evidence concerning compensability.
Thank you.
Id.
On October 20, 2014, Attorney Simpson filed a petition for hearing with
the South Dakota Department of Labor and Regulation, Division of Labor and
Management, Worker’s Compensation on Ms. Tovares’ behalf.
pp. 80-83; see also Docket 65 ¶ 18).
(Docket 67-2 at
On November 12, 2014, Praetorian filed
an answer admitting Ms. Tovares fell on March 19, 2014, and that she sought
medical attention on March 26, 2014.
(Docket 1 ¶ 32).
On January 31, 2015, Attorney Daniel Ashmore, as attorney for
Praetorian, e-mailed Attorney Simpson.
(Docket 67-3 at pp. 16-17).
Attorney
Ashmore asked “[c]an we resolve this case for $2,500 for a full and final?
should allow her to get the bills paid and something for you.
That
Let me know.”
Id. at p. 17.
On February 6, 2015, after talking with Ms. Tovares, Attorney Simpson
rejected the $2,500 offer.
Id. at p. 16. He attached a summary of the bills to
date and agreed to get the Wright Vision Center bill to Attorney Ashmore. Id.
Attorney Simpson indicated “the bills plus interest total over $3,000, not
including the Wright bill.”
Id.
He asked Attorney Ashmore and his clients to
complete the following tasks:
12
1)
Pay all the bills, plus interest.
2)
File an amended answer admitting that the bills are
compensable.
3)
Then I will prepare a proposed order for the DOL, dismissing
the case, per the amended answer’s admission of
compensability.
Id.
Later that day, February 6, Attorney Ashmore e-mailed Attorney Simpson
with Praetorian’s response to plaintiff’s demands.
As we discussed, we are willing to pay $3,000 to you to resolve this
case but we will maintain our denial. I will draft an agreement
accordingly and we will then dismiss the case upon approval of the
agreement. You and your client will be responsible for making sure
the bills are paid and your fees will come out of the amount paid.
We can include that amount in the agreement if you like. Let me
know if we have a deal.
Id. at p. 15; see also Docket 65 ¶ 20.
Late that afternoon, Attorney Simpson
responded by e-mailed to Attorney Ashmore. (Docket 67-3 at p. 15).
He
wrote: “[h]ere is an updated bill summary, which includes the Wright Vision
Center bill.
Please provide this to your client and ask them to pay the updated
amount—$3225.12.”
Id.
While there may have been additional discussions between the attorneys
which are not in the record, on February 24, 2015, Attorney Simpson sent
Attorney Ashmore a letter agreeing “[u]]pon receipt of a check in the amount of
$3,225.12 made out to Julius & Simpson, L.L.P. and Annie Tovares, I will file
this document [a notice of dismissal with prejudice] with the Department of
13
Labor.”
Id. at p. 12; see also Docket 65 ¶ 21.
An unsigned copy of the
proposed notice of dismissal with prejudice accompanied the letter.
(Docket
67-3 at p. 13).
On March 9, 2015, Attorney Ashmore tendered a check for $3,225.12 to
Attorney Simpson.
Id. at p. 8.
The letter indicated, “[i[t is my understanding
that you will now file the Notice of Dismissal with the Court.” Id.
On March 12, 2015, Attorney Simpson mailed the executed notice of
dismissal with prejudice to the South Dakota Department of Labor and
Regulation, Division of Labor and Management.
Docket 65 ¶ 23.
Id. at pp. 7 & 18-19; see also
The full text of the notice of dismissal with prejudice is:
COMES NOW, Claimant by and through undersigned counsel, and
hereby dismisses her Petition for Hearing with prejudice. Claimant
informs the Department of Labor that in her Petition for Hearing she
requested that Employer/Insurer pay certain medical bills totaling
$3,225.12 (including interest). Employer/Insurer has paid these
bills in full and therefore Claimant is dismissing her Petition for
Hearing with prejudice.
(Docket 67-3 at p. 18; see also Docket 65 ¶ 2).
There are no unpaid medical
benefits owed to Ms. Tovares under the South Dakota Worker’s Compensation
Act.
(Docket 65 ¶ 35).
ANALYSIS
Plaintiff filed a motion for leave to file supplemental authority, together
with a legal memorandum and a copy of Skjonsberg v. Menard, Inc., 2019 WL
237328 (S.D. August 27, 2018).
(Dockets 78, 78-1 & 79).
14
Defendants filed a
brief in response to plaintiff’s motion.
(Docket 82).
Plaintiff’s motion is
granted.
Plaintiff’s complaint alleges two causes of action against the defendants.
(Docket 1).
Those are: count I, bad faith, and count II, misrepresentation.
at pp. 6-7.
In addition to compensatory damages and attorney’s fees, the
complaint seeks punitive damages.
