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UNFAIR TRADE PRACTICES ACT AND
OTHER SOUTH DAKOTA STATUTES
By Mike Abourezk and Marialee Neighbours
Several South Dakota statutes prescribe insurance company responsibilities to insurance claimants. Some of these statutes are:
Unfair Trade Practices
The Unfair Trade Practices Act, S.D.C.L. § 58-33-67, defines unfair or deceptive insurance company practices in South Dakota. Some unfair or deceptive insurance company practices are:
- S.D.C.L. § 58-33-67 (1): It is an unfair or deceptive practice for an insurance company to fail to answer letters and phone calls that seek claim payment. Insurers are required to acknowledge and act within thirty days upon communications with respect to claims. In addition, an insurer must adopt and adhere to reasonable standards for the prompt investigation of claims.
- S.D.C.L. § 58-33-67 (3): It is an unfair or deceptive practice for an insurance company to fail to give a prompt and reasonable explanation of the basis for denial of a claim or a compromise settlement.
- S.D.C.L. § 58-33-67 (4): It is an unfair or deceptive practice when liability has become reasonably clear under one portion of insurance policy coverage for insurance company to influence settlements under another portion of insurance policy coverage.
Admissibility
In South Dakota, there is no private right of action against an insurer under the Unfair Trade Practices Act. S.D.C.L. § 58-33-69. However, courts routinely admit evidence of a state's unfair claim practices act and regulations in insurance bad faith actions. See, e.g., Ingalls v. Paul Revere Life Ins. Co., 561 N.W.2d 273(N.D. 1997)(violation of State's Prohibited Practices in Insurance Business Act may be considered as evidence of bad faith); Walston v. Monumental Life Ins. Co., 923 P.2d 456, 461 (Idaho1996) (expert witness testimony on insurance statute proper to show insurance industry standards even though no private cause of action exists under the statute); Spray, Gould & Bowers v. Associated International Ins. Co., 71 Cal. App. 4th 1260, 84 Cal. Rptr. 552 (Cal. App.1999) (court looks to insurance regulations to determine if there was a duty to speak, violation of which estops insurer from raising defense); MacFarland v. United States Fidelity & Guarantee Co., 818 F. Supp. 108, 110 (E.D. Pa. 1993) (unfair claim practices act and regulations can be considered in determining whether insurer engaged in bad faith); Certainteed Corp. v. Federal Ins. Co., 913 F. Supp. 351 (E.D. Pa. 1995) (allowed evidence of unfair claims practices act and regulations to be considered in determining whether insurer engaged in bad faith); Weiford v. State Farm Mutual Automobile Ins, Co., 831 P.2d 1264, 1269 (Ala. 1992) (where insured had common law bad faith claim no error in instructing on duties imposed by unfair claim practices act); Inland Group of Cos., Inc. v. Providence Washington Ins. Co., 985 P.2d 674, 683 ( Idaho1999)(Court upheld use of expert testimony to "utilize Idaho's Unfair Claims Settlement Practices Act to show insurance industry practices in Idaho.").
Uninsured and Underinsured Motorist Insurance
South Dakota Codified Law § 58-11-9 provides that no motor vehicle liability insurance policy may be issued in South Dakota unless uninsured motorist coverage is provided. The statute provides in pertinent part:
No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle may be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, ..., unless coverage is provided therein ... for bodily injury or death equal to the coverage provided by such policy for bodily injury and death, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom.... (emphasis added).
South Dakota Codified Law § 58 11 9.4 specifies that no motor vehicle liability insurance policy may be issued in South Dakota unless underinsured motorist coverage is provided. S.D.C.L. § 58 11 9.4 provides in pertinent part:
No motor vehicle liability policy of insurance may be issued or delivered in this state with respect to any motor vehicle registered or principally garaged in this state,..., unless underinsured motorist coverage is provided therein at a face amount equal to the bodily injury limits of the policy. (emphasis added).
Since S.D.C.L. § 58-11-9 and S.D.C.L. § 58 11 9.4 are intended to protect motorists from the losses attributable to uninsured and underinsured drivers, an insurer's bad faith handling of these claims thwarts public policy.
Worker's Compensation
In bad faith cases involving worker's compensation, there are several statutes that establish an insurance company's responsibilities to an injured worker. Some pertinent parts of these statutes are:
- S.D.C.L. § 62-5-20: An insurer must pay the entire cost of the employee's loss and then seek reimbursement from the insured employer for the amount of the deductible.
- S.D.C.L. § 58 20-4: Worker's compensation insurance policies, issued or delivered in South Dakota, must cover separately and for a separate consideration, all liabilities which are imposed upon an insurer by the Worker's Compensation Act.
- S.D.C.L. § 58-20-5: Worker's compensation insurance policies must cover the entire liability of the employer to his employees covered by the policy or contract.
- S.D.C.L. § 58-20-6: No worker's compensation insurance policy will be issued unless it contains an insurer's agreement that it will promptly pay to the person entitled to compensation all installments of the compensation that may be awarded or agreed upon. The agreement will be construed to be a direct obligation by the insurer to the person entitled to compensation, enforceable in his name.
- S.D.C.L. § 62-7-38: In cases where there are multiple employers or insurers, if an employee claims an aggravation of a preexisting injury or if an injury is from cumulative trauma making the exact date of injury undeterminable, the current insurer must pay the claim until all employers and insurers agree on responsibility or the matter is appropriately adjudicated by the Department of Labor.
- S.D.C.L. § 62-4-1: An employer must provide necessary first aid, medical, surgical, and hospital services, or other suitable and proper care during the disability or treatment of an employee. The employee has the right to initially select his or her own physician, surgeon, or hospital services at the employer's expense.
- S.D.C.L. § 62-6-3: Insurer must file a copy of the report required by S.D. C.L. § 62-6-2 [Employer's First Report of Injury] with Department of Labor within ten days after it is received. The insurer is required to investigate the claim and notify the injured employee and the Department, in writing, within twenty days from receipt of the report, if it denies coverage in whole or in part.
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