Court Opinion

ID: 9581265
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:13:12.428448+00
Date Added: 2024-06-11T13:36:48.976116
License: Public Domain

FOSHEIM, Chief Justice.
Jeffrey W. Brown (Brown), Earl R. Brown and Elaine Brown appeal a denial of attorneys fees which are available for an action against an insurer under SDCL 58-12-3. We reverse.
An automobile tort action was brought against Brown. Brown requested legal representation from his insurer, appellee All Nation Insurance Company (Company). The Company denied that Brown was insured but agreed to provide counsel for Brown until the coverage question was resolved. The Company then instituted a declaratory judgment action against Brown and his parents. The trial court held *494Brown entitled to representation and indemnity from the Company in the tort action.
Brown’s attorney requested attorney fees pursuant to SDCL 58-12-3, which provides:
In all actions or proceedings hereafter commenced against any insurance company, including any reciprocal or interin-surance exchange, on any policy or certificate of any type or kind of insurance, if it appears from the evidence that such company or exchange has refused to pay the full amount of such loss, and that such refusal is vexatious or without reasonable cause, the department of labor, the trial court and the appellate court, shall, if judgment or an award is rendered for plaintiff, allow the plaintiff a reasonable sum as an attorney’s fee to be recovered and collected as a part of the costs, provided, however, that when a tender is made by such insurance company or exchange before the commencement of the action or proceeding in which judgment or an award is rendered and the amount recovered is not in excess of such tender, no such costs shall be allowed. The allowance of attorney fees hereunder shall not be construed to bar any other remedy, whether in tort or contract, that an insured may have against the same insurance company arising out of its refusal to pay such loss.
The trial court denied the request because the declaratory judgment action was not commenced by an insured against an insurance company and did not involve an allegation of refusal to pay benefits. We do not see these as valid reasons in a situation such as this, which is, in effect, an insurance company’s substitute for defending an action for refusal to pay benefits.
Although the statute specifically refers to actions commenced against insurance companies, even the Company concedes that whether the insurer is the named plaintiff and the insured the named defendant is not dispositive of attorney fee liability. Our statutes are given a liberal construction with a view to effect their objects and to promote justice. SDCL 2-14-12. The obvious objective of SDCL 58-12-3 is to discourage contesting insurance coverage and to reimburse an insured for any reasonable attorney’s fees necessarily incurred in defending or enforcing a valid insurance contract right. Cf. Florida Rock, Etc. v. Continental Insurance Company, 399 So.2d 122 (Fla.1981). Taking the initiative to have liability determined does not occlude an insurer’s responsibility to pay attorney’s fees when its refusal to pay according to the policy is found to be vexatious or without reasonable cause.
That the pleadings for declaratory judgment did not contain a specific allegation of the Company’s refusal to pay is likewise insufficient to negate an attorney’s fees award under SDCL 58-12-3. Such refusal was implicit and understood by bringing the action. Faced with such a situation, the insured, in order to secure his policy benefits, was obliged to hire counsel and defend the action. The statute was intended to protect him when he must do that.
We reverse. On remand the trial court is directed to enter findings on the vexa-tiousness or unreasonableness of the Company’s refusal to pay (which it did in its initial findings but omitted in the amended findings) and then apply SDCL 58-12-3 according to this opinion.
DUNN, J., concurs.
HENDERSON, J., concurs specially.
WOLLMAN and MORGAN, JJ., dissent.