Id.
Id. at p. 8.
Defendants’ motion for summary judgment asserts the following grounds
for dismissal of plaintiff’s complaint.
1.
Plaintiff has not demonstrated insurance policy benefits were
owed and denied;
2.
Exhaustion of administrative remedies;
3.
Reasonable basis existed–head injury fairly debatable;
4.
Gallagher did not make any misrepresentation;
5.
Gallagher cannot be held legally liable for breach of the duty
of good faith and fair dealing;
6.
Plaintiff suffered no damages due to defendants’ conduct; and
7.
Plaintiff is not entitled to punitive damages.
(Docket 63) (capitalization and bold omitted).
The court addresses defendants’
arguments in the order deemed most efficient for resolving the motion for
summary judgment.
I.
EXHAUSTION OF ADMINISTRATIVE REMEDIES
In South Dakota, a workers’ compensation bad faith claim is barred until
the injured employee obtains an administrative ruling she is entitled to benefits
15
under the worker’s compensation act.
N.W.2d 925 (S.D. 1999).
Zuke v. Presentation Sisters, Inc., 589
“Before a trial court may grant relief for a bad faith
denial of worker’s compensation benefits, it must decide whether the plaintiff is
entitled to benefits. This threshold issue must be decided within the worker’s
compensation forum.”
Id. at 930. This condition precedent “furthers the goal
behind the worker’s compensation laws in having a claimant’s entitlement to
benefits properly determined by the agency which has the most experience and
expertise in dealing with these type of issues”
Id.
“Therefore, only after a
worker’s compensation claimant has exhausted her remedies under the South
Dakota Worker’s Compensation statutes may a trial court hear her bad faith
claim for denial [of] worker’s compensation benefits.”
Id.
In Hein v. Acuity, 731 N.W.2d 231 (2007), the South Dakota Supreme
Court clarified its ruling in Zuke.
In Hein, plaintiff argued her bad faith claim
was not dependent on an ultimate award of benefits by the South Dakota
Department of Labor.
Id. at 237 n.5.
The Supreme Court held:
This assertion is mistaken.
The unique circumstances
surrounding bad faith relating to a workers’ compensation claim
requires that the claimant first be entitled to the benefits requested.
The claimant is not in a contractual relationship with the employer’s
insurer and, therefore, absent entitlement to benefits, a bad faith
claim cannot be sustained.
Id.
The court “conclude[d] that the circuit court was correct when it ruled
that Hein’s bad faith claim against Acuity was premature because at the time
16
she brought her lawsuit her request for rehabilitation benefits was pending
before the Department.”
Id. at 237.
This court acknowledges the importance of Zuke.
While addressing a
statute of limitation defense, the court recognized “that a plaintiff alleging a
bad-faith denial of worker’s compensation benefits must first bring her
worker’s compensation claim before the state department of labor.”
Brennan
v. Western National Mutual Ins. Co., 125 F. Supp. 2d 1152, 1155 (D.S.D. 2001)
(referencing Zuke, 589 N.W.2d at 930).
The court ruled the statute of
limitation had not yet expired because “Plaintiff's claim for bad-faith denial of
worker’s compensation benefits did not accrue until she had obtained a final
judgment from the department of labor.”
Id.
The court concluded pursuant
to the ruling “in Zuke, a plaintiff does not know whether the denial of her
worker’s compensation benefits was reasonable—and hence whether she has a
bad-faith claim—until after worker’s compensation proceedings are complete.”
Id. (referencing Zuke, 589 N.W.2d at 930) (other reference omitted).
Addressing when a claim accrues in a bankruptcy proceeding, the court
in Harms v. Cigna Ins. Companies, 421 F. Supp. 2d 1225 (D.S.D. 2006),
acknowledged “[i]n a bad faith claim for failure to provide worker’s
compensation insurance benefits, one of the elements of the bad faith claim is
a final judgment in South Dakota worker’s compensation proceedings in favor
of the claimant.”
Id. at 1229 (referencing Zuke, 589 N.W.2d at 930).
Based
on this Zuke principle, the court held a “claim accrues upon entry of ‘final
17
judgment from the department of labor,’ including all appeals, in the worker’s
compensation proceedings.”
Id. (citing Brennan, 125 F. Supp. 2d at 1155).
See also Lagler v. Zurich American Ins. Co., No. CIV 12-4037, 2012 WL
3264906, at *2 (D.S.D. Aug. 10, 2012) (“It is true that the state courts of South
Dakota will not entertain a tort action based on a denial of workers’
compensation benefits until the department of labor has determined whether
the plaintiff is in fact entitled to such benefits.” (referencing Zuke, 589 N.W.2d
at 930).
