On August 10, 2022, the South Dakota Supreme Court issued its opinion in the matter of Althoff v. Pro-Tec Roofing, Inc., 2022 S.D. 49, affirming, in part, and reversing, in part, the Third Judicial Circuit Court of South Dakota’s decision to deny both parties’ motions for summary judgment related to the employer’s alleged intentional misconduct.

In 2016, Justin Althoff fell to his death while working on the roof of a community center project for Pro-Tec Roofing, Inc. (Pro-Tec). Pro-Tec paid Mr. Althoff’s estate (Estate) workers’ compensation benefits accordingly. The Estate then sued Pro-Tec in circuit court. The Estate alleged Pro-Tec intentionally violated several Occupational Safety and Health Administration (OSHA) guidelines related to fall prevention, despite having received citations for similar violations on three prior occasions. The Estate claimed Pro-Tec’s failure to provide adequate fall protection meant serious injury or death was “absolutely certain.”

Pro-Tec moved for summary judgment to dispose of the Estate’s claims by asserting workers’ compensation as the Estate’s only remedy under the “exclusivity provision” of SDCL 62-3-2 (providing workers’ compensation is the exclusive remedy for employee death or injury). In a cross-motion for summary judgment, the Estate argued Pro-Tec’s intentional misconduct fell under the “intentional tort exception” to the exclusivity provision of SDCL 62-3-2 (providing an exception for “rights and remedies arising from intentional tort”). The Third Circuit Court denied both motions, and the South Dakota Supreme Court permitted a discretionary appeal clarifying the standards for the intentional tort exception.

Importantly, the Court analyzed its prior precedent regarding the intentional tort exception under SDCL 62-3-2. The Court analyzed the following decisions in detai: McMillin v. Mueller, 2005 S.D. 41; Fyer v. Kranz, 2000 S.D. 125, Harn v. Continental Lumber Co, 506 N.W.2d 370 (S.D. 1993); and VerBouwens v. Hamm Wood Products, 334 N.W.2d 874 (S.D. 1983). The Court’s earliest decision, VerBouwens,defined intentional conduct as when “an ordinary, reasonable, prudent person would believe an injury was substantially certain to result from his conduct.” However, in subsequent cases Harn, and Fryer,the Court applied a “virtual certainty” standard. Later, in 2005, the Court reverted to the “substantial certainty” standard in the McMillin decision. As a result, there was a conflict among the Court’s prior rulings on whether a plaintiff needed to prove the employer was “substantially certain” or “virtually certain” about the occurrence of an injury.

To remedy this conflict, the Court clarified the intentional tort exception requires the employer to be “substantially certain” about the occurrence of serious injury or death. It explicitly stated “virtual certainty” is not a requirement to establish an intentional tort by an employer. Additionally, the Court also clarified the general negligence standard based on what an “ordinary, reasonable, prudent person would believe” is inadequate to establish an intentional tort committed by an employer.

Resultantly, the Court determined, despite Mr. Althoff’s tragic death, Pro-Tec’s conduct could only be described as reckless or negligent. The Court found, even if Pro-Tec knew failing to follow OSHA guidelines “could” have resulted in Mr. Althoff’s fall, Pro-Tec did not know the fall was “substantially certain” to occur, as required to meet the intentional tort exception. The Court unanimously reversed the Circuit Court’s decision to deny Pro-Tec’s motion for summary judgment.

The Court’s decision reaffirmed the criteria for meeting the intentional tort exception, eliminating the more stringent “virtual certainty” standard that favored the employer’s defense. However, the Court also confirmed that even when an employer acts recklessly or consciously ignores a known risk, “more than the knowledge and appreciation of that risk” is necessary. The employer must have had a “substantial certainty” of death or serious injury. If you have any questions about this clarified standard, please feel free to reach out to us.

On August 24, 2022, the South Dakota Supreme Court issued its opinion in the matter of Douglas Ries v. JM Custom Homes, LLC, 2022 S.D. 52 indicating workers’ compensation was the only remedy available to Ries, an employee of JM’s subcontractor, under the workers’ compensation statutes SDCL 62-3-2 and SDCL 62-3-10.

