Delka v. Continental Casualty Co.

#24288-a-SLZ

2008 SD 28

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *

TED E. DELKA, Plaintiff and Appellant,
v.
CONTINENTAL CASUALTY COMPANY, Defendant and Appellee,
and
GREENTREE TRANSPORTATION CO.,
and CHARLENE BURD, Defendants.

* * * *

APPEAL FROM THE CIRCUIT COURT OF
THE FOURTH JUDICIAL CIRCUIT
LAWRENCE COUNTY, SOUTH DAKOTA

* * * *

HONORABLE RANDALL L. MACY
Judge

* * * *

SARA FRANKENSTEIN
G. VERNE GOODSELL of
Gunderson, Palmer, Goodsell & Nelson, LLP
Rapid City, South Dakota

W. JASON GROVES of
Groves Law Office Attorneys for plaintiff
Rapid City, South Dakota and appellant.

RONALD J. HALL of
Hall Law Firm Attorney for defendant
Aberdeen, South Dakota and appellee.

* * * *

ARGUED ON APRIL 25, 2007

OPINION FILED 04/02/08
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ZINTER, Justice

[¶1.] Following an occupational disability, Ted E. Delka commenced this

action against Greentree Transportation Company (Greentree); one of Greentree’s

employees, Charlene Burd (Burd); and Continental Casualty Company (CCC).

Delka pleaded nine causes of action arising out of his enrollment under Greentree’s

group occupational accident insurance policy that Greentree had purchased from

CCC for Greentree’s employees and independent contractors. The circuit court

granted summary judgment dismissing CCC. Delka appeals. We affirm.

[¶2.] In 1999, Delka, a trucker residing in South Dakota, began working as

an independent contractor for Greentree, a Pennsylvania company. Greentree

required its independent contractors to have workers’ compensation insurance or

occupational accident insurance (OAI) as a condition of employment. Burd advised

Delka that group OAI was available through Greentree, and allegedly stated that it

was “just like” workers’ compensation insurance. Delka did not have either type of

insurance, and he enrolled under Greentree’s group OAI policy with CCC. Upon

enrollment, Delka received an insurance card, but alleges that he received no other

information about the policy.

[¶3.] CCC is in the business of providing OAI. CCC employed Ameriplan

Benefit Corporation (Ameriplan) as CCC’s underwriting manager. Greentree had

applied to CCC for a group OAI policy. Southern States Insurance Agency

(Southern States) acted as Greentree’s insurance agent or broker in the transaction.

CCC issued the group policy to Greentree as the policyholder. Greentree purchased

and received delivery of the policy in Pennsylvania. Therefore, the parties agree

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that Pennsylvania law governs the relationship between CCC as the insurer,

Greentree as the policyholder, and Delka as an insured under the group policy. The

parties further agree that, pursuant to their employment agreement, Pennsylvania

law governs the relationship between Greentree and Delka.

[¶4.] Greentree’s contract of insurance with CCC required Greentree, not

Delka, to pay the monthly premiums for the OAI. The premium was based upon the

total number of independent contractors covered each month. Greentree’s cost of

insurance for Delka was $92 per month. Greentree, however, deducted $125 per

month from Delka’s checks, which was $33 per month (a total of $396) more than

Greentree’s cost of OAI during the time Delka was employed. Allegedly, $18 of the

monthly excess was deducted for a “contingent liability policy” that covered

Greentree, and $15 was deducted for “Greentree’s losses” on independent contractor

insurance. Delka contends that he had no knowledge of these additional premium

deductions and alleges that he was being overcharged. 1

[¶5.] In 2000, Delka was involved in a work-related accident that rendered

him unemployable. After his accident, Delka had his first contact with CCC: Delka

received copies of his application and CCC’s policy. CCC subsequently paid Delka

all disability and medical benefits afforded under Greentree’s OAI policy. Although

there is no dispute that CCC fully complied with the terms of the group policy, the

policy benefits were limited to five years, and Delka alleges that he is permanently

1. Allegedly, another $35 was deducted for “bobtail deadhead” insurance, but
the actual premium for that insurance was only $18. CCC did not provide
the “bobtail deadhead” insurance: it was provided to Greentree by another
company.

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disabled and will need further medical care for the rest of his life. Delka therefore

contends that the OAI is insufficient to cover his disability and that Greentree and

CCC are liable for misleading him in believing that OAI was just like workers’

compensation insurance.

