Zimmer, Duncan & Cole

When Insurance Companies (and Judges) Just Won't Listen

It's rare for a court case to ever make it into a Supreme Court opinion. Our Court has released only a baker's dozen of opinions so far this year. During that same time, thousands of cases have been filed across the state.
So it is quite unusual when the same case ends up in front of the Supreme Court twice. That's what happens in this week's case, Bonnie & Paul Bertelsen v. Allstate Insurance (2011 S.D. 13). As we'll see, the neither Allstate nor the trial judge was very helpful to the Bertelsens.
Bonnie was injured in a car accident the day after Christmas in 2005. She worked as an in-home, pediatric nurse. On the way to a patient's house, her car was struck by another vehicle with tremendous force. After six weeks in the hospital, countless surgeries and eight months of recuperation, her medical bills totaled $382,849.92.
With the help of her attorneys, Bonnie began asking her insurance companies to pay those bills. Some said "no".
The first company to refuse coverage was AIG, her employer's workers comp carrier. AIG said that Bonnie's injuries happened on the way to work, rather than during work. (Bonnie didn't start getting paid until she arrived at a residence.) Thus, AIG believed the policy did not apply.
Much, much later, AIG would change its mind. But in the two years until AIG backed down, this denial of coverage was very significant for one of Bonnie's other policies, namely the auto insurance she had with Allstate.
Her auto policy included a benefit which paid $100,000 for medical bills in the event of an accident.
But Allstate's policy also included this exclusion: "This coverage does not apply to any person to the extent that the treatment is covered under any workers' compensation law."
So if AIG had provided coverage, Allstate was off the hook. But during that two year window where AIG was denying coverage, Allstate had an immediate duty to pay $100,000 towards Bonnie's medical bills.
(If you're already frustrated with all this insurance mumbo-jumbo, just think how Bonnie must have felt as she tried to figure it out from a hospital bed! This is why it helps to have a lawyer in your corner.)
Despite its duty, Allstate refused to pay for Bonnie's medical bills. It sent letters saying it was "investigating" the issue.
Allstate didn't move very fast, however, with its investigation. Two years later, Allstate had not paid a dime. Bonnie then filed this lawsuit.
Bonnie brought two claims against Allstate. The first was for breach of contract. In other words, Allstate was breaking the promises it had made in the insurance policy by refusing to pay.
The second was for bad faith. This type of claim is brought against insurers that don't "play fair". The insurance company faces the possibility of paying extra damages...not just enough to pay the claim it denied, but multiple times that amount. The threat of these extra damages forces insurers to act in line with their catchy mottos: "like a good neighbor" and "you're in good hands".
In 2009, our State Supreme Court agreed with both claims. The Court said that Allstate had breached the contract, and that it had committed the sin of bad faith, because there was no good reason for not paying.
The Supreme Court said the only issue left was for a jury to decide how much Allstate would have to pay in damages. It sent the case back for a trial on damages.
At trial, however, the judge all but ignored the higher court. The trial judge refused to let Bonnie introduce important evidence, while he let Allstate explain why it believed it had no duty to pay. Not surprisingly, the jury voted for Allstate.
On this second appeal, the Supreme Court was livid. There was no "explaining" to be done here by Allstate. Once AIG had denied workers compensation coverage, Allstate had an immediate duty to pay. This duty existed even if AIG was wrong. (In that case, AIG would later need to repay Allstate for stepping up to the plate for it....This type of rule helps protect injured people, who are the least likely to have an extra $100,000 lying around for their medical bills.)
The Court took the original trial judge off the case and sent the case back for another trial. A new jury will decide the damages issue later this year.

In this column, I explain recent court cases and answer your legal questions in plain English. Send questions or comments to dan@zdclaw.com or "Less Legalese, Please," 5000 S. Broadband Lane, Suite 107, Sioux Falls, SD 57108.

Daniel K. Brendtro is a trial attorney from Sioux Falls. His firm, Zimmer, Duncan & Cole, LLP, has represented clients statewide since 1948 on all types of cases, including injuries, accidents, criminal defense, and business lawsuits.