Pine Tree Plumbing (“Pine Tree”) was a subcontractor of JM Custom Homes, LLC (“JM”). Ries was injured when he fell through a plywood stair while working as an employee of Pine Tree. Ries filed for workers’ compensation benefits against Pine Tree and Pine Tree’s insurer, Acuity Insurance. After Pine Tree and Acuity paid Ries’ workers’ compensation benefits, Ries filed a negligence claim against JM for failing to anchor the plywood or install handrails. In response, JM asserted the affirmative defense of statutory immunity under SDCL 62-3-2 and 62-3-10.

SDCL62-3-2 is an exclusivity provision, which limits an employee’s right to sue. The statute provides that, when an employer accepts liability for workers’ compensation, the employer is provided immunity against all other rights and remedies of an injured employee in return (except those arising from intentional torts). Also known as the “great compromise” the trade-off is a “quid pro quo” exchange inherently ingrained in South Dakota’s Workers’ Compensation Act.

SDCL 62-3-10 provides that a principal contractor (JM) is liable for workers’ compensation “to the same extent as the immediate employer” (Pine Tree). The statute extends liability upwards to general contractors for workers’ compensation claims from sub-contractor employees. However, it also extends the exclusivity provisions of SDCL 62-3-2 to general contractors, limiting a sub-contractor employees’ claims for injuries against higher-rung general contractors to workers’ compensation.

Under these statutes, JM argued that Ries’ sole remedy for his injuries was through workers’ compensation, and he could not sue JM for negligence. The circuit court agreed, and Ries appealed.

On appeal, Ries argued that JM’s insurance policy overrode the exclusive remedy provisions of SDCL 62-3-2. Ries argued that, under the language of the policy, JM was not liable for workers’ compensation claims of its subcontractors and, therefore, could not claim immunity from Ries’ negligence claims. In response, JM argued: (1) the language of the insurance policy was irrelevant; and (2) the policy provided coverage for workers’ compensation by stating “we will pay promptly when due the benefits required of you by workers compensation law.”

The Court determined the ultimate issue was whether JM accepted its obligation to be liable for workers’ compensation claims. If JM was deemed to have accepted its obligation by purchasing insurance coverage, Ries’ claims would be limited to workers’ compensation under SDCL 62-3-2, and JM would be entitled to immunity from Ries’ negligence claims. The Court determined that a private employer is deemed to have accepted its obligation under the Workers’ Compensation Act when it (1) purchases insurance (or enters into a reciprocal insurance agreement); or (2) complies with self-insurance rules.

The Court held the language of the insurance policy was relevant to determine whether JM had accepted its obligation to be liable for workers’ compensation. However, the Court found that JM’s policy secured the relevant coverage, so JM was deemed to have accepted its obligation under the Act. Accordingly, the Court held Ries’ sole remedy was limited to workers’ compensation, and affirmed the circuit court’s dismissal of Ries’ negligence claims against JM.

This decision clarified the importance of, not only securing insurance coverage for workers’ compensation claims, but also ensuring that the policy’s language is sufficient to establish the employer’s acceptance of its workers’ compensation obligations under the laws of South Dakota. Failure to do so in this case may have exposed JM to liability for injuries of its subcontractor’s employee under a theory of negligence.

As always, please feel free to contact us for more information.

On July 20, 2022, the South Dakota Supreme Court issued its opinion in the matter of Baker v. Rapid City Regional Hospital and Hartford Insurance, 2022 S.D. 40 affirming the denial of Permanent Total Disability (“PTD”) to the Claimant based in part upon deference to the South Dakota Department of Regulation, Division of Labor Management’s (the “Department”) factual determinations.

The Claimant, William Baker, was attacked by a patient and struck on the head in 2013 and 2014 while employed by the Rapid City Regional Hospital (“RCRH”). Baker was subsequently diagnosed with Post Concussive Syndrome (PCS), Post Traumatic Stress Disorder (PTSD), and anxiety. Years after the initial attacks, Baker continued to suffer from paranoia and obsession that purportedly limited his ability to work in public or interact with co-workers. However, it was unclear whether Baker’s symptoms were caused by the attacks at work or the stress from Baker’s ongoing litigation.