[¶6.] Delka brought this suit on causes of action alleging deceit, bad faith,

violation of South Dakota’s Unfair Trade Practices Act, violation of Pennsylvania’s

Unfair Insurance Practices Act, negligent misrepresentation, breach of fiduciary

duty, conversion, fraud and concealment, and negligence. The gravamen of all

claims is that the OAI was misrepresented as being “just like” workers’

compensation insurance and Delka was overcharged. With respect to CCC and

vicarious liability, Delka alleges that Greentree was CCC’s agent in the group

insurance transactions and therefore, CCC is vicariously liable for Greentree’s acts

and omissions. With respect to direct liability, Delka alleges that CCC

misrepresented certain facts to Delka, had knowledge of overcharging for OAI, and

breached duties it owed to Delka arising from obligations independent of the group

insurance contract.

[¶7.] The circuit court granted summary judgment dismissing CCC on all

claims. With respect to vicarious liability, the circuit court concluded that

Greentree and Burd could not, as a matter of Pennsylvania law, be deemed CCC’s

agents in enrollment and premium transactions involving group insurance. With

respect to direct liability, the circuit court observed that Delka failed to assert that

CCC made any representations to Delka prior to his accident. The court also

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concluded that CCC owed Delka no duty independent of its obligations under the

group insurance contract. 2

[¶8.] Delka appeals raising the following issues:

1. Whether Greentree was CCC’s agent in the OAI group insurance
transactions.

2. Whether CCC made misrepresentations or owed any duties to
Delka independent of CCC’s obligations under the policy.

We review these issues under our familiar standard of review:

Summary judgment is authorized if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact, and that the moving party is entitled to
judgment as a matter of law. We will affirm only when there
are no genuine issues of material fact and the legal questions
have been correctly decided. All reasonable inferences drawn
from the facts must be viewed in favor of the non-moving party.
The burden is on the moving party to clearly show an absence of
any genuine issue of material fact and an entitlement to
judgment as a matter of law. Summary judgment will be
affirmed if there exists any basis which would support the trial
court’s ruling.

Schwaiger v. Avera Queen of Peace Health Serv., 2006 SD 44, ¶7, 714 NW2d 874,

877.

Agency

[¶9.] Delka contends that Greentree acted as CCC’s agent in the marketing

and servicing of the group insurance and therefore CCC is vicariously liable for

2. The circuit court noted that there was sufficient evidence at the summary
judgment stage to conclude that CCC may or should have had knowledge that
Greentree was charging more than its cost of insurance. The circuit court
concluded, however, that absent an agency relationship, that knowledge was
not material because CCC had no other duty to Delka other than CCC’s
duties under the contract.

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Greentree’s alleged overcharging and misrepresentations. Pennsylvania’s law on

agency with regard to group insurance is well settled. The United States Supreme

Court, applying Pennsylvania law, concluded:

When procuring [a group] policy, obtaining applications of
employees, taking payroll deduction orders, reporting changes in
the insured group, paying premiums, and, generally, in doing
whatever may serve to obtain and keep the insurance in force,
employers [such as Greentree] act not as agents of the insurer
[such as CCC], but for their employees [such as Delka] or for
themselves.

Boseman v. Connecticut Gen. Life Ins. Co., 301 US 196, 204-05, 57 SCt 686, 690, 81

LEd 1036 (1937) (citations omitted). The state and federal courts of Pennsylvania

have also concluded that employers are not the agent of the insurer in group

insurance transactions. See Henning v. Metro. Life Ins. Co., 546 FSupp 442, 446

(MDPa 1982); Aetna Life Ins. Co. v. Messier, 173 FSupp 90, 96 (MDPa 1959);

Layman v. Cont’l Assur. Co., 416 Pa 155, 160, 205 A2d 93, 95-96 (1964); Hanaieff v.

Equitable Life Assur. Soc. of U.S., 371 Pa 560, 564, 92 A2d 202, 204 (1952);

McFadden v. Equitable Life Assur. Soc., 351 Pa 570, 575, 41 A2d 624, 626 (1945);

Smith v. CNA Ins., 319 PaSuper 449, 462 n9, 466 A2d 629, 636 n9 (1983).

[¶10.] In Hanaieff, the Pennsylvania Supreme Court acknowledged the split

of authority on this agency question; nevertheless, it adopted the majority view

holding that the employer acts as the agent of the employee, not the insurer:

[W]hile it is true that there is a diversity of opinion among the
several jurisdictions as to whether, in the case of such group
insurance policies, the employer occupies the role of agent of the
employees or of the insurer, in our own State, as in the Supreme
Court of the United States, this question has been definitely
resolved against plaintiff's contention.