While the court in Lagler was addressing plaintiff’s intentional tort claim
for the insurance company’s failure to pay workers’ compensation benefits, the
court again acknowledged “any decision on the merits of those claims will
depend on whether Lagler is in fact entitled to such benefits.” Id. at 2012 WL
3264906, at *3 (referencing Zuke, 589 N.W.2d at 930).
“Under South Dakota
law, the decision whether a person is entitled to workers’ compensation
benefits is committed to the jurisdiction of the department of labor and the
state courts exercising appellate review.”
Id.
The court concluded:
[I]t will not decide Lagler’s tort claim until state administrative
procedures, originating in the department of labor and subject to
judicial review in state court, have produced a final determination
whether she is entitled to workers’ compensation benefits. If the
Court were to decide Lagler’s tort claim it would risk rendering a
decision which is inconsistent with the department of labor’s
regulation of workers’ compensation.
Id.
The court acknowledged “a decision by this Court on Lagler’s entitlement
to benefits would interfere with South Dakota’s efforts to establish a coherent
18
workers’ compensation policy by concentrating entitlement issues in the
department of labor.”
Id.
“Only after the administrative procedures
established under the workers’ compensation statutes . . . have produced a
decision on Lagler’s underlying entitlement to benefits will the Court have an
administrative decision it can use in adjudicating Lagler’s bad faith claims.”
Id.
Defendants argue “voluntary payment of benefits is not an admission of
liability and there has been no finding that any workers’ compensation benefits
were actually owed.”
(Docket 63 at p. 8) (referencing Tiensvold v. Universal
Trans, Inc., 464 N.W.2d 820, 825 (S.D. 1991) (“Any statutory interpretation
which would penalize an employer who voluntarily makes weekly payments to
an injured employee in excess of [the employer’s] ultimate liability would
certainly discourage voluntary payment by employers and would therefore
constitute a disservice to injured workers generally.”) (citing Western Casualty
and Surety Company v. Adkins, 619 S.W.2d 502 (Ky. App. 1981)).
Defendants
submit plaintiff has not obtained “an administrative finding holding that
Defendants are legally responsible for payment of any medical bill(s).”
Id.
“Because Plaintiff filed a Notice of Dismissal with Prejudice,” defendants assert
the South Dakota Department of Labor “is forever barred from adjudicating
entitlement to payment of the CT scan under the South Dakota workers’
compensation laws.”
Id.
Based on the ruling in Zuke, defendants argue they
“are entitled to summary judgment as a matter of law as Plaintiff has not
19
obtained a final administrative determination holding that she was entitled to
payment of the CT scan of the head or any other medical invoice under the
South Dakota Workers’ Compensation Act.”
Id.
Plaintiff argues defendants’ position must fail because the parties
“reached an agreement in regard to compensation, the Department of Labor
had no jurisdiction under SDCL 62-7-12—which means administrative
remedies were at an end.”
(Docket 70 at p. 22).
Plaintiff submits the notice
of dismissal with prejudice “inform[ed] the Department of the agreement” of the
parties and “pursuant to SDCL 62-7-5 . . . made the agreement ‘enforceable for
all purposes.’ ”
Id. (citing SDCL § 62-7-5).
Plaintiff contends the parties’ agreement was final and defendants “failed
to reserve any dispute over the validity of [plaintiff’s] workers comp [sic] claim.”
Id. at p. 23. If defendants “wanted to preserve some issue for dispute,”
plaintiff argues “it was their burden to preserve the issue by notifying the
Department of Labor through the statutorily mandated memorandum of
agreement.”
Id.
In support of her argument, plaintiff submits defendants’ last proposal
was to pay her “$3,000 and to maintain their denial of her claim.”
Plaintiff rejected this offer. Id.
interest[.]”
Id.
Id.
She “insisted on payment in full, plus
Plaintiff contends defendants “acceded to [her] demand and
dropped their insistence on maintaining a denial of compensability.” Id. In
plaintiff’s view, defendants agreed to pay her claim in full and the Department
20
of Labor’s “jurisdiction lapsed and with it any further administrative remedies.”
Id.
Plaintiff argues Hein and Brennan support her position.
She submits
that in Hein “the Supreme Court meant what it said: After settlement, the
worker ‘has no further administrative remedies to exhaust.’ ”
(citing Hein, 731 N.W.2d at 237).
Id. at p. 24
Plaintiff contends defendants “cite no
authority that contradict Hein and the statutes discussed above.”
Id. at p. 25.
Plaintiff argues defendants’ reliance on Brennan is misplaced.
She
argues “Brennan contradicts [defendants’] broad proposition that a work comp
bad faith claim requires a ruling on compensability by the Department of
Labor.”
Id. (referencing Brennan, 125 F. Supp. 2d at 1153-54).
