News Index:
Post-Claim Underwriting Found In
Newborn's Life Insurance Policy
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Schoenbeck Law completed an insurance
bad faith claim against a company in 2008 that provided life insurance for
newborns. In this case the child died within a few months of birth, and the
company refused to pay the death benefits.
When the Mother submitted the life insurance
claim, the company proceeded to underwrite the risk - for the first time.
Now with the child already deceased, the company decided to not accept the
risk and returned the premium to the grieving mother. We were successful
in pursuing a bad faith suit against the company on behalf of the young mother
who first suffered the loss of her baby, and then suffered the indignity
of being defrauded by her life insurance company. |
"Deny First" Strategy of Health Insurance
Carrier Comes to Light in Bad Faith Case
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Also in 2008 Schoenbeck Law exposed
a "deny first" strategy of a South Dakota health insurance carrier. The carrier
denied coverage for an expensive medical procedure, ignored letters and reports
from medical providers, and refused to follow the health insurance policy
- until we sued them. In short order the health insurance carrier paid the
bills, and the litigation to hold the carrier accountable for it's wrongful
acts towards it's insured continues. |
Bad Faith Victory:
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The South Dakota Supreme Court affirmed
a jury verdict against American Family Insurance in Biegler v. American
Family Ins., 2001 SD 13. The original verdict is discussed below. The
Supreme Court reduced the amount of the judgment to $165,000, which resulted
in a payment of over $200,000 after allowing for interest and costs. The
South Dakota Supreme Court particularly affirmed a count of deceit, which
was directed at how American Family handled this claim once they got it in
house. The Supreme Court described American Family's conduct as trying to
"sandbag" their insured. |
Jury Finds Insurance Company Commits
Fraud On Small Businessman:
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On September 9, 1999, a Brown County
jury returned a $245,000 verdict for our client, an Aberdeen small businessman,
against his insurance company, American Family Mutual Insurance Company.
Three and a half years ago, a customer was injured by an employee at the
businessman's convenience store, and American Family refused to assist its
insured. He was eventually sued and forced to hire his own attorney to handle
the lawsuit. After settling the victim's suit, he sued American Family for
abandoning him. The jury found that American Family breached the insurance
contract, committed fraud, and acted in bad faith towards its insured. Punitive
damages were also awarded to make an example of the company. American Family
appealed the verdict, and the South Dakota Supreme Court decision is referenced
above. |
Bad Faith Victory:
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The South Dakota Supreme Court once
again reaffirmed that an insured can sue their insurance company for bad
faith in handling a claim in a case we brought before the Court (Brooks
v. Milbank Insurance Company, 2000 SD 16, 605 NW2d 173). After the Court's
decision, and prior to a second trial, the matter was settled. Details of
the first trial decision can be found below.
In Brooks v. Milbank Insurance
Company, a rental house owned by our client was destroyed by fire. The
insurance company refused to pay the loss, claiming our client conspired
to have the house set on fire. The only evidence inculpating our client stemmed
from a recorded "interview" of one of the tenants conducted by an investigator
hired by Milbank Insurance. During this "interview" the tenant was threatened
with prosecution and was told "If I find out the truth, you get to go home."
The tenant later testified he didn't light the fire, nor was he hired by
our client to do so, and only confessed because he was threatened and thought
he was going to jail. After a five-day trial, a Roberts County jury found
in favor of our client and determined the value of the house at $15,000.
The Court then awarded attorney's fees under SDCL 58-12-3 in the amount of
$77,287.50 because it found the insurance company acted vexatiously and without
reasonable basis. We appealed a prior dismissal of the bad faith action against
the insurance company. The Supreme Court reinstated the bad faith claim in
a February 2000 decision. The Court also sent the attorney's fee award back
to the Trial Court for review on a procedural issue. On remand, the attorney's
fees were again awarded, this time in the amount of $75,437.50. |
Insurance Coverage Victory:
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Circuit Judge Robert Timm handed
down a decision determining more than $1,000,000 of insurance coverage was
available for our client and other victims. The factual setting in which
the case arose is as follows:
A car accident occurred on February
14, 1998. The automobile involved was owned by a garage/convenience store.
The owner of the business allowed his daughter to drive the vehicle. At the
time of the accident she was a passenger. She had allowed a friend of hers
to operate the vehicle. The car went off a curve and struck a utility pole.
Two of the passengers, including the vehicle owner's daughter, were severely
injured.
The vehicle owner had a standard
garagekeeper's policy with Employers Mutual Casualty Company (EMC) with
$1,000,000 liability limits, which had the appropriate boxes checked to provide
coverage for "any auto". In purchasing personal auto insurance, the same
insurance agent placed this business vehicle on a personal automobile insurance
policy.