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371 Pa at 564, 92 A2d at 204. In Aetna Life the federal district court explained that

the purpose of group insurance was to supply low-cost insurance for the protection

of employees, 3 and:

In procuring such [group] insurance, obtaining applications,
taking payroll deductions, and paying premiums, the employer
acts as agent for the employees and for themselves . . . thus
rendering their employees a service and promoting industrial
goodwill.

173 FSupp at 96 (citations omitted). Therefore, under Pennsylvania law, 4

Greentree, the employer/policyholder of the group insurance policy, was not the

agent of CCC in the group insurance transactions involving Delka.

[¶11.] Delka, however, citing 1994 Pennsylvania insurance regulations,

argues that because Greentree explained coverage, enrolled applicants, collected

premiums, and was responsible for the delivery of certificates of insurance, we

should recognize Greentree as CCC’s agent. See 31 Pa. Code §§ 37.1, 37.11, 37.17

(defining these types of activities as those that are performed by an agent).

Although we may assume without deciding that Greentree’s insurance activities

could have fallen within these regulatory definitions, Delka still may not prevail

3. One treatise has observed that group insurance policies provide affordable
insurance coverage to a pool of people through a common central entity, like
an employer. 1A Lee R. Russ, et al., Couch on Insurance 3D § 7.1 (Clark
Broadman Callaghan 1995). One of the reasons group policies remain an
inexpensive source of insurance is because the employer performs much of
the costly administrative process, presumably for the benefit of its employee.
Id.

4. We also acknowledge the split of authority on this issue. Although Delka
urges us to adopt the minority view applied in other jurisdictions, under the
parties’ choice of law agreement, we apply Pennsylvania law.

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because the authority for the regulations has been repealed. 5 The “purpose of

[those regulations was] to implement sections 601 -- 639 of the act (40 [Pa. Cons.

Stat.] §§ 231-279), by setting forth requirements and standards for the operation of

a single licensing system for insurance agents and brokers in [Pennsylvania].” 31

Pa. Code § 37.2. The relevant enabling statutes (40 Pa. Cons. Stat. §§ 231-240, 251-

282) for those regulations were, however, repealed. 6 See 40 Pa. Cons. Stat. §§ 231-

240, 251-282 (repealed by Dec. 6, 2002 P.L. 1183, No. 147 § 1) (repealing statutes

which defined the broker/agent distinction). Moreover, under the replacement

statutes, the prior licensing definitions of “agents” and “brokers” were abandoned in

favor of a single category called “insurance producers.” See 40 Pa. Cons. Stat. §§

310.1-310.14. And, under this superseding statutory definition of “insurance

producers,” the types of group insurance activities upon which Delka relies are

5. Even if the regulations were effective, the preexisting statutes, which provide
authority for the regulations cited by Delka, applied to the requirements for
licensure and certification rather than the agent’s duty to potential enrollees
of a group insurance policy. See 40 Pa. Cons. Stat. § 232 (repealed by Dec. 6,
2002 P.L. 1183, No. 147 § 1). See also 31 Pa. Code § 37.2 (stating the
regulations “set[] forth requirements and standards for the operation of a
single licensing system”) (emphasis added); and 31 Pa. Code §§ 37.1-37.84
(setting forth state requirements and fees for certification and licensure of
insurance agents and brokers).

6. Although the Pennsylvania Legislature did not repeal 40 Pa. Cons. Stat. §§
241-246; those statutes govern “the termination of certain agency contracts in
effect for more than four years.” Faust Agency, Inc. v. Pennsylvania Ins.
Dept., 734 A2d 932, 933 n2 (PaCommwCt 1999); see also Leach Agency, Inc.
v. Foster, 133 PaCmwlth 425, 426, 576 A2d 1156, 1156 (PaCmmwCt 1990).

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excluded from the definition of insurance producer. See 40 Pa. Cons. Stat. §

310.3(b). 7

[¶12.] We finally note that, notwithstanding Delka’s administrative

regulation argument, the two post-1994 Pennsylvania decisions on this issue

continue to follow the rule that there is no agency relationship between employers

that provide group insurance benefits and the insurers that sell the policies to the

employers. See Schurich v. Principal Fin. Group, No CivA 304CV2074, 2005 WL

1154490, at *4 (MDPa 2005) (holding that employer does not act as insurer’s agent

7. 40 Pa. Cons. Stat. § 310.3 provides in relevant part:

