United States District Court, D. South Dakota, Southern Division
OPINION AND ORDER ON POST TRIAL MOTIONS
ROBERTO A. LANGE, UNITED STATES DISTRICT JUDGE
Laura Dziadek (Dziadek), sued Defendant, Charter Oak Fire
Insurance Company, doing business as Travelers (Charter Oak),
making claims sounding in contract and tort relating to a
commercial insurance policy issued by Charter Oak (the
Policy). Doc. 15. Dziadek's Amended Complaint asserted
that she was entitled to declaratory judgments that she is an
insured under the Policy's underinsured motorist (UIM)
endorsement with Charter Oak owing her a duty of good faith
and fair dealing, that $1, 000, 000 of UIM coverage for her
exists under the Policy, and that she is an insured under the
Policy's medical payments endorsement. Doc. 15 at
¶¶ 15-51. Dziadek further alleged that Charter Oak
breached the insurance contract and engaged in unfair trade
practices, fraud and deceit, and bad faith in its dealings
with Dziadek. Doc. 15 at ¶¶ 52-95. She sought
compensatory damages, punitive damages, and attorney's
fees. Doc. 15 at ¶¶ 96-102; Doc. 15 at 13-14.
Charter Oak acknowledged coverage after the lawsuit was filed
and, on February 21, 2012, paid Dziadek $900, 000 under the
Policy's UIM coverageand $5, 000 under the Policy's
medical payments coverage. After discovery, Charter Oak moved
for summary judgment on all claims. Doc. 118. This Court
granted summary judgment on the unfair trade practices claim
but otherwise denied Charter Oak's motion. Doc. 153 at
28. The case proceeded to a jury trial in May 2016.
27, 2016, the jury returned a verdict for Dziadek on the
claims of deceit and breach of contract for UIM coverage.
Doc. 300. The jury found for Charter Oak, however, on
Dziadek's claims of breach of contract for medical
payments coverage, insurance bad faith, and fraud. Doc. 3 00.
The jury awarded prejudgment interest on the $900, 000 of UIM
coverage from December 15, 2009, on both the deceit claim and
the breach of contract for UIM benefits claim, $250, 000 for
out-of-pocket expenses on the deceit claim, plus an
additional $500, 000 for "[a]ny other harm . . .
including mental and emotional harm." Doc. 300. The
jury then, in phase two of the trial, returned a verdict for
Dziadek on her punitive damages claim for $2.75 million. Doc.
31, 2016, this Court entered a preliminary judgment on the
jury verdict, but identified three issues that required
resolution: (1) whether Dziadek's declaratory judgment
claims are now moot; (2) whether a 10% prejudgment interest
rate or some different rate applies to calculate prejudgment
interest; and (3) whether a deceit claim can support an award
for "mental and emotional harm." Doc. 311. Both
parties have filed briefs on the three issues discussed in
the preliminary judgment. Charter also moved for judgment as
a matter of law on the claims of deceit and breach of
contract for UIM coverage, as well as the punitive damages
award. Doc. 317. Charter Oak alternatively moved for a new
trial on these claims. Doc. 318.
Summary of Facts
Oak issued the commercial insurance policy at issue to
Billion Empire Motors, Inc. (Billion), an auto dealership in
Sioux Falls, South Dakota, for the period of July 1, 2008 to
July 1, 2009. Pl's Ex. 25. The Policy included UIM and
medical payments coverage. Pl's Ex. 25. Billion loaned
one of its vehicles to a customer, Lori Peterson (Peterson),
while her vehicle was in for repairs. Peterson and Dziadek
took a trip together to the Black Hills, during which Dziadek
stopped at a hospital to do some nursing work. On September
22, 2008, while returning from the Black Hills, Peterson lost
control of the Billion vehicle in or near a construction zone
on Interstate 90 in South Dakota, causing the vehicle to
crash in a ravine. Doc. 313-6 at 22-28. Dziadek was a
passenger in the Billion vehicle driven by Peterson and was
very badly injured. Dziadek hired Jeffrey A. Cole (Cole) of
Zimmer, Duncan, and Cole in December 2008 to represent her in
matters stemming from that motor vehicle accident.