Plaintiff
submits in Brennan there was neither a settlement of a workers’ compensation
claim, nor a decision of the Department of Labor but instead the department
dismissed the petition for benefits on a technical basis not relevant to this
case.
Id.
Plaintiff’s argument concludes that based on SDCL §§ 62-7-5 and 12
“and pursuant to Zuke and Hein, [Ms. Tovares] has no further administrative
remedies to exhaust. . . . [Plaintiff’s] bad faith claim is ripe and properly before
the Court.”
Id. at p. 26 (internal quotation marks omitted).
In the alternative, plaintiff submits that if necessary she would seek a
declaratory judgment from the Department of Labor.
Id. at p. 27.
In that
circumstance, plaintiff proposes the court should “stay this case” until a
21
declaratory judgment can be obtained or “dismiss it without prejudice, to allow
[her] to pursue those remedies.” Id.
In its reply, defendants argue “[t]here has not been an administrative
determination that Plaintiff’s workers’ compensation claim was compensable[.]”
(Docket 72 at p. 2).
Defendants contend they “did not withdraw any dispute
involving Plaintiff’s claim.”
Id. at p. 3. “Absent an administrative finding in
Plaintiff’s favor or Defendants’ withdrawal of dispute and agreement to accept
compensability,” defendants argue “liability for the dispute has not been
established.”
Id.
In Skjonsberg, the Department of Labor entered an order in plaintiff’s
favor. Id. at 2019 WL 237328, at *3. When medical bills were still unpaid
over two years later, plaintiff filed a “second motion for partial summary
judgment . . . seeking payment for her unpaid medical expenses.” Id. One
month later, the workers’ compensation insurance carrier, Praetorian, resolved
the medical expenses with the health care providers. Id.
The Department of
Labor later granted Skjonsberg’s motion for a second partial summary
judgment. Id. at *4. “The order repeated the Department’s conclusions from
its first order by stating that Employer and Insurer were responsible for the
medical expenses for both of Skjornsberg’s injuries.” Id.
The South Dakota Supreme Court concluded “no controversy exists or
existed before the Department” because the Department’s earlier order “had
already determined that Skjonsberg’s injuries were work-related and that
22
Employer and Insurer were liable to compensate her for her medical expenses.”
Id. at *7. Based on this conclusion, the court held “[b]ecause Employer and
Insurer paid Skjonsberg’s medical expenses, the Department lacked
jurisdiction to grant summary judgment—the issue of payment was moot
before the Department and remains moot before this Court.” Id. at *8.
The court finds Skjonsberg, 2019 WL 237328, not applicable to the facts in this
record.
South Dakota workers’ compensation law permits the parties to resolve a
claim without a hearing.
If the employer and employee reach an agreement in regard to the
compensation under this title, a memorandum of the agreement
shall be filed with the department by the employer or employee.
Unless the department within twenty days notifies the employer and
employee of its disapproval of the agreement by letter sent to their
addresses as given in the memorandum filed, the agreement shall
stand as approved and is enforceable for all purposes under the
provisions of this title.
SDCL § 62-7-5.
“Compromise agreements permitted under SDCL 62-7-5 have
the same force and effect as adjudicated awards[.]”
Co., Inc., 575 N.W.2d 225, 229 (S.D. 1998).
Sopko v. C & R Transfer
“If the employer and injured
employee . . . fail to reach an agreement in regard to compensation under this
title, either party may . . . request a hearing[.]”
SDCL § 62-7-12.
The question before the court is whether the notice of dismissal with
prejudice constituted a contract, that is, an agreement or a memorandum of
agreement.
This is a question of law rather than a question of fact.
23
“South
Dakota law governs here, and under South Dakota law, contract construction
is a question of law that is determined by the court.”
Mehlbrech v. Acuity,
Civ. No. 11-4102, 2012 WL 4718659, at *2 (D.S.D. Oct. 3, 2012) (referencing
LaMore Restaurant Group, LLC v. Akers, 748 N.W.2d 756, 761 (S.D. 2008)).
In the Department of Labor proceeding, defendants denied Ms. Tovares’
medical bills were incurred as the result of a work-related injury.
During the
settlement discussion, Attorney Simpson wanted defendants to file an amended
answer admitting the bills were compensable under the workers’ compensation
law.
In response to that demand, defendants’ attorney countered with a
$3,000 offer but insisted they would maintain their denial position.
Throughout the remainder of the attorneys’ discussions defendants’ position
never changed and they never agreed to admit the medical bills were
compensable under the workers’ compensation law.
Rather, Attorney
Simpson settled by accepting defendants’ check and filed the notice of
dismissal with prejudice with the Department of Labor.
Despite their
discussions, there was no oral agreement as to compensability and the notice
of dismissal does not contain any acknowledgment of compensability.
The
attorneys’ discussion “fail[s] to comprise a memorandum of agreement.”