(a) General rule.--Except as provided in subsection (b), a person
shall not sell, solicit or negotiate a contract of insurance in this
Commonwealth unless the person is licensed as an insurance
producer for the line of authority under which the contract is
issued.
(b) Exceptions.--The following persons shall not be insurance
producers for purposes of this act:
***
(4) A person that does any of the following, provided no
commission is paid for the services:
(i) Secures and furnishes written information for the purpose of
group life insurance, group property and casualty insurance,
group annuities, group or blanket accident and health
insurance.
(ii) Performs administrative services related to the enrollment of
individuals under plans.
(iii) Issues certificates under plans or otherwise assists in
administering plans.
(iv) Performs administrative services related to mass marketed
property and casualty insurance.
(v) Provides risk management services to a business entity.
(vi) Performs administrative functions, provides clerical support or
enrolls renters on behalf of the rental company which offers insurance
coverages in connection with and incidental to the rental of motor
vehicles.

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with respect to group insurance); McBride v. Hartford Life & Accident Ins. Co., Civ.

No. 05-6172, 2007 US Dist. LEXIS 169171, at *3 (EDPa Jan 29, 2007) (same). We

therefore conclude that, under Pennsylvania law involving group insurance policies,

Greentree was not CCC’s agent and CCC cannot be vicariously liable for

Greentree’s alleged acts and omissions related to the group OAI transactions.

Direct Liability

Negligence and Bad Faith

[¶13.] Greentree purchased and was the policyholder of the OAI policy. CCC

and Delka had no relationship until Delka’s enrollment under Greentree’s policy.

CCC and Delka also had no communications until after Delka’s accident, at which

time CCC provided the policy information and paid all benefits required by the

contract. Because CCC fully performed its contractual obligations, there was no

contractual duty running from CCC to Delka that would support Delka’s claim for

negligence or bad faith. 8

[¶14.] Delka, however, argues that CCC is directly liable on duties

independent of CCC’s obligations under the insurance contract. Delka contends

that duties may be premised upon two experts who opined that CCC breached the

8. Delka does assert a contractual duty to audit and examine Greentree’s
records for overcharging employees. Delka also contends that, as CCC’s
underwriting manager, Ameriplan held itself out to provide marketing
services, and those marketing services should have better informed Delka of
the nature of OAI. Those contractual provisions, however, only gave CCC
“the right to inspect and audit” and the right to use Ameriplan’s other
services. We do not view CCC’s rights under its contract with Ameriplan as
inuring for the benefit of Delka. CCC’s contractual rights were intended for
the protection and benefit of CCC rather than potential enrollees like Delka.

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duties of good faith and insurance standards of care in its marketing of the group

insurance. Those experts opined that CCC had a duty to ensure that Greentree

marketed the OAI with properly trained and licensed insurance agents, who would

“assure [that CCC’s] insureds understood what their policy provide[d] and at what

cost.” With two exceptions that we do address below, Delka has not cited

Pennsylvania law requiring a duty under these theories. Because both parties rely

primarily on South Dakota law establishing the existence of a duty, we generally

limit our review to those authorities.9

[¶15.] Delka points out that we have recognized that a duty may arise

independent of a contract.

“[L]egal duty . . . may spring from extraneous circumstances, not
constituting elements of the contract as such, although connected
with and dependent upon it, and born of that wider range of legal
duty which is due from every man to his fellow, to respect his
rights of property and person, and refrain from invading them by
force or fraud.”

Smith v. Weber, 70 SD 232, 236, 16 NW2d 537, 539 (1944) (quoting Rich v. New

York Cent. & H. R. R. R. Co., 87 NY 382 (NY 1882)). “Whether a duty exists is a

question of law, fully reviewable by this Court on appeal.” Fisher Sand & Gravel

9. Delka alleges that CCC breached a “public policy duty” in its dealings with
Delka, including a public policy duty to inform insureds of the cost of the
premium. Delka, however, only cites authority for the general proposition
that duties may arise from public policy. He cites no authority supporting
the proposition that there is a public policy duty on the part of a group
insurer regarding its policyholder’s marketing and premium collection
practices relating to enrollees. Therefore, although we address the marketing
and premium collection duties that are supported by authority, we do not
address any amorphous public policy duty.

