Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerKeep Right Traffic LawsLaws Regarding Using Cell Phones/Headphones/Texting While DrivingMed Pay/PIP SubrogationOwner Liability For Stolen VehiclesPayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Which Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Total Loss Formula (See HERE for definition).
Insurer or self-insurer determines a total loss. S.D.C.L. § 32-3-51.19.
Automobile and Property: No applicable statute, Administrative Code provision or case law exists. Insurer can collect even if insured has not been made-whole.
Related Case Law: Julson v. Federated Mut. Ins. Co., 562 N.W.2d 117 (S.D. 1997).
Diminution of Value
First Party: The South Dakota Supreme Court followed the majority rule and refused to allow recovery of diminished value after the full repair of a vehicle and applied the clear language of the insurance policy. Culhane v. Western Nat’l Mut. Ins. Co., 704 N.W.2d 287 (S.D. 2005).
Third Party: No court decisions regarding recovery allowed for diminution in value of a damaged vehicle in a third-party claim.
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
There does not appear to be any law indicating it is bad faith for a liability carrier to settle for policy limits with one of multiple claimants, leaving the remaining claimants without recourse.
Funeral Procession Traffic Laws
There are no state laws governing funeral processions.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Contributory negligence of driver should not be imputed to an owner in owner’s action against third party for damage to vehicle operated by permissive use, absent a showing of a master/servant relationship or a joint enterprise. Fredrickson v. Kleuver, 152 N.W.2d 346 (S.D. 1967).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
The Family Purpose Doctrine is not recognized in South Dakota. Flanagan v. Slattery, 49 N.W.2d 27 (S.D. 1951).
Sponsor Liability for Minor’s Driving: No Sponsorship Liability Statute.
Keep Right Traffic Laws
Statute: S.D.C.L. § 32-26-1.
Summary: Slower traffic must keep right. Drivers must drive in the right lane unless it is impracticable to travel in the right lane or when overtaking and passing another vehicle.
Flow of Traffic: Drivers proceeding slower than the normal speed of traffic must drive in the right lane.
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: No hand-held electronic wireless communication device may be used by a driver for text-based communications. Exceptions include if the vehicle is parked, contacting emergency personnel, or while using hands-free technology. S.D.C.L. § 32-26-47.
No driver under the age of 18 or holding a restricted minor’s permit may operate a vehicle and use a wireless communication device in any manner. S.D.C.L. § 32-12-12.
Other Prohibitions: No Applicable Laws.
Med Pay/PIP Subrogation
Med Pay and PIP: Insurer entitled to both contractual and equitable subrogation rights. Schuldt v. State Farm Mut. Auto. Ins. Co., 238 N.W.2d 270 (S.D. 1975).
- “Add-on” PIP State.
Made Whole: Made whole can be overridden by policy terms. Julson v. Federated Mut. Ins. Co., 562 N.W.2d 117, 121 (S.D. 1997).
Statute of Limitations: The three (3) year personal injury statute of limitations runs from the date of insured’s accident. S.D.C.L. § 15-2-14(3) (1984).
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: S.D.C.L. § 32-30-5.
Common Law Rule: No case is exactly on point, but a truck driver was held liable for violation of South Dakota’s key in the ignition statute in Stevens v. Wood Sawmill, Inc., 426 N.W.2d 13 (S.D. 1988) (the truck driver failed to properly secure his truck, and it rolled down a hill causing injury to a third party, and the owner and driver were negligent as a matter of law due to violation of S.D.C.L. § 32-30-5).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: “First-party claims are controlled by the relationship provided by the insurance contract, so the results depend on the policy language.” E-mail from Frank Marnell – South Dakota Department of Labor and Regulations. However, no applicable statute, case law, or regulation governing recovery of sales tax.
Third-Party Claims: “Third-party claims are controlled by tort law and sales tax is generally payable on third-party total loss claims”. Email from Frank Marnell – South Dakota Department of Labor and Regulations. However, no applicable statute, case law, or regulation governing recovery of sales tax.
Pedestrian and Crosswalk Laws
S.D.C.L. § 32-27-3: Tasks local authorities with passing crosswalk regulations.
