Blanchard v. Mid-Century Insurance Co.

#28652-a-SRJ
2019 S.D. 54

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

****

CHRISTINA BLANCHARD, Plaintiff and Appellant,

v.

MID-CENTURY INSURANCE
COMPANY, also known as
FARMERS INSURANCE, Defendant and Appellee,

v.

MID-CENTURY INSURANCE Third-Party Plaintiff and
COMPANY, Appellee,

v.

ERIC C. BLOMFELT, and ERIC
BLOMFELT & ASSOCIATES, P.C., Third-Party Defendants.

****

APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
MINNEHAHA COUNTY, SOUTH DAKOTA

****

THE HONORABLE MARK E. SALTER
Judge

****

CONSIDERED ON BRIEFS
FEBRUARY 19, 2019
OPINION FILED 09/11/19
HEATHER LAMMERS BOGARD of
Costello, Porter, Hill, Heisterkamp,
Bushnell & Carpenter, LLP
Rapid City, South Dakota Attorneys for plaintiff
and appellant.

MICHAEL F. TOBIN
MITCHELL W. O’HARA of
Boyce Law Firm, LLP
Sioux Falls, South Dakota Attorneys for appellee Mid-
Century Ins. Co. a.k.a. Farmers
Ins.
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JENSEN, Justice

[¶1.] Christina Blanchard filed this complaint for bad faith against Mid-

Century Insurance Company, alleging that Mid-Century pursued a “baseless and

meritless appeal” from a decision of the South Dakota Department of Labor

(Department) awarding Blanchard workers’ compensation benefits. The circuit

court granted Mid-Century’s motion for summary judgment on the bad faith

complaint. Blanchard appeals, arguing the circuit court erred by failing to consider

all the facts supporting Mid-Century’s bad faith conduct, failing to impute the

knowledge and actions of Mid-Century’s attorney to Mid-Century, erroneously

adding an additional element to the tort of insurance bad faith, and incorrectly

excluding evidence under the litigation conduct rule. We affirm.

Facts and Procedural History

[¶2.] From March 2008 to January 2011, Blanchard was employed by

Millstone II, Inc. (Millstone), a restaurant located in Rapid City. In August 2010,

she began to experience persistent lower-back pain after lifting boxes at work.

Blanchard sought medical treatment for her back pain on September 23, 2010. As

her pain worsened, Blanchard began missing work and struggled to perform her job

duties. Millstone terminated Blanchard’s employment in January 2011.

Thereafter, Mid-Century, Millstone’s workers’ compensation carrier, began paying

temporary total disability benefits to Blanchard. On July 22, 2011, Blanchard’s

treating physician determined she had reached maximum medical improvement.

He rated Blanchard with a five-percent whole-person impairment, and a permanent

lifting restriction of twenty pounds. Mid-Century stopped paying benefits to

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Blanchard in August 2011. Blanchard did not find employment that accommodated

her work restrictions until August 2012.

[¶3.] Blanchard filed a petition with the Department in November 2011,

seeking continuing benefits. The Department held an evidentiary hearing on

Blanchard’s petition in March 2014. The administrative law judge awarded

Blanchard benefits, determining that her work activities at Millstone were a major

contributing cause of her back pain and her inability to work. The decision directed

Blanchard to submit proposed findings of fact, conclusions of law, and an order

within twenty days. Millstone/Mid-Century was directed to submit objections

and/or proposed findings of fact and conclusions of law within twenty days after

Blanchard’s submissions.

[¶4.] Eric Blomfelt, defense counsel for Millstone/Mid-Century, informed

Mid-Century’s claim adjuster, Beth Neu, of the adverse decision on July 21, 2014.

Neu and Blomfelt discussed the case, including whether to appeal the decision to

circuit court. Blomfelt explained to Neu that the Department’s decision generally

accepted the testimony of Blanchard’s treating physician, while discounting the

testimony from the doctor who conducted an independent medical examination for

Millstone/Mid-Century. Blomfelt advised Neu that a decision finding one expert

more credible than another is ordinarily not a good candidate for appeal. However,

Blomfelt recommended appealing this decision because he believed deficiencies

existed in the opinions offered by Blanchard’s treating physician. In particular,

Blomfelt noted that Blanchard’s treating physician lacked knowledge regarding the

scope of Blanchard’s job duties at Millstone.

