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The Standard Fire Insurance Company v. Continental Resources, Inc.

Supreme Court of South Dakota

June 28, 2017

THE STANDARD FIRE INSURANCE COMPANY, A SUBSIDIARY OF TRAVELERS INSURANCE, Plaintiff and Appellant,
v.
CONTINENTAL RESOURCES, INC., Defendant and Appellee.

          CONSIDERED ON BRIEFS NOVEMBER 7, 2016

         APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES COUNTY, SOUTH DAKOTA THE HONORABLE MARK BARNETT Judge

          THOMAS J. VON WALD of Boyce Law Firm, LLP Sioux Falls, South Dakota Attorneys for plaintiff and appellant.

          MICHAEL F. SHAW of May, Adam, Gerdes & Thompson LLP Pierre, South Dakota Attorneys for defendant and appellee.

          KERN, JUSTICE

         [¶1.] Standard Fire Insurance Co. appeals from a circuit court order dismissing its case against Continental Resources Inc. Standard Fire sued Continental Resources for reimbursement or in the alternative subrogation of workers' compensation benefits paid to an employee between 2009 and 2013. The circuit court dismissed the case pursuant to SDCL 15-6-12(b)(5), finding that the terms of a settlement agreement barred further litigation and that res judicata applied. We reverse and remand.

         Facts and Procedural History

         [¶2.] Dale Denzin sustained a work-related injury while employed at one of Koch Industries' oilfields. The accident occurred on March 23, 1983, and crushed Denzin's pelvis. Standard Fire, a subsidiary of Travelers Insurance, provided Koch Industries workers' compensation insurance and paid Denzin temporary total disability and permanent partial disability (PPD) benefits. Denzin resumed work in January 1984. In 1995, Continental Resources acquired Koch Industries' interest in the oilfield and became Denzin's employer. Denzin underwent hip-replacement surgeries in 2009 and 2010. Standard Fire agreed to pay for the operations. Following the surgeries, Denzin received a permanent partial impairment rating of 50% in both the lower-right and lower-left extremities.

         [¶3.] In May 2012, Denzin filed a workers' compensation petition against Continental Resources with the Department of Labor and Regulation. Denzin sought PPD benefits related to his hip-replacement surgeries. Under SDCL 62-4-6, Denzin qualified for the maximum weekly benefit of $620 per week and was entitled to 160 weeks of compensation, totaling $99,200 in permanent partial impairment payments.

         [¶4.] On June 22, 2012, Continental Resources filed a third-party petition against Koch Industries and Standard Fire. Continental Resources claimed that Koch Industries-as Denzin's employer at the time of the accident-was responsible for any benefits that were then due and owing. Standard Fire answered and denied any obligation to pay Denzin additional workers' compensation benefits, claiming that Continental Resources was responsible for payment of any such benefits.

         [¶5.] In December 2013, Denzin, Standard Fire, and Continental Resources entered into a settlement agreement. The agreement, entitled "Settlement Agreement and Dismissal of Petition for Hearing," reprised the foregoing facts and stipulated that Continental Resources would accept Denzin's claim, pay a lump sum of $99,200, and dismiss its third-party action against Koch Industries and Standard Fire. The agreement further provided that "the parties agree to settle this matter without further litigation[.]" The Department of Labor and Regulation approved the agreement, dismissed Continental Resources' claim against Koch Industries and Denzin's workers' compensation petition for hearing, and ordered Continental Resources to pay Denzin within ten days.

         [¶6.] On November 10, 2014, Standard Fire commenced a civil action against Continental Resources seeking reimbursement or subrogation for workers' compensation benefits paid to Denzin between 2009 and 2013. Standard Fire claimed that it paid $82,276.26 in medical bills on Denzin's behalf and $4,676.20 in indemnity benefits directly to Denzin. Standard Fire sought reimbursement pursuant to SDCL 62-7-38 for these amounts, which totaled $86,952.46. Standard Fire alleged that Continental Resources stipulated in the settlement agreement that Denzin's work duties after Continental Resources' acquisition of the oilfield in 1995 contributed independently to Denzin's need for medical treatment in 2009 and beyond. Standard Fire also asserted an alternative claim for equitable subrogation. Continental Resources answered, denying these claims and asserting various affirmative defenses. Continental Resources filed a motion to dismiss pursuant to SDCL 15-6-12(b)(5) on October 9, 2014, arguing that res judicata barred Standard Fire's claims and that any equitable claims were "barred by the Settlement Agreement of the parties, Plaintiff's available remedies at law, and Plaintiff's voluntary payment of workers' compensation benefits to Dale Denzin."

         [¶7.] On January 19, 2016, the circuit court set the matter for hearing. Because Continental Resources moved to dismiss under SDCL 15-6-12(b)(5), the parties asked the court to consider the complaint and attached pleadings and documents from the administrative proceeding. The parties did not ask the circuit court to take judicial notice of the administrative record and agreed that there were no material facts in dispute.

         [¶8.] After oral argument, the circuit court observed that both the identity of the parties and the issues of "who's on the risk, [and] who's got to pay for the hips" were identical to those resolved in the settlement agreement. The court noted that the agreement stated that "the parties agree to settle this matter without further litigation," and deemed this language a "shotgun clause." The court refused "to surgically interpret . . . 'this matter' . . . as dissecting out disability from medicals," which the court viewed as calling for "a mighty fine scalpel." The court then orally granted Continental Resources' motion to dismiss. It concluded that the language of the settlement agreement resolved all the issues concerning workers' compensation benefits related to Denzin's hip surgeries, including the benefits previously paid and the most-recently-requested impairment benefits. In its written order, the court found that Standard Fire's "case involves identical parties [and] identical issues"; that the Department of Labor entered a final judgment on the merits; that "both parties had a full and fair opportunity to litigate the issues involved in this matter"; and that "the parties entered into a Stipulation settling the matter without reimbursement to [Standard Fire] for any reason and agreed to a settlement 'without further litigation.'" The court concluded that "the parties' settlement agreement and [dismissal of ...


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