Policy contained a provision titled, "Duties In The
Event Of Accident, Claim, Suit Or Loss, " which required
the named insured, Billion, to provide notice of accident or
loss. Pl's Ex. 25. Charter Oak received notice of the
accident from Billion's insurance agent on January 29,
2009, and on that same day, Faith Styles (Styles), Charter
Oak's claims representative, began to investigate.
Def.'s Ex. 1034. Styles learned that Peterson was the
driver in a single car accident and that Peterson may have
fallen asleep while driving to cause the accident. Def.'s
Ex. 1034. She also learned that Dziadek was a passenger in
the car at the time of the accident, that Dziadek was
seriously injured as a result of the accident, and that
Peterson was insured under a Progressive Insurance Company
(Progressive) policy. Def.'s Ex. 1034. Styles contacted a
Progressive adjuster and learned that Peterson had a $100,
000 liability coverage limit under the Progressive policy,
that Dziadek was a nurse, and that Dziadek's medical
bills already had exceeded $100, 000. Def.'s Ex. 1034.
Shortly thereafter, on February 2, 2009, Styles received
information about Dziadek's injuries from Dziadek's
sister, Mae Schafer (Schafer). Def.'s Ex. 1034. As a
result of injuries from the accident, Dziadek's vocal
cords were partially paralyzed so Schafer communicated with
Styles on Dziadek's behalf. Def.'s Ex. 1034. Styles
began referring to Dziadek as a "claimant" in her
claims notes and assigned her a claim number. Def.'s Ex.
February 6, 2009, Styles created a "Bodily Injury
Worksheet" for Dziadek which r included a
liability analysis; she assigned 0% liability for Dziadek and
Billion and 100% liability for Peterson. Def.'s Ex. 1095;
Doc. 313-12 at 66. Styles spoke with Cole that same day.
Def.'s Ex. 1034. Cole testified at trial that although he
could not remember the exact words of his February 6, 2009
telephone conversation with Styles, Doc. 313-6 at 112; Doc.
313-7 at 87, he knew they discussed insurance coverage for
Dziadek under the Billion Policy, Doc. 313-6 at 112, 116. A
note Cole made while speaking with Styles recorded:
Claim no coverage
Claim no excess coverage
Pl's Ex. 1; Doc. 313-6 at 113. Cole testified that he
believed that Styles said there was no coverage of any kind
for Dziadek under the Billion Policy. Doc. 313-6 at 114-116;
see also Doc. 313-6 at 120. According to Cole, he
was interested in any type of coverage for Dziadek; he
therefore did not have any reason to focus on liability
coverage only when speaking with Styles. Doc. 313-6 at 116,
met with her supervisor Tim Westbrook and an in-house
coverage lawyer on February 12, 2009. Def's Ex. 1034;
Doc. 313-11 at 94. According to Styles's testimony, the
three Charter Oak employees determined that the Policy did
not provide liability coverage for Peterson. Doc. 313-11 at
then wrote a letter to Cole that same day regarding
"YOUR CLIENT: Laura Dziadek." Pl's Ex. 3. The
We have reviewed the facts of this loss in conjunction with
the policy issued to our insured and it is our determination
that no coverage for your client exists under this policy.
Under the terms of the policy, Lori Peterson's liability
coverage would be primary. If she did not have insurance or
if the limits of her policy were less than the minimum
required limits for South Dakota, then she would qualify as
an insured under our insured's policyat [sic] amount is
$25, 000. It is my understanding that Ms. Peterson had a
liability limit of $100, 000 so she would not qualify as an
insured under this policy.
Pl's Ex. 3. Cole understood the letter as meaning that
there was no coverage for Dziadek under any of the provisions
in the Billion Policy. Doc. 313-6 at 119-20. Nevertheless,
Cole sent Styles a letter on February 18, 2009, requesting
the declaration sheet for the Billion Policy and "a true
and correct copy" of the Policy itself. Doc. 313-6 at
121; Pl's Ex. 4. Styles sent Cole the declarations page,
but only excerpts of the Policy defining an
"insured" for purposes of liability coverage,
together with a letter telling Cole to "pay particular
attention to the pages which I have marked because they
address the issue of 'who is an insured.'"