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[¶5.] Neu directed Blomfelt to file an appeal to the circuit court. While

waiting for entry of the final order, Neu emailed Blomfelt for updates on the status

of the case and asked if Blanchard might be open to settling. Blomfelt suggested

waiting to discuss settlement, because Blanchard would not “have much motivation

to settle” since she won at the administrative hearing.

[¶6.] Blanchard timely submitted proposed findings of fact, conclusions of

law, and an order, requiring Millstone/Mid-Century to pay Blanchard’s medical

expenses related to the injury. Millstone/Mid-Century was also ordered to pay

$18,763.16 in temporary total benefits for the period from August 25, 2011 through

August 1, 2012. On September 2, 2014, Blomfelt submitted proposed findings of

fact and conclusions of law on behalf of Millstone/Mid-Century that agreed in all

material respects with the Department’s decision, including the compensability of

Blanchard’s injuries. Blomfelt also failed to submit objections to Blanchard’s

proposed findings of fact and conclusions of law. Blomfelt did not provide a copy of

his proposed findings of fact and conclusions of law to Neu or Mid-Century.

Millstone/Mid-Century timely appealed the decision on October 13, 2014.

[¶7.] At his deposition, Blomfelt admitted he had received a letter from

Blanchard’s counsel in early November 2014 advising that Blomfelt’s proposed

findings of fact and conclusions of law failed to preserve error for appellate review of

the Department’s decision. The letter claimed that this omission rendered the

appeal infirm. Blomfelt did not provide a copy of the letter to Neu or discuss it with

her.

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[¶8.] Blanchard moved to dismiss the appeal on November 14, 2014, arguing

that Millstone/Mid-Century failed to preserve objections to the findings of fact and

conclusions of law. Blomfelt informed Neu by email on November 30th that

Blanchard had filed a motion to dismiss. Blomfelt did not provide a copy of the

motion to dismiss or explain the basis for the motion to Neu.1 While discussing the

motion to dismiss, Blomfelt also recommended that Mid-Century should explore

settlement with Blanchard’s counsel. Blomfelt sent a letter to Blanchard’s counsel

on November 30th asking if Blanchard was interested in discussing settlement.

Blanchard rejected this overture. Blomfelt filed a resistance to the motion to

dismiss and an appeal brief on behalf of Millstone/Mid-Century.

[¶9.] On December 11, 2014, Blanchard’s counsel sent correspondence to

Blomfelt claiming that Blanchard was “in severe financial distress” and “on the

verge of having her vehicle repossessed and [could not] pay her rent” due to Mid-

Century not paying her benefits. The letter also stated Blanchard’s belief that Mid-

Century was acting in bad faith by pursuing a meritless appeal in hopes of settling

for less than Mid-Century had already conceded it owed under the Department’s

decision. Blomfelt did not inform Neu of this second letter.

1. Neu made the following notations in response to this communication:

Received email from [Blomfelt] dated 11/30/14. He states that he is
filing a brief. [Blanchard] will then respond w/brief of their own.
[Blanchard] has filed motion to dismiss the appeal. [Blomfelt] states
that this is not unusual, but their motion is not very well grounded.
[Blomfelt] states we may have a hearing on the motion. It just
depends how the [judge] wants to treat the motion.
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[¶10.] On December 30, 2014, the circuit court granted Blanchard’s motion to

dismiss explaining Millstone/Mid-Century “actually made no indication that [it]

disagreed with the Department’s findings” and their appeal “directly contradicts the

proposed findings of fact and conclusion[s] of law [Mid-Century] submitted to the

Department.” Mid-Century first learned the motion to dismiss had been granted in

an email from Blomfelt to Neu on January 6, 2015. Millstone/Mid-Century did not

appeal the dismissal and immediately paid Blanchard’s workers’ compensation

award in accordance with the Department’s decision.