S.D.C.L. § 32-27-4: Pedestrians crossing outside crosswalk must yield to vehicle.
Summary: Question of whether crossing outside crosswalk was contributory negligent was question for jury. Alley v. Siepman, 87 S.D. 670, 214 N.W.2d 7 (1974).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated.
Recovery From Third-Party: Nothing directly dealing with the right of a car rental company to recover loss of use damages. Generally, loss of use is recoverable for the period of time a vehicle is being repaired. Joseph v. Kerkvliet, 642 N.W.2d 533 (S.D. 2002).
Rental Car Company’s Liability Insurance Primary or Excess
Summary: With regard to “automobile service agencies” (businesses engaged in selling, repairing, servicing, storing, or parking motor vehicles), § 58-23-4 provides:
58–23–4. Primary and excess coverage on vehicle loaned by automobile service agency.
When an automobile insurance policy is in force for anyone engaged in the business of selling, repairing, servicing, storing, or parking motor vehicles and the person or organization allows the use of a vehicle with or without consideration to any other person or organization and the vehicle is involved in an accident out of which bodily injury or property damage to third persons or damage to the insured vehicle arises, the following automobile insurance policies shall be applicable:
(1) In the event no other automobile insurance policy is in force at the time of the accident for the person or organization using the vehicle, the coverage provided by the motor vehicle owner’s automobile policy shall extend to the borrower in the event the owner’s automobile insurance policy extends coverage to said borrower.
(2) In the event that another automobile insurance policy is in force for the person or organization using the vehicle, any coverage provided by the motor vehicle owner’s automobile insurance policy shall be excess coverage only but limited by the terms of the owner’s applicable automobile insurance policy. The coverages in the policy afforded the person or organization using the vehicle shall be primary.
If the renter does not have insurance, then the car rental company’s policy is primary. However, one decision seems to question this. In Auto-Owners Ins. Co. v. Enterprise, 663 N.W.2d 208 (S.D. 2003), the court held that the policy of a self-insured car rental company was primary, and the renter’s personal auto policy was excess. The decision seemed to suggest that because the state has an omnibus statute, the car rental company was primarily liable. In Subrogation Division, Inc. v. Brown, 446 F.Supp.3d 542 (D.S.D. 2020), the court discussed primary vs. secondary coverage considerations concerning rental cars and federal preemption under the Graves Amendment. No commercial rental vehicle owner can be held “liable under the law of any State … by reason of being the owner of the vehicle” for damages “arising out of the use, operation, or possession of the vehicle during the period of the rental.” 49 U.S.C. § 30106(a). Overland (Hertz) rented a vehicle to Brown. The rental agreement provided that Brown would indemnify Overland and Brown’s “valid and collectible automobile liability insurance” “will be primary” in the event of an accident. Brown’s negligence caused an accident with Claymore resulting in $2,271.75 in damages to Claymore’s vehicle. Overland’s carrier paid the damages and Overland reimbursed its carrier because it was within the deductible. The court’s reasoning is essentially that “vicarious liability” becomes implicit whenever a renter’s insurance company seeks to avoid primary coverage using a “shift” in financial responsibility imposed under state law. The renter’s insurer (21st Century Insurance) has not appealed this published decision. Brown had the state’s minimum insurance with 21st Century, which assigned its right to Subrogation Division, Inc.(SDI), which sued Brown seeking to recover the $2,271.75. SDI raised the Graves Amendment as the central theme of its complaint and the parties vigorously dispute its application to this case. In South Dakota, “[a]n owner’s policy of liability insurance … shall insure the person named therein and any other person as insured, using any insured vehicle or vehicles with the express or implied permission of the named insured[.]” S.D.C.L. § 32-35-70. “This statute clearly requires that an automobile owner provide coverage for those who use the vehicle with either express or implied permission.” The court held that “vicarious liability” becomes implicit whenever a renter’s insurance company seeks to avoid primary coverage using a “shift” in financial responsibility imposed under state law. By requiring Overland’s insurance—and ultimately Overland—to primarily cover the Claymore damages, Auto-Owners forces Overland to be vicariously liable for Mr. Brown’s torts. This is the precise result barred by the Graves Amendment. The Amendment states rental companies like Overland “shall not be liable” under state law for damages incurred by renters.
