The South Dakota Supreme Court recently ruled in favor of an insurance company, marking an important and significant clarification in bad faith litigation in workers’ compensation cases.  A recent decision by the South Dakota Supreme Court in Blanchard v. Mid-Century Ins. Co., 2019 S.D. 54, refused to extend the scope of bad faith liability for insurance companies to actions surrounding procedural errors made by defense counsel after litigation was commenced. This case clarifies the facts that may be presented as evidence of bad faith, offering insight into the extent an insurer can be held responsible for attorney conduct after litigation has commenced.

The plaintiff, Christina Blanchard (“Blanchard”), developed back pain at work in 2010 and filed a workers’ compensation claim. Blanchard was paid workers’ compensation benefits by Mid-Century Insurance until further benefit payments were denied in 2011. As a result of the denial, Blanchard filed a Petition for workers’ compensation benefits with the Department of Labor. After a hearing in 2014, the Department awarded Blanchard benefits, based in part on the opinions of Blanchard’s medical expert.

The facts establish that when counsel for Mid-Century received the unfavorable decision, he advised Mid-Century that while the Department’s decision to adopt one medical expert’s testimony over another was not likely to be overturned, there were deficiencies with the opposing expert’s opinion that counsel believed justified an appeal. Based on this advice, Mid-Century instructed its attorney to proceed with the appeal.

After the Department rendered its decision, but before issuing a final order, the Department instructed the parties to submit proposed findings of fact and conclusions of law. Counsel for Mid-Century submitted proposed findings and conclusions that comported with the Department’s decision, thereby agreeing that Blanchard’s injury was compensable. Additionally, Counsel for Mid-Century failed to object to Blanchard’s proposed findings of fact and conclusions of law. After receiving each parties’ proposed findings and conclusions, the Department entered its final order granting benefits. Mid-Century appealed. Within one month of filing the appeal, counsel for Mid-Century was advised that his proposed findings of fact and conclusions of law had failed to preserve any issues for appeal. Counsel for Mid-Century did not share this information with his client nor engage in any discussion with his client. Blanchard moved to dismiss the appeal for Mid-Century’s failure to preserve any issue for appeal and the motion was granted.

Blanchard later filed a bad faith claim, arguing that Mid-Century pursued a “baseless and meritless appeal in an attempt delay or avoid payment of that claim or settle that claim in an amount less than that indisputably due to [Blanchard]”. Agreeing with the Second Judicial Circuit, the Court, recognized that, “[t]he essence of Blanchard’s bad faith claim arose after Mid-Century decided to appeal the Department’s decision.” For instance, Blanchard argued that the actions taken by Mid-Century’s attorney after deciding to appeal the case – such as opposing Blanchard’s motion to dismiss and attempting to engage in settlement negotiations prior to dismissal – was done in bad faith. Blanchard went on to argue that the findings of fact and conclusions of law drafted by Mid-Century’s attorney, which failed to preserve any issue for appeal, was evidence that Mid-Century knew it had no basis to appeal and that the appeal was frivolous.

In considering these arguments, the Court explained that the litigation conduct rule prevents a court from considering evidence of an insurer’s conduct in subsequent litigation as evidence of bad faith. In this case, the Court determined that the entirety of Blanchard’s evidence in support of her claim for bad faith was litigation conduct. The conduct with which Blanchard took issue occurred after Mid-Century decided to appeal the Department’s decision. The Court’s opinion explains that bad faith is determined at the time a claim is denied, and thus, litigation conduct occurring after the denial is not relevant to assess an insurer’s alleged bad faith. On a general level, the Court emphasized that “it would be a rare case where the insurer’s decisions and conduct in the underlying litigation would be admissible in a first-party bad faith claim.”