EMC contended that there was no liability
coverage for personal use of the vehicle, and that this inventoried vehicle
from the used car dealership part of the business was not disclosed to the
company at the time the insurance was procured. EMC also contended that SDCL
58-23-4 put the garagekeeper's policy in the third position for coverage.
State Auto contended that the family exclusion applied, barring any coverage
for the owner's daughter, and that State Auto should be in the last position
as to insurance coverage. American Family contended that there was coverage,
but that the driver's carrier should be in the last position as to priority.
The Court determined that in the application
process, the insured had disclosed the existence of the used car dealership.
There were documents in EMC's file that supported this conclusion.
The Court also determined that there
is no implied exclusion for personal use in a standard garagekeeper's policy.
There clearly was no express exclusion, so an implied exclusion was the only
basis the insurance company could utilize.
The Court determined that the family
exclusion limitation in the personal auto policy providing coverage for "named
insureds" includes those people covered by SDCL 58-23-6(5).
Finally, with respect to the garagekeeper's
priority statute, SDCL 58-23-4(2), the Court found priority in the following
order: the personal coverage on the vehicle was first; the coverage of the
driver was second; and the garagekeeper's coverage was moved into the last
position as a result of the above-noted statute.
The net effect of the decision was to
provide an additional $1,025,000 of coverage for the victims of the accident.
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Insurance Dispute Victory:
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On July 15, 1998, the South Dakota
Supreme Court handed down a favorable decision in Rumpza v. Donalar
Enterprises and Stockholm Farm Mutual Ins. Co., 1998 SD 79, 581 NW2d
517 (Rumpza II). The decision was another step in an insurance dispute we
had been pursuing for five years, and which had been previously considered
by the Supreme Court, resulting in a decision expanding the law in South
Dakota concerning insurance agents' liability for professional negligence.
Rumpza v. Larsen and Stockholm Farm Mutual Ins. Co., 1996 SD 87, 551
NW2d 810 (Rumpza I). In Rumpza II, the Supreme Court, for one of the first
times, found an ambiguity in an insurance contract, and ambiguities are to
be construed against the insurance company under longstanding legal precedent.
The Trial Court had dismissed our action on summary judgment, and in both
instances the Supreme Court reversed the Trial Court's decisions and sent
the matter back for trial. One week after Rumpza II was handed down, Stockholm
Insurance settled the matter by paying the entire claim, five years' of
accumulated pre-judgment interest, all of the attorney's fees that had been
incurred, and damages for its bad faith conduct. |
Bad Faith Litigation with Safeco
Insurance:
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In a Roberts County case in the
Fifth Judicial Circuit against Safeco Insurance Company, we obtained a favorable
verdict on the underlying personal injury case, and pursued Safeco for their
unreasonable conduct in handling the claim. In that setting, it is an examination
of whether the company acted reasonably in denying the claim, and it is a
review of why they acted the way they did. The trial court required Safeco
to produce their claims file, the information concerning incentive plans
and bonuses for their claims personnel, claims training materials and manuals,
and a list of all prior cases in which Safeco had been sued in South Dakota
for fraud, breach of fiduciary duties, or bad faith. In the first trial the
court awarded attorney's fees in the amount of $21,243.80, and for the second
trial the court ruled that the company's conduct warranted proceeding with
a claim for punitive damages. The bad faith claim was settled prior to the
second trial. |
Day County jury returned a $300,000
verdict, March, 2002
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In March, 2002, a Day County jury
returned a $300,000 verdict for a local farmer for back injuries arising
from a 1999 car accident. This is the largest verdict ever returned in Day
County, and it reaffirms that local juries understand what a back injury
means in the life of a farmer. LeMars Mutual was the defendant, and urged
the jury to return a zero verdict. Additionally, the court made a very
significant ruling in the area of expert testimony. The defense utilized
Dr. Suga, an orthopedic surgeon from Sioux Falls, to do an "independent medical
evaluation". It is our contention that these types of evaluations generally
are not independent, and in this case the evaluation was not independent.
Our client contended that the doctor only examined him for 9 minutes and
46 seconds, and had used a stopwatch at the evaluation to prove it. The doctor
said that he had done the evaluation in 30-45 minutes, and that it took that
amount of time to properly do the evaluation. At a pre-trial hearing where
the court had the opportunity to listen to other people who have also been
evaluated by Dr. Suga, and heard them testify to similar experiences, the
court found that our clients were more credible, that the doctor didn't spend
the amount of time he claimed, and so the doctor lacked the foundation to
testify--given that the doctor said it took 30-45 minutes to properly do
an evaluation to render the opinions he chose to render. The court excluded
Dr. Suga's testimony. |
Clausen v. Aberdeen Grain Inspection,
Inc. and South Dakota Wheatgrowers Assoc.