Sudden Medical Emergencies While Driving
Legal Excuse Doctrine. Allows a defendant to escape liability for a technical violation of statute if the violation was the result of an emergency not of his own making. Meyer v. Johnson, 254 N.W.2d 107 (S.D. 1977); Dartt v. Berghorst, 484 N.W.2d 891 (S.D. 1992).
No cases using the sudden emergency defense for a medical emergency. Sudden Emergency Doctrine is merely an expansion of the reasonably prudent person standard of care. Meyer v. Johnson, 254 N.W.2d 107 (S.D. 1977).
Suspension of Drivers’ Licenses
Administrative Suspension: Driver’s licenses can be suspended for convictions of no insurance. See HERE. After license has been suspended, proof of financial responsibility must be shown for reinstatement. See HERE.
Judgment: Upon receipt of the unsatisfied judgment, the Division will immediately suspend the license/ registration of the person against whom the judgment was rendered. S.D.C.L. § 32-35-52. Suspension will last until the judgment is stayed or satisfied, and the judgment debtor provides proof of financial responsibility. S.D.C.L. § 32-35-52.
Contact Information: State of South Dakota, Department of Public Safety, Driver Licensing Division, 118 West Capitol Avenue, Pierre, SD 57501, (605) 773-3178, http://dps.sd.gov/licensing/driver_licensing/default.aspx.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: S.D.C.L. § 32-15-35; S.D.C.L. § 32-15-36; S.D.C.L. § 58-33-70; S.D.C.L. § 58-33-71.
Summary: Non-OEM parts should be marked with the name or logo of their manufacturer, and such mark should be left visible after installation whenever practicable. An insured must be given written notification of the insurer/repair shop’s intent to use non-OEM parts before the parts are used. The written estimate must disclose information as to which parts are non-OEM parts and the disclosure must conform to the standards outlined in the statute and must state that the vehicle manufacturer warrants the non-OEM parts, not the auto manufacturer.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Remedies Against Public Entities: S.D.C.L. §§ 21-32a-1 to 21-32a-3. To extent of risk pool or liability insurance purchased, sovereign immunity waived.
Notice Deadlines: Written notice of claim must be filed within 180 days. Suit must be filed within one (1) year. S.D.C.L. §§ 21-32a-1
Claims/Actions Allowed: Public entities liable for ministerial acts. King v. Landguth, 726 N.W.2d 603 (S.D. 2007).
Discretionary: Highway construction and Maintenance; Allocating plows, resource and equipment for snow removal.
Ministerial: Once it is determined that act should be performed, subsequent performance is ministerial. (e.g., operating motor vehicle).
Masad v. Weber, 772 N.W.2d 144 (S.D. 2009).
Damage Caps: None.
State Sovereign Immunity And Tort Liability
Tort Claims Act: Remedies Against The State.S.D.C.L. §§ 21-32-1 to 21-32-21 (1947).
South Dakota common law and Constitution prohibit that “governing acts” of State, its agencies and other public entities can’t be attacked in court without the State’s consent. S.D. Const. Art. III, § 27; Blue Fox Bar, Inc. v. City of Yankton, 424 N.W.2d 915 (S.D. 1988).
Notice Deadlines: Written notice of the time, place, and cause of the injury is given to the public entity within 180 days after the injury. S.D.C.L. § 3-21-2.
Claims/Actions Allowed: Whether a State employee, who is sued in an individual capacity, is entitled to immunity depends upon the function performed by the employee. They are immune when they perform discretionary function (involving State’s policy-making power), but not when they perform ministerial function (“absolute, certain, and imperative” act simple carrying out of a policy already established).* Wulf v. Senst, 669 N.W.2d 135 (S.D. 2003).
*Even if discretionary function involved: State may purchase liability insurance. S.D.C.L. § 21-32-15.
Purchase of insurance waives immunity and is consent to be sued. S.D.C.L. § 21-32-16.
State and its employees immune except as provided in § 21-32-16; S.D.C.L. § 21-32-17.
