United States District Court, D. South Dakota, Northern Division
GREG A. HAANEN, Plaintiff,
NORTH STAR MUTUAL INSURANCE COMPANY, Defendant.
OPINION AND ORDER
CHARLES B. KORNMANN United States District Judge
Haanen initially filed a complaint against North Star Mutual
Insurance Company ("North Star") in the Fifth
Judicial Circuit of South Dakota, alleging breach of
contract, breach of the implied covenant of good faith and
fair dealing, bad faith, breach of fiduciary duty,
attorney's fees, and punitive damages. On January 11,
2016, North Star removed the case to federal district court
under 28 U.S.C. §§ 1332 and 1441. North Star has
filed a motion for partial judgment on the pleadings on
Haanen's claims of breach of the implied covenant of good
faith and fair dealing, bad faith, breach of fiduciary duty,
attorney's fees, and punitive damages, pursuant to
case arises from an automobile accident that occurred on
March 18, 2010. Plaintiff, Greg Haanen, is a resident of
Browns Valley, South Dakota. Defendant, North Star, sells
insurance policies to South Dakota residents. At the time of
the accident, Haanen was insured by North Star. The
automobile insurance policy provides $500, 000.00 of
underinsurance coverage. The party responsible for the
accident, Leo Cameron, had $100, 000.00 of liability
insurance coverage. Haanen notified North Star that he
intended to accept Cameron's liability insurance policy
limit of $100, 000.00, unless it wished to substitute its
draft. North Star declined to substitute its draft.
Accordingly, Haanen accepted Cameron's offer of $100,
000.00. Haanen admits North Star would be entitled to a $100,
000.00 credit as a result of Cameron's payment, leaving
$400, 000.00 of available underinsurance coverage.
made a claim for benefits under the policy. North Star
refused to pay any benefits. Haanen alleges he suffered
serious bodily injury as a result of the automobile accident.
Moreover, Haanen claims he incurred medical bills of
approximately $30, 000.00 and farm expenses of approximately
$41, 485.85. Lastly, Haanen pleads he will continue to incur
additional farm expenses in the future as a result of the
review a 12(c) motion under the standard that governs
12(b)(6) motions." Haney v. Portfolio Recovery
Associates, L.L.C., No. 15-1932, 2016 WL 5112026, at 4
(8th Cir. 2016) (quoting Westcott v. City of Omaha.
901 F.2d 1486, 1488 (8th Cir. 1990)). "We accept as true
all facts pleaded by the non-moving party and grant all
reasonable inferences from the pleading in favor of the
non-moving party." Id. (quoting United
States v. Any & All Radio Station Transmission
Equip., 207 F.3d 458, 462 (8th Cir. 2000)).
"Pursuant to Rule 12(b)(6), a complaint must contain
sufficient factual matter, accepted as true, to 'state a
claim that is plausible on its face.' " Id.
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Id. "We assess plausibility by
drawing on our own judicial experience and common
sense." Id. "Further, we review the
plausibility of the plaintiffs claim as a whole, not the
plausibility of each individual allegation." Zoltek
Corp. v. Structural Polymer Grp., 592 F.3d 893, 896 n.4
(8th Cir. 2010).
South Dakota Law Applies
matter jurisdiction is established by diversity of
citizenship in this case. "It is, of course,
well-settled that in a suit based on diversity of citizenship
jurisdiction the federal courts apply federal law as to
matters of procedure but the substantive law of the relevant
state." Jacobs ex rel. Estate of Jacobs v.
Evangelical Lutheran Good Samaritan Soc, 849 F.Supp.2d
893, 896-97 (D.S.D. 2012) (citing Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 118
(1938)). "In a choice-of-law analysis for a diversity
action brought in federal district court, the choice-of-law
rules are substantive for Erie purposes, and the
choice-of-law rules of the forum state are applied to
determine the litigating parties' rights."
Id. The forum state is "the state in which a
lawsuit is filed." FORUM STATE, Black's Law
Dictionary (10th ed. 2014). Haanen originally filed his claim
with the Fifth Judicial Circuit of South Dakota. Therefore,
South Dakota law governs the substantive issues in this case.
Breach of the Implied Covenant of Good Faith and Fair
first issue is whether Haanen failed to plead a plausible
factual basis for his claim of breach of the implied covenant
of good faith and fair dealing. "South Dakota does not
recognize an independent tort for breach of the implied
covenant of good faith and fair dealing." Nygaard v.
Sioux Valley Hosps. & Health Svs., 731 N.W.2d 184,
193 (S.D. 2007) (quoting Farm Credit Servs. of Am. v.
Dougan, 704 N.W.2d 24, 28-29 (S.D. 2005)); Garrett
v. BankWest, Inc., 459 N.W.2d 833, 842 (S.D. 1990).
While South Dakota recognizes that "every contract
contains an implied covenant of good faith and fair dealing
that prohibits either contracting party from preventing or
injuring the other party's right to receive the agreed
benefits of the contract, " the "duty of good faith
permits an aggrieved party to bring a breach of contract
action .. ." Id. at 193-194. Therefore, Haanen
has failed to plead a plausible factual basis for his claim
of breach of the implied covenant of good faith and fair
dealing because such claim is not recognized as an
independent tort in South Dakota.
next issue is whether Haanen failed to plead a plausible
factual basis for a breach of the implied covenant of good
faith and fair dealing. "Before undertaking a study of
the law of bad faith, ' it is necessary to understand the
difference between 'first party' and 'third
party' insurance coverage." Roger M. Baron, When
Insurance Companies Do Bad Things: The Evolution of the
"Bad Faith" Causes of Action in South Dakota.
44 S.D. L. Rev. 471, 472-73 (1999). "Third party
insurance typically protects the insured against claims of
third parties which may be made against him/her."
Id. "First party insurance is a broad term that
is utilized to describe just about everything else other than
third party coverage." Id. "[A]n
understanding of the distinction between first party and
third party coverage is critical to understanding the