[¶11.] On March 16, 2015, Blanchard filed this bad faith action claiming Mid-

Century pursued a “baseless and meritless appeal in an attempt to delay or avoid

payment of that claim or settle that claim in an amount less than that indisputably

due to Plaintiff . . . .” Blanchard further alleged that the entire purpose of the

appeal was to try to exploit her “desperate need for money by intentionally offering

to settle [her] claim for less money[,]” causing her “to incur significant legal fees and

costs.”2

[¶12.] Mid-Century initially moved for summary judgment on Blanchard’s

bad faith claim and moved to exclude certain evidence under the litigation conduct

rule. See generally Dakota, Minn. & E.R.R. Corp. v. Acuity (DM&E), 2009 S.D. 69,

771 N.W.2d 623 (explaining the litigation conduct rule). The circuit court denied

the motion without prejudice, explaining the factual record was not adequately

2. As part of her motion to dismiss the administrative appeal, Blanchard
requested attorney’s fees under SDCL 58-12-3 (awarding attorney’s fees
where an insurer’s failure to pay benefits is “vexatious or without reasonable
cause”). The circuit court did not award attorney’s fees to Blanchard after
dismissing the appeal. Blanchard did not appeal that ruling.
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developed concerning Mid-Century’s knowledge. Mid-Century subsequently filed a

third-party complaint against Blomfelt for professional negligence and indemnity.

[¶13.] On August 1, 2017, Mid-Century renewed its motion for summary

judgment and again moved to exclude evidence of Mid-Century’s litigation conduct.

Mid-Century argued that evidence of its litigation conduct was not admissible, and

the evidence did not establish that Mid-Century “denied her claim for further

workers’ compensation benefits without a reasonable basis, or that it knew or

recklessly disregarded the lack of a reasonable basis for denial.” In her resistance,

Blanchard argued that Blomfelt’s knowledge should be imputed to Mid-Century.

Blanchard further argued that Mid-Century’s conduct was admissible because the

litigation conduct rule did not protect the decision to pursue a meritless appeal and

attempt to settle for less than had already been conceded to be owed.

[¶14.] Following a hearing, the circuit court granted summary judgment to

Mid-Century. The court explained that Blanchard could not satisfy the standard for

bad faith as she could not prove Mid-Century “knew of or acted with reckless

disregard of counsel’s conduct.” The circuit court emphasized that Blanchard’s bad

faith claim was “narrow” because “she does not seem to claim the decision to appeal,

itself, is bad faith. Instead, she claims Blomfelt’s findings and conclusions rendered

[Mid-Century’s] continued denial of benefits during the pendency of the appeal

frivolous.” The court reasoned that the determination to file the appeal was made

before Blomfelt submitted the proposed findings of fact and conclusions of law.

Further, the court concluded that the litigation conduct rule precluded evidence of

Blomfelt’s conduct after the appeal was filed as it did not “shed light” on the

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reasonableness of Mid-Century’s decision to “pursue an appeal on the merits of the

case” and was inadmissible under Rule 403.3

[¶15.] Blanchard appeals arguing the circuit court erred in granting

summary judgment on Blanchard’s claim for bad faith against Mid-Century.

Standard of Review

[¶16.] “We review a circuit court’s entry of summary judgment under the de

novo standard of review.” Heitmann v. Am. Family Mut. Ins. Co., 2016 S.D. 51, ¶ 8,

883 N.W.2d 506, 508. On appeal, we must “determine whether genuine issues of

material fact exist and whether the law was applied correctly.” Western Nat’l Mut.

Ins. Co. v. Gateway Bldg. Sys., Inc., 2016 S.D. 85, ¶ 7, 887 N.W.2d 887, 890. “The

evidence must be viewed most favorably to the nonmoving party and reasonable

doubts should be resolved against the moving party.” Saathoff v. Kuhlman, 2009

S.D. 17, ¶ 11, 763 N.W.2d 800, 804. “We will affirm a circuit court’s decision so long

as there is a legal basis to support its decision.” Heitmann, 2016 S.D. 51, ¶ 8,

883 N.W.2d at 509.

[¶17.] A court’s evidentiary rulings in summary judgment proceedings are

reviewed for an abuse of discretion. Hamilton v. Sommers, 2014 S.D. 76, ¶ 18, 855

N.W.2d 855, 861. See also Burley v. Kytec Innovative Sports Equip., Inc., 2007 S.D.