Pl's Ex. 7; Doc. 313-11 at 116-17. Styles did not send
Cole the Policy provisions on UIM or medical payments
coverage that Dziadek actually met.
testified that in his experience, he could trust that an
insurance adjuster would send the applicable policy
provisions when asked to do so. Doc. 313-7 at 36. He
explained that he had never dealt with a commercial garage
policy like the Billion Policy. To Cole, it made sense that
the definition of an insured that Styles sent him applied to
the entire policy. Doc. 313-7 at 39-40. Because Dziadek was
not an insured under the definition of an insured Styles sent
him, Cole did not follow up with Charter Oak at that time.
offered Peterson's $100, 000 liability limits to Dziadek
on February 24, 2009, in exchange for a full release.
Pl's Ex. 6; Doc. 313-6 at 122-23. Cole declined the offer
because Dziadek's medical bills already had exceeded
$100, 000, because Dziadek was receiving workers'
compensation benefits, and because Cole was hopeful to
collect more from Peterson, possibly from other alleged
tortfeasors, and their insurers. Doc. 313-6 at 122-24.
spent the next two years pursuing other avenues of recovery
for Dziadek. He hired an investigator to determine whether a
problem with the Billion vehicle caused the accident, but
found nothing to support that theory. Doc. 313-7 at 24. He
pursued workers' compensation coverage for Dziadek. He
sued Peterson in September 2009. Doc. 313-7 at 22; Def. Ex.
1014. About one year later, Cole and another attorney in his
office, Daniel Brendtro (Brendtro), filed a second lawsuit on
Dziadek's behalf against the State of South Dakota, a
road contractor, and a signage company (DOT case), alleging
that the configuration and maintenance of the Interstate 90
construction zone caused or contributed to the accident. Doc.
313-7 at 4-8; Doc. 313-12 at 84-85, 89. By June 2011,
however, discovery in the DOT case had convinced Cole and
Brendtro that Dziadek did not have a viable claim against the
defendants in the DOT case. Doc. 313-7 at 8.
than two years had passed since Styles had communicated with
Cole and provided information that there was no coverage
under the Policy for Dziadek. Before accepting
Progressive's $100, 000 limits, Brendtro decided to pour
through the firm's Dziadek file to see if something
possibly was missed. Doc. 313-12 at 91-92. Looking back at
what Styles had sent, Brendtro found a reference to UIM
coverage in the declarations page, Doc. 313-12 at 95-96, and
realized that the UIM provision was not part of the
provisions Styles had sent, Doc. 313-12 at 102-03; Doc.
313-13 at 56-57. Brendtro instructed his paralegal Jennifer
Doubledee (Doubledee) to contact Styles for a copy of the
entire policy. Doc. 313-12 at 97. Doubledee called Styles on
July 15, 2011, asking for the entire Policy, but Styles
refused to send it, saying that the Policy could be over 2,
pages and that Doubledee would need to request specific
provisions. Doc. 313-12 at 100; Pl's Ex. 19. Doubledee
emailed Styles back that same day asking only for the UIM and
uninsured motorist provisions. Doc. 313-12 at 101; Def. Ex.
1055. Styles, however, did not immediately send the requested
policy provisions. Def. Ex. 1055; Doc. 313-12 at 101. After
Doubledee repeated her request on July 21, 2011, Styles
provided the UIM and uninsured motorist policy provisions to
Cole and Brendtro's firm on July 22, 2011. Def. Ex. 1055.
reviewed the UIM policy language and on July 28, 2011, sent
Styles a letter seeking to confirm that Dziadek had UIM
coverage under the Policy. Def.'s Ex. 1056. Charter Oak
received the letter on August 1, 2011, but did not
respond. When Charter Oak still had not responded
by September 20, 2011, Dziadek filed this lawsuit. Charter
Oak's answer admitted the existence of UIM coverage and
medical payments coverage for Dziadek, although it denied
other claims and matters.