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Co. v. State, 1997 SD 8, ¶12, 558 NW2d 864, 867 (citing Tipton v. Town of Tabor,

538 NW2d 783, 785 (SD 1995)).

[¶16.] We have recognized that a professional duty may exist in the context of

providing insurance services. See Mark, Inc. v. Maguire Ins. Agency, Inc., 518

NW2d 227, 229-30 (SD 1994) (acknowledging liability, but finding no factual basis

for liability in that case). In considering whether a duty exists to provide

professional services in a manner that does not cause economic damages to

foreseeable third parties, this Court has not required privity of contract. Mid-

Western Elec., Inc. v. DeWild Grant Reckert & Assoc. Co., 500 NW2d 250, 254 (SD

1993). The question is generally one of foreseeability. Maguire Ins., 518 NW2d at

229-30. Ultimately, the “duty arises either by legislation or by the common law,

through the ever-changing movement of social, political, and economic forces.”

Fisher v. Kahler, 2002 SD 30, ¶6, 641 NW2d 122, 125.

[¶17.] With respect to negligence before Delka was enrolled and had any

relationship with CCC, Delka relies on his experts’ opinions that CCC failed to

follow industry standards. As previously noted, those experts opined that CCC had

a legal duty to market its insurance to Delka through trained, licensed insurance

agents that would have provided correct information. As discussed above, however,

Pennsylvania law explicitly exempts persons such as Burd (therefore Greentree)

from insurance agent licensure. 40 Pa. Cons. Stat. § 310.3(b); supra ¶11 n6.

Moreover, even if that statute did not apply, under Pennsylvania law, CCC’s duty

was limited to furnishing Greentree with policy certificates/summaries: Greentree

owed Delka any remaining duties. See 40 Pa. Cons. Stat. § 756.2(b)(2), infra ¶¶24-

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25. See also 1A Lee R. Russ et al., Couch on Insurance 3D § 8.10 (Clark Broadman

Callaghan 1995) (citing Pennsylvania as a state that follows “venerable authority”

requiring the employer to administer many of the “various acts required to make

effective a policy of group insurance covering employees, such as obtaining the

employees’ applications, taking payroll deductions orders, reporting changes in the

insured group, paying premiums and the like”). Thus, we have been directed to

nothing in the statutes or common law of Pennsylvania imposing upon CCC a pre-

enrollment duty to potential employees/enrollees such as Delka that would support

Delka’s claim of negligence. 10

[¶18.] Delka has also directed us to no Pennsylvania statute or case

indicating that after the contractual relationship was established by enrollment,

CCC owed Delka any independent duty apart from the contract. We therefore look

to our decision in Fisher Sand & Gravel Co., 1997 SD 8, 558 NW2d 864. In Fisher,

this Court considered a situation where the relationship between the parties

involved a contract and the plaintiff argued that failure to follow industry standards

could also create a duty independent of that contract. Fisher acknowledged Delka’s

above quoted independent duty language from Smith. See supra ¶15.

Nevertheless, this Court concluded that when a contract exists and is not breached,

no action in tort arising out of that relationship will lie. “[W]hen ‘the duties or

10. We parenthetically note that the certificates of insurance CCC furnished to
Greentree for delivery to enrollees stated in bold on the first page: “THIS IS
NOT WORKERS’ COMPENSATION INSURANCE,”(emphasis in
original), and the insurance identification cards stated above the space for
the Driver’s Signature: “This Occupational Accident Plan is not a
replacement for Workers’ compensation Insurance.” (Emphasis added).

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obligations of the parties are contractual rather than fiduciary . . . a breach of those

express or implied duties can give rise only to a cause of action in contract, not one

in tort.’” Fisher, 1997 SD 8, ¶18, 558 NW2d at 869 (quoting Beck v. Farmers Ins.

Exch., 701 P2d 795, 800 (Utah 1985)). Although this Court has acknowledged

exceptions to this general rule (involving first party insurance relationships), CCC

satisfied all of its contractual duties to Delka, and Delka has not shown that any of

the recognized exceptions apply. 11 Therefore, the circuit court correctly applied the

rule that “[i]f one in good faith fully complied with the contract, one cannot be held

liable for actions arising out of the contract under a theory of negligence.” Id. ¶19,

558 NW2d at 869.

[¶19.] Delka has also failed to establish an independent duty giving rise to a

cause of action for bad faith. Delka’s factual allegation for this theory is the

“suggestion or assertion of a fact” that the OAI policy was equivalent to workers’

compensation insurance and that CCC was “intentionally suppressing facts”

concerning the policy. There is no dispute, however, that CCC and Delka had no

communications prior to Delka’s enrollment with Greentree. Therefore, CCC could

not have misrepresented or suppressed facts that led to Delka’s decision to enroll in

11. Beck recognized that in some cases the acts constituting a breach of contract
may also result in breaches of duty that are independent of the contract and
may give rise to causes of action in tort. Beck, 701 P2d at 801 n3. Some of
those examples include intentional acts against an insured. Id. For example,
failure to bargain in good faith, fraudulent activity, and certain conduct
under unfair practice acts may result in tort liability independent from the
concurrent contractual liability. Id. Such conduct is not at issue in this case
or it is hereafter discussed.