Comments/Exceptions: Factors to be considered in determining a discretionary function include:
(1) nature and importance;
(2) extent to which passing judgment on exercise of discretion passes judgment on branch of government;
(3) would liability impair free exercise of discretion?;
(4) likelihood of harm to members of public if action taken;
(5) nature and seriousness of harm; and
(6) availability of other remedies.
Discretionary: Highway construction and Maintenance; Allocating plows, resource and equipment for snow removal.
Ministerial: Once it is determined that act should be performed, subsequent performance is ministerial. (e.g., operating motor vehicle). No immunity for breach of contract claims. Masad v. Weber, 772 N.W.2d 144 (S.D. 2009). S.D.C.L. § 21- 32-1 establishes the Office of Commissioner of Claims, which hears contract and tort claims against the State.
Damage Caps: None.
General Tort Laws/Statutes
Prohibits Broad Indemnity. Applies to Construction Contracts or Agreements. S.D. Codified Laws § 56-3-18.
Modified Joint and Several Liability. Joint and several liability for defendants 50% or more at fault. S.D.C.L. § 15-8-11. Joint and several liability for defendants less than 50% at fault, but with a cap on liability – no more than twice their proportionate share of the fault. S.D.C.L. § 15-8-15.1.
A joint tortfeasor has a right of contribution in the underlying action and separate action if they settle and extinguish the liability of the contribution defendant. A release by the injured person of one joint tortfeasor does not relieve him from contribution liability unless the release is given before right of contribution accrues, and provides a pro-rata reduction of plaintiff’s damages recoverable against all other tortfeasors. S.D.C.L. § 15-8-12; Freeman v. Berg, 482 N.W.2d 32, 34 (S.D. 1992). One year statute of limitation after payment, whether judgment or settlement. Uniform Contribution Among Tortfeasors Act (“UCATA”).
Contributory Negligence/Comparative Fault
Slight/Gross Negligence Comparative Fault: Complete bar of recovery for anything other than slight negligence. Damaged parties can recover even if 99% at fault. Recovery is reduced by the damaged party’s degree of fault. The fault of the plaintiff and defendant is only compared if the plaintiff‘s negligence is “slight” and the defendant’s negligence is “gross.” Otherwise, the plaintiff is barred from recovery. “Slight/gross” comparative fault has been viewed as a compromise between the traditional contributory negligence defense and the more common comparative fault alternatives. This system has been criticized due to the inherent difficulties in defining a precise standard for “slight” and “gross” negligence. The Slight/Gross Negligence Comparative Fault Rule is a “modified” pure comparative fault system and is currently used only in South Dakota. S.D.C.L. § 20-9-2.
Dog Bite Laws
Dog owner will be liable if the victim can prove that the owner knew, or should have known, of the dog’s dangerous propensities, or if the owner was negligent. Blaha v. Stuard, 640 N.W.2d 85 (S.D. 2002).
Economic Loss Doctrine
Majority Rule. When there is no accident and no physical harm so that the only loss is pecuniary” – such as damage to the product itself – there can be no recovery in tort. Diamond Surface, Inc. v. State Cement Plant Commission, 583 N.W.2d 155 (S.D 1998). The general rule is that economic losses are not recoverable under tort theories; rather, they are limited to the commercial theories found in the U.C.C. One exception to the general rule is when personal injury is involved. City of Lennox v. Mitek Indus., Inc., 519 N.W.2d 330 (S.D. 1994). The second exception may apply when the damage is to “other property” as opposed to the specific goods that were part of the transaction. Other property has been defined as damage to property collateral to the product itself.
Willful Misconduct. Liability imposed on parents when child willfully or maliciously causes damage, except when child’s conduct occurred through the operation of a motor vehicle. S.D.C.L. § 25-5-15.
The limit of liability is $2,500.00 of actual damages plus costs. Child must be under 18-years-old.