January 17, 2011, Cole ultimately demanded that Charter Oak
pay both the UIM and medical payments limits. Def.'s Ex.
1070. Cole then requested assent from Charter Oak to settle
Dziadek's claims against Peterson and Progressive for the
$100, 000 liability limit on February 3, 2012. Def.'s Ex.
1071. Charter Oak, on February 16, 2012, consented to that
settlement and also consented to Dziadek's dismissal of
the DOT case. Def.'s Ex. 1075. On February 21, 2012,
Charter Oak sent two checks totaling $905, 000 to pay the UIM
and medical payments coverage claims of Dziadek. Def.'s
Ex. 1076. Charter Oak did not pay any interest on these
amounts, and Dziadek did not release any claims against
Oak's defenses at trial included that it had done nothing
wrong because Cole had, not made a claim for UIM coverage in
February 2009. Charter Oak argued that Cole should have
realized that UIM coverage was available and made a request
for payment under the UIM provision earlier. Charter Oak also
claimed at trial that the delay in receiving the $905, 000
actually benefited Dziadek in terms of the money she received
from workers' compensation. The jury obviously rejected
Charter Oak's defense theories on the breach of contract,
deceit, and damages claims.
Motion for Judgment as a Matter of Law and Motion for New
50(b) allows a party that previously moved for judgment as a
matter of law to renew that motion after entry of final
judgment. Judgment as a matter of law is proper "[i]f a
party has been fully heard on an issue during a jury trial
and the court finds that a reasonable jury would not have a
legally sufficient evidentiary basis to find for the party on
that issue." Fed.R.Civ.P. 50(a)(1). In diversity cases
such as this, a court considering a motion for judgment as a
matter of law typically applies the
sufficiency-of-the-evidence standard of the state in which it
sits, at least where the state and federal standards are
similar. Mich. Millers Mut. Ins. Co. v. Asoyia,
Inc., 793 F.3d 872, 877-78 (8th Cir. 2015). The federal
sufficiency-of-the-evidence standard is essentially the same
as the South Dakota standard: courts draw all reasonable
inferences in the nonmoving party's favor and, without
weighing the evidence, determine whether there is a
sufficient evidentiary basis to support the verdict.
Garcia v. City of Trenton, 348 F.3d 726, 727 (8th
Cir. 2003); Stensland v. Harding Cty., 872 N.W.2d
92, 95 (S.D. 2015). Judgment as a matter of law should be
granted only when "all of the evidence points in one
direction and is susceptible to no reasonable interpretation
supporting the jury verdict." Garcia, 348 F.3d
at 727 (quotation omitted); accord Stensland, 872
N.W.2d at 95 ("If sufficient evidence exists so that
reasonable minds could differ, judgment as a matter of law is
not appropriate." (quoting Huether v. Mihm
Transp. Co., 857 N.W.2d 854, 860 (S.D. 2014))).
standard for granting a new trial under Rule 59 is different.
White v. Pence, 961 F.2d 776, 779-82 (8th Cir.
1992). The governing question under Rule 59 is whether a new
trial is required to avoid a miscarriage of justice.
Greaser v. Mo. Dep't of Corrs., 145 F.3d 979,
983 (8th Cir. 1998). Grounds for granting a new trial include
a verdict that is against the weight of the evidence, an
excessive damage award, and erroneous jury instructions or
evidentiary rulings. Children's Broad. Corp. v. Walt
Disney Co., 245 F.3d 1008, 1017 (8th Cir. 2001).
"In /determining whether a verdict is against the weight
of the evidence, the trial court can rely on its own reading
of the evidence-it can 'weigh the evidence, disbelieve
witnesses, and grant a new trial even where there is
substantial evidence to sustain the verdict.'"
White, 961 F.2d at 780 (quoting Ryan v.
McDonough Power Equip., 734 F.2d 385, 387 (8th Cir.
1984)). However, district courts may not "reweigh the
evidence and set aside the jury verdict merely because the
jury could have drawn different inferences or conclusions or
because judges feel that other results are more
reasonable." Id. (quoting Fireman's
Fund Ins. Co. v. Aalco Wrecking Co., 466 F.2d 179, 186
(8th Cir. 1972)). Erroneous evidentiary rulings do not
justify a new trial "unless [the wrongful admission or
exclusion of] the evidence was so prejudicial that a new
trial would likely produce a different result."