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OAI rather than workers’ compensation insurance, and CCC cannot be liable on this

theory.

[¶20.] Moreover, even if there were disputed issues of material fact

concerning CCC’s representations to Delka regarding coverage or premiums, there

is no common law cause of action under Pennsylvania law for such bad faith

conduct on the part of insurers. D’Ambrosio v. Pennsylvania Nat’l Mut. Cas. Ins.

Co., 494 Pa 501, 507, 431 A2d 966, 970 (1981). Instead, insureds are relegated to

Pennsylvania’s statutory remedy. See 42 Pa. Cons. Stat. § 8371 (statutory bad

faith).

[¶21.] Delka did not, however, plead a cause of action under 42 Pa. Cons.

Stat. § 8371. In Delka’s third amended complaint, he claimed that CCC violated the

Pennsylvania Unfair Insurance Practices Act (UIPA).

[¶22.] Although Delka alleged violations of the UIPA, he has no cause of

action under that act. The UIPA and the statutory bad faith statute (Section 8371)

are independent acts providing different remedies. Furthermore, private persons

cannot utilize the UIPA; it may only be enforced by the Insurance Commissioner of

Pennsylvania. Smith v. Nationwide Mut. Fire Ins. Co., 935 FSupp 616, 620 (WDPa

1996) (stating that “it is clear that there is no private cause of action under the

UIPA”) (citations omitted); D’Ambrosio, 494 Pa at 507, 431 A2d at 969-70 (stating

that the Insurance Commissioner of Pennsylvania is empowered to enforce the

UIPA); Romano v. Nationwide Mut. Fire Ins. Co., 435 PaSuper 545, 552, 646 A2d

1228, 1232 (1994) (stating: “It is clear that the UIPA and the Department of

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Insurance Regulations can only be enforced by the State Insurance Commissioner

and not by way of private action.”).

[¶23.] On the other hand, the statutory bad faith legislation (Section 8371)

specifically creates a cause of action for private persons. See Romano, 435 PaSuper

at 551, 646 A2d at 1231 (noting that the Supreme Court’s refusal to create a

common law bad faith remedy led to the Legislature developing a statutory bad

faith remedy, 42 Pa. Cons. Stat. § 8371). Although it has been stated that violations

of UIPA may be used as evidence for a bad faith claim, the UIPA itself provides no

private remedy without Pennsylvania’s bad faith statute (Section 8371). Romano,

435 PaSuper 545, 646 A2d 1228 (holding that an insured may reference violations of

UIPA to illustrate the bad faith claim). But see Parasco v. Pac. Indem. Co., 920

FSupp 647, 655 (EDPa 1996) (explaining violations of the UIPA did not establish

statutory bad faith per se). Ultimately, Delka did not bring his bad faith claim

under his exclusive statutory remedy, nor has he cited other authority supporting

an independent bad faith duty arising under the facts alleged in this case. 12

Therefore, Delka’s bad faith claim fails.

12. Delka does point out that bad faith can also arise from a frivolous or
unfounded refusal to investigate or communicate with the insured. See Frog,
Switch & Mfg. Co., Inc. v. the Travelers Ins. Co., 193 F3d 742, 751, n9 (3dCir
1999). Although we agree with this proposition, Delka’s reliance on Frog is
misplaced. That case involved an insurer’s failure to defend its insured. This
case does not involve a first party insured’s claim for failure to defend.
Delka’s remaining authorities also involved conduct that is not relevant to
Greentree’s representations, marketing, and premium collection practices.

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[¶24.] Delka next contends that two statutory duties support negligence and

bad faith. Delka first relies on SDCL 58-30-92. 13 That statute prohibits the

issuance of an insurance policy in this state through any person other than a

licensed agent. The undisputed facts, however, reflect that the group policy was

issued to Greentree through an agent (Southern States) in Pennsylvania.

Moreover, the South Dakota Legislature could not have intended that the South

Dakota statute on issuance of policies in this state applied to employees enrolling

for group benefits with out-of-state employers. We finally observe that even if the

statute applied to Delka’s enrollment, to interpret the statute in the manner Delka

suggests would require all employers to employ insurance agents to provide its

employees with any group insurance benefits. We do not read the statute to require

such an absurd result.

[¶25.] Delka also argues that CCC breached a Pennsylvania statutory duty to

deliver an individual certificate summarizing the insurance coverage. 40 Pa. Cons.