Blanchard also argued that an insurer may have a duty to reassess a decision denying coverage based upon subsequently obtained information. However, the Court remarked that case law addressing this issue does not discuss whether this duty exists after litigation commences and the Court was unwilling to extend the insurer’s liability to that extent. Blanchard further argued that Mid-Century’s attorney’s conduct should be imputed onto Mid-Century for purposes of bad faith. However, the Court explained their refusal to add a layer of liability to bad faith in South Dakota, providing that an insurer’s duty of good faith does not require an insurance carrier to reassess a claim because of procedural errors by the carrier’s defense counsel conceding the validity of the claim during the litigation.

In sum, the evidence Blanchard sought to introduce in support of her claims of bad faith against Mid-Century was insufficient.  The Supreme Court acknowledged that to rule otherwise would overly extend the scope of bad faith and expose insurers to liability for procedural errors by their defense counsel, requiring insurers to become legal experts capable of recognizing procedural missteps by counsel during the litigation.

Blanchard v. Mid-Century is a unanimous refusal by the Court to expand bad faith liability with respect to an insurer’s liability for its attorney’s procedural errors and post-litigation conduct, further defining the scope of bad faith in South Dakota.

 

 

 

According to the Federal District Court in South Dakota, it is only after a workers’ compensation claimant has exhausted her remedies under the South Dakota Workers’ Compensation statutes that a trial court may hear a bad faith claim for denial of workers’ compensation benefits. But what does it mean to exhaust your administrative workers’ compensation remedies? This important question was recently explored in Tovares v. Gallagher Bassett Services, Inc., Civ. 16-5051-JLV, 2019 WL 1446390 (Mar. 30, 2019).

Citing Hein v. Acuity, 731 N.W.2d 231 (2007), the Court noted that “[t]he unique circumstances surrounding bad faith relating to a workers’ compensation claim requires that the claimant first be entitled to the benefits requested.” Thus, a bad faith claim is dependent on an ultimate award of benefits by the South Dakota Department of Labor, the agency with jurisdiction over workers’ compensation benefit determinations. “

The parties in Tovares had entered into a voluntary agreement by which the insurer agreed to pay the benefits but did not admit liability and the claimant agreed to dismiss the case with prejudice. The Court found this did not amount to a memorandum of agreement regarding entitlement to benefits because there was no acknowledgement of compensability. “Had plaintiff intended to insist on an admission or determination of compensability, she should have rejected defendants’ check and requested a hearing.” Thus, the Court dismissed the claimant’s bad faith claim because there was no finding by the South Dakota Department of Labor that the claimant was indeed entitled to the benefits which she claimed were denied in bad faith.

Despite the dismissal of the bad faith cause of action, however, a claim for misrepresentation was allowed to continue.  The letter sent from the insurer to the claimant denying benefits stated, “We have investigated this claim and found no evidence to support your claim for benefits under South Dakota Worker’s Compensation provisions.”  The Court found that whether this was a misrepresentation of the claimant’s entitlement to benefits was a fact question best left to the jury.

What does this mean for insurers and claims handlers going forward?  Contact us to discuss how to address these issues moving forward.

On January 16, 2019, the Supreme Court of South Dakota published its opinion in Skjonsberg v. Menard, Inc., 2019 S.D. 6. This decision, which provides favorable language for Employers and Insurers, has potential ramifications on the bad faith environment in South Dakota.

In Skjonsberg, Cassandra Skjonsberg (“Claimant”) injured her right foot while working for Menard, Inc. (“Employer”). Claimant’s workers’ compensation claim was eventually denied, causing her to file a Petition for Hearing with the Department of Labor. Claimant alleged to have incurred medical expenses related to her injury after the denial of her claim. During litigation, Claimant issued written discovery requests. After multiple attempts to have Employer and Insurer answer her discovery, Claimant moved for partial summary judgment.  In doing so, she asked the Department to find Employer and Insurer responsible for payment of her medical expenses. Employer and Insurer responded, arguing that the discovery requests were burdensome and excessive. The Department granted Claimant’s motion for partial summary judgment and ordered that Employer and Insurer pay Claimant’s medical expenses.