Adverse Inference: Under South Dakota law, if a party fails to present evidence or witnesses, such non-production justifies an inference that the evidence would be unfavorable. Cody v. Leapley, 476 N.W.2d 257, 264 (S.D. 1991). “The non-production or suppression by a party of evidence which is within his power to produce and which is material to an issue in the case justifies the inference that it would be unfavorable to him if produced.” Id.; Leisinger v. Jacobson, 651 N.W.2d 693, 699 (S.D. 2002). The burden of proof with respect to the adverse inference rule is on the spoliator to show that it acted in a non-negligent, good faith manner in destroying the document sought. Wuest v. McKennan Hosp., 619 N.W.2d 682, 686 (S.D. 2000). The spoliator must show he acted in good faith without negligence or malice in destroying the evidence. Id. A jury is required to determine if the explanation given is reasonable and if so, may not infer that the missing information contained unfavorable evidence to the opposing party. Id.
Statute of Limitations
Personal Property6 YearsS.D.C.L. § 15-2-13(4)
Personal Injury/Death3 YearsS.D.C.L. § 15-2-14(3)
Personal Injury/Medical Malpractice2 YearsS.D.C.L. § 15-2-14.1
Breach of Contract/Written6/20 YearsS.D.C.L. § 15-2-13(1) and § 15-2-6(2)
Breach of Contract/Oral6 YearsS.D.C.L. § 15-2-13(1)
Breach of Contract/Sale of Goods4 YearsS.D.C.L. § 57A-2-725
Statute of Repose/Real Property10 YearsS.D.C.L. § 15-2A-3*
Breach of Warranty (U.C.C.)4 YearsS.D.C.L. § 57A-2-725
Workers’ Comp Third Party Case3 YearsS.D.C.L. §§ 62-4-38, 39 and 40
Strict Product Liability3 YearsS.D.C.L. § 15-2-12.2
Statute of Limitations Exceptions
*10 Years from substantial completion of improvement. If injury occurs during 10th year after substantial completion, action may be brought within one (1) year after injury, but can’t be brought more than 11 years after substantial completion. S.D.C.L. § 15-2A-3.
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 3 Years. S.D.C.L. § 15-2-14(3). Medical Malpractice – 2 Years. S.D.C.L. § 15-2-14.1.
Subrogation of Medical and Disability Benefits are allowed. S.D.C.L. § 58-18A-79; Schuldt v. State Farm Mut. Auto. Ins. Co., 89 S.D. 687, 238 N.W.2d 270 (1975). Made Whole Doctrine does not apply. Westfield Ins. Co., Inc. v. Rowe, 631 N.W.2d 175 (S.D. 2001) (a standard subrogation provision trumps the common law made whole rule). Common Fund Doctrine applies. Van Emmerik v. Mont. Dakota Utilities Co., 332 N.W.2d 279 (S.D. 1983).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: State v. Hofer, 512 N.W.2d 482 (S.D. 1994).
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: No.
Failure to Disclose A Basis For Bad Faith: An insurer’s refusal to discuss settlement may be considered in the determination of a bad faith claim. Further, the failure of an insurer to disclose policy limits is relevant in determining if an insurer refused to discuss a settlement. Kunkel v. United Sec. Ins. Co. of N. J., 84 S.D. 116, 168 N.W.2d 723 (1969) (citing State Auto. Ins. Co. of Columbus, Ohio v. Rowland, 221 Tenn. 421, 427 S.W.2d 30 (1968)).
Comments: However, an insurer owes a duty not to knowingly cause or further a third-party claimant’s misunderstanding of the limits. Railsback v. Mid-Century Ins. Co., 2004 S.D. 64, 680 N.W.2d 652.
One-Party Consent: It is not unlawful for an individual who is a party to or has consent from a party of an in-person or electronic communication to record and or disclose the content of said communication. S.D. Codified Laws § 23A-35A-20; S.D. Codified Laws § 23A-35A-1.
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 3 years for personal injury and wrongful death. S.D.C.L. § 15-2-12.2. Discovery Rule applies.
Liability Standards: Negligence, Strict Liability, Warranty.
Fault Allocations: Modified Comparative. S.D.C.L. § 20-9-2.
Non-Economic Caps/Limits On Actual Damages: No.
Punitive Y/N and Limits: Yes.
Heeding Presumption?: No.
Innocent Seller Statute: Yes. S.D.C.L. § 20-9-9.
Joint and Several Liability: Yes. S.D.C.L. § 15-8-11.
Available Defenses: Assumption of Risk; Misuse; Alteration; State of the Art; Presumption.