Stat. § 756.2(b)(2) provides:

(b) Each group accident and sickness policy shall contain in
substance the following provisions: . . . (2) A provision that the
insurer will furnish to the policyholder, for delivery to each
employe[e] or member of the insured group, an individual

13. That statute provides:

No authorized insurer may issue or cause to be issued any policy,
duplicate policy, or insurance contract covering a subject of insurance
that is resident, located or to be performed in this state through any
person who is not licensed as an agent under this chapter. Violation of
this section is a Class 2 misdemeanor.

SDCL 58-30-92.

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certificate setting forth, in summary form, a statement of the
essential features of the insurance coverage of such employe[e]
or member and to whom benefits thereunder are payable. If
dependents are included in the coverage, only one certificate
need be issued for each family unit.

(Emphasis added.)

[¶26.] We note that this statute imposes two separate duties. First, the

insurer (CCC) must “furnish” a certificate/summary to the “policyholder”

(Greentree). Id. The statute separately requires that the “policyholder” (Greentree)

must effect “delivery” of that certificate/summary on the “employe[e]” (Delka). Id.

As is readily apparent, the statute does not impose any duty upon CCC to deliver

the certificate/summary to Delka. That was Greentree’s duty. Therefore, although

this statute creates a duty for purposes of Delka’s claims against Greentree, the

statute creates no duty for purposes of Delka’s claim against CCC. 14

[¶27.] Nevertheless, Delka contends there is a disputed issue of fact whether

CCC furnished certificates/summaries to Greentree. Delka, however, failed to raise

this issue to the circuit court. Delka’s arguments were limited to agency theories

and direct liability with respect to overcharging. On appeal, Delka argues Burd’s

deposition reflects that CCC may not have delivered summaries to Greentree.

14. Delka relies on Bierly v. John Hancock Mutual Life Insurance Co., 13
PaD&C3d 40, 46 (PaComPl 1979), for the proposition that both the insurer
and the policyholder had a duty to deliver a summary to Delka. Although
Bierly confirms that both the insurer and the policyholder have duties under
the statute, it reinforces that the statutory duties are separate and distinct:
“[40 Pa. Cons. Stat. § 756.2(b)(2)] places a duty upon both the insurer to
provide, and the policyholder to deliver, a summary of the group insurance
plan’s features to the employe[e].” Id. (emphasis added).

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Delka did not, however, provide this portion of Burd’s deposition to the circuit court

for its consideration. Therefore, this argument is waived.

[¶28.] Even if this argument were not waived, there is no material issue of

disputed fact about the matter. Although Delka alleged that he never received a

certificate/summary, that is not a material issue with respect to CCC because, as

explained above, it was not CCC’s duty to deliver the certificate/summary to Delka.

That was Greentree’s duty.

[¶29.] Finally, even if the issue were material, Delka failed to raise a factual

dispute about the matter. CCC supported its Motion for Summary Judgment by

submitting a Statement of Undisputed Facts, which specifically alleged in

paragraph eight that:

CCC caused certificates to be prepared describing the benefits
provided, to whom payable and the Group Policy limitations,
and caused such certificates to be delivered to Greentree as
Holder pursuant to the Group Policy provision. . . .

Delka’s response did not, however, raise a disputed issue of fact about this

assertion. Instead, Delka only generally asserted that he disputed paragraph eight.

Delka responded:

Specifically, Delka disputes CCC’s “undisputed facts” as listed in
CCC’s Statement of Undisputed Facts, ¶¶3, 8, 9, 22, 23, 27, 29,
30, 31, 34, 38, 39, 40, & 41.

This general response failed to raise a genuine issue of material fact as required by

SDCL 15-6-56(e). “The party opposing a motion for summary judgment must be

diligent in resisting the motion, and mere general allegations and denials which do

not set forth specific facts will not prevent issuance of a judgment.” McDowell v.

Citicorp U.S.A., 2007 SD 53, ¶22, 734 NW2d 14, 21 (citations omitted); see also

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Himrich v. Carpenter, 1997 SD 116, ¶18, 569 NW2d 568, 573 (noting “[w]hen

challenging a summary judgment, the nonmoving party ‘must substantiate his

allegations with ‘sufficient probative evidence [that] would permit a finding in [his]

favor on more than mere speculation, conjecture, or fantasy.’’”) (citations omitted).