Diesel Mach.. Inc. v. B.R. Lee Indus., Inc., 418
F.3d 820, 834 (8th Cir. 2005) (quoting Harrison v. Purdy
Bros. Trucking Co., 312 F.3d 346, 351 (8th Cir. 2002)).
Similarly, courts will grant a new trial based on erroneous
jury instructions "only 'if the error misled the
jury or had a probable effect on its verdict.'"
Bamford. Inc. v. Regent Ins. Co., 822 F.3d 403, 410
(8th Cir. 2016) (quoting Acuity v. Johnson, 776 F.3d
588, 596 (8th Cir. 2015)).
denying Charter Oak's motion for summary judgment on
Dziadek's deceit claim, this Court concluded that Charter
Oak had an obligation to refrain from making statements
intended to deceive Dziadek about the coverage available to
her and that this obligation was separate and apart from
Charter Oak's duties under the Policy. Doc. 153 at 22-23.
Charter Oak moved to reconsider, arguing first that the
deceit claim failed under the independent tort doctrine and \
second that Charter Oak did not owe Dziadek a duty to
disclose information about the UIM coverage. Doc. 173. This
Court denied Charter Oak's motion to reconsider,
explaining that a contractual relationship does not insulate
a party from fraud claims and reiterating that Charter Oak
had an obligation to refrain from deceiving Dziadek about the
existence of coverage for her that was independent of its
duties under the Policy. Doc. 218 at 11-12. Charter Oak
raised the duty issue again during settling of instructions
when it argued that, under the Supreme Court of South
Dakota's decision in Taggart v. Ford Motor Credit
Co., 462 N.W.2d 493 (S.D. 1990), parties in
arm's-length business transactions have no duty to
disclose absent an employment or fiduciary relationship. Doc.
313-13 at 113. Relying in part on Trouten v. Heritage
Mutual Insurance Co., 632 N.W.2d 856 (S.D. 2001), this
Court concluded that the relationship of an insurer to its
insured is akin to that of a fiduciary rather than a typical
arm's-length business transaction. Doc. 313-13 at 112.
Moreover, Charter Oak did not simply fail to disclose the
existence of $900, 000 of UIM coverage available to Dziadek,
but actively deceived Dziadek and her attorney into believing
that there was no such coverage. Charter Oak once again
raises the same arguments it asserted previously.
deceit claim is a tort action separate though related to an
insurance contract. The Supreme Court of South Dakota has
recognized that '"an omission to perform a contract
obligation is never a tort, ' but. . . that the breach of
a legal duty upon which a tort is based 'may arise out of
a relation or state of facts created by contract.'"
Karas v. Am. Family Ins. Co., 33 F.3d 995, 998 (8th
Cir. 1994) (quoting Smith v. Weber, 16 N.W.2d 537,
539 (S.D. 1944)). As a result, "[w]hile the matters
complained of. . . [may have] had their origin in a contract,
the gist of the action is for alleged wrongful and tortious
acts of defendant." Id. (alterations in
original) (quoting Smith, 16 N.W.2d at 539). Here,
Charter Oak had a legal duty not to violate the South Dakota
deceit statutes, SDCL Ch. 20-10, in providing information to
Dziadek and her attorney Cole. Charter Oak had an obligation
to refrain from making statements intended to deceive Dziadek
about the existence of coverage for her, separate and apart
from its duties under the Policy. See Grynberg v.
Citation Oil & Gas Corp.. 573 N.W.2d 493, 501 (S.D.