Restatement 2nd or 3rd?: Neither.
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Condominium/Co-Op Waiver of Subrogation Laws
No waiver of subrogation required. No statute regarding condominium insurance.
Damage to Property Without Market Value
Service Value: No Case Law
Intrinsic Value: Rule of damages depends upon the purpose and character of the action. A party injured may … recover the value of such trees, not as a part of the realty, but their intrinsic value as detached and separated therefrom, and proved in the usual mode of proving value. Wallahan v. Black Hills Elec. Co-op, Inc., 523 N.W.2d 417 (S.D. 1994).
Sentimental Value: Damages in an eminent domain proceeding must include present and prospective damages caused by the condemnor but not those which are speculative or remote or damages which are sentimental only. Lawrence Cty. v. Miller, 786 N.W.2d 360 (S.D. 2010).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment And Depreciation Of GCOP/Sales Tax: No applicable case law, statutes, administrative rules, or other guidance with regard to the calculation and/or depreciation of GCOP.
South Dakota rejects the blanket following of the “Sutton Rule” (see Oklahoma) which holds that the tenant is an “implied co-insured” of the landlord’s insurer. American Family Mut. Ins. Co. v. Auto-Owners Ins. Co., 2008 WL 4816666 (S.D. 2008). Instead, South Dakota adopts the case-by-case approach as a better reasoned rule that recognizes the intent of the parties under contract law and the equitable underpinning of subrogation. Subrogation may be denied under the case-by-case approach if the lease expressly requires the landlord to maintain fire insurance or the lease exonerates a tenant from losses caused by a fire.
ASR yet to be specifically determined. However, in James v. State Farm Mutual Auto. Ins. Co., 929 N.W.2d 541 (S.D. 2019), State Farm insured both drivers in a rear-end accident and then sought subrogation of $5,000 in Med Pay benefits paid under the plaintiff’s policy. The court held that State Farm could not subrogate against another of its insureds but noted that the reimbursement clause in the plaintiff’s policy was ambiguous. The policy stated that “if we make payment under this policy and the person or organization to or for whom we make payment recovers or has recovered from another person or organization”, but the policy defined “person” as “a human being” but “organization” was left without a definition. The insured argued that the term “person” was ambiguous because it could also be interpreted to require reimbursement only when the insured recovers from another person or organization, but not another insured by State Farm. The insured contended that, here, there is no other “person or organization”—there is only State Farm. For some reason, the court held that there were two “equally reasonable” interpretations of the reimbursement provision, and because ambiguity is construed most strongly against the insurer and in favor of the insured, the language “another person or organization” in the reimbursement provision did not include State Farm or any of its insureds. Therefore, the court held that State Farm has no contractual right to reimbursement for the $ 5,000 paid to James for medical expenses under the policy. While this was less of an anti-subrogation case and more of an “ambiguous policy language” case, it does address the insurer being on both sides of a subrogation action.
Per the South Dakota statute, any “victim” who suffers a pecuniary loss due to a criminal defendant’s conduct will be entitled to recover restitution amounts. S.D.C.L. § 23A‐28‐2(5). Case law on the issue has determined that, where an insurer has to indemnify their insured as a result of criminal defendants’ conduct, insurer will, therefore, be a “victim” per the statute. State v. Wingler, 734 N.W.2d 795 (S.D. 2007).
Made Whole Doctrine
In South Dakota the Made Whole Doctrine is a default rule subject to the right of the parties to agree otherwise. Westfield Ins. Co., Inc. v. Rowe, 631 N.W.2d 175 (S.D. 2001). The agreement need not be specific or use the magical phrase “made whole.” Rather, the South Dakota Supreme Court has adopted a plain meaning approach to reach the conclusion that general subrogation language is sufficient to displace the doctrine. Id. In Rowe, the Supreme Court noted subrogation rights may arise independent of the Made Whole Doctrine, especially where a policy or Plan specifically provides for the right of subrogation without a requirement that the insured be made whole. Westfield, supra. Therefore, it appears that South Dakota meekly applies the Made Whole Doctrine, but it can be overcome by simple subrogation policy language which does not require application of the Made Whole Doctrine. Id.; Julson v. Federated Mut. Ins. Co., 562 N.W.2d 117 (S.D. 1997).