Despite the Department’s order, Claimant’s medical expenses went unpaid for two years. Claimant then filed a second motion for partial summary judgment, again seeking payment of unpaid medical expenses. Employer and Insurer responded by sending a letter to the Department claiming that they were taking care of the outstanding medical bills. Counsel for Employer and Insurer later submitted an affidavit, providing that Claimant’s medical bills had been resolved. Employer and Insurer also filed a two-line response to Claimant’s motion for partial summary judgment, arguing the motion should be denied because the issue was moot – in other words, that there was no controversy for the Department to decide because the bills had been paid.

Despite the Employer and Insurer’s argument, the Department granted the second motion for partial summary judgment. Employer and Insurer requested a reconsideration which the Department denied.  On appeal, Circuit Court Judge John Pekas affirmed the Department’s order, and the issue was appealed to the Supreme Court. The Supreme Court reversed and remanded, finding that the second motion for partial summary judgment was granted in error because the issue was moot at the time of adjudication.

The parties likely litigated this issue in anticipation of future bad faith litigation, hoping to collect a pile of orders finding against the employer and insurer. With increasing frequency, Claimants’ attorneys have filed actions where there is no dispute over benefits owed.  Instead, it appears that the goal is getting the Department to enter an Order that may assist a future potential bad faith claim. This decision is useful as the basis for a motion for summary judgment when claims of this nature are filed with the Department.

Reach out to one of us here at Boyce Law Firm to discuss more.

The National Workers Compensation Defense Network (NWCDN) is hosting its 2018 Fall Conference in Minneapolis, Minnesota on September 27, 2018.  Boyce Law Firm, LLP is the only South Dakota law firm that is a NWCDN member.

The 2018 Fall Conference event is open to all NWCDN member firms and their invited guests.  The NWCDN never charges its guests for attendance at its Conferences.  The all-day conference will be conducted on September 27, 2018 at the JW Marriott Minneapolis Mall of America, located at 2141 Lindau Lane, Minneapolis, Minnesota 55425.

You can follow this link http://www.nwcdn.com/2018-seminars to register for the event.  You will also find information relating to the JW Marriott hotel for reservations should you wish to stay there.  If you have any issues with registration or have any questions, please let us know.  NWCDN Conferences are intended to be educational and informative, packed-full of useful information about what is going on in the world of workers’ compensation.

The NWCDN will also be hosting a Cocktail Party on Wednesday, September 26, 2018, at the Conference Hotel location.  The NWCDN is a network of “Many Firms, One Purpose”, with all of our firms dedicated to defending workers’ compensation claims, for the protection of their clients, employers, insurers, and third-party administrators.

Join us in Minneapolis to meet our members and member firms!

In January, the South Dakota Supreme Court issued Harvey v. Regional Health Network, Inc., 2018 SD 3, 906 N.W.2d 382, wherein it affirmed summary judgment for the employer and dismissed the terminated employee’s claims for slander, malicious prosecution, intentional and negligent infliction of emotional distress (I/NIED), wrongful termination, breach of contract, and punitive damages. Harvey, who worked at a nursing home, claimed her termination was premised upon false reports of resident abuse by two coworkers who wanted her fired. She also argued the employer should be held liable for failing to conduct a thorough investigation of the co-worker reports, both before her termination and when the employer reviewed her termination via an internal grievance process, and for causing her to be criminal prosecuted for felony elder abuse. The case is instructive to the practitioner and employer on issues involving: (1) internal investigations, (2) mandatory reporting, and (3) employment policies:

1. Investigations/Decisions: Upon receiving a verbal report of employee misconduct (hitting a resident), the employer obtained written statements from two coworkers (one of whom had a good performance record, the other did not). Other coworkers were not interviewed. In recommending termination, a supervisor noted her own observation of other behavior consistent with the incident reported by the two coworkers. As applied to the I/NIED claims, the Court held that a failed or insufficient investigation did not rise to the level of outrageous conduct, even if the investigation was lacking. Similarly, the slander claim failed because there was no evidence that the speakers (supervisors and leadership) entertained serious doubt as to the truth of the publication (hitting a resident). Harvey is instructive to employers and practitioners particularly as it provides guidance on taking care to conduct sufficient internal investigations and, when possible, having the ultimate disciplinary decision being made by an individual who is not a witness to the conduct at issue in the investigation.