82, ¶ 12, 737 N.W.2d 397, 402 (reviewing a circuit court’s decision to admit or deny

an expert’s testimony in a summary judgment proceeding for abuse of discretion);

Andrushchenko v. Silchuk, 2008 S.D. 8, ¶ 15, 744 N.W.2d 850, 856 (determining the

3. Blanchard also moved for summary judgment on Mid-Century’s third-party
complaint against Blomfelt. The circuit court denied the motion as moot,
which has not been challenged on appeal.
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circuit court did not abuse its discretion in determining certain documents

submitted in a summary judgment proceeding lacked foundation). An abuse of

discretion “is a fundamental error of judgment, a choice outside the range of

permissible choices, a decision, which, on full consideration, is arbitrary or

unreasonable.” Thurman v. CUNA Mut. Ins. Soc’y, 2013 S.D. 63, ¶ 11, 836 N.W.2d

611, 616.

Analysis and Decision

Whether the circuit court erred in granting summary
judgment on Blanchard’s bad faith claim.

[¶18.] “[I]n South Dakota a workers’ compensation bad faith claim derives

from the first-party bad faith context, [but] it is nevertheless a distinct cause of

action.” Hein v. Acuity, 2007 S.D. 40, ¶ 14, 731 N.W.2d 231, 236. “First-party bad

faith, . . . is an intentional tort and typically occurs when an insurance company

consciously engages in wrongdoing during its processing or paying of policy benefits

to its insured.” Id. ¶ 10, 731 N.W.2d at 235. First-party bad faith may also “extend

to situations beyond mere denial of policy benefits,” including the failure to conduct

a reasonable investigation as required by the insurance contract. DM&E, 2009 S.D.

69, ¶¶ 18-19, 771 N.W.2d at 629. However, “there exists a key difference between

bad faith in a workers’ compensation action and bad faith in a traditional first-party

insured-insurer relationship” because there is no contractual relationship between a

claimant and the workers’ compensation carrier. Hein, 2007 S.D. 40, ¶ 13,

731 N.W.2d at 236. Thus,

workers’ compensation bad faith will not arise whenever an
insurer’s conduct toward a claimant is unreasonable. Rather, to
establish bad faith, the claimant must show that there has been

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(1) “an absence of a reasonable basis for denial of policy benefits”
and (2) “the [insurance carrier’s] knowledge or reckless
disregard of [the lack of] a reasonable basis for denial . . . .”

Id. ¶ 18, 731 N.W.2d at 237 (quoting Champion v. U.S. Fid. & Guar. Co.,

399 N.W.2d 320, 324 (S.D. 1987)).

[¶19.] Further, “we have recognized the right of [a workers’ compensation]

insurer to challenge claims which are fairly debatable.” DM&E, 2009 S.D. 69, ¶ 20,

771 N.W.2d at 630. “An insurer is liable to a claimant only when it has

intentionally denied (or failed to process or pay) a claim without a reasonable

basis.” Hein, 2007 S.D. 40, ¶ 18, 731 N.W.2d at 237. “The questions of whether the

insurer’s actions were unreasonable or whether the claim was fairly debatable must

be viewed at the time the insurer made the decision to deny or litigate the claim,

rather than pay it.” DM&E, 2009 S.D. 69, ¶ 21, 771 N.W.2d at 630 (emphasis

added). “The question of whether an insurer has acted in bad faith is generally a

question of fact.” Id. ¶ 19, 771 N.W.2d at 629-30.

1. Whether Mid-Century’s decision to appeal the Department’s decision was
made in bad faith.

[¶20.] Blanchard contends Mid-Century acted in bad faith when it decided to

appeal the Department’s decision because (1) Neu failed to comply with Mid-

Century’s internal policies requiring an adjustor to obtain appeal authority from a

supervisor; (2) Neu failed to comply with internal policies requiring its adjustors to

obtain all “legal pleadings, notices or Board decisions” and “any information that

could significantly affect case outcome”; (3) Neu relied on Blomfelt’s advice despite

evidence that Blomfelt had interposed “frivolous defenses” and failed to provide

competent representation in prior workers’ compensation cases he defended for

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Mid-Century; (4) Neu believed the Department’s decision had awarded Blanchard

permanent disability benefits; and (5) the decision to appeal was part of a strategy

to pressure Blanchard into settling for less than the Department had awarded.

[¶21.] Assuming admissibility, none of the evidence cited by Blanchard

creates a question of fact as to whether Mid-Century’s decision to appeal the

Department’s decision was made in bad faith.4 Unreasonable conduct by a workers’

compensation carrier, in and of itself, does not prove bad faith. The claimant must

present evidence of the “absence of a reasonable basis for denial of policy benefits”

to prove bad faith arising from a workers’ compensation claim. Hein, 2007 S.D. 40,

¶ 18, 731 N.W.2d at 237.

