South Dakota P&C Study Guide

Two of the four figures in South Dakota’s property and casualty guaranty statute are not in the numbered list. They sit in unnumbered paragraphs after subdivision (3), which is exactly where a reader scanning for “(1), (2), (3)” stops looking. And South Dakota runs two unfair claims regimes, in two chapters, with two different tests — one of which reaches a producer personally and one of which expressly does not. Both facts are examinable and neither survives a national outline.

Four limbs, three units, one ceiling

SDCL 58-29A-68 is catchlined “Obligation of association on claims against insolvent insurer — Deductible and maximum amounts,” and it enumerates three subdivisions before it stops enumerating.

(1) Workers’ compensation: uncapped. The association pays “The full amount of” the claim. There is no ceiling on this limb at all.

(2) Unearned premium: $25,000, per POLICY. “An amount not exceeding twenty-five thousand dollars.” The unit is the policy.

(3) All other covered claims: $300,000, per CLAIM. “An amount not exceeding three hundred thousand dollars.” The unit is the claim — not the claimant — which matters where several claimants share one occurrence.

Then the section keeps going without numbering. An unnumbered paragraph limits unearned-premium payment to “only that amount of each unearned premium which is in excess of one hundred dollars” — a $100 deductible on each unearned premium. And a final unnumbered paragraph imposes an aggregate: once $10,000,000 has been paid “to or on behalf of any insured and its affiliates on covered claims or allowed claims arising under the policy or policies of any one insolvent insurer,” the association’s obligation ends — and that count includes payments made by other states’ associations and property and casualty security funds.

That aggregate carries an exception in its own words: “except in the case of a claim for benefits under workers’ compensation coverage.” So the workers’ compensation limb is both uncapped per claim and outside the ceiling — the only benefit in the statute that is unlimited twice over.

Two exclusions that end a claim before the caps are reached

The same section defines a covered claim narrowly at both ends.

The filing bar excludes a claim filed “after the earlier of eighteen months after the date of the order of liquidation, or the final date set by the court for the filing of claims.” Note “the earlier of” — a court that sets a twelve-month date has shortened the eighteen months, not extended them.

Incurred-but-not-reported losses are excluded outright.

And the trigger window at the opening of the section has four limbs, not three: claims existing before the liquidation order; claims arising within thirty days after it; claims arising before policy expiration if that comes sooner; and claims arising before the insured replaces the policy or causes its cancellation, if the insured does so within thirty days of the order of liquidation.

The advertising ban is a closed class

SDCL 58-29A-104 makes it “unfair trade practice for any insurer or insurance producer” to use the association’s existence as an inducement to buy insurance.

Two members. Insurer and producer. That is the whole class.

The life and health chapter is drafted the opposite way: 58-29C-62 opens “No person, including a member insurer, agent, or affiliate of a member insurer” — an open class in which the list is illustrative. South Dakota’s two guaranty chapters genuinely differ on who is bound, and a candidate who assumes they match will be wrong on one of them whichever way they guess.

Two unfair claims regimes, and only one reaches you

South Dakota did not replace its old unfair claims provisions when it adopted a modern NAIC-style regime in 2014. It kept both, in different chapters, and they answer the two most important questions differently.

Chapter 58-33 — the older regime, and the one that binds you personally.

58-33-67 opens “In dealing with the insured or representative of the insured, unfair or deceptive acts or practices in the business of insurance include, but are not limited to, the following,” and lists seven items: failing to acknowledge and act within thirty days on claim communications and failing to adopt reasonable investigation standards; paying a claim without a statement setting out the applicable coverage; failing to promptly explain a denial or a compromise offer; failing to settle promptly under one coverage where liability is clear in order to influence settlement under another; requiring repairs by a particular contractor or shop as a condition of payment; failing to make a good faith assignment of contributory negligence; and refusing settlement on an assumption of responsibility by others.

A single act suffices. There is no frequency threshold anywhere in 58-33-2, 58-33-3 or 58-33-67 — and 58-33-2 binds “No person,” which is why this chapter reaches a producer.

Its neighbour 58-33-66 carries a separate clock aimed at licensees rather than insureds: it is an unfair or deceptive act to fail to respond to a Division inquiry or supply requested documents within twenty days of receipt, or to knowingly give the Division false, misleading or incomplete information.

Chapter 58-12 — the modern regime, and the one that does not.

58-12-33 sets the test, and the conjunction is the answer: an act is an unfair claims practice if “(1) It is committed flagrantly and in conscious disregard of the provisions of ss 58-12-31 to 58-12-37 … or (2) It is committed with such frequency to indicate a general business practice to engage in that type of conduct.” Disjunctive. A single flagrant act qualifies; otherwise a pattern must be shown.

58-12-34 then lists thirteen acts, including knowingly misrepresenting a relevant fact or policy provision, failing to acknowledge pertinent communications with reasonable promptness, refusing to pay without a reasonable investigation, compelling litigation by tendering substantially less than is ultimately recovered, unreasonably delaying by requesting duplicative documentation, and failing to provide claim forms within fifteen days of a request.

And 58-12-31 is where it stops short of you. Its definition of “insurer” reaches claim agents, brokers, adjusters and third party administrators, and then says: “This term does not include any insurance producer licensed pursuant to chapter 58-30, unless an insurance producer is directly involved in the adjudication of claims.”

So the answer to “does South Dakota’s unfair claims law reach a producer personally?” is yes under chapter 58-33 and no under chapter 58-12 unless you adjudicate claims. Both answers are correct for their own chapter. Neither chapter creates a private right of action — 58-33-69 and 58-12-21 both close that door.

Rebating splits by line of business

South Dakota does not have one rebating rule. SDCL 58-33-30 takes “life insurance, health insurance, or annuity contracts” out of sections 58-33-24 to 58-33-27 entirely, which leaves two regimes.

Life, disability and annuity — 58-33-14. “No person shall knowingly permit or offer to make or make any contract of life insurance …” with undisclosed terms, premium rebates, special dividend advantages, offers of employment, “any valuable consideration or inducement whatever not specified in the contract,” or securities as inducements.

Everything else — 58-33-24. “No insurer or any employee or representative thereof, and no insurance producer may pay, allow, or give, or offer to pay, allow or give …” with one exception: “except to the extent provided for in an applicable filing with the director as provided by law.”

And 58-33-25 catches the other side of the transaction — an insured who accepts a rebate commits a misdemeanour too.

Modern safe harbours sit at 58-33-136 to 58-33-140: value-added products and services, pilot and testing programs with notice to the Division, and permitted raffles or drawings.

Twisting: cite the section, quote the text

SDCL 58-33-8 is catchlined “Twisting as misdemeanor” — and the word “twisting” appears nowhere in the operative text. What the section actually says is “No person shall make or issue, or cause to be made or issued, any written or oral statement misrepresenting or making incomplete comparisons as to the terms, conditions, or benefits contained in any policy for the purpose of inducing or attempting or tending to induce a policyholder to lapse, forfeit, surrender, retain, exchange, or convert any insurance policy.” Note “retain” in that list — the section reaches a producer who talks a client out of a switch as well as into one. Violation is a Class 2 misdemeanour.

South Dakota’s catchlines are editorial headings supplied by the code. Cite 58-33-8 for the prohibition and quote the text, not the heading, as the rule. “Churning” appears in none of the chapter’s one hundred and forty catchlines at all; that conduct is reached through the replacement rules at ARSD 20:06:08:49 to :65 and through 58-33-8 where a same-insurer exchange involves misrepresentation.