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In early June, 1999, in Clausen
v. Aberdeen Grain Inspection, Inc. and South Dakota Wheatgrowers Assoc.,
1999 SD 66, 594 NW2d 718, the South Dakota Supreme Court ruled in favor of
our client in a wrongful death action. Clausen was commenced after our client's
husband died after falling while removing grain samples from atop a railcar.
The Trial Court dismissed the claims against Aberdeen Grain Inspection and
SD Wheatgrowers, holding they owed no duty to the decedent because he was
an independent contractor. On appeal, the South Dakota Supreme Court reversed
the Trial Court's decision as to Aberdeen Grain Inspection. According to
the Court, "it is clear that there is a genuine issue of material fact as
to whether AGI retained any control over [the decedent] as to remove it from
the general rule of employer non-liability." The first jury trial on the
claim against Aberdeen Grain Inspection resulted in a hung jury, and the
matter settled favorably before the second trial. |
Wegleitner v. Town of Lake City
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(1998 SD 88), was the last dram
shop case decided by the South Dakota Supreme Court. We represented a deputy
sheriff who was rear-ended by a drunk driver. In the litigation, we settled
with the drunk driver for his policy limits. The Trial Court dismissed the
city-owned bar for the lack of a dram shop cause of action in South Dakota.
We appealed. In a 3-2 decision, the Supreme Court affirmed, nailing the coffin
on the dram shop causes of action in South Dakota. |
Wegleitner v. Hartford Insurance:
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After the South Dakota Supreme Court's
refusal to permit a dram shop cause of action, we tried a jury trial in Marshall
County against the underinsurance carrier on October 1, 1998, and obtained
a verdict of $600,000 for our client. |
Banks Are Entitled To Be Treated
Fairly Too
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Schoenbeck Law had the honor and
pleasure of successfully completing 2 1/2 years of representation of an
established South Dakota commercial institution in a banking litigation case
involving a participating lending arrangement. Near the end of the litigation
we prevailed on a series of summary judgment motions. The Honorable Stuart
Tiede's 54 page decision, which is a treatise on many current commercial
litigation issues, can be read below.
Read:
Honorable
Stuart Tiede's 54 page Decision
(PDF Document. Requires
Adobe Reader)
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Investment Banking Dispute
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On February 25, 2002, the United
States 8th Circuit Court of Appeals handed down a win in an investment banking
dispute involving a client of our office who assisted a meatpacker in obtaining
financing for a meatpacking plant. After the financing was obtained, the
meatpacker refused to pay the success fees on the contract. In the 8th Circuit's
decision, there are a couple of particularly significant results. Our client
was awarded all of the balance of the fees owing on his contract, plus
prejudgment interest. Additionally, the 8th Circuit reversed the District
Court and ordered the enforcement of the contract provision that provides
that our client is to receive the attorney's fees and collection costs he
expended in enforcing the contract. The 8th Circuit Court of Appeals found
that South Dakota law permits enforcement of negotiated contract provisions
like this one.
Read:
Orion
Financial v. American Foods Group
(PDF Document. Requires
Adobe
Reader) |
Securities Fraud
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The South Dakota Supreme Court handled
its first case in the Uniform Securities Act in: Tschetter, et al. v.
Berven, et al., Beadle County Civ. File No. 97-87. The case arose out
of actions by the promoters of a Country Kitchen investment in Huron, South
Dakota. The Trial Court had allowed that breach of fiduciary duty, fraud,
and punitive damages can go forward at trial. The appeal focused on the issues
that had been dismissed by the Trial Court. The South Dakota Supreme Court
in Tschetter v. Berven, 2001 SD 11, determined that the LLC investments
were not securities, and that there was no duty to perform a suitability
assessment. The fraud and breach of fiduciary duty issues were settled after
the appeal and prior to trial. |
Attorney Malpractice
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We had the opportunity to be brought
in as co-counsel in an attorney malpractice case where the trial judge ruled
that the attorney's conduct was such that it was appropriate to go forward
with discovery on a claim for punitive damages. In South Dakota you can only
go forward with a claim for punitive damages if you can make an initial showing
that there is a reasonable basis to believe that the defendant's conduct
was willful, wanton, or malicious.
In Friske et al v. Hogan 2005
SD 70 the South Dakota Supreme Court, on June 8,2005, ruled for the clients
of Schoenbeck Law Office that an attorney may owe a duty to a non-client
third party, which ruling builds on the Supreme Court decision entered in
Chem Age Industries, Inc. v. Alan F. Glover, 652 N.W.2d 756, 2002 SD 122,
which is discussed below.
