SALTER, Justice
#28467-a-MES APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT MOODY COUNTY, SOUTH DAKOTA THE HONORABLE PATRICK T. PARDY Judge SEAMUS W. CULHANE
NANCY J. TURBAK BERRY of
Turbak Law Office, P.C.
Watertown, South Dakota Attorneys for plaintiff and
appellant. MARK W. HAIGH
EDWIN E. EVANS
RYAN W. W. REDD of
Evans, Haigh & Hinton, LLP
Sioux Falls, South Dakota Attorneys for defendant and
appellee. SALTER, Justice [¶1.] Ivan Zochert filed a complaint against Protective Life Insurance, Co. (Protective), alleging breach of contract and bad faith. He appeals the circuit court's decision to grant Protective's motion for summary judgment. We affirm.
Background
[¶2.] Ivan and Lenore Zochert obtained a supplemental cancer insurance policy from Protective. The policy limited coverage to "loss resulting from definitive [c]ancer treatment" with the requirement that "[p]athologic proof thereof must be submitted." The policy included a schedule of benefits which listed the specific types of coverages available to the Zocherts. Benefits were "payable for those expenses incurred by an insured from 10 days preceding the date of positive diagnosis of [c]ancer or from the first day of a period of [h]ospital confinement during which positive diagnosis is made, whichever is more favorable to you." The policy stated that Protective would send "forms for filing proof of loss" following notice of a claim. Protective would then pay benefits due under the policy after receiving proof of the loss established through "a written statement of the nature and extent of [the] loss[.]" [¶3.] On July 5, 2012, a needle core biopsy of tissue from a lump in Lenore's left breast revealed the presence of cancer. In a July 11 pathology report, doctors listed the specific diagnosis as invasive ductal carcinoma. On August 14, Lenore underwent a partial mastectomy and layered closure on her left breast. Two days later she was discharged, but returned to the hospital on August 31 due to treatment. Protective processed these bills and paid the benefits under the policy on August 29. On September 2, Protective issued a final payment for Lenore's home-recovery benefits. [¶15.] Around the same time, Ivan commenced this action against Protective, alleging breach of contract and tortious breach of the duty of good faith and fair dealing. The parties both moved for summary judgment. [¶16.] At a November 6, 2017, hearing, the circuit court granted Protective's motion for summary judgment and denied Ivan's motion. The court ruled that the language of the contract was unambiguous, and Protective did not fail "to pay other benefits allegedly owed[.]" Ivan does not challenge these determinations on appeal. The court noted that the "insurer made timely payments once the pathology report was received, and additional payments once itemized bills were received." It found that Ivan's claim for breach of the covenant of good faith and fair dealing failed because "[t]he benefits were clearly articulated . . . Protective Life paid the benefits that the Plaintiff was entitled in accordance with the language of the policy, and had not breached the language of the policy, and had not acted deceitful[ly]." The court also ruled that "[i]n regards to the independent tort for breach of duty of good faith and fair dealing . . . South Dakota [has] not recognized that action . . . if it did, the record does not support such a claim." For those reasons, the court also rejected Ivan's claim for attorney fees. [¶17.] Ivan now appeals, and based upon the parties' submissions, we have identified the following issues for our consideration:
1. Whether Ivan's claim that Protective breached the implied contractual duty of good faith and fair dealing is reviewable.
2. Whether the circuit court erred when it determined that Protective did not breach the implied contractual duty of good faith and fair dealing.
3. Whether the circuit court erred in ruling that Protective did not commit bad faith in handling Ivan's claims.
The 1969 California Relative Value Schedule provides value codes for procedures. Protective used the value provided by the schedule and multiplied that times $50 for surgery benefits and $42 for anesthesia benefits. The policy included an explanation of this calculation and a sample listing of value codes for common surgical procedures. Insureds could request the benefit amount for procedures not listed on the policy.
