Lawyers Say Injured S.D. Workers Lose Rights if Bad Faith Proposal Approved

June 15, 2017

Lawyers who represent injured workers in South Dakota are preparing for a proposal from the insurance industry that would limit their ability to pursue legal claims against insurance companies that are intentionally dishonest.

Insurance industry representatives were scheduled to present the proposal to the state Workers’ Compensation Advisory Council later this month, a step that could lead to legislation limiting injured workers from pursuing bad faith claims against insurance companies. But lawyer Mike McKnight, who represents insurance companies, said the proposal is delayed until August.

“We’re going to have some further discussions – both sides, the other claimant lawyers, trial lawyers, etc. – and see if we can come to some resolution of it,” McKnight said.

Lawyers representing workers expect the proposal to include caps on damages awarded in bad faith cases or even barring those claims from being filed at all, the Argus Leader reported.

“There’s been a concern raised in the past that worker compensation insurance companies are unduly susceptible to liability for bad faith,” said James Marsh, who oversees the state Division of Labor and Management and workers’ compensation system.

Bad faith claims usually accuse insurance companies of intentionally hiding information from those insured. Should a jury find that a company acted in bad faith, it can levy punitive damages to punish the bad behavior and hopefully deter future similar behavior.

Mike Abourezk is a Rapid City attorney who won a $4 million verdict last year after finding that an insurance company hid the details of a $1 million insurance policy after a woman suffered catastrophic injuries in a car accident. Abourezk said insurance companies are willing to gamble that they won’t get caught, especially with workers’ comp claims where the amount is usually only a few thousand dollars.

He said that by denying legitimate claims, those companies “are going to make more money than they lose even if they get caught now and again.”

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