In Julson, a property insurer paid property damages to its insured and then settled a subrogation suit with the tortfeasor without the insured having been made whole. Julson, supra. Significant, however, is the fact that the Court noted that the pool of funds awarded from the third-party tortfeasors was not shown to be inadequate to make all parties whole. However, the court also pointed out that the policy specifically provided for the carrier’s right to subrogation after making full payment to Julson as required by its contract, and that there was no clause in the policy requiring the insured to be made whole before subrogation could arise or at the time any settlement is made with any third-party tortfeasors.
A property insurer which pays policy limits does not act in bad faith by pursuing and settling its subrogation action against the tortfeasor, even though the insurer reaches its settlement before the insured is made whole. Id. In Julson, the carrier notified the insured of its intention to settle and provided for the insured’s ability to seek damages from the tortfeasors, and nothing indicated that the insurer consciously disregarded the insured’s rights under the policy. Id.
Under the South Dakota approach, the absence of language in the policy or statute that limits the right of subrogation to instances where the insured has been made whole evidences the parties’ intent to dispense with the default rule.
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Common Law CSR. CSR prohibits evidence that plaintiff’s medical expenses are paid by collateral source. Degen v. Bayman, 241 N.W.2d 703 (S.D. 1976). Damages not reduced by collateral source. Jurgensen v. Smith, 611 N.W.2d 439 (S.D. 2000).
Recovery Of Medical Expenses Rule:
Private Insurance: Paid amounts inadmissible. Papke v. Harbert, 738 N.W.2d 510 (S.D. 2007). Write-offs not admissible. Plaintiff is entitled to recover the reasonable value of medical services which is a question for the jury. Ruling that either amount is the reasonable value makes the other value inherently unreasonable. S.D.C.L. § 21-3-12.
Medicare/Medicaid: CSR applies. Amounts written off not admissible. Papke, supra.
Exception to CSR: Malingering. Cruz v. Gorth, 763 N.W.2d 810 (S.D. 2009).
Employee Leasing Laws
Neither the South Dakota Workers’ Compensation Act nor case law shed any light on the issue involving the Exclusive Remedy Rule and employee leasing companies. This issue, most likely, will be determined by applying common law factors to determine who is the employer, and who is the third party subject to suit.
Hospital Lien Laws
Statute: S.D. Stat. §§ 44-12-1 to 44-12-8. Hospital Liens.
(1) Written notice of lien must be filed in the office of the register of deeds of the county in which the hospital is located before any third-party settlement before any third-party settlement.
(2) Notice must contain name/address of injured party, hospital, tortfeasor and tortfeasor’s insurance company.
(3) Must also be sent by mail, postage prepaid to the tortfeasor and the patient’s attorney. § 44-12-4.
Comments: Any hospital (private, public) has lien on third-party action of patient for the “reasonable and necessary charges” of the hospital up to the date of the settlement. § 44-12-1. Lien doesn’t affect patient/attorney contract. § 44-12-2. No lien if covered by workers’ compensation. § 44-12-3. Hospital must first submit bill/charges to third-party tortfeasor/carrier. § 44-12-3.1. Tortfeasor must divulge name of liability carrier upon request from hospital. § 44-12-7. Settlement of third-party case without paying lien makes tortfeasor liable for lien for one (1) year. § 44-12-8. Tortfeasor is permitted to examine the billing/records of the hospital. § 44-12-9.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP.
Statutory Employer Law: The principal contractor in a construction setting is liable for payment of workers’ compensation to the same extent as any of his subcontractors. Thompson v. Mehlhaff, 698 N.W.2d 512 (S.D. 2005). Immunity is also extended to the principal contractor, regardless whether it actually pays benefits. Metzger v. J.F. Brunken & Son, Inc., 169 N.W.2d 261 (S.D. 1969).
