Zimmer, Duncan & Cole

Explaining Insurance in Plain English

As an attorney, I know that legal jargon can often be confusing to people outside of the profession.

Our state’s Supreme Court issues around 125 opinions every year, on topics of all kinds. My goal is to explain many of them, and other legal matters, in plain English.

So far this year, the Court has issued two opinions, and both of them involve insurance.

Stuckey v. Sturgis Pizza Ranch (2011 S.D. 1).

The first case of this new year involves an injury at work. In 2005, an employee at the Sturgis Pizza Ranch got her arm caught in a pizza dough machine. Her hand was crushed.

The employer agreed that accident has caused a permanent and total disability, and that she is unable to return to work. The injury causes constant pain. The injured worker then qualifies for replacement income, which is based on her income before the accident.  

Normally, these income benefits are paid monthly by the employer’s insurance company until retirement age. In some cases, an employee can request a “lump sum” award, which would pay out all of the benefits at once.  This option is available when the employee has a unique, immediate financial need, or if the employee would be better off investing the “lump sum” and using the investment income to replace her lost wages. 

Here, the Court determined that the employee does not have a special need, and so she does not qualify for a lump sum award. The Court also approved a medical care plan that is expected to cost the employer’s insurance company $2.9 million. The insurance company doesn’t have to pay that amount all at once, though.  It will continue to have the right to review those future medical expenses, and challenge them if they are no longer medically necessary. 

This case highlights a big difference between a work-comp case and a personal injury case. The reason a jury is asked for such large awards in personal injury cases is because that money has to replace lost income and pay for medical bills forever.

There isn’t any insurance company standing by to pay a monthly salary for lost income, or to pay for medical bills as they come due. Instead, every award in a personal injury case is essentially a “lump sum” award.

State Farm v. Bottger, Kosinski, and AMCO Insurance (2011 S.D. 2)

The second case of the year involves the odd situation where an insurance company sues the victim of a car accident. Normally, we don’t see the insurance companies named as parties in a car accident case. In fact, the attorneys are not allowed to discuss insurance during the trial. 

One exception is when there are coverage questions. In those situations, an insurance company can file a lawsuit asking the court to “declare” whether or not there is coverage. These types of suits are called “declaratory” actions.  

The case of State Farm involves an unusual car accident in Union County. After a high school “drinking party,” a group of students left together in a car. Although they designated a driver, they soon discovered the driver is just as drunk as his passengers. The car crashes into a steep ditch and comes to rest in a cornfield.  

All of the passengers exited the car, unharmed. The driver then tried to move the car out of the ditch, even though he was told not to. He accidentally runs over one of the passengers, pinning her under the vehicle and injuring her.

Since the driver didn’t own the car, the question is, “Whose insurance will cover his carelessness?” 

To resolve this question, State Farm then sued the injured passenger, the driver, and the driver’s mother’s insurance company.

The car’s owner had insurance that covered others who drove the car with permission. However, the driver was told to get out, so he didn’t have actual permission. 

So the first policy doesn’t cover him. The driver’s mother had her own insurance that also covered her family members when they drive other vehicles. However, the coverage is available only if those family members reasonably believed they had permission to drive the car. The case will be sent back to the trial court to find out if the driver reasonably believed he had permission to drive the vehicle out of the ditch, even though he was told to get out of the car (and out of the driver’s seat).

This case highlights the need for uninsured and under-insured motorist coverage, which can be added as part of your own policy. These provisions kick in when the other driver is under-insured or uninsured. This coverage is inexpensive and worth every penny.

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You can find the full opinions on the state Supreme Court Web site, at www.sdjudicial.com.

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If you have a question about the law or about a recent court case, please, e-mail me at dan@zdclaw.com or send a letter to “Less Legalese, Please,” 5000 S. Broadband Lane, Suite 107, Sioux Falls, SD 57108.