Baker argued the injuries he sustained at work remained a contributing cause of his mental impairments and he was entitled to PTD benefits. The Department held that even if Baker’s mental impairments were disabling, they were not caused by physical trauma from the injuries, and, therefore, he was not entitled to PTD. Baker appealed the Department’s decision to the Sixth Circuit Court, County of Hughes, Judge Christina Klinger presiding. The circuit court remanded the causation issue but affirmed the denial of PTD benefits.

Baker appealed the denial of PTD benefits to the Supreme Court, arguing: (1) the circuit court erred in denying his claim for PTD as he made a prima facie showing of obvious unemployability; and (2) RCRH and Insurer failed to meet their burden of proving suitable employment was available to Baker, because their vocational expert failed to inform potential employers of all of Baker’s limitations.

The Court agreed Baker did make a prima facie showing of obvious unemployability. However, the Court declined to impose “the exacting requirement suggested by Baker that the employer must speak with each prospective employer and inform them of claimant’s limitations.” Instead, the Court concluded an employer need only “show more than a general availability of jobs to persons with some of claimant’s disabilities.”

Baker further argued he was unemployable as he could not work around other people due to his mental condition. However, RCRH and Insurer’s vocational expert provided examples of 24 different available jobs, most of which would allow Baker to work without significant interaction with other co-workers. The positions were approved by one of Baker’s treating physicians, and Baker testified the positions would allow him to work individually. However, Baker never applied to any job position. Deferring to the Department’s personal observations regarding Baker and whether he was permanently totally disabled, the Court affirmed the Department and the circuit court’s determinations that Baker failed to meet his burden to show his impairments prevented him from obtaining employment.

Although the opinion generally reaffirms long-established precedent regarding odd-lot disability benefits, the opinion is unique insofar as it is the first time the Supreme Court has encountered a claim for odd-lot benefits based upon a mental condition, rather than a “physical condition” as stated in SDCL 62-4-53 (stating “An employee is permanently totally disabled if the employee’s physical condition . . . causes the employee to be unable to secure [employment]”). The Court questioned whether the Legislature ever intended to allow PTD benefits for a mental condition in the first place under the statutory language of SDCL 62-4-53. However, the Court declined to answer the question, as the issue was not challenged on appeal.

The South Dakota Supreme Court recently ruled in favor of an insurance company clarifying the minimum standards required for a Petition for Hearing under the administrative regulations of the South Dakota Department of Labor and Regulations (the “Department”).  On August 18, 2021, the South Dakota Supreme Court released its Opinion in the matter of William May v. Spearfish Pellet Co., LLC, and Western National Mutual Insurance Co., 2021 S.D. 48.

Claimant, William May (“May”), injured his left shoulder in 2009 and his right shoulder a year later in 2010 while working at Spearfish Pellet Co. (the “Employer”).  Employer’s insurer, Western National (“Insurer”), found the workers’ compensation claims were compensable and paid indemnity and medical benefits for surgeries to both shoulders.  Insurer continued to pay medical benefits but discontinued May’s indemnity benefits in 2013.

Around December 2013, May sent a letter to Insurer requesting a review of his workers’ compensation benefits, and also sent a copy of the letter to the South Dakota Department of Labor and Regulation (the “Department”), which was received December 2, 2013.  Insurer responded on January 24, 2014, advising May of the reasons for discontinuing the indemnity benefits, and told May that he had two years to file a petition with the Department if he disagreed.  May sent a second letter to the Insurer and the Department in February 2014, containing the same contents of the December 2013 letter, disputing the Insurer’s determination.  Although the Department stamped both letters as “Received”, the letters were not addressed to the Department and neither the Department nor the Insurer treated the letters as a Petition for Hearing.  Despite retaining counsel in April 2015, May allowed the two-year statute of limitations to expire without filing a formal Petition.

In March 2017, May’s counsel requested that May’s second February 2014 letter be considered a Petition under the Department regulation specifying the necessary contents of a Petition, ARSD 47:03:01:02 (the “Regulation”).  The Regulation requires, among other things, that a Petition be in writing, clearly and concisely state the cause of action, the names of the parties, the time of the place of the accident, how the accident occurred, and the nature and extent of the claimed disability.