The policy paid benefits up to ten days before the initial diagnosis. The August 14 pathology report would not have covered the July 5 biopsy because it did not fall within the time frame for coverage. Therefore, the July 11 pathology report was required to pay benefits for the earlier biopsy.
Standard of Review
[¶18.] "We review a circuit court's entry of summary judgment under the de novo standard of review." Harvieux v. Progressive N. Ins. Co., 2018 S.D. 52, ¶ 9, 915 N.W.2d 697, 700 (quoting Wyman v. Bruckner, 2018 S.D. 17, ¶ 9, 908 N.W.2d 170, 174). When conducting a de novo review, "[w]e give no deference to the circuit court's decision[.]" Oxton v. Rudland, 2017 S.D. 35, ¶ 12, 897 N.W.2d 356, 360.
Analysis
[¶19.] The legal principles guiding our review of a circuit court's decision to grant a motion for summary judgement are well-settled:
We must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.
Brandt v.
Cty.
of Pennington, 2013 S.D. 22, ¶ 7,
827 N.W.2d 871, 874 (quoting
Jacobson v.
Leisinger, 2008 S.D. 19, ¶ 24,
746 N.W.2d 739, 745). Moreover, "[u]nsupported conclusions and speculative statements do not raise a genuine issue
of fact."
Dakota Indus.,
Inc.
v.
Cabela's.
com,
Inc.,
2009 S.D. 39, ¶ 20,
766 N.W.2d 510, 516.
1. Whether Ivan's claim that Protective breached the implied contractual duty of good faith and fair dealing is reviewable. [¶20.] Protective argues as an initial matter that Ivan's contractual claim for a breach of the implied duty of good faith and fair dealing is not contained in his complaint, which alleges a breach of contract for express policy provisions and tortious breach of the duty of good faith and fair dealing. Therefore, Protective argues that Ivan is raising a new claim on appeal, and it cannot be considered. See Liebig v. Kirchoff, 2014 S.D. 53, ¶ 35, 851 N.W.2d 743, 752. [¶21.] While there may be some uncertainty in the formulation of Ivan's claims in the complaint and in his initial summary judgment briefing, a broader review of the record indicates that Ivan raised the contractual duty of good faith and fair dealing in the circuit court. In his response to Protective's motion for summary judgment, Ivan argued specifically that Protective breached its contractual duty of good faith and fair dealing. Also, the circuit court perceived that the issue was before it and addressed the merits of the good faith argument, stating that "the Plaintiff's claim on covenant of good faith and fair dealing fails[.]"
2. Whether the circuit court erred when it determined that Protective did not breach the implied contractual duty of good faith and fair dealing. [¶22.] "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." Schipporeit v. Khan, 2009 S.D. 96, ¶ 7, 775 N.W.2d 503, 505 (quoting Farm Credit Servs. of Am. v. Dougan, 2005 S.D. 94, ¶ 8, 704 N.W.2d 24, 28). Lack of good faith may be evidenced by various conduct, such as "evasion of the spirit of the deal; abuse of power to determine compliance; and, interference with or failure to cooperate in the other party's performance." Garrett v. BankWest, Inc., 459 N.W.2d 833, 845 (S.D. 1990). "A breach of contract claim is allowed even though the conduct failed to violate any of the express terms of the contract agreed to by the parties." Id. at 841. The meaning of good faith "varies with the context" of the contract. Farm Credit Servs., 2005 S.D. 94, ¶ 8, 704 N.W.2d at 28. Yet, "'if the express language of a contract addresses an issue, then there is no need to construe intent or supply implied terms' under the implied covenant." Nygaard v. Sioux Valley Hosps. & Health Sys., 2007 S.D. 34, ¶ 22, 731 N.W.2d 184, 194 (quoting Farm Credit Servs., 2005 S.D. 94, ¶ 10, 704 N.W.2d at 28).