Fredekind v. Trimac Ltd., 566 N.W.2d 148, 152 (S.D. 1997).
The notice of
dismissal does not “provide the requisite filing necessary to make it binding” on
the defendants should later medical bills arise.
Id.
Had plaintiff intended to
insist on an admission or determination of compensability, she should have
24
rejected defendants’ check and requested a hearing pursuant to SDCL § 62-712.
The court finds as a matter of law the notice of dismissal is not a binding
agreement or a memorandum of agreement which would come within the
purpose of SDCL § 62-7-5.
The notice of dismissal was not a “[c]ompromise
agreement[]” contemplated by § 62-7-5 and it does not “have the same force
and effect as adjudicated awards[.]”
Sopko, 575 N.W.2d at 229.
Plaintiff’s bad faith claim fails because she did not obtain an
administrative ruling that she was entitled to benefits under the workers’
compensation act.
Zuke, 589 N.W.2d at 930.
Defendants’ motion for
summary judgment on count I of plaintiff’s complaint is granted.
II.
PLAINTIFF HAS NOT DEMONSTRATED INSURANCE
POLICY BENEFITS WERE OWED AND DENIED
Defendants premise their argument on the assertion “that a district court
has no legal authority to make the determination that a bill or claim is payable
under the South Dakota workers’ compensation laws as that determination
must be made at the administrative level.”
(Docket 63 at p. 6) (referencing
Zuke, 589 N.W.2d at 930; Hein, 731 N.W.2d at 237).
The court already
determined that count I of plaintiff’s complaint must be dismissed for her
failure to secure an adjudication of compensability from the South Dakota
Department of Labor.
Supra.
For that reason, defendants’ motion for
summary judgment on the basis asserted in this section is denied as moot.
25
III.
REASONABLE BASIS EXISTED—HEAD INJURY FAIRLY
DEBATABLE
Defendants again premise this argument on their challenge that plaintiff
failed to secure a determination of compensability from the South Dakota
Department of Labor.
(Docket 63 at pp. 9-16).
For the reasons stated above,
defendant’s motion for summary judgment asserted in this section is denied as
moot.
IV.
GALLAGER DID NOT MAKE ANY MISREPRENTATION
Count II of plaintiff’s complaint asserts a cause of action under SDCL
§ 58-33-5.
(Docket 1 at p. 7 ¶¶ 51-58).
Plaintiff alleges GBS sent a letter to
Ms. Tovares on April 30, 2014, which contained a false representation.
¶ 52.
Id.
The false representation allegation is premised on the following
statement: “We have investigated this claim and found no evidence to support
your claim for benefits under South Dakota Worker’s Compensation
provisions.”
Id.
Plaintiff claims this letter “characterized Plaintiff’s accident
as ‘alleged,’ when they knew an actual accident had occurred and had a video
to prove it. . . . misrepresented the fact that they had conducted an
investigation sufficient to make a determination to deny the claim. . . . [and]
misrepresented that they had ‘found no evidence to support [her] claim.’ ”
¶¶ 53-55.
Id.
Plaintiff alleges “Praetorian is vicariously liable for the conduct of
[GBS], and owed a non-delegable duty to Plaintiff to ensure that proper
representations were made concerning coverage and benefits.” Id. ¶ 58.
26
Defendants’ motion for summary judgment seeks dismissal of count II of
plaintiff’s complaint.
(Docket 63 at pp. 16-20).
Defendants’ assert
“[p]laintiff’s allegation that [GBS] made a misrepresentation under SDCL
§ 58-33-5 fails as a matter of law.” Id. at p. 16.
Defendants contend “[n]one
of the ‘facts pled by Plaintiff . . . represent an actionable misrepresentation of
policy terms.”
Id. Defendants submit “[n]o South Dakota case interpreting
this provision has extended the scope of the statute to include a determination
regarding a factual dispute concerning compensability.”
Id. at p. 17.
Defendants represent to the court that Texas Mutual Ins. Co. v. Ruttiger, 381
S.W.3d 430, 446 (Tex. 2012), supports their position. Id.
In response, plaintiff argues “[a] jury could find that [defendants] violated
SDCL 58-33-5, by ‘misrepresenting . . . the benefits or advantages promised’ by
an insurance policy.”
(Docket 70 at p. 40).
Plaintiff submits “[i]t’s a jury
question whether [defendants’] statements . . . constitute an honest, albeit
incorrect misstatement of the available benefits, or if [defendants] made an
actionable misrepresentation.” Id. at pp. 40-41.
Defendants’ reply brief points out plaintiff’s argument “cited no legal
authority[.]”
(Docket 72 at p. 11).
Defendants reiterate “[t]he denial of
Plaintiff’s claim is not an actionable misrepresentation under the plain terms of
SDCL 58-33-5.”