May argued that as a pro-se litigant, the definition of a written petition under the Regulation should be liberally construed and that that each piece of information should not be required because it runs contrary to the informal nature of South Dakota’s workers’ compensation procedures.  May also argued that his claims should not be dismissed on mere technicalities.

The Department of Labor ruled against May and found that his February 2014 letter did not constitute a Petition.  May appealed to the Circuit Court, Judge Christina Klinger presiding.  The Circuit Court concluded that ARSD 47:03:01:02 is unambiguous, and therefore its only function was “to declare the meaning of the rule as clearly expressed.” May appealed to the South Dakota Supreme Court.

The South Dakota Supreme Court determined that, even when construed liberally, May’s letter failed to meet the requirements of ARSD 47:03:01:02 to constitute a valid petition.  Specifically, the Court found that the letter: (1) was not addressed to the Department; (2) failed to include basic information such as the name of May’s employer; (3) did not state where May sustained his injury; (4) and provided no details about the time, location, or injury to May’s shoulder.  Importantly, May’s letter complained of many other aliments besides his shoulder injury including heart disease, a lung infection, and muscle disorders.  The Court noted separately that May’s explanation of his disability was so intertwined with his other physical ailments that it failed to sufficiently identify “the nature and extent of his disability” under ARSD 47:03:01:02.

Accordingly, the Court held that due to the inadequacies in the correspondence from May, the Department and the Circuit Court did not err by determining that the February 2014 letter was not a Petition under ARSD 47:03:01:02 affirming the Circuit Court’s decision.


On June 2, 2021, the Supreme Court of South Dakota released its opinion in the matter of Hughes v. Dakota Mill & Grain, 2021 S.D. 35, which addressed the Court’s interpretation of the causation standard of “a major contributing cause.”.  Although this opinion addresses aspects of the causation standard (i.e., what a claimant does not have to prove), it does not give clear direction regarding how medical experts should interpret the causation standard when there are multiple causes for the condition from which the injured worker complains.

Claimant, Taylor Hughes, worked various construction and heavy labor jobs from the time he left high school in the ninth grade (2004) until his employment with Dakota Mill & Grain (the “Employer”) in 2017.  In 2010 and 2011, prior to his employment with Employer, he underwent two back surgeries that he related to his work activities with a prior employer Hughes reported no real back issues between 2014 and 2017.  Hughes began working for the Employer in 2017.  Before being cleared to work for the Employer, Hughes underwent a physical examination.  At the physical, Hughes reported no back problems and was approved by the examining doctor to start work.  Hughes’ job duties with the Employer included heavy labor.  Several months after starting with the Employer, Hughes claimed that he injured his back when he fell off a skid-loader but did not report the injury.  Five days after the injury, Hughes went to the emergency room complaining of back pain similar to the pain experienced from his prior injury with his previous employer.  An MRI after the work injury in 2017 detected a herniated disk in Hughes’ back, and Hughes complained of shooting pain down his legs.  Hughes filed a worker’s compensation claim against the Employer.

The South Dakota Department of Labor (the “Department”) held an administrative hearing.  At the hearing, conflicting expert testimony was submitted regarding whether Hughes’ symptoms were the result of degenerative back conditions from the prior injuries sustained while working for his previous employer, or whether they were caused by Hughes’ fall from the skid-loader and related to the work injury of June 26, 2017, reported to the Employer.  The Department determined that Hughes failed to show that his disability was caused by a workplace injury and failed to show that his work activities with the Employer were a major contributing cause of the injury.  The Department’s decision was appealed.  The decision was appealed to the Sixth Judicial Circuit in Hughes County, South Dakota.  The Circuit Court reversed the Department’s decision, finding that the Department committed clear error in reaching the decision, and the matter was then appealed to the South Dakota Supreme Court (the “Court”).

On appeal, the Court addressed two issues.  The first issue was whether the Department erred in determining Hughes failed to establish that he sustained an injury that arose out of his employment. The Court identified three instances where an injury is said to “arise out of” the employment under South Dakota law: (1) the employment contributes to causing the injury; (2) the activity is one in which the employee might reasonably engage; or (3) the activity brings about the disability upon which compensation is based.  The Court determined that an employee need only show that the employment was “a contributing factor” to the injury to establish this element.