Until now in South Dakota, an attorney
who didn't do the work necessary to achieve his client's estate planning
objectives wasn't accountable to the surviving family members that were the
victims. Since the problem only arises after the client dies, and if the
victims can't sue the attorney, one court described this scenario as being
able to bury your mistakes!
This case put South Dakota squarely
with the majority of states that hold attorneys responsible when they are
negligent in doing wills and estate planning documents. The victims in this
case lost half of the family farm that their father was trying to leave them.
The farmer hired an attorney who drew a will to leave the farm to the children.
Instead, half of the farm went to somebody else. The surviving children sued
the attorney. The attorney wanted the case tossed out, claiming he owed no
duty to the intended beneficiaries of the will he drew. The Supreme Court
said he did. This is a decision that is good for the public and for the bar
association. It holds professionals accountable for the work they are hired
to do, encourages good legal work and punishes shoddy legal work.
Our office prevailed in a decision handed
down by the South Dakota Supreme Court on attorney malpractice: Chem-Age
Industries, Inc. v. Alan F. Glover, 2002 SD 122. The trial judge had
dismissed the suit on summary judgment, and our clients appealed. On appeal,
the Supreme Court permitted the case to go forward to trial on claims of
negligence, aiding or assisting the breach of fiduciary duty, conversion,
and exemplary damages. |
Accountant Malpractice
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Our office completed an accounting
malpractice case which also obtained a favorable ruling from the trial court
permitting us to go forward with a punitive damage claim against the accountant.
Specific facts were presented to the trial court that showed a reasonable
basis to believe that the accountant's conduct was willful, wanton, or malicious.
In accounting negligence, the defense typically claims that the accountant
wasn't asked to do an audit, and therefore is not responsible for the failure
to notice or report any information concerning irregularities. This litigation
was favorably resolved because we were able to show that the accountant knew
or should have known of gross irregularities in the financial affairs of
the business, and yet the accountant did nothing to warn the owners of the
business. The trial judge had an opportunity to rule on a number of the
traditional defenses asserted by accountants in these types of cases. Both
the assumption of the risk and statute of limitation defenses were stricken.
The claim that the losses were due to third-party misconduct was limited
to the instance where the accountant would have to show that the sole cause
of the loss was the third-party misconduct. With respect to the usual accountant
defense of contributory negligence on the part of their client, the court
only allowed the defense to go forward because South Dakota is a comparative
negligence state. Those states that use contributory negligence do not allow
this defense. |
Medical Negligence
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In a Day County South Dakota medical
negligence case we represented a victim of unnecessary multiple back surgeries.
The victim had a non-operative compression fracture, but had the misfortune
of being treated in the Avera St. Luke's emergency room by Dr. Britt Borden,
a neurosurgeon. The patient had a non-operative compression fracture, but
Dr. Borden told her that she needed back surgery. Comparing the films taken
post-surgery to the operative notes, he put hooks and rods two levels off
on each side of her back, and put them out on her ribs -- not on her spine!
The effect of being two levels off on the back created leverage at the
compression fracture site, and broke her back over the next couple of weeks.
A number of the rulings in the litigation
are particularly interesting. The hospital and doctors tried to keep the
litigation out of the county where the victim lived, but the trial judge
held tough on venuing it in Day County, South Dakota. The trial judge ruled
that it was permissible to proceed with punitive damage discovery against
Dr. Borden, after the preliminary evidence was presented to the court. The
trial judge refused to let the defendants subject the victim to multiple
defense medical exams, ruling such treatment of this victim was unnecessary.
Particularly important in these types
of cases is access to the checkered past of the provider, like Dr. Borden.
Both the doctor and the hospital went to great lengths to try and keep that
information from the victim and the jury. The trial court ruled that the
National Practitioner Data Bank information on Dr. Borden had to be produced,
and that the information Dr. Borden provided to licensing agencies in other
states had to be produced. The defendants attempted five separate appeals
to the South Dakota Supreme Court to deter the victim or to suppress evidence.
Each of the five efforts was denied by the Supreme Court.
The case ultimately settled prior to
trial. Two South Dakota newspapers reported on this case. The Sioux Falls
Argus Leader published “A Culture of Silence” on March 29, 2004,
which can be read at (PDF
338kb). Another article was published in the Aberdeen American News,
on November 15, 2003, entitled Waubay Couple Suing Doctors, Hospital.
(PDF 197kb)
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Lee Schoenbeck is a Civil Trial
Specialist
Certified by the National Board of Trial Advocacy.
Schoenbeck Law
215 10th St NW / P.O. Box 1325
Watertown, South Dakota 57201
Toll Free: (888) 204-0561
Local: (605) 886-0010
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