STEVEN J. KRUEGER and CORALEE A. KRUEGER, Plaintiffs and Appellees,
GRINNELL MUTUAL REINSURANCE COMPANY, Defendant and Appellant.
CONSIDERED ON BRIEFS ON NOVEMBER 12, 2018
FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT DAY
COUNTY, SOUTH DAKOTA, THE HONORABLE JON S. FLEMMER Judge
SCHOENBECK JOE ERICKSON of Schoenbeck Law, P.C. Attorneys for
plaintiffs and appellees.
L. CARPENTER of Woods, Fuller, Shultz & Smith, P.C.
Attorneys for defendant and appellant.
GILBERTSON, Chief Justice
Steven and Coralee Krueger filed a complaint against Grinnell
Mutual Reinsurance Co. (Grinnell) alleging failure to pay
underinsured motorist benefits. The Kruegers served written
discovery requests on Grinnell. Grinnell responded but raised
several objections. The Kruegers wrote a letter demanding
answers to certain discovery requests within a week. Grinnell
did not respond, and the Kruegers filed a motion to compel.
The circuit court granted the Kruegers' motion in its
entirety, finding that Grinnell had sufficient notice of the
Kruegers' bad faith claim and thus had intentionally not
responded to requests related to a bad faith cause of action.
The circuit court also granted the Kruegers' request for
attorney fees. We granted Grinnell's request for
discretionary appeal. We reverse.
and Procedural History
This case arises from an accident on March 14, 2015. The
Kruegers were rear-ended by a vehicle driven by William
Akron. Akron's insurance had limits of $50, 000 per
person. The Kruegers' policy with Grinnell included a
$25, 000 per person medical payment (med-pay) coverage and
underinsured motorist coverage of $250, 000 per person or
$500, 000 per accident. Following the accident, claims for
med-pay coverage and vehicle damage were opened. The
Kruegers' medical bills were paid as they were incurred.
Initially, there was no claim for underinsured motorist
On January 17, 2017, Lee Schoenbeck informed Grinnell he
would be representing the Kruegers. On March 31, the Kruegers
told Grinnell they reached a settlement agreement against
Akron to his policy's limits. They also noted, "We
now intend to pursue an underinsured motorist claim against
your company." Grinnell continued to pay the
Kruegers' medical bills until Steven's med-pay limits
were exhausted in May 2017. Coralee's limits were
exhausted after the filing of this lawsuit.
On July 12, 2017, the Kruegers demanded payment of
underinsured motorist benefits, asking Grinnell,
"[W]ould it be reasonable to expect that you complete
your investigation by August 1, 2017?" The adjuster who
had been working on the Kruegers' med-pay file, Pat
McCumber, replied on July 13. She informed the Kruegers that
Grinnell had opened an underinsured motorist benefits file
and that Sheryl Stepanek was the assigned adjuster to that
On July 27, Stepanek wrote the Kruegers a letter advising
them that she had received their demand for underinsured
motorist coverage and that she was assigned to the
underinsured motorist file to avoid a conflict of interest
while the med-pay file was still open. She requested
authorization from the Kruegers for McCumber to release
documents from the med-pay file to the underinsured motorist
file so that she could consider their claim. On August 3, the
Kruegers replied, providing the requested authorization. The
same day, the Kruegers' counsel signed a summons and
complaint against Grinnell.
The Kruegers' complaint alleged in pertinent part:
14. Grinnell Mutual has refused to pay the underinsurance
benefits owing under the contract, and has not been