2. Mandatory Reporting: Harvey involved the employer making a mandatory report of alleged elder abuse to the Department of Health. Not only did the report form the basis of Harvey’s slander claim, but she also brought a claim of malicious prosecution (involving the prosecutor’s later decision to pursue criminal charges against Ms. Harvey). The employer did not report as quickly as required by the applicable reporting laws and did not comply with the Department’s requests for supporting documentation, resulting in a Department audit of the employer policies. Nonetheless, the Court upheld dismissal of the malicious prosecution claim, finding that the employer merely reported the conduct and allowed the authorities to do their jobs. Harvey reminds employers and practitioners to be mindful to (a) timely transmit any required disclosure; (b) provide all information learned in their own investigation; and (c) not advocate or otherwise get overly involved in the independent decision of an investigating agency or authority.

3. Policies: In Harvey, Court engaged in a lengthy analysis of the employer’s post-termination grievance procedure and whether the alleged failure to follow the procedure created a breach of contract claim. The Court ultimately answered this question in the negative. Significant to its holding was a review of the employer’s written policies, including: (a) express statements that the employment was at-will and that the terms in the handbook should not be regarded as promises for employment and do not create any contract; (b) reservation of the right to terminate for any reason with or without notice; (c) not having an “exclusive” list of reasons for which an employee could be terminated; (d) not having a mandatory progressive discipline policy; and (e) a grievance procedure that did not restrict the employer from terminating at will and did not require the employer to review the termination decision to make sure the policies/procedures were consistently applied. Employers and practitioners are encouraged to keep these concepts in mind when drafting or revising employment policies.

Also notable in Harvey was the Court’s refusal to expand the whistle-blower wrongful termination cause of action to an employee’s report to supervisors of concerns that her coworkers’ performance was “unsafe” and/or her request to place security cameras in the facility. On this issue, the Court noted existing law limit whistleblowing activity to “the reporting of unlawful or criminal conduct to a supervisor or outside agency”, and it noted to expand the law to include the cited report would wrongfully eviscerate the at-will doctrine in favor of judicial management of the employee/management relationship.

Recommendation is made for review of the Harvey decision in its entirety, as it provides a great analysis of multiple tort and contract claims that an aggrieved employee may seek to bring against an employer.

Let’s take a moment to consider this hypothetical scenario:

John Smith is at work for the Widget Company working on the assembly line. Mr. Smith has been working for about 10 hours when he faints, causing him to fall and hit his head on the ground beneath him. The Widget Company gets Mr. Smith to an emergency room where several tests are run to determine the cause of Mr. Smith’s fainting spell. A review of the diagnostic testing and Mr. Smith’s medical history uncovers that Mr. Smith has a history of fainting due to a personal health condition and he has experienced these fainting spells several times in the background. The Emergency Room physician tells Mr. Smith that the fainting spell was related to his personal health condition and provides him recommendations how to address this issue in the future.

Now, the million-dollar question: Is the diagnostic testing performed on Mr. Smith a covered benefit under South Dakota workers’ compensation law?

Whenever the purpose of the diagnostic test is to determine the cause of a claimant’s symptoms, which symptoms may be related to a compensable accident, the cost of the diagnostic test is compensable, even if it should later be determined that the claimant suffered from both compensable and noncompensable conditions. Mettler v. Sibco, 2001 S.D. 64, ¶ 9, 628 N.W.2d 722, 724.

We get several questions about whether or not diagnostic testing is compensable when the ultimate outcome relates the reason for the event pointing to a personal health condition. However, keep the above case law in mind when evaluating the responsibility for payment of diagnostic testing to determine the medical explanation for an accident or injury.

