Abourezk & Garcia - Focused on Insurance Law - Selected Articles from Mike Abourezk

Abourezk & Garcia - Focused on Insurance Law - Selected Articles from Mike Abourezk: "UNREASONABLE DELAY IN CLAIM PAYMENT: EVENTUAL PAYMENT DOES NOT RELEASE INSURER FROM BAD FAITH LIABILITY

By Mike Abourezk and Marialee Neighbours

In South Dakota, the eventual payment of a plaintiff's insurance claim does not extinguish the wholly separate tort claim of bad faith. The South Dakota Supreme Court specifically embraced this principle in Champion v. U.S.F.& G. when it concluded:

. . .an insurer's violation of its duty of good faith and fair dealing constitutes a tort, even though it is also a breach of contract. Such tortious conduct is demonstrated where there is unreasonable delay in performing under a contract, including delays in settlement under a liability policy.

399 N.W.2d at 322, citing 16 J.A. Appleman and J. Appleman, Insurance Law and Practice, 8878.15 at 422-24 (1981)(emphasis added).

Another South Dakota Supreme Court case, Grynberg v. Citation Oil & Gas Corp., 573 N.W.2d 493 (S.D.1997), is instructive on this issue. In Grynberg, the plaintiff alleged claims of fraud, breach of contract and punitive damages. The action arose out of a contract.

In that case, the Court held that it was not a sufficient remedy to permit the intentional tortfeasor, a party to a contract, to simply pay back what is owed under the contract:"