The Court agreed with the Circuit Court and overturned the Department’s determination that Hughes’ disability was not “caused by” a workplace injury. The Court held that the correct standard to determine whether an injury “arose out of” Hughes’ employment should have been whether Hughes’ work activities “contributed to” his injury.  The Court held that, under the correct standard, Hughes established that his injury arose out of and in the course of his employment with the Employer by a preponderance of the evidence because Hughes reported that he felt “100 percent” before beginning work with the Employer, Hughes informed his supervisor that his back was sore the day he fell off the skid-loader, and the work Hughes performed with the Employer included activities that would aggravate one’s back.

The second issue determined by the Court was whether Hughes established that his’ work activities were a major contributing cause of his condition.  The Court determined that, under SDCL 62-1-1, the test for causation when a person has a pre-existing work injury is whether the injury was a major contributing cause of the injury.  Relying on Orth v. Stoebner & Permann Constr., Inc., 2006 S.D. 99, 724 N.W.2d 586, the Department found that a major contributing cause was “a cause which cannot be exceeded.”  The Department determined that because 60% of Hughes’ condition was caused by other factors, any of which could have exceeded 40%, Hughes did not meet the causation threshold.

The Court found that a claimant does not need to reach a 50% threshold to establish causation or show that the work activities were the sole cause of the injury.  Instead, the Court determined that the injury only needs be determined to be a major contributing cause.  Although both experts agreed that from 2012 through 2017 Hughes’ showed an increasing disc bulge in his back, the Court ultimately sided with Hughes’ expert and found that the work activities were a major contributing cause of his condition and he had proven this by a preponderance of the evidence.  In doing so, the Court adopted the opinion of Hughes’ expert determined that because Hughes was symptom-free before working for the Employer; because he had worked full-time for months without complaint prior to his injury with the Employer; and, because he had not been utilizing pain medication or back injections for years prior to the injury, his work activities were a major contributing cause of his condition.

As noted above, this decision gives direction from the Court on what “a major contributing cause” standard is not.  However, the Court left open the definition of “a major contributing cause” by adopting the definition provided by Hughes’ expert stating that “a major contributing cause” is “not the only cause, not the most significant cause, just a major contributing cause.”  When reviewing cases for causation, this new direction from the Court should be taken into consideration.

The South Dakota Supreme Court recently decided Fern Johnson v. United Parcel Service and Liberty Mutual Fire Insurance, 2020 S.D. 39, holding that SDCL 62-7-33 is the exclusive means by which a final decision from the Department of Labor (the “Department”) may be modified. Previously, SDCL 62-7-1 and SDCL 62-1-1(7) were routinely used to revisit and, if appropriate, deny open medical benefits when determining if the work injury remained a major contributing cause of the condition and need for treatment. However, the Court in Fern Johnson determined that this procedure is not appropriate. In a case where benefits remain open following a final decision from the Department, the Court held that ongoing workers’ compensation benefits should not be denied based on additional medical evidence without first obtaining approval from the Department. The Court held that a Petition pursuant to SDCL 62-7-33 should be filed with the Department to determine whether the work injury remains a major contributing cause of the condition and need for treatment and cannot be denied without such a finding.

Johnson prevailed at a workers’ compensation hearing in 2006 and was awarded benefits for future medical care. Liberty Mutual, the workers’ compensation carrier, paid medical benefits for several years thereafter. In 2010, Liberty Mutual sought legal advice regarding its ongoing obligation to pay medical benefits. Liberty Mutual’s attorney recommended a statutorily allowed compulsory medical examination pursuant to SDCL 62-7-1, more commonly known as an IME.  An IME physician examined Johnson and determined that her work injury was no longer a major contributing cause of her condition and need for the recommend medical treatment. Following the IME, Liberty Mutual wrote Johnson a letter advising that further benefits were being terminated based on the IME physician’s opinion.

Johnson filed a Petition for Hearing with the Department arguing that Liberty Mutual did not have authority to deny medical treatment without first seeking approval from the Department for a review pursuant to SDCL 62-7-33.  The Department agreed with Johnson, reinstating her medical benefits, and finding that Liberty Mutual was required to reimburse Johnson for out-of-pocket expenses incurred as a result of the denial.