[¶22.] Mid-Century’s decision to appeal was premised on Blomfelt’s

recommendation that the opinions of claimant’s treating physician were deficient

and could be challenged on de novo review to the circuit court. See Smith v. Stan

Houston Equip. Co., 2013 S.D. 65, ¶ 18, 836 N.W.2d 647, 652 (“[B]ecause the . . .

evidence in this case was offered through deposition testimony, our review of that

evidence is without deference to the [administrative law judge].”). The summary

judgment record shows that the parties presented disputed expert testimony before

the Department on the question whether Blanchard’s injuries were compensable.

4. Mid-Century argues that some of this evidence is inadmissible under the
litigation conduct rule set forth in DM&E, 2009 S.D. 69, 771 N.W.2d 623.
Mid-Century also argues that some of the evidence is inadmissible under
SDCL 19-19-404(b). It is not clear from the record if Mid-Century raised
these specific evidentiary issues in its motion in limine, or if the circuit court
addressed these issues. Because we conclude the evidence does not create a
fact question as to whether Mid-Century’s initial decision to appeal was
unreasonable, it is unnecessary to consider these evidentiary issues.
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Further, Blanchard does not claim that Blomfelt’s recommendation to appeal the

decision was erroneous, or that it lacked a reasonable basis under South Dakota

law. Because the Department’s factual determinations were fairly debatable on

appeal, Blanchard has failed to present facts to support her claim that Mid-

Century’s decision to appeal was unreasonable.

2. Whether the circuit court erred in granting summary judgment on Mid-
Century’s conduct following the decision to appeal the Department’s decision.

[¶23.] The essence of Blanchard’s bad faith claim arose after Mid-Century

decided to appeal the Department’s decision. Blanchard argues the circuit court

made several errors in granting summary judgment on this claim. She initially

argues the court erred by requiring her to show an additional element of a

“dishonest purpose” to prove bad faith. Blanchard also argues the circuit court

erred by failing to consider the imputed knowledge from Blomfelt to Mid-Century.

Finally, Blanchard contends the court erred by determining the post-filing conduct

lacked relevance and was inadmissible under the litigation conduct rule. We

conclude the circuit court’s exclusion of the evidence under the litigation conduct

rule is determinative of the appeal.

[¶24.] In DM&E, we addressed the litigation conduct rule, which limits

evidence of bad faith conduct during the litigation. 2009 S.D. 69, ¶ 42, 771 N.W.2d

at 635. DM&E involved a first-party bad faith claim in which the insured alleged

its insurer improperly investigated and denied a claim for uninsured motorist

coverage before the commencement of litigation. The insured argued the actions

and conduct of the insurer during the subsequent litigation presented additional

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evidence of bad faith conduct on the part of the insurer. Here, Blanchard offers

litigation conduct as the entire basis for her bad faith claim.

[¶25.] After addressing the important policy reasons for excluding most post-

filing conduct, DM&E stated that “courts have strictly limited the type of post-filing

conduct that may be used as evidence of the insurer’s bad faith.” Id. ¶ 37, 771

N.W.2d at 634. In limiting the admissibility of this evidence, we required that

evidence of post-filing conduct by the insurer must shed “light on the

reasonableness of the insurer’s decision or conduct in denying insurance benefits[]”

to be admissible. Id. ¶ 42, 771 N.W.2d at 635. We further stressed the importance

of the court balancing the probative value of such evidence against its prejudicial

impact under SDCL 19-19-403. 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.” Id.

[¶26.] More recently in Harvieux v. Progressive N. Ins. Co., 2018 S.D. 52,

915 N.W.2d 697 (reh’g denied Aug. 13, 2018), we discussed the admissibility of post-

litigation conduct evidence in another first-party bad faith case. In Harvieux, the

insurer filed a motion to enforce an earlier alleged settlement agreement. The

insured claimed the motion was frivolous and evidenced ongoing bad faith by the

insurer in failing to reasonably settle an uninsured motorist claim. Harvieux,

2018 S.D. 52, ¶ 11, 915 N.W.2d at 701. In granting summary judgment, the circuit

court excluded evidence of the motion to enforce the settlement agreement under

the litigation conduct rule. We affirmed, stating that “litigation conduct by the

insurer is generally not relevant to a claim of first-party bad faith,” and did not

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shed light on the investigation or valuation of the case at the time the insurer

considered the claim. Id.