Comments: An employee of a general contractor may collect workers’ compensation from the worker’s compensation carrier of his employer and may also sue a negligent subcontractor or sue a subcontractor for the negligence of an employee of that subcontractor. Metzger v. J.F. Brunken & Son, Inc., 169 N.W.2d 261 (S.D. 1969). Court rejected the common employment theory holding the general contractor’s and all subcontractor’s employees on the job, regardless of position, when engaged in a common employment and who have had the benefits of workers’ compensation, are all immune from being sued. Thompson v. Mehlhaff, 698 N.W.2d 512 (S.D. 2005).
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? No.
Statute/Case Law: Schipke v. Grad, 562 N.W.2d 109, 112 (S.D. 1997).
Rule Summary: Court denied recovery on the ground that the employer, having no more rights under the workers’ compensation statutes against a negligent third party than the employee injured by the third party’s negligence, has no right to sue for increased premiums. The South Dakota Supreme Court says that the subrogation remedy of workers’ compensation statute does not afford cause of action to an employer to recover increases in workers’ compensation insurance premiums from third-party tortfeasor. Increased premiums are merely part of the exchange the employer must bear to be free from employee lawsuits.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
There is no precedent or discussion in case law regarding whether nurse case management fees or other allocated costs which may benefit the employer and/or employee can be recovered in subrogation. Section 65-01-09 describes a workers’ compensation carrier’s subrogation lien as follows:
… the total amount the organization has paid or would otherwise pay in the future in compensation and benefits for the injured employee. N.D.C.C. § 65-01-09.
North Dakota is one of four remaining monopolistic states in the country. In North Dakota, a state organization known as Workforce Safety and Insurance (“WSI” – formerly known as North Dakota Workers’ Compensation but referred to simply as the “Organization”) manages and regulates an exclusive employer-financed, no-fault insurance system covering workplace injuries. WSI is the sole provider and administrator of the workers’ compensation system in North Dakota. The North Dakota Workers’ Compensation Act defines “medical services” as:
…a medical, surgical, chiropractic, psychological, dental, hospital, nursing, ambulance, and other related or ancillary service, including physical and occupational therapy and drugs, medicine, crutches, a prosthetic appliance, braces, and supports, and physical restoration and diagnostic services…
As of 2005, North Dakota requires compliance with ODG Guidelines. See the state of Kentucky and the Preamble above for an argument that the subrogated carrier can recover the “case manager’s” fee for development of a “treatment plan,” utilizing the ODG guidelines.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
South Dakota has not directly addressed the issue. However, § 42-1-560 describes the workers’ compensation carrier’s subrogation interest as “…compensation and other benefits under this Title.” S.D.C.L. § 58-20-24 mandates that all worker’s compensation policies contain provisions to provide medical services and health care to injured workers for compensable injuries and diseases under a case management plan. The Department of Labor has issued administrative rules governing case management plans which address medical referrals and review of treatment. A.R.S.D. § 47:03.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: S.D.C.L. § 62-4-38, 39, 40
Waiver Allowed? Nothing in the South Dakota Workers’ Compensation Act or applicable case law prohibits the use or efficacy of a waiver of subrogation.
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: The effect of a waiver of subrogation on the carrier’s rights, including its right to enforce its statutory lien, has not yet been decided.
Other Applicable Law: None.
Statute of Limitations: 3 Years. S.D.C.L. §§ 62-4-38, 39 and 40.
Can Carrier Sue Third Party Directly: Yes.
Right to Intervene: Yes.
Recovery from UM/UIM Benefits: Employer’s Policy Only.
Subrogation Against Medical Malpractice: Undecided.
Subrogation Against Legal Malpractice: Undecided.
Recovery Allocation/Equitable Limitations: Subrogation limited to “like damages” (economic v. non-economic). Below is “Zoss Formula”:
(1) Allocate recovery into “like damages” (hearing);
(2) Determine amount of “like damages” paid by carrier;
(3) Subtract pro-rata fees/costs (ratio of lien to gross recovery); and
(4) Balance paid to carrier.
Employer Contribution/Negligence: No.
Attorney’s Fees/Costs: Pro-rata, up to 35%. Allocated between worker and carrier.
Future Credit: Yes, recovery and credit limited to “like damages”.
Auto No-Fault: No.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statute is silent on “aliens” and does not mention “illegal” or “legal” in terms of employment. S.D. Codified Laws § 62-1-3.
Case Law: Undecided.