Liberty Mutual and UPS appealed the Department’s decision to Circuit Court, arguing that SDCL 62-7-1 and SDCL 62-1-1(7) provided the statutory authority to review and determine if Johnson’s work injury remained a major contributing cause of the need for medical treatment without the need for a separate hearing under SDCL 62-7-33. The Circuit Court disagreed, holding that SDCL 62-7-33 was the proper mechanism to review the 2006 order.

In 2014, Johnson commenced a bad faith action against Liberty Mutual in Circuit Court. Johnson alleged bad faith surrounding the denial of benefits in 2010. The case addressed the two-part analysis applicable to a bad faith claim: (1) Absence of a reasonable basis for a denial of benefits and (2) knowledge or reckless disregard of the insurer of the lack of a reasonable basis for the denial. In advance of trial, in a purported attempt to narrow the scope of the issues, the Circuit Court precluded Liberty Mutual from asserting an advice-of-counsel defense and precluded the admission of certain evidence regarding the advice Liberty Mutual received from its attorney.  After a jury trial, a jury returned a verdict in Johnson’s favor that included damages of $500,000 for bad faith and $45,000,000 in punitive damages. Following the trial, the Circuit Court later reduced the punitive damages to $10,000,000, citing constitutional concerns.

Liberty Mutual appealed to the Supreme Court. The Court agreed with the Circuit Court, finding that SDCL 62-7-33 is the exclusive method for modifying a final order of the Department. However, in analyzing the two-part bad faith analysis, the Court agreed that Liberty Mutual lacked a reasonable basis to deny the benefits under the first prong.  However, the Court found that the Circuit Court erred in providing certain jury instructions.  The Court ultimately disagreed with the Circuit Court’s decision to exclude evidence relative to the second prong of the bad faith test relating to Liberty Mutual’s knowledge of the lack of a reasonable basis for the denial.  Due to the Circuit Court’s error, the Court remanded the case for a retrial.

The Court’s analysis of SDCL 62-7-33 as the exclusive means by which workers’ compensation benefits may be denied following a final determination and order from the Department  has a widespread impact on workers’ compensation cases in South Dakota.  A careful investigation, review and analysis of the benefits requested must be performed on a case-by-case basis and consider any prior orders of the Department. Further updates on this case and these issues will be provided as available.  As always, please feel free to contact us for more information.


As the world is being overwhelmed with questions surrounding the pandemic of COVID-19, the potential implications across several areas of law have resulted in many calls to our office with one common question: If someone believes they contracted COVID-19 at work, is that a compensable workers’ compensation claim?

Under South Dakota law, an “injury” is defined, in part, as “only injury arising out and in the course of the employment, and does not include a disease in any form except as it results from the injury.”  SDCL § 62-1-1(7). Thus, the COVID-19 is not an “injury” as defined by South Dakota law because it is a disease which is specifically excluded by the definition of injury.  Given that, the next step requires looking at the occupational disease statutes, analyzing whether COVID-19 is an occupational disease such that it would bring it under the purview of the workers’ compensation statutes.

The occupational disease statutes are found in Title 62, specifically SDCL 62-8.  The definition of occupational disease is found at SDCL § 62-8-1(6) which provides:

“Occupational disease,” a disease peculiar to the occupation in which the employee was engaged and due to causes in excess of the ordinary hazards of employment and includes any disease due or attributable to exposure to or contact with any radioactive material by an employee in the course of employment.

How is that applied in practice? In Sauder v. Parkview Care Center, 2007 S.D. 103, 740 N.W.2d 878, the South Dakota Supreme Court quoted an earlier case from 1997, Zoss v. United Building Centers, Inc., 1997 S.D. 93, 566 N.W.2d 840, holding that before something may be classified as an occupational disease, the injury must be caused by a distinctive feature of the claimant’s occupation, not by the environmental conditions of the claimant’s workplace.  The Court went on to say that unless the condition is intrinsic to an occupation, one does not suffer from an occupational disease.  In Sauder, an individual was exposed to mold in her workplace and claimed to have developed a condition as a result.  In reaching its decision, the Court discussed that while the workplace may have exposed the woman to an environmental condition, it was not a distinctive feature of her occupation.

