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South Dakota

What Is The Time for Responding to a Defense Tender?

Insurers must acknowledge and act within 30 days upon communications with respect to claims. S.D. Codified Laws § 58-33-67.

Does Reserving Rights Create a Conflict of Interest? 

No cases found.

Does a Reservation of Rights Create Additional Duties?

No cases found.

What Must Be Done If A Conflict of Interest Exists?

When the insurer assumes the defense under a reservation of rights, the insured may either engage independent counsel (at the insured’s expense) to take control of representation or assist the insurer in representation. Connolly v. Standard Cas. Co., 73 N.W.2d 119, 122 (S.D. 1955).

Who Is Responsible for Fees of Independent Counsel?

The insured. See above.

What Are Independent Counsel’s Obligations?

No cases found.

What Settlement Duties Exist?

No cases found.

What Actions May Result in a Claim for Bad Faith?

An insurer that breaches its duty of good faith and fair dealing may be liable in tort, even though it is also a breach of contract. Such tortious conduct is shown where there is unreasonable delay in performing under a contract, including delays in settlement under a liability policy. Champion v. United States Fidelity & Guaranty Co., 399 N.W.2d 320, 322 (S.D. 1987).

To prove its bad faith claim, an insured must show an absence of a reasonable basis for denial of policy benefits or a failure to comply with a duty under the insurance contract and the knowledge or reckless disregard or lack of a reasonable basis for denial. Phen v. Progressive Northern Ins. Co., 672 N.W.2d 52, 59 (S.D. 2003).

South Dakota recognizes a claim for the bad faith in cases where an insurer wrongfully refuses to settle a case brought against its insured by a third-party. Kunkel v. United Sec. Ins. Co., 168 N.W.2d 723, 734 (S.D. 1969). This claim arises when an insurer breaches its duty to give equal consideration to the interests of its insured when making a decision to settle a case. Kunkel v. United Sec. Ins. Co., 168 N.W.2d 723, 736 (S.D. 1969). 

Conditioning the settlement of an underinsurance policy on the release of a bad faith claim has been found to be evidence of bad faith and to support an award of punitive damages against an insurer. Harter v. Plains Insurance Company, 579 N.W.2d 625, 634 (S.D. 1998).

South Dakota does not recognize a private cause of action for insureds in the Unfair Insurance Trade Practices Act. S.D. Codified Laws § 58-33-69.

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

By statute, an insured may recover reasonable attorney’s fee if it can establish that an insurer refused to pay the amount of loss and that refusal was vexatious or without reasonable cause. S.D. Codified Laws § 53-12-3.

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

By statute, punitive damages may be awarded at trial 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. S.D. Codified Laws  § 21-3-2.

Alternative Coverage Options

Under South Dakota law, “typically and most appropriately, the issue regarding an insurer’s duty to defend arises in a separate declaratory judgment action, preceding a trial on the underlying damage action.” Stoebner v. South Dakota Farm Bureau Mutual Insurance Company, 598 N.W. 2d 557, 561 (1999).

Relevant Statutes

Declaratory Judgment – S.D. Codified Laws § 21-24-1.

“Courts of record, within their respective jurisdictions, shall have power to declare rights, status, and other legal relations, whether or not further relief is or could be claimed. No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect; and such declarations shall have the force and effect of a final judgment or decree.”

Unfair Insurance Trade Practices Act – S.D. Codified Laws § 58-33-69.

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