Delka’s general objection to paragraph eight of CCC’s statement of facts is precisely

the type of general allegation that Rule 56 prohibits. Therefore, Delka failed to

raise a material issue of disputed fact concerning CCC’s duty to furnish summaries

to Greentree, and the circuit court did not err in concluding that CCC violated no

statutory duty. Delka’s remaining causes of action asserting direct liability are

discussed below. 15

Deceit

[¶30.] Delka’s third amended complaint did not allege statutory deceit. 16 The

common-law tort involves a misrepresentation of fact. The tort requires:

[A] representation was made as a statement of fact, which was
untrue and known to be untrue by the party making it, or else
recklessly made; that it was made with the intent to deceive and
for the purpose of inducing the other party to act upon it; and
that he did in fact rely on it and was induced thereby to act to
his injury or damage.

Grynberg v. Citation Oil & Gas Corp., 1997 SD 121, ¶24, 573 NW2d 493, 502

(citations omitted). It is undisputed, however, that CCC and Delka never

communicated with each other prior to Delka’s accident. Therefore, CCC could not

15. The dismissal of Delka’s negligence and bad faith causes of action also
disposes of Delka’s negligent misrepresentation claim.

16. The elements of statutory deceit require an affirmative misrepresentation or
intentional suppression of facts. SDCL 20-10-2.

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have misrepresented any fact relating to premiums or coverage that caused Delka

to purchase the OAI.

[¶31.] In any event, Delka presented no evidence that CCC intended to

deceive him. In fraud and deceit claims, “[s]ummary judgment is proper [when a

plaintiff] produces no evidence of deceitful intent on [defendant’s] part. . . .” Garrett

v. BankWest, Inc., 459 NW2d 833, 847 (SD 1990) (citation omitted). See also Roper

v. Noel, 32 SD 405, 143 NW 130, 132 (1913) (stating that when “the connection of

[defendant] with the fraud and deceit, if any, rests solely upon conjecture. . . . [A]

case should not [even] be submitted to [a] jury.”) (citation omitted). It is Delka’s

duty to assert facts suggesting CCC’s intent to deceive in both the trial and the

summary judgment context. Because Delka did not identify any fact suggesting

CCC’s intent to deceive, summary judgment was correctly granted.

Unfair Trade Practices

[¶32.] Delka contends that CCC breached duties it owed Delka under South

Dakota’s Unfair Trade Practices Act, SDCL ch 58-33. CCC sold and delivered the

OAI policy to Greentree in Pennsylvania. Burd’s representations to Delka

regarding the OAI policy took place over the phone, with Delka in South Dakota

and Burd in Pennsylvania. Although the parties agree Pennsylvania law applies,

Delka argues that CCC violated SDCL ch 58-33 by making deceitful statements

concerning coverage. Although Delka does not cite any particular statute in that

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chapter, SDCL 58-33-5 prohibits insurer misrepresentation concerning insurance

coverage. 17

[¶33.] The alleged misrepresentations, however, only took place between

Delka and Greentree through Burd, Greentree’s employee. Delka makes no claim of

direct communications between Delka and CCC. Therefore, CCC cannot be directly

liable for Delka’s claims of misrepresentation. Those claims are merely a restated

version of the barred agency claims.

Fiduciary Duty, Conversion, Fraud and Concealment

[¶34.] A fair reading of Delka’s complaint reflects that he only alleged

“defendant Greentree” breached fiduciary duties and committed conversion. No

such allegation was made against CCC. Furthermore, Delka’s cause of action for

fraud and concealment alleges the same factual and legal basis for the causes of

action previously dismissed. Summary judgment was correctly entered on these

remaining claims. 18

17. SDCL 58-33-5 provides:
No person shall make, issue, circulate, or cause to be made, issued, or
circulated, any estimate, circular, or statement misrepresenting the
terms of any policy issued or to be issued or the benefits or advantages
promised thereby or the dividends or share of the surplus to be
received thereon, or make any false or misleading statement as to the
dividends or share of surplus previously paid on similar policies, or
make any misleading representation or any misrepresentation as to
the financial condition of any insurer, or as to the legal reserve system
upon which any life insurer operates, or use any name or title of any
policy or class of policies misrepresenting the true nature thereof.
Violation of this section is a Class 2 misdemeanor.

18. Delka’s brief also asserts direct liability on causes of action for “concealment,
amongst others.” Because there is no direct liability argument and authority
(continued . . .)
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[¶35.] Affirmed.

[¶36.] GILBERTSON, Chief Justice, SABERS, KONENKAMP, and

MEIERHENRY, Justices, concur.

_________________
(. . . continued)
on concealment and other unidentified causes of action, we do not address
them.

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