Id.
SDCL § 58-33-5, which plaintiff alleges forms the basis for count II,
provides in pertinent part, “[n]o person shall make . . . or cause to be made any
27
. . . statement misrepresenting the terms of any policy issued . . . or the
benefits or advantages promised thereby . . . . Violation of this section is a
Class 2 misdemeanor.”
Id.
Chapter 58–33 provides a private right of action
for damages for any insured claiming to have been injured by an insurance
company’s unfair insurance practice. See SDCL § 58–33–46.1 (“Any person
who claims to have been damaged by any act or practice declared to be
unlawful by this chapter shall be permitted to bring a civil action for the
recovery of all actual and consequential damages suffered as a result of such
act or practice including reasonable attorneys’ fees to be set by the court.”).
In Ruttiger, the Texas Supreme Court analyzed a statute captioned
“Misrepresentation of Insurance Policy,” which provided:
It is an unfair method of competition or an unfair or deceptive act or
practice in the business of insurance to misrepresent an insurance
policy by:
(1)
making an untrue statement of material fact;
(2)
failing to state a material fact necessary to make other
statements made not misleading, considering the
circumstances under which the statements were made;
(3)
making a statement in a manner that would mislead a
reasonably prudent person to a false conclusion of a
material fact. . . .
Ruttiger, 381 S.W.3d at 445 (citing Tex. Ins. Code § 541.061) (bold omitted).
The court held “section 541.061 does not specify that it applies in the context
of settling claims. . . . [The section] applies to the misrepresentation of an
insurance policy, but . . . does not evidence intent that it be applied in regard
28
to settling claims . . . .” Id. at p. 446. The Texas statute in Ruttiger is
substantially different from the enforcement scheme of SDCL Chap. 58-33.
As the court noted when denying defendants’ Rule 12(b)(1) motion,
“[w]hether there was a misrepresentation by denial of entitlement to benefits or
a misrepresentation of the benefits to which plaintiff may have been entitled,
the issue remains a jury question.”
Tovares v. Gallagher Bassett Services,
Inc., CIV. 16-5051, 2017 WL 4041983, at *9 (D.S.D. September 17, 2017).
“[V]viewed in the light most favorable to the [plaintiff] opposing the
motion,” the court finds plaintiff has presented “sufficient evidence” to create a
jury question. Matsushita Elec. Indus. Co., 475 U.S. at 587. Defendants’
motion to dismiss count II of plaintiff’s complaint is denied.
V.
GALLAGHER CANNOT BE HELD LEGALLY LIABLE FOR
BREACH OF THE DUTY OF GOOD FAITH AND FAIR
DEALING
Defendants argue Ms. Tovares “has not alleged [GBS] was a party to the
insuring agreement under which Plaintiff sought workers’ compensation
benefits.”
(Docket 63 at p. 20).
They assert because GBS was only adjusting
plaintiff’s workers’ compensation claim on behalf of Praetorian, GBS “cannot be
held liable for breach of the duty of good faith and fair dealing[.]”
Id.
Defendants argue this conclusion because GBS “had no contractual
relationship with Plaintiff, thus it had no special relationship to support a duty
of good faith and fair dealing.”
Id.
Defendants contend Gilchrist v. Trail King
Industries, Inc., 612 N.W.2d 10 (S.D. 2000), supports its position. Id.
29
Plaintiff argues the court already ruled it was “confident the South
Dakota Supreme Court would conclude a third party administrator . . . [has] a
duty of good faith and fair dealing with [an employer’s] workers’ compensation
claimants . . . .”
(Docket 70 at p. 42) (citing Fair v. Nash Finch Co., CIV. 11-
5005 (D.S.D. March 25, 2013) (Docket 138 at p. 11).
Plaintiff concludes,
“[p]ursuant to Chem-Age 9 and Fair, since [GBS] itself performed all the claim
handling functions in this case, if Praetorian breached its duties of good faith
through its agent . . . then [GBS] aided and abetted the breach.”
Id.
Defendants argue “[n]ationwide, Courts have held that the existence of a
special relationship must exist before such a duty can be imposed, and that
third party administrators do not hold such a special relationship.”
(Docket
72 at p. 12 (referencing Reid v. Ruffin, 469 A.2d 1030, 1033 (Pa. 1983); Walter
v. Simmons, 818 P.2d 214, 222 (Az. Ct. App. 1991); Natividad v. Alexsis, Inc.,
875 S.W.2d 695, 697-98 (Tex. 1994); Cary v. United of Omaha Life Ins. Co., 68
P.3d 462, 466 (Colo. 2003)).
In Fair, the court adopted the magistrate judge’s analysis of Scott Wetzel
Services, Inc., v. Johnson, 821 P.2d 804 (Colo. 1991), and Cary, 68 P.3d 462.