[¶27.] Here, in considering the post-appeal evidence, the circuit court stated

it was unable to discern how questions concerning Blomfelt’s professional conduct

during the appeal supported bad faith conduct on the part of Mid-Century. The

court also determined that any probative value was substantially outweighed by

“the danger of confusing the issues and the likelihood that the jury would become

involved in a collateral ‘mini-trial’ on the ‘finer points of administrative law and

appellate practice.’” We agree.

[¶28.] The inadequacy of Blomfelt’s objections to the Department’s findings

and his responses to Blanchard’s claims of procedural missteps simply do not

provide evidence to support a claim for intentional bad faith on the part of Mid-

Century.5 These subsequent procedural issues do not shed light on whether Mid-

Century acted in bad faith in handling the claim for benefits, or deciding to appeal

the Department’s decision. Instead, the evidence merely reflects Blomfelt’s

professional judgment and actions in handling procedural aspects of the appeal.

Post-litigation conduct is generally not relevant because “the focus of a bad faith

claim is the insurer’s knowledge and belief during the time the claim is being

5. Likewise, Mid-Century’s effort to initiate settlement with Blanchard during
this time was limited to inquiring whether Blanchard wished to engage in
settlement discussions. The record does not reflect any terms or conditions of
settlement that were discussed because Blanchard was not interested in
pursuing these discussions. This evidence does not support a claim for bad
faith in the workers’ compensation context.
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reviewed.” DM&E, 2009 S.D. 69, ¶ 42, 771 N.W.2d at 635-36. As a result, “the

relevance of the litigation conduct is severely diminished.” Id.

[¶29.] Blanchard argues the evidence is relevant because Blomfelt’s

knowledge that the appeal had been judicially conceded should be imputed to Mid-

Century under SDCL 59-6-5 and Gilchrist v. Trail King Indus., Inc. (Gilchrist II),

2002 S.D. 155, 655 N.W.2d 98.6 With this imputed knowledge, Blanchard contends

that Mid-Century acted in bad faith when it continued to prosecute the appeal and

attempted to settle with Blanchard for less than it had already judicially conceded

was owed.

[¶30.] Even if Blomfelt’s knowledge is imputed to Mid-Century, a review of

Gilchrist II shows that it is inapposite. In Gilchrist II, a claimant sued his former

employer, who was self-insured, and its third-party rehabilitation specialist for bad

faith, wrongful termination and intentional infliction of emotional distress arising

from a workers’ compensation claim. The claimant alleged that the employer and

rehabilitation specialist had engaged in bad faith to diminish the value of his claim

by failing to disclose the extent of his work-related injuries to medical providers

during the claims process.7 In concluding the rehabilitation specialist’s imputed

knowledge was admissible, the Court noted this imputed knowledge arose during

6. Blanchard cites a number of cases holding that a judicial admission by an
attorney is binding on the client. In re Estate of Tallman, 1997 S.D. 49, ¶ 13,
562 N.W.2d 893, 896; Stemper v. Stemper, 415 N.W.2d 159, 160 (S.D. 1987);
see also Heesch v. Swimtastic Swim Sch., 823 N.W.2d 211, 222 (Neb. 2012).

7. The claims against the rehabilitation specialist were dismissed before trial
and this Court affirmed that decision. See Gilchrist v. Trail King Indus., Inc.
& Rehab. Strategies, Inc. (Gilchrist I), 2000 S.D. 67, 612 N.W.2d 10.
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the claim’s handling process. This contested evidence included the failure of the

rehabilitation specialist to disclose the extent of the claimant’s injuries to the

physician assessing claimant’s ability to work. Gilchrist II, 2002 S.D. 155, ¶ 18, 655

N.W.2d at 103.

[¶31.] The imputed knowledge of the rehabilitation specialist in Gilchrist II

was highly probative to the question of what the employer knew, or recklessly

disregarded, at the time it considered the claim for benefits. In contrast, the

evidence that Blanchard seeks to introduce involves only subsequent procedural

litigation questions as to whether Blomfelt properly preserved objections to the

Department’s decision. The fact that Blomfelt may have unwittingly conceded the

merits of Mid-Century’s appeal is not relevant to what Mid-Century knew when it

decided to appeal the Department’s decision. As the Court stated in Gilchrist II, “in

a claim of bad faith against an employer, the relevant inquiry is what that employer

knew at the time it denied coverage to the insured.” Id.