1997) (finding duty independent of the obligations under the
contract and stating, "[s]imply put, a contract is not a
license allowing one party to cheat or defraud the
other"). Even though the torts "grow out of or are
"coincident with" the Policy, Charter Oak is
"not immune . . . from the penalty that is ordinarily
visited upon tort-feasors." Smith, 16 N.W.2d at
Oak argues next that Dziadek failed to present sufficient
evidence to prove deceit. Dziadek had to prove six elements
to succeed on her deceit claim: (1) Charter Oak had a duty to
disclose a material fact to Dziadek; (2) Charter Oak
willfully concealed a material fact or willfully gave
information of other facts which were likely to mislead
because of Charter Oak's failure to communicate the
material fact; (3) Charter Oak acted with the intent to
induce Dziadek to alter her position to her injury or risk;
(4) the undisclosed information was something Dziadek could
not discover by acting with reasonable care; (5) Dziadek
relied on the lack of information to her detriment; and (6)
Dziadek was legally caused damages as a result. Doc. 229 at
24; SDCL §§20-10-1 to 20-10-2. South Dakota Pattern
Jury Instructions: Civil § 20-110-25 (2008 ed. with 2016
Oak focuses on the fourth element first, arguing that Dziadek
failed to show that the existence of UIM coverage for her was
something Cole could not have discovered by acting with
reasonable care. The evidence is sufficient to find in
Dziadek's favor on the fourth element of deceit. Cole
asked Styles whether there was any type of coverage available
for Dziadek under the Policy. Doc. 313-6 at 114-120. Despite
Styles telling Cole on the phone and later in writing that no
Coverage existed, Doc. 313-6 at 114-116; Pl's Ex. 3, Cole
followed up and asked Styles for a copy of the entire Policy,
Doc. 313-6 at 121; PI. Ex. 4. Styles responded by sending
Cole a portion of the policy containing a definition of
insured under which Dziadek did not qualify and a letter
telling Cole to pay particular attention to this definition.
PI. Ex. 7; Doc. 313-11 at 117. Cole, who had never dealt with
a commercial garage policy before and whose experience taught
him that he could trust a claims adjuster to send the
applicable policy provisions when asked to do so, believed
that the definition of an insured Styles sent him applied to
the entire Policy. Doc. 313-7 at 36, 39-40. Charter Oak's
argument has irony to it; Charter Oak is essentially arguing
that trusting what Charter Oak had said, written, and sent is
not exercising reasonable care. A reasonable jury could
conclude from the evidence that Cole and in turn Dziadek
could not have discovered the deceit by acting with
Oak next complains that Dziadek failed to prove the second
and third elements of deceit. Again, there is a sufficient
evidentiary basis for the jury's decision on these
elements. First, Styles was no stranger to UIM coverage in
February 2009; she handled one or two UIM claims a month,
Doc. 313-11 at 88, and had received praise from her
supervisor in January 2009 for seeking offsets on UIM claims,
Pl's Ex. 158. Second, by the time Styles spoke with Cole
on February 6, 2009, she knew enough to realize that the
Policy's UIM provision might apply to Dziadek.
Specifically, Styles knew that Dziadek had been seriously
injured in an accident which Peterson had caused, that
Peterson's insurance policy with Progressive had a $100,
000 liability coverage limit, and that Dziadek's medical
bills already had exceeded $100, 000. Def.'s Exs. 1034,
1095. Third, Styles orally and in writing told Cole there was
no coverage under the Policy for Dziadek when, in fact,
Dziadek met the UIM provision's definition of an insured.
Doc. 313-6 at 114-116; Pl's Ex. 3. Fourth, rather than
send Cole the entire Policy as he asked, Styles sent Cole
provisions of the Policy under which Dziadek could not
recover. Pl's Ex. 7; Doc. 313-11 at 117. Finally, Styles
refused to send Doubledee the entire Policy in July 2011,
stating erroneously that the Policy could be over 2, 000
pages. Doc. 313-12 at 100; Pl's Ex. 19. She also delayed
sending the UIM provision until Doubledee requested the
provision a second time. Doc. 313-12 at 101; Def. Ex. 1055. A
reasonable jury could conclude that Charter Oak in 2009
willfully misled Dziadek and Cole about the existence of UIM
coverage with the intent to avoid having to pay Dziadek the
Oak's last argument about the elements of deceit is that
Dziadek failed to show that she relied on Charter Oak's
misleading statements concerning the existence of coverage
under the Policy. Ample evidence supported the jury's
finding on this element as well. Dziadek testified that she
relied on the insurance company to "do the right
thing" in addition to relying on Cole. Doc. 313-6 at 76.
