Court Opinion

ID: 9515151
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:54:16.434391+00
Date Added: 2024-06-11T09:06:25.593753
License: Public Domain

SABERS, Justice
(concurring in part and dissenting in part).
[¶ 32.] I concur on Issues 2 and 3 but dissent on Issue 1 because:
1. Wagaman’s superiors used the judicial system to bully Wagaman at her expense while protecting themselves at the State’s expense.
2. Insurance principles apply even if PEPL is not insurance nor an insurance company.
3. The declaratory judgment action was “generated by” and “related to” the claim and the defense of the claim and is covered under PEPL.
4. Genuine issues of material fact exist as to whether the conduct of PEPL was vexatious and unreasonable.
[¶ 33.] 1. Wagaman’s superiors used the judicial system to bully Waga-man at her expense while protecting themselves at the State’s expense.
[¶ 34.] The primary purpose of the youth training facility was to break these youngsters emotionally and physically and reform them into respectful, law-abiding citizens. Part of that program included these walk-runs and the “encouragement” provided by the immediate counselors. Wagaman was doing her job as it was designed and defined by her superiors. She had no control over this policy and was expected to enforce it. Failure to do that job may have resulted in her dismissal. When the policy led to the death of Gina Score, Wagaman’s superiors, who designed the policy, were fully protected by PEPL. Wagaman, the person with the least control over that policy, was left standing alone without protection by her superiors or the fund specifically provided to defend her against this type of action.
[¶ 35.] Being hung out to dry was bad enough, but then Wagaman was forced to deal at her own expense not only with the civil suit in federal court, but also with the criminal case. This declaratory judgment action was the last straw. She had no choice but to defend the declaratory judgment action at her own expense or forfeit her coverage under PEPL. Wagaman’s superiors used her as a scapegoat and used the judicial process to bully her civilly and criminally while they were protected under PEPL. This is a wrong that is not tolerated by the law and should not be tolerated by this Court.
[¶ 36.] 2. Insurance principles apply even if PEPL is not insurance nor an insurance company.
[¶ 37.] Although SDGL 3-22-18 provides that PEPL is not insurance and is not considered an insurance company, we have recognized that principles of insurance law still apply. PEPL v. Winger, 1997 SD 77, ¶ 8, 566 N.W.2d 125, 128 n5; Kyllo v. Panzer, 535 N.W.2d 896, 900 (S.D.1995); See also, ¶ 7, majority opinion (referring to principles of insurance to support a proposition regarding PEPL). We should continue to follow this course and apply principles of insurance law to the PEPL fund, including vexatious or unreasonable refusals to pay.
*75[¶ 38.] Failure to apply insurance principles would be a travesty of justice.
[¶ 39.] First, by refusing to apply either contract or insurance principles to PEPL, the majority opinion leaves PEPL free of any legal repercussions for acting in bad faith against those it covers.
[¶ 40.] Second, the majority opinion eliminates any judicial oversight of this fund. If principles of insurance do not apply, how can the judicial system enforce such provisions as SDCL 3-22-8? (providing in part, “the PEPL shall pay any valid claim up to the limits established in § 3-22 — 1[.] ”) (emphasis supplied).
[¶ 41.] Third, the majority opinion precludes any recourse for a state employee who is wrongfully denied coverage under the plan, simply because SDCL chapter 3-22 provides no specific or express recourse.
[¶ 42.] The majority opinion refuses to hold PEPL accountable for its actions by stating that to do so “would adversely affect the pool’s ability to provide members cost-effective liability coverage and subsequently defeat the purpose and intent of these self-insuring groups.” That reasoning is flawed because while one purpose of such a pool is that the coverage be “cost-effective,” the primary purpose is to provide liability coverage to State employees. With no judicial or statutory mechanism to ensure that PEPL will provide liability coverage to state employees, coverage would be at the whim of the directors of the fund even though the employee is legally entitled.
[¶ 43.] 3. The declaratory judgment action was “generated by” and “related to” the claim and the defense of the claim and is covered under PEPL.
[¶ 44.] The majority opinion unreasonably constricts the language of the Memorandum. The plain language of that document indicates that attorney’s fees for defending a declaratory judgment action are payable. These fees are “generated by” and “related to” adjustment, defense and litigation of the claim. As noted in the majority opinion, properly payable “defense costs” are defined as, “fees and expenses generated by and related to adjustment, investigation, defense or litigation of a claim.” (emphasis supplied).
[¶ 45.] A different conclusion may have been reached in similar circumstances if PEPL had not brought the declaratory judgment action against Wagaman. When PEPL did so, Wagaman had to defend or forfeit her PEPL coverage. PEPL forced Wagaman to incur these related defense costs by commencing the declaratory judgment action against her. A declaratory judgment action brought to determine whether a claim must be defended is inherently “generated by” and “related to” the claim and the defense of that claim. The sole question in this declaratory judgment action was whether PEPL was obligated to defend a claim. Thus, the action was generated by and directly related to the claim and the defense of that claim and was covered under “defense costs.”
[¶ 46.] 4. Genuine issues of material fact exist as to whether the conduct of PEPL was vexatious and unreasonable.
[¶ 47.] Whether PEPL’s refusal to pay is vexatious or without reasonable cause under SDCL 58-12-3 is a question of fact. Sawyer v. Farm Bureau Mut. Ins. Co., 2000 SD 144, ¶ 29, 619 N.W.2d 644, 652; Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752, 763 (S.D.1994). This record reveals genuine issues of material fact regarding whether PEPL’s conduct was vexatious and unreasonable.
*76[¶ 48.] First, PEPL’s own investigator determined that Wagaman should be afforded coverage “for any liability that may arise out of this situation.”
[¶ 49.] Second, Wagaman was performing her job according to State policy.
[¶ 50.] Third, PEPL defended ah of Wagaman’s superiors and the nurse for actions equally if not more culpable than hers.
[¶ 51.] Fourth, PEPL did not consult the Attorney General before denying coverage.
[¶ 52.] Whether any one of these acts rose to the level of vexatious or unreasonable refusal to pay is a question of material fact rendering the trial court’s grant of summary judgment premature and improper. See, Department of Revenue v. Thiewes, 448 N.W.2d 1, 2 (S.D.1989) (providing, in a summary judgment action, the evidence must be viewed in a light most favorable to the nonmoving party, the burden of proof is on the movant, and reasonable doubts as to the existence of a genuine issue of material fact should be resolved against the movant); Wilson v. Great Northern Railway Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968).
[¶ 53.] We should reverse and remand to the trial court to determine these genuine issues of material fact.