Fair, CIV. 11-5005, Docket 138 at p. 9.
In the report and recommendation,
the magistrate judge fully evaluated the factual setting and holdings in
9Chem-Age
Industries, Inc. v. Glover, 652 N.W.2d 756 (S.D. 2002).
30
Johnson and Cary.
Fair, CIV. 5005, Docket 134 at pp. 47-51.
Regarding
Johnson, the magistrate judge wrote:
The court noted that “[i]n the absence of an obligation to deal in good
faith and fairly,” both self-insured employers and independent
claims administration services “may create obstacles to payment.”
. . . “This kind of delaying tactic runs counter to the goals of workers’
compensation.” . . . Based on this reasoning, the Colorado Supreme
Court held that “an independent claims adjusting company, such as
Wetzel, acting on behalf of a self-insured employer owes a duty of
good faith and fair dealing to an injured employee in investigating
and processing a workers’ compensation claim even in the absence
of contractual privity with the employee.”
Fair, CIV. 11-5005, Docket 134 at p. 49 (citing Johnson, 821 P.2d at 812-13).
The magistrate judge addressed Cary with the following comments:
In Cary, the court noted that the claims administrator “fulfilled
virtually all of the functions normally performed by an insurance
company in processing claims and determining whether to deliver
insurance benefits.” . . . The court held that “[w]hen a third-party
administrator performs many of the tasks of an insurance company
and bears some of the financial risk of loss for the claim, the
administrator has a duty of good faith and fair dealing to the insured
in the investigation and servicing of the insurance claim.”
Id. at p. 51 (citing Cary, 68 P.2d at 468-69).
In Gilchrist v. Trail King Industries, Inc., 612 N.W.2d 10 (S.D. 2000), the
South Dakota Supreme Court examined the proof required for a third party to
be liable under a bad faith claim.
Whether an employer’s rehabilitation consultant [a third-party
administrator] can be held liable to a workers’ compensation
claimant for bad faith is a question of first impression in South
Dakota. In the insurance context, an insurer’s violation of its duty
of good faith and fair dealing may give rise to the tort of bad faith
. . . . Analogously, to establish bad faith against a workers’
31
compensation rehabilitation consultant there must first be a
showing that the rehabilitationist owed a duty to the injured worker.
Id. at 15.
The South Dakota Supreme Court concluded “if the worker had
been able to establish that the rehabilitation company had caused the worker
additional injuries then public policy would dictate that the worker be
compensated.”
Id. at 16.
In 2002, the South Dakota Supreme Court reaffirmed the responsibility
of a third-party for a claimant’s damages.
“For harm resulting to a third
person from the tortious conduct of another, one is subject to liability if he
knows that the other’s conduct constitutes a breach of duty and gives
substantial assistance or encouragement to the other so to conduct himself.”
Chem-Age Industries, Inc., 652 N.W.2d 773 (citing Restatement (Second) of
Torts § 876(b) (1977)).
In Fair the court considered Natividad.
“Without repeating the
magistrate judge’s analysis of Natividad, the court concludes that the South
Dakota Supreme Court logically would look to Colorado law rather than Texas
law for guidance on third party administrator bad faith liability.”
11-5005, Docket 138 at p. 11.
Fair, CIV.
Based on Gilchrist and Chem-Age Industries,
Inc., the court remains “confident the South Dakota Supreme Court would
conclude a third party administrator like [GBS] ha[s] a duty of good faith and
fair dealing with [Menard’s] workers’ compensation claimants[.]”
Fair, CIV. 11-
5005, Docket 138 at p. 11.
Defendants’ motion for summary judgment seeking dismissal of count II
of the complaint on the basis asserted in this section is denied.
32
VI.
PLAINTIFF SUFFERED NO DAMAGES DUE TO
DEFENDANTS’ CONDUCT
Defendants seek dismissal of plaintiff’s complaint asserting Ms. Tovares
“suffered no damages as a result of Defendants’ conduct.”
p. 20).
(Docket 63 at
They submit “damages for emotional distress are recoverable only in
‘exceptional cases.’ ”
Id. (citing Kunkel v. United Security Ins. Co. of N.J., 84
S.D. 116, 135 (S.D. 1969)).
Defendants’ argue “denial of a single medical bill
for an objective test to a body part that was not injured in the course and scope
of employment does not constitute an ‘exceptional case’ warranting an award
for emotional distress. Thus, the claim of emotional distress damages should
be dismissed.”
Id. at p. 21. Defendants submit “[b]ecause Plaintiff cannot
establish she suffered damages due to Defendants’ conduct, she fails to meet
an essential element to establish her cause of action for breach of the duty of
good faith and fair dealing.”
Id.
Plaintiff resists defendants’ motion for summary judgment as to the
damages element of her claim.