As always, please call us if you have any questions, we are happy to help.

The first decision of 2018 involves a permanent total disability claim heard by Judge Thronson. This is the first decision we have seen from Judge Thronson following a hearing. There were a number of issues presented at hearing and the Department found in Claimant’s favor on all of them.

The first issue was whether the work injury was a major contributing cause of Claimant’s condition. Frankly, this part of the opinion is difficult to understand. The opinion starts by stating the Insurer argued that Claimant could not prove that the accident, and not some other unrelated medical condition, was responsible for her condition. There is then some discussion of cervical stenosis and the Department of Labor states the injury need only be a major contributing cause, not the major contributing cause. Despite that, the Department then states that Dr. Cederberg, the IME doctor, provided the medical opinion that the work injury was a major contributing cause to the disability. If the IME doctor relates the injury to work, it is not at all clear why it would have been an issue at hearing. Regardless, the Department found the injury was a major contributing cause of the condition complained of.

The next question was whether Claimant was permanently and totally disabled. Claimant had a $691.00 per week comp rate. She was 61 years old with a high school diploma, and her vocational expert, Tom Audet, testified she would be unable to work within her restrictions and make at least her workers’ compensation rate. The Employer and Insurer did not have their own expert at the hearing. The Department of Labor accepted Audet’s testimony that Claimant was in the odd-lot category. The most interesting part of this opinion was in the Department’s analysis of whether Claimant conducted a good faith job search. Claimant looked for 26 jobs between December of 2014 and May of 2015. It appears she did not make any other job search and the hearing was in August of 2017. If that is correct, Claimant would have gone more than two (2) years without looking for work. The Department held that “no case law in South Dakota specifies that a job search need be made in any particular timeframe.” What constitutes a reasonable job search depends on the facts, but it’s curious that the Department of Labor found the job search to be reasonable as it focused only on the 26 job contacts over a five-month period and did not make any mention that Claimant failed to look for work for more than two (2) years, or attempt to address why the Department was not concerned with this seemingly relevant fact. The Employer and Insurer’s lack of an expert may have been the determining factor here as there was no evidence that a job search would have made a difference.

The final claim was that Claimant refused medical care, and thus, aggravated her condition. Claimant was prescribed a second round of physical therapy but did not proceed forward with it. The IME doctor indicated the failure to complete the second round of physical therapy aggravated Claimant’s shoulder. The Department of Labor stated the evidence was insufficient to establish that the physical therapy would have helped Claimant’s condition as the first round of physical therapy did not provide much benefit. Moreover, the Department of Labor did not find Claimant at fault for failing to attend physical therapy as Claimant had difficulties in obtaining authorization from the Insurer on getting therapy. The Department stated, “Claimant cannot be penalized for failing to attend physical therapy sessions which are not available to her.”

If you have questions regarding this decision or any other South Dakota questions, please contact the Boyce Law Firm at 605-336-2424 or contact Charles Larson at calarson@boycelaw.com

When hiring a new employee, many employers request that a potential employee sign what is often referred to as a “Release,” which is used to initial a background screening process. However, there are strict federal rules to which an employer must comply when obtaining this information.

Section 604(b)(2) of the FCRA specifically provides that “…a person may not procure a consumer report…for employment purposes with respect to any consumer, unless—

(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured…in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and

(ii) the consumer has authorized in writing…the procurement of the report by that person.”

The statute requires this disclosure in a completely standalone document, without any extraneous information. The document should be referred to as the “Disclosure and Authorization” form, with the intent being to inform the applicant that the employer may obtain a consumer report for purposes of the employment application process, and they are seeking the applicant’s written permission to do the same. The Fair Trade Commission has made clear as have the courts that Section 604(b)(2) does allow the authorization to be part of this standalone document and therefore certain identifying information may also be included to initiate a background check, like name, date of birth, and social security number.

