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BURDEN OF PROOF REQUIRED TO ESTABLISH PUNITIVE DAMAGES
By Mike Abourezk and Marialee Neighbours
Applicable Law
-S.D.C.L. § 21-3-2
South Dakota Codified Law § 21-3-2 authorizes the award of punitive damages. It provides in pertinent part:
In any action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud, or malice, actual or presumed . . . the jury, in addition to the actual damage, may give damages for the sake of example, and by way of punishing the defendant.
Under S.D.C.L. § 21-3-2, punitive damages are appropriate in intentional tort cases when there is evidence of "oppression, fraud, or malice." Kjerstad v. Ravellette Publications, Inc., 517 N.W.2d 419, 425 (S.D. 1994). Thus, in order to recover punitive damages, a plaintiff must make a minimum showing of oppression, fraud or malice.
The malice required for an award of punitive damages can be either actual or presumed. Isaac v. State Farm Mutual Auto. Ins. Co., 522 N.W.2d 752, 761 (S.D. 1994). Actual malice is a positive state of mind evidenced by a positive desire and intention to injure another, actuated by hatred or ill-will. Dahl v. Sittner, 474 N.W.2d 897, 900 (SD 1991).
"Presumed legal malice on the other hand, is malice which the law infers from or imputes to certain acts." Id. (citation omitted). "A claim for presumed malice can be shown by demonstrating a disregard for the right of others." Id., citing Case v. Murdock, 588 N.W.2d 885, 891 (S.D. 1992)(citing Flockhart v. Wyant, 467 N.W.2d 473, 475 (S.D. 1991).
Applicable Law
-S.D.C.L. § 21-1-4.1
South Dakota Codified Law § 21-1-4.1 requires an evidentiary finding by a court prior to submitting a punitive damage claim to the trier of fact:
In any claim alleging punitive or exemplary damages, before. . . any such claim must be submitted to the finder of fact, the court shall find, after a hearing and based upon clear and convincing evidence, that there is a reasonable basis to believe that there has been wilful, wanton, or malicious conduct on the part of a party claimed against.
However, the burden on a plaintiff under S.D.C.L § 21-1-4.1 has been held to be lower than the level of proof, which must be established, to the trier of fact. It is essentially a "prima facie case for punitive damages." Case, 588 N.W.2d at 891; Vreugdenhil v. First Bank of South Dakota, N.A., 467 N.W.2d 756, 760 (S.D. 1991); Isaac, 522 N.W.2d at 761.
In Isaac v. State Farm Mutual Auto. Ins. Co., a bad faith case, the South Dakota Supreme Court explained:
Under SDCL § 21-1-1.4, the trial court applies a clear and convincing standard to determine, before any such claim may be submitted to discovery or to the jury, whether there is a reasonable basis to believe that there has been [ ] willful, wanton or malicious conduct on the part of the party complained against. This statute merely requires clear and convincing evidence to show a reasonable basis.
Id., citing Flockhart, 467 N.W.2d at 475 (emphasis in original). See also Shippen v. Parrott, 506 N.W.2d 82, 87 (SD 1993) (§ SDCL 21-1-4.1 "does not establish a clear and convincing evidence standard but merely requires clear and convincing evidence to show a reasonable basis. The clear and convincing basis merely modifies the 'reasonable basis' language to make a prima facie showing that punitive damages may be in order.").
Therefore, a plaintiff in a bad faith action must show, by clear and convincing evidence, that there is a reasonable basis to believe that there has been willful, wanton or malicious conduct on the part of an insurer.
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