Cole, in turn, relied on Styles's misleading statements
that Dziadek did not have any coverage under the Policy. Cole
and Dziadek delayed for over two years accepting
Progressive's tender of its limits and pursued an
ultimately futile lawsuit against defendants named in the DOT
case, because of a reliance on Charter Oak's 2009
statements and letters.
Oak also makes two arguments concerning the jury's
verdict on deceit in its motion for a new trial. Charter Oak
argues first that it is entitled to a new trial on the deceit
claim for the same reasons expressed in its motion for
judgment as a matter of law. Although the ' standard for
a new trial is less stringent than the standard for judgment
as a matter of law, the evidence discussed above demonstrates
that there was no miscarriage of justice in the jury's
finding for Dziadek on the deceit claim. This Court cannot
order a new trial simply because the jury conceivably could
have drawn different conclusions. White, 961 F.2d at
Oak complains second that it was error not to define the
words "willfully" and "materially" in the
jury instruction on deceit. Charter Oak argued during trial
that this Court should define "willfully, " Doc.
313-13 at 20, but did not propose an instruction defining
this term, either before the jury's verdict or in its
post-trial motions, see Docs. 197, 285, 319, 320, 339, 340. A
court within this district has held that a party must offer a
proposed instruction along with the party's objection to
preserve a claim of instructional error. Skrovig v. BNSF
Ry. Co., 916 F.Supp.2d 945, 970 (D.S.D. 2013). Even if
Charter Oak preserved its argument, it has not cited any
cases holding that "willfully" is a technical term
that must be defined for the jury. Instead, Charter Oak notes
that after this Court defined the term "reckless"
at the jury's request, the jury found in Charter
Oak's favor on the fraud and bad faith
claims. Docs. 295, 209. Charter Oak then
speculates that the jury misunderstood the term
"willfully" and might have found for Charter Oak on
the deceit claim if that term been defined. This argument
overlooks that Dziadek's three tort claims had different
elements and that she faced issues proving fraud and bad
faith that she did not face in proving deceit. The more
reasonable inference is that the jury understood the term
"willfully" but still found that Charter Oak
engaged in deceit. After all, the jury sent a jury note
asking for a definition of "reckless?"
but did not ask for a definition of "willfully."
The jury demonstrated that it knew how to seek guidance
during deliberations on a term in the jury instructions on
which it was unclear. Charter Oak's arguments do not
establish that the failure to define "willfully"
was in error or had a probable effect on the outcome of this
Oak's argument that this Court should have defined
"material" is similarly unconvincing. Charter Oak
wanted an instruction stating that "a misrepresentation
is not material if the person has consulted a lawyer before
acting, and the lawyer is charged by law with having
knowledge of the fact represented." Doc. 197 at 45. The
only support Charter Oak offered for this instruction was the
South Dakota pattern jury instruction on attorney
malpractice. Doc. 197 at 45. The South Dakota pattern
instruction on attorney malpractice does not mention the word
"material, " let alone support Charter Oak's
proposed instruction that a plaintiffs consultation with a
lawyer can render a fact immaterial. And even if Charter Oak
had a legal basis for its proposed instruction on the word
"material, " it has not shown that the failure to
give this instruction had a probable effect on the jury's
Breach of Contract
Oak argued that it could not be liable for breach of contract
to Dziadek because it eventually paid Dziadek the $900, 000
owed for UIM coverage, albeit after Dziadek discovered the
deceit and after Dziadek sued Charter Oak. The elements for
breach of contract under South Dakota law typically are
"(1) an enforceable promise; (2) a breach of the
promise;, and, (3) resulting damages." Bowes
Constr.. Inc. v. S.D. DOT, 793 N.W.2d 36, 43 (S.D.