a. Whether Protective fulfilled its duty to investigate. [¶23.] Insurers must make a reasonable investigation of insurance claims before denying benefits. Dakota, Minn. & E. R.R. Corp. v. Acuity, 2009 S.D. 69, ¶ 19, 771 N.W.2d 623, 629. The investigation must be based upon the "facts and law available to Insurer at the time it made the decision to deny coverage." Walz v. Fireman's Fund Ins. Co., 1996 S.D. 135, ¶ 8, 556 N.W.2d 68, 70. However, where an insurer's obligation to process claims is governed by the policy's express language, "[t]he covenant of good faith does not create an amorphous companion contract with latent provisions to stand at odds with or in modification of the express language of the parties' agreement." Nygaard, 2007 S.D. 34, ¶ 22, 731 N.W.2d at 194 (quoting Farm Credit Servs., 2005 S.D. 94, ¶ 9, 704 N.W.2d at 28). 2d 407 (Ala. 1993). In Cope, the insured argued that because he sent some bills to the insurer, the insurer should have been prompted to investigate and locate remaining bills based on the information already submitted. Id. at 411. The Alabama Supreme Court, however, rejected this argument, holding that "the obligation to pay or to evaluate the validity of the claim does not arise until the insured has complied with the terms of the contract with respect to submitting claims." Id. The court reasoned, "[u]ntil the insured furnishes proof of loss in the form required by the policy, the insurer is under no obligation to pay or to investigate the claim." Id. at 412. [¶29.] Accepting Ivan's argument that the claims process should be effectively self-executing is unsupportable for reasons that are as practical as they are legal. An insurer in circumstances such as those present here will seldom, if ever, have complete information about when or where an insured is receiving treatment. As one Protective claims official explained during her deposition, "unfortunately, if we don't know . . . what your bills are and what your diagnosis is and when you are going to the doctor, there's no way for us to try and even get that information[.]"
A Protective claims official testified at her deposition that the company would have assisted Ivan if he indicated he could not produce bills: "If the insured said: This is all they gave me and they won't give me any more, we would certainly do everything we could to help them file that claim."
b. Whether Protective fulfilled its duty to disclose and accurately represent policy provisions. [¶30.] An insurer violates its duty of good faith by failing to disclose policy benefits it knows it has a duty to provide under the language of the contract. Biegler v. Am. Family Mut. Ins. Co., 2001 S.D. 13, ¶¶ 33-34, 621 N.W.2d 592, 602 (liability insurer engaged in deceit when, among other things, it failed to advise insured of its duty to defend after receiving notice of a third-party's civil action against its insured). Additionally, an insurer cannot misrepresent what it requires of the insured by forcing the insured to "elect upon which of the clauses in the policy the claim might be made." Eide v. S. Sur. Co., 55 S.D. 405, 226 N.W. 555, 556 (1929). [¶31.] Here, Ivan cannot prevail on his claim that Protective breached the implied contractual duty of good faith and fair dealing by failing to inform him of the coverages for which he qualified. Initially, because the contract was unambiguous and set forth a schedule of benefits, Ivan should be charged with knowing applicable coverages, and therefore, what kinds of bills to send. See Culhane v. W. Nat'l Mut. Ins. Co., 2005 S.D. 97, ¶ 16, 704 N.W.2d 287, 292 (rejecting the doctrine of reasonable expectations where policy language is unambiguous). Moreover, there is no indication in the record that Protective misrepresented the benefits to which Ivan was entitled. In fact, in its communication with Ivan and Culhane, Protective explained the reasons for its actions, did not avoid answering inquiries, and provided answers consistent with the policy. [¶32.] Also, contrary to Ivan's claims, Protective did not require him to identify policy provisions as a pre-requisite to making his claim. It merely sought compliance with the policy provisions which required a pathology report and a written statement of loss as part of the claims process so it could accurately investigate and process his claim.
