Court Opinion

ID: 9514540
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:50:20.887607+00
Date Added: 2024-06-11T09:06:18.737430
License: Public Domain

SABERS, Justice
(dissenting).
[¶ 27.] I dissent.
This is an assignment of an insurance malpractice case. As such, it is determined in the same manner as a legal malpractice case, which is on a “case within a case” basis. It was brought within the appropriate statute of limitations, it was not necessary to reduce it to judgment, and it is only necessary to prove the “case within a case.” Obviously, it was not necessary for Kobbe-man to sue Defendants in Daniel’s name or obtain any judgment because Daniel’s cause of action had been assigned to him.
[¶ 28.] This is an assignment of an insurance malpractice case; as such, it is determined in the same manner as a legal malpractice case, which is on a “case within a case” basis.
The manner in which the plaintiff can establish what should have transpired in the underlying action is to recreate, i.e. litigate, an action which was never tried. This procedure of recreating the underlying action is known as a suit within a suit, a trial within a trial, an action within an action, a case within a case, to name but a few of the designations. The objective is to establish what the result would have been had the case been filed....
Thus, the plaintiff in a legal malpractice ease has not only to prove the four elements basic to negligence cases, but may be asked to prove three additional factors: 1) that the underlying claim was valid, 2) that it would have resulted in a favorable judgment had it not been for the attorney’s error, and 3) the amount of the judgment and that the judgment was collectible.
Haberer v. Rice, 511 N.W.2d 279, 285 (S.D.1994) (citations omitted). The assignment to Kobbeman carried with it the burden to prove 1) his damages sustained because of Daniel’s negligence, and 2) Defendants’ liability to Daniel for failing to procure insurance and Daniel’s damages therefrom. To prove the latter, he must show that Daniel requested the policy and that the loss would have been within the risk insured against. Kagele v. Aetna Life & Cas. Co., 40 Wash.App. 194, 698 P.2d 90, 94 (1985) (“[A]s a condition precedent to recovery against the insurer [in assigned action], the injured party would *642have to prove the claim was within the coverage of the policy.”).
[¶ 29.] Since this action is tried on a “case within a case” basis, it was brought within the appropriate statute of limitations and it is not necessary to reduce Kobbeman’s claim to judgment within that timeframe.8 It is necessary to prove the case within a case, but there is no need for a judgment at this time. The fact that no out of pocket payment was made and no personal liability incurred because of the covenant not to execute did not mean, as a matter of law, that Daniel was not damaged. See Steinmetz ex rel. Palmer v. Hall-Conway-Jackson, Inc., 49 Wash.App. 223, 741 P.2d 1054, 1056 (1987):
The assignee’s rights are coextensive with those of the assignor at the time of the assignment. ... At the time of settlement, [insured] had a claim against [insurer] for damages owed to [injured party] resulting from [insurer’s] negligence in failing to obtain the proper insurance. In consideration of [injured party’s] agreement not to sue or execute, [insured] assigned to [injured party] her right to sue [insurer]. Palmer, as the assignee, took those rights held by Steinmetz at the time of assignment. ... The fact that Steinmetz did not pay out of her own pocket and was not subjected to personal liability because of the covenant is immaterial....
Therefore, because the trial court looked at the effect the covenant had on Steinmetz’⅛ personal liability rather than on the right to sue possessed by Steinmetz when she assigned the right to Palmer, we conclude that the trial court erred when it concluded as a matter of law that Steinmetz was not damaged and thus awarded summary judgment to Conway.
(Emphasis added).
[¶30.] Additionally, the majority opinion ignores the “assignment” statutes. In the absence of a statute, an unliquidated claim for damages arising out of tort is not assignable. 6A CJS Assignments § 37, at 642-43 (1975).9 South Dakota’s policy is to permit parties to assign these causes of action. See SDCL 43^2-1, which defines a “thing in action” as “a right to recover money or other personal property by a judicial proceeding.” See also SDCL 43-42-2:
A thing in action arising out of the violation of a right of property or out of an obligation may be transferred by the owner. Upon the death of the owner it passes to his personal representatives except where in the cases provided by law it passes to his devisees or successor in office.
In Sherman v. Harris, 36 S.D. 50, 153 N.W. 925 (1915), overruled on other grounds by *643Simons v. Kidd, 73 S.D. 280, 41 N.W.2d 840 (1950), an action for deceit was brought by-Sherman for damages suffered 1) by Sherman, and 2) by Wade, who assigned his right of action to Sherman. The defendant’s appeal was based on whether the cause of action could be assigned at all, which the court answered affirmatively. Apparently not at issue was whether the assignor’s damages must be reduced to judgment before the action could be assigned; however, it is clear that damages to both assignor and assignee were ascertained by the trial court after the assignment:
The court made findings of fact and conclusions of law, from which it appears that the plaintiff suffered damage to the amount of $1,000 under the first cause of action, and that the said W.V. Wade suffered damage to the amount of $200 under the claim set forth in the third cause of action.
[¶ 31.] In Helmbolt v. LeMars Mutual Insurance Co., Inc., 404 N.W.2d 55, 59 (S.D.1987), this court ruled that an insured was not required to reduce a claim against a tort-feasor to judgment prior to payment of un-derinsurance benefits by the insurer. The majority opinion distinguishes Helmbolt by stating it is based upon the statutory mandate of SDCL 58-11-9.5, which does not require an insured to reduce a claim to judgment prior to payment of underinsurance benefits. Likewise, SDCL 43-42-1 & -2 provide that a right to recover money in a judicial proceeding may be transferred by the owner, yet neither dictate that the right must be reduced to judgment. If they did, then they would no longer be providing for assignment of a right to recover money, but rather an assignment of a judgment. Helm-bolt states, “Nothing in the statutes requires an insured to reduce a claim against a tort-feasor to judgment prior to payment of un-derinsurance benefits.” 404 N.W.2d at 59. Similarly, nothing in the “thing in action” statutes mentions or requires a judgment, so Helmbolt is not contrary authority.
[¶ 32.] Not only is there no law, there is absolutely no reason to require litigation and a judgment between Kobbeman and Daniel when damages would almost certainly be disputed and relitigated between Kobbeman and Defendants. Why require an obviously unnecessary and duplicative act? Even eases cited by the majority opinion recognize that the assignee must prove hi's damages in the suit against the insurer. See, e.g., Campione v. Wilson, 422 Mass. 185, 661 N.E.2d 658, 662-63 (1996):
To recover against the defendants, therefore, in addition to proving the essential elements of their negligence claim against them, the plaintiffs will have to establish O’Donnell’s fault for accident (at least because the question of comparative fault may be in dispute and may affect the measure of damages), and they must prove the extent to which their damages exceeded the coverage afforded by American. We do not consider the settlement agreement as probative on any of these points, particularly damages. Placing with the plaintiffs the responsibility of proving their assigned claims in full reduces the risk of . collusion, and justifies giving effect to the assignment of the negligence claims. We conclude that the plaintiffs’ negligence claims should not have been dismissed.
(Citations & footnote omitted); cf. Miller v. Byrne, 916 P.2d 566, 582 (Colo.Ct.App.1995) (agreeing with trial court that 1) settlement may not reflect an arm’s length determination of the worth of plaintiffs claim and therefore 2) settlement amount should not be the conclusive measure of damages in bad faith breach of insurance contract action and 3) assignee would be required to prove her damages on retrial); Red Giant Oil v. Lawlor, 528 N.W.2d 524, 535 (Iowa 1995) (putting burden on injured party to prove 1) the underlying claim was covered by the policy, and 2) the settlement which resulted in the judgment was reasonable and prudent); accord Freeman v. Schmidt Real Estate & Ins., 755 F.2d 135, 141 (Heaney, J., dissenting) (“Of course, in any action, the insured would have to prove his damages and the insurer would have a right to assert any defense that it might have had if the insurance had been purchased as requested. This simple safeguard would prevent any collusive settlement.”).
[¶33.] As noted by the majority opinion, “[T]he ‘debt’ for which an insurer becomes *644liable is fixed at the time of loss even though the amount of compensation is still to be ascertained.” Antal’s Restaurant, Inc. v. Lumbermen’s Mut. Cas. Co., 680 A.2d 1386, 1389 (D.C.1996). Since the case against Ole-son and Kahler was assigned to Kobbeman by Daniel, there was obviously no need for Kobbeman to bring a suit in Daniel’s name against Defendants, and, in fact, to do so would have clearly been improper.10 Nor was it necessary for Kobbeman to reduce his damages to judgment prior to bringing this action. The covenant not to execute does not eliminate the fact of damage and does not absolve Oleson and Kahler of liability. Chaussee v. Maryland Cas. Co., 60 Wash. App. 504, 803 P.2d 1339, 1343 (1991). Consequently, the trial court erred in dismissing this case and the majority opinion repeats the error. Therefore, we should reverse and remand for trial.