2010). Charter Oak's Policy is the enforceable promise or
contract at issue. However, Charter Oak argued that it did
not breach the contract and that Dziadek has no
breach-of-contract damages. Doc. 133 at 21-25.
excess insurance to underlying liability coverage, and a
person seeking UIM coverage must satisfy certain conditions
precedent to recover UIM benefits. Specifically, Dziadek had
to notify Charter Oak of her intention to accept the
underlying liability limits, allow Charter Oak an opportunity
to exercise its Schmidt/Clothier rights, make a
formal demand for UIM benefits, and show damages above the
limits of the underinsured motorist.
South Dakota law, a contract may be unenforceable when it
contains a condition precedent that fails to occur and may be
unenforceable until the condition precedent occurs. See
Weitzel v. Sioux Valley Heart Partners, 714 N.W.2d
884, 896 (S.D. 2006); see also Johnson v. Coss, 667
N.W.2d 701, 705-06 (S.D. 2003) ("A condition precedent
is a contract term distinguishable from a normal contractual
promise in that it does not create a right or duty, but
instead is a limitation on the contractual obligations of the
parties."). South Dakota law recognizes the prevention
doctrine as an exception to the requirement of a condition
precedent to contract performance. Weitzel, 714
N.W.2d at 896. The South Dakota Supreme Court adopted the
prevention doctrine as stated in the Restatement (Second) of
Where a duty of one party is subject to the occurrence of a
condition, the additional duty of good faith and fair dealing
imposed on him . . . may require some cooperation on his
part, either by refraining from conduct that will prevent or
hinder the occurrence of that condition or by taking
affirmative steps to cause its occurrence. . . .
[N]on-performance of that duty when performance is due is a
breach. . . . [I]t has the further effect of excusing the
non-occurrence of the condition itself, so that performance
of the duty that was originally subject to its occurrence can
become due in spite of its non-occurrence.
Johnson, 667 N.W.2d at 706 (alterations in original)
(quoting Restatement (Second) Contracts § 245 cmt. (a)).
Stated another way, "if a party to a contract hinders
the occurrence of a condition precedent, that condition is
waived." Id. This doctrine "requires that
the conduct have 'contributed materially' to the
non-occurrence of the condition." Id.
(quotation omitted). Application of the prevention doctrine
is a question of fact reserved for the jury. Id.;
see also Berry v. Time Ins. Co., 798 F.Supp.2d 1015,
1020-21 (D.S.D. 2011) (denying motion to dismiss on contract
claim because prevention doctrine may excuse condition
precedent where insured did not negotiate as required by the
policy, initially provided inconsistent information to
insured, and later imposed nonexistent and heighted
restrictions). Therefore, this Court submitted to the jury
Dziadek's breach of contract claim and whether Charter
Oak prevented Dziadek from formalizing her UIM claim at an
Oak makes four arguments for why it is entitled to judgment
as a matter of law on Dziadek's breach of contract claim.
To succeed on her breach of contract claim, Dziadek had to
show: (1) that the Policy contained an enforceable promise to
her; (2) that Charter Oak breached that promise by preventing
her from formalizing her UIM claim; and (3) that Charter
Oak's breach legally caused Dziadek's damage. Doc.
299 at 15. The jury found that Charter Oak breached the
contract for UIM benefits and, if not for Charter Oak's
actions, Dziadek would have formalized her UIM claim on
December 15, 2009. Doc. 300 at 1.
Oak argues first that Dziadek had to establish the amount she
was entitled to recover from any tortfeasor to become
entitled to UIM benefits. Charter Oak's first argument
fails because, as explained more fully below, neither the
Policy nor South Dakota law imposed such a requirement.
Oak argues next that Dziadek could not have formalized her
UIM claim until October 2011 because that is the first date
she submitted any medical records to Charter Oak. This
argument has no merit because it ignores the jury's
finding that Charter Oak prevented Dziadek from formalizing
her UIM claim earlier. Having been deceived by Charter Oak
into thinking there was no coverage under the Policy, neither
Cole nor Dziadek would have any reason to submit medical
records to Charter Oak in 2009 or 2010.
Oak's next argument is equally baseless. Charter Oak
contends that the prevention doctrine does not apply here
because Dziadek had not satisfied the conditions precedent to
receiving UIM benefits when it deceived her in 2009. Again,
this argument overlooks the obvious fact that Charter