be that an insurer and an insured have distinct and even conflicting interests in some first-party claims. Harvieux, 2018 S.D. 52, ¶ 13, 915 N.W.2d at 701 (quoting Hein, 2007 S.D. 40, ¶ 10, 731 N.W.2d at 235) (for first-party allegations of bad faith, the insurer and the insured are adversaries, and the insurer may challenge claims that are "fairly debatable" and not "frivolous or unfounded"). Therefore, imposing a duty of equal consideration for first-party claims could fundamentally alter the rights and obligation of insureds and insurers contained in the express contractual provisions of the policy. [¶36.] Here, the policy provisions governed the claims process, and when Ivan furnished proof of his loss, Protective paid him the benefits to which he was entitled. No arguable duty of equal consideration could be implicated here in any event.
Even if we were to review Ivan's equal consideration claim further, this example illustrates vexing incongruity in Ivan's argument—Protective should undertake an investigation to determine the details of Lenore's care, but doing so can be evidence of an intent to avoid paying benefits.
3. Whether the circuit court erred in ruling that Protective did not commit bad faith. [¶37.] In general terms, "we have consistently refused to recognize an independent tort action" for the breach of the implied covenant of good faith and fair dealing. Trouten v. Heritage Mut. Ins. Co., 2001 S.D. 106, ¶ 30, 632 N.W.2d 856, 862. However, an exception exists in the context of insurance contracts where a violation of the implied contractual provision constitutes the independent tort of bad faith. Id. ¶¶ 29-30, 632 N.W.2d at 862-63. In Trouten, we also recognized an insured's ability to seek punitive damages for bad faith as an incident of the "special relationship between the insurer and the insured" and discouragement of "objectionable corporate policies[.]" Id. ¶ 31, 632 N.W.2d at 863 (quoting Egan v. Mut. Omaha Ins. Co., 620 P.2d 141, 146 (Cal. 1979)). unconnected to the payment of benefits in this case. For example, his allegation that claims handlers searched for ways to avoid paying covered benefits had no causal bearing upon the payment of Ivan's claim. The same is true of a handwritten note from Protective's claim file which incorrectly stated a policy provision. Ivan's claim that Protective "uses employee incentive plans to promote individual adherence to practices that promote the company's profitability" is also not material to the dispute before us since it bears no causal connection to the claims process here. See Harvieux, 2018 S.D. 52, ¶ 20, 915 N.W.2d at 703 ("Harvieux presented no evidence that . . . Progressive's internal policies caused it to unreasonably investigate or evaluate her UM claim."). [¶43.] Here, Ivan acknowledges he received all the benefits due under the policy. There is no evidence that any of this additional alleged conduct led to Protective processing his claim incorrectly. In fact, the undisputed material facts show that when sufficient proof of Ivan's loss was submitted, Protective consistently and promptly processed the claim and paid all benefits owed.
Although the circuit court overlooked the existence of the bad faith tort in the insurance context, we can affirm the court for any basis which supports the court's ultimate determination. BAC Home Loans Servicing, LP v. Trancynger, 2014 S.D. 22, ¶ 8, 847 N.W.2d 137, 140 (quoting De Smet Farm Mut. Ins. Co. of S.D. v. Busskohl, 2013 S.D. 52, ¶ 11, 834 N.W.2d 826, 831) ("If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.").
The claims handler's note mistakenly failed to recognize the ten-day period prior to a cancer diagnosis during which claims can be made. --------
Conclusion
[¶44.] We recognize that the process of gathering paperwork and documentation necessary to comply with the proof of loss requirements of an insurance policy can be challenging, especially when simultaneously dealing with the sickness or death of a loved one. However, the insurer-insured relationship is governed by contract, and the record before us demonstrates that Protective acted 20 within the terms of its policy with Ivan. We affirm the circuit court's order granting Protective's motion for summary judgment because there are no genuine issues of material fact indicating Protective breached its contract with Ivan. [¶45.] GILBERTSON, Chief Justice, and KERN and JENSEN, Justices, concur.