. Footnote 7 of the majority opinion misses the point because it incorrectly assumes that it is somehow necessary to extend Daniel’s exposure beyond the expiration of the statute of limitations, which it claims violates public policy. It is not necessary because the suit on the assigned cause of action for insurance malpractice was commenced well within the statute of limitations. Since Oleson and Kahler were sued on the assigned cause of action well within the statute of limitations, it is only necessary to prove the proper damages resulting from the failure to procure insurance.
Therefore, the majority opinion's accountant example improperly manufactures "an indefinite waiver” that does not exist in this case. The accountant example implies that Assignee brings the assigned cause of action after the expiration of the statute of limitations, which would clearly preclude prosecution of the action. See Gilbert v. United Nat'l Bank, 436 N.W.2d 23, 25-26 (S.D.1989) (dismissing assigned claims on basis of untimeliness, not for lack of prior judgment). Here, Kobbeman timely filed the assigned lawsuit.
Under the majority’s example, any assignee suing within the appropriate statute of limitations stands to lose the "basis for suit" because it "ceases to exist” on the date the statute of limitations would have expired. If this were the law, all assigned suits, brought within the proper statute of limitations, would be subject to defendants' foot-dragging and ultimate dismissal. A better example is as follows:
Debtor (D) owes Creditor (C) $1,000. C assigns the claim to Assignee (A). A sues D on the assigned cause of action well within the statute of limitations. It is not necessary for A to also sue D in C's name on the underlying debt. Nor is it necessary for C to sue D before or after the assignment. It is simply a matter of proof of the assigned claim against D.

. As a general rule, any right of action arising out of a contract may be assigned, including a right of action for damages for a breach of contract, even though the contract itself is not assignable. Assignments § 36, at 641.

. The majority opinion’s citation to 46A CJS Insurance § 1410 (1993) for the proposition that a "valid judgment must be obtained against insured before a cause of action arises in favor of the injured person against the insurance company ...” is misleading; section 1410 discusses "direct actions” against insurance companies, which are prohibited by statute in most jurisdic- • tions. See, e.g., SDCL 58-23-1; Klatt v. Continental Ins. Co., 409 N.W.2d 366, 373 (S.D.1987). This case concerns an assigned cause of action, not a direct action. Furthermore, SDCL 58-23-1 demonstrates that the Legislature knows how to provide that a judgment is a prerequisite to a lawsuit, and would have written SDCL 43-42-1 & -2 accordingly if that is what it had intended.