The Court addressed a similar situation in Sauer v. Tiffany Laundry & Dry Cleaners, 2001 S.D. 24, 622 N.W.2d 741, where the Court found that a laundry room worker did not prove that her rashes and breathing troubles were related to her work in a laundry room.  Therefore, these cases have set forth the framework by which COVID-19 claims would be analyzed.  This means that before someone could potentially receive workers’ compensation benefits for COVID-19, the claimant would be required to prove that COVID-19 was a recognized risk for someone in their specific job and peculiar to their employment.  Given the widespread nature of the virus and the fact that it has been officially recognized as a pandemic warranting the declaration of a national emergency, that will prove highly improbable.

On January 15, 2020, the South Dakota Supreme Court issued an opinion in Armstrong v. Longview Farms, LLP, 2020 S.D. 1, that differentiates between the effects of an acute injury and the effects of a non-work-related degenerative condition in assessing causation. This is a significant decision that signals a more nuanced approach to causation, challenging the “cause-in-fact” arguments often asserted in workers’ compensation claims.

On March 31, 2016, Armstrong injured his left knee while working for Longview Farms, a pork producer. Armstrong was scraping the floor of Longview Farms’ hog confinement building with a curved push blade when the blade caught on the floor, causing Armstrong to fall on his left leg.

Armstrong had previously sustained two other work injuries with different employers. In 1999, Armstrong was irrigating cotton when his left knee suddenly “clicked” and became painful. He underwent surgery to repair a torn meniscus. In 2005, Armstrong slipped and fell onto his left knee at work. During arthroscopic surgery addressing Armstrong’s 2005 injury, the surgeon discovered the presence of severe osteoarthritis. Armstrong discussed the possibility of undergoing a total knee replacement, but instead chose to pursue conservative treatment. At several points after his 2005 work injury, Armstrong complained of worsening knee pain. Over the years, Armstrong told his providers that he knew he needed knee replacement surgery but wanted to wait.

After Armstrong’s 2016 injury, he chose to proceed with a total left knee replacement surgery. Travelers, Longview Farms’ workers’ compensation insurer at the time, denied coverage for the surgery, asserting that Armstrong’s 2016 work injury was not a “major contributing cause” of Armstrong’s left knee condition. An independent medical evaluation was previously conducted of Armstrong and found that the 2016 work injury was not a major contributing cause of Armstrong’s knee condition. The treating provider for Armstrong disagreed, citing the basis for his opinion being that Armstrong was able to do heavy work before the injury, but was not able to work after the injury.

At the administrative hearing, the Department found the testimony of the independent medical examiner more persuasive. The Department acknowledged that Armstrong’s 2016 work injury contributed to his disability but was not a major contributing cause. The circuit court affirmed, and Armstrong then appealed to the South Dakota Supreme Court challenging, in part, causation.

The Supreme Court discussed South Dakota’s causation standard, set out in SDCL 62-1-1(7)(b), and that it requires a work injury be a major contributing cause of a claimant’s current condition and need for treatment to be compensable. In Armstrong, the South Dakota Supreme Court found no evidence in the record that Claimant’s osteoarthritis was related to his employment at Longview Farms, noting that for a long period of time before Armstrong’s 2016 injury, his medical providers commented on the need for knee replacement surgery. In reaching this conclusion, the South Dakota Supreme Court rejected Dr. Adler’s argument that “relegated the causation standard of SDCL 62-1-1(7)(b) to an elementary cause-in-fact determination.” Armstrong, 2020 S.D. 1, citing Jewett, 2011 S.D. 33, ¶ 24. The Supreme Court further noted a lack medical testimony linking Armstrong’s osteoarthritis to his work injury.

The South Dakota Supreme Court looked deeper than the treating provider’s analysis, parsing out the totality of Armstrong’s disability, and separated the effects of Armstrong’s acute incident from the effects of his pre-existing osteoarthritis. This decision rejects the cause-in-fact arguments that are often asserted in cases where an acute incident overlays a non-work-related preexisting condition and more closely examines the contributions of acute injury and pre-existing conditions to a claimant’s overall condition and need for treatment.

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.