(Docket 70 at pp. 42-43).
Plaintiff asserts she
suffered the following damages: emotional distress damages when defendants
suggested she was lying about her workers’ compensation claim; economic
damages because she had to borrow money to pay the medical bills which
defendants should have paid; and attorney’s fees.
Id. at p. 42.
Defendants argue plaintiff’s damages claim must fail because she did not
produce any “documentation of any financial damage for which Plaintiff has
33
not been compensated. . . . [And there is no] evidence of damage to her credit
because of the denial of the medical bill(s).”
(Docket 72 at pp. 12-13).
The court finds plaintiff presented sufficient evidence to defeat
defendants’ motion for summary judgment based on the issue of damages.
Plaintiff testified she had to borrow money to pay the medical bills.
67-1 ¶15).
(Docket
The record establishes she incurred fees with Attorney Simpson in
her workers’ compensation claim, which fees may also be considered in the
misrepresentation claim if plaintiff prevails at trial.
The issue of emotional
distress she may have suffered is a jury question.
Defendants’ motion for summary judgment seeking dismissal of count II
of the complaint on the basis asserted in this section is denied.
VII
PUNITIVE DAMAGES
Defendants argue they “are entitled to summary judgment as to the
punitive damages claim as the evidence does not establish that Defendants
acted with malice, actual or implied.”
(Docket 63 at p. 21) (referencing
Bertelsen v. Allstate Ins. Co., 796 N.W.2d 685, 698-99 (S.D. 2011) (citing
S.D.C.L. § 21-3-2).
Defendants assert “[t]here is no evidence or allegation that
Defendants intentionally initiated any conduct with the intent to harm Plaintiff.
Because Defendants had a reasonable basis for the denial, Defendants cannot
be held liable for breach of the duty of good faith and fair dealing, much less
the higher standard of showing Defendants initiated actions seeking to
intentionally cause Plaintiff harm.”
Id. at p. 22.
They assert “South Dakota
law has long held that even mere negligence does not establish that Defendants
34
acted with willful and wanton misconduct warranting imposition of punitive
damages.”
Id. (referencing Baxter v. Campbell, 97 N.W. 386 (S.D. 1903)).
Plaintiff argues she is entitled to punitive damages because “a jury could
conclude that [defendants] acted with actual or implied malice toward [Ms.
Tovares].
That is, a jury could conclude that [defendants] disregarded
[plaintiff’s] rights and willfully denied her claim knowing the denial was wrong
and could harm [her].”
(Docket 70 at p. 43).
Plaintiff submits “South Dakota
law permits punitive damages on that basis.” Id. (referencing Biegler v.
American Family, 621 N.W.2d 592, 604-05 (S.D. 2001).
In response, defendants argue they are “entitled to summary judgment
as to the punitive damages claim as Plaintiff offered no evidence that
Defendants acted with malice.”
796 N.W.2d at 698-99).
evidence of malice.”
(Docket 72 at p. 13) (referencing Bertelsen,
Defendants submit plaintiff’s brief “offered no actual
Id.
In South Dakota, the statute “permit[s punitive damages] in the case of a
tort arising independent of [a] contract obligation including an action for
deceit.”
Biegler, 621 N.W.2d at 604 (referencing SDCL § 21-3-2).
“[SDCL] 21-
3-2 allows for punitive damages when there is evidence of ‘oppression, fraud, or
malice.’ ”
Id. at 605 (references omitted).
“Since the statute is in the
disjunctive, it [is] only necessary to prove one of the three.”
the statute is either actual or presumed.”
Id.
Id.
“Malice under
“A claim for presumed malice
can be shown by demonstrating a disregard for the rights of other[s].”
(internal references omitted).
35
Id.
The court finds plaintiff presented sufficient evidence by which a jury
could conclude the defendants disregarded Ms. Tovares’ rights under SDCL
§ 55-33-5.
Such conduct would constitute presumed malice and may entitle
plaintiff to an award of punitive damages.
Biegler, 621 N.W.2d at 605.
Defendants motion for summary judgment as to punitive damages is
denied.
Based on the court’s rulings above, plaintiff’s Rule 56(d) motion seeking
to conduct discovery before summary judgment (Docket 68) is denied as moot.
ORDER
Based on the above analysis, it is
ORDERED that plaintiff’s motion for leave to file supplemental authority
(Docket 78) is granted.
IT IS FURTHER ORDERED that defendants’ motion for summary
judgment (Docket 62) is granted in part and denied in part.
IT IS FURTHER ORDERED that plaintiff’s motion (Docket 68) is denied
as moot.
IT IS FURTHER ORDERED that count I of plaintiff’s complaint (Docket 1)
is dismissed without prejudice.
Dated March 30, 2019.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE
36
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