Despite the clear language provided in the statute, many employers continue to include other information, including language asking the applicant to release the company and others from any liability and responsibility in connection with the consumer report, also known as a release of liability. While including this language may seem to make some business sense, it is in direct violation of the statutory requirements. Employers also add information about drug screening and company-specific policies to the

Some employers also add company policy language, drug screen information and other miscellaneous items. Some add this “Disclosure and Authorization” as part of their employment application, although it has always been clear that this “Disclosure and Authorization” cannot be part of some boilerplate language somewhere in the application, and the statute specifically provides that it must be separate in a standalone document.

Are you complying with the FCRA?

Feel free to give me a call at 605-731-0218 if you have any questions.

I hope this finds you doing well. I have received many inquiries over the last couple of weeks on when temporary disability benefits are owed. I think that the confusion comes from the mislabeling of the benefits. There is a difference between TTD and TPD benefits, even though the amount may be the same. TTD is paid when the employee is ordered completely off of work. If there is a compensable claim, benefits are owed regardless of other factors. For instance, if the employee is ordered completely off work, and is unable to work because he is in jail, you’d still owe TTD benefits. The reason for this is that the standard for whether any benefit is owed is whether the work injury is and remains a major contributing cause to the benefit sought. If the employee is ordered completely off work, the employee being in jail makes no difference as he couldn’t work whether he is in jail or not as the doctor has taken him off of work.

The analysis changes once employee has been released to work by the doctor, even if the employee has not actually returned to work. Let’s take our employee who is in jail. When he was ordered completely off of work, his incarceration did not matter as he wouldn’t be able to work even if he was a law- abiding citizen. Once he is released to work, you would ask whether the work injury is and remains a major contributing cause to his inability to work. If the employer could accommodate the restrictions, you would stop paying benefits because the reason the employee cannot work is not related to his work injury, but, instead, from the fact that he is incarcerated. However, let’s say the employer cannot accommodate the restrictions when the employee is released to work, then what? You would still pay TPD in that situation because whether he is in jail or not makes no difference as he would not be working anyway. You would continue paying benefits until the employee is released to work full duty, receives an impairment, or the employer is able to accommodate the restrictions.

If confused, just ask yourself whether the work injury is a major contributing cause to the inability to work. If the employee is ordered off of work by the doctor because of the work injury, the answer is yes and you would owe TTD benefits. If the employee has been released to work but is not working, ask yourself “Why isn’t he working? Is it related to his injury?”

TTD and TPD are often interchanged, however the distinction is important because TPD benefits have defenses available. Always look to the doctor’s restrictions – not whether the employee is actually working. The proper question does not begin with the work status. Instead, the proper question is whether the employee has been released to work. If you have questions on this or any other issue, please contact Boyce Law Firm at 605-336-2424.

Considered by many scholars to be the most comprehensive source on mediation, Christopher W. Moore in The Mediation Process describes the steps to active listening in the following manner.

First, the mediator must listen to what the party is saying and determine the emotion the party is feeling. Is it frustration? Anger? Fear?

Second, select the word or words that reflect what the interviewee is feeling. Care must be taken not to minimize the feeling or blow it out of proportion. Disempowering the interviewee will also be counterproductive so saying “You are feeling really weak and helpless…” is not a good strategy.

Third, tell the interviewee what you have heard in the words and language selected. If more than one emotion is being expressed give feedback as to all the emotions.

Fourth, wait for the response from the party. Be patient and do not fill the silence with more from your own mouth. The response will either confirm the accuracy of the emotion expressed or provide further clarification of those feelings.

Fifth, if the emotions are confirmed encourage the party to talk more about those feelings.

SIxth, if the mediator has not accurately understood the emotions being expressed obtain further clarification from the interviewee. In essence, start over again at the top of this list.

Finally, it may take several attempts to accurately describe the emotion felt and do not be afraid to spend the time and effort necessary to accurately understand what is going on. Do not, however, force this process on the interviewee. If you encounter resistance, move on.

Like most skills, active listening takes practice. It may very well be the most important skill a mediator can possess for resolving disputes. Let me know if you have any questions.