[¶32.] Blanchard also relies on our statement in DM&E, that an insurer may

have a duty to reassess a decision denying coverage based upon subsequent

information it receives. However, we have not discussed the parameters of this

ongoing duty after litigation has commenced. “A review of these cases demonstrates

that each involved decisions or conduct by the insurer prior to the institution of

litigation on the underlying claim.” DM&E, 2009 S.D. 69, ¶ 34, 771 N.W.2d at 633

(emphasis added); see also Walz v. Fireman’s Fund Ins. Co., 1996 S.D. 135, 556

N.W.2d 68 (addressing an insurer’s failure to review pertinent legal authority

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provided by claimant’s counsel after insurer’s initial decision to deny coverage but

prior to the ensuing litigation).

[¶33.] Further, we have never extended an insurer’s duty of good faith to

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.

Blanchard’s bad faith claim is premised on adding this layer of liability to our bad

faith doctrine in the workers’ compensation realm, but she fails to cite any

authority to support such a proposition.8 Bad faith arising from a workers’

compensation claim is “an intentional tort and typically occurs when an insurance

company consciously engages in wrongdoing during its processing or paying of

policy benefits to its insured.” Hein, 2007 S.D. 40, ¶ 10, 731 N.W.2d at 235

(emphasis added). The tort occurs when an “insurer breaches its duty to deal in

8. Blanchard cites two workers’ compensation cases where each court affirmed
an award of attorney fees to a claimant under a statute, similar to SDCL 58-
12-3, allowing attorney fees to be assessed against an insurer when there was
no reasonable controversy concerning a claim for benefits: Heesch,
823 N.W.2d 211, 222 (Neb. 2012), and Williams v. KW Prod., Inc., 784
N.W.2d 202 (Iowa Ct. App. 2010). However, these cases did not involve bad
faith claims. In each case, the attorney for the carrier conceded issues in the
course of the workers’ compensation litigation that were deemed conclusive of
the claimant’s request for benefits. It is unclear whether the insurance
carrier knew about or authorized these admissions by counsel. The courts
nevertheless affirmed the agency’s determination in each instance,
concluding that the carrier was bound by the judicial admissions of the
attorney. The results in both cases were much the same as the result in the
underlying workers’ compensation case here. Because Blomfelt failed to
adequately preserve appellate error, Mid-Century became obligated to pay
Blanchard’s claim. However, these results should not be confused with the
proof necessary for bad faith on the part of the insurer at the time it
considers the claim.
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good faith and fairly when processing a workers’ compensation claim.” Hein, 2007

S.D. 40, ¶ 11, 731 N.W.2d at 235.

[¶34.] The evidence Blanchard seeks to introduce does not reflect on the

reasonableness of Mid-Century’s decision to appeal or whether they knew or

recklessly disregarded information concerning the reasonableness of this decision.

Further, there are no facts supporting a finding that Mid-Century acted recklessly

or in reckless disregard of Blomfelt’s procedural missteps conceding the merits of

the appeal. To extend the scope of bad faith as Blanchard proposes would expose

insurers to liability occurring as a result of negligent procedural errors by defense

counsel and would require insurance providers to become legal experts capable of

recognizing procedural missteps by counsel during the litigation. Such an

expansion of the bad faith doctrine is not supported by our case law or the facts

before the Court. We determine the circuit court did not abuse its discretion in

excluding this evidence under the facts of this case.

[¶35.] We hold that the circuit court properly excluded the evidence from the

time the decision to appeal was made until the appeal was dismissed. Therefore,

the circuit court properly granted summary judgment to Mid-Century based upon

the other undisputed facts in the record. In light of our decision, it is unnecessary

to discuss Blanchard’s other claims of error. See Hass v. Wentzlaff, 2012 S.D. 50,

¶ 11, 816 N.W.2d 96, 101 (“If there exists any basis which supports the ruling of the

trial court, affirmance of a summary judgment is proper.”).

[¶36.] GILBERTSON, Chief Justice, KERN and DEVANEY, Justices, and

KONENKAMP, Retired Justice, concur.

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[¶37.] SALTER, Justice, disqualified.

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