Brooks v. Milbank Insurance Co.

2000 SD 16, 605 N.W.2d 173, 2000 S.D. LEXIS 16
CourtSouth Dakota Supreme Court
DecidedFebruary 2, 2000
DocketNone
StatusPublished
Cited by21 cases

This text of 2000 SD 16 (Brooks v. Milbank Insurance Co.) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brooks v. Milbank Insurance Co., 2000 SD 16, 605 N.W.2d 173, 2000 S.D. LEXIS 16 (S.D. 2000).

Opinion

JOHNS, Circuit Judge.

[¶ 1.] Kenneth Brooks appeals the trial court’s dismissal of his action for bad faith refusal to pay an insurance claim, the denial of his motion to amend his complaint to reallege the bad faith action and the denial of his motion to reconsider the motion to amend. 1 By notice of review, Milbank Insurance Company appeals the granting of attorney’s fees for vexatious or unreasonable refusal to pay and the granting of terms. We affirm in part, reverse in part and remand.

STATEMENT OF THE FACTS

[¶ 2.] In late 1996, Kenneth Brooks purchased a 190 acre farm property in Roberts County, South Dakota for $80,000. The property, which included a barn, a house and a few small sheds, was insured with Milbank Insurance Company. In January 1997, Brooks submitted an insurance claim to Milbank after the roof of the barn collapsed under the weight of heavy snow. Milbank denied the claim on March 4, 1997, saying that the insurance policy did not provide coverage for that type of loss.

[¶ 3.] On March 13, 1997, nine days after the denial of Brooks’ claim, the house located on Brooks’ property was destroyed by fire. The only person present at the time of the fire was Delano Du-Marce. Delano, his mother Kathy Du-Marce and her boyfriend Jeff Keller rented the house from Brooks. Brooks submitted a claim for the loss of the house to Milbank. Within five days of the fire, Milbank had investigator Bob Huber interview Brooks and Keller. Mil-bank also hired David Robertson of Rob-co Fire Investigations Service to conduct an independent cause and origin investigation. After conducting an on-site investigation of the fire, Robertson sent samples of the debris to Rocky Mountain Instrumental Laboratories, Inc. for analysis. Rocky Mountain issued a laboratory report indicating that “very small concentrations” of petroleum distillates, ie. gasoline and paint thinner residue, were present on two of the four samples received from Robertson. Upon receipt of the lab report, Robertson issued a fire investigation report concluding that “[a]ll of the indicators found in the investigation of the fire, point to the use of flammable accelerants to intensify the fire in the dwelling and to cause its destruction.”

[¶ 4.] After issuance of Robertson’s report, Milbank hired Dennis Olson, a pri *176 vate investigator, to conduct interviews. On April 21, 1997, Olson interviewed Jeff Keller, Delano DuMarce and certain fire personnel. Olson tape recorded the interview with DuMarce. During the interview, DuMarce repeatedly denied any involvement in the fire, but eventually, after veiled threats of impending incarceration, promises of leniency for the “truth,” and statements making it clear what Olson proposed the “truth” to be, DuMarce stated that he started the fire. DuMarce said that Brooks had come to the house and promised to pay him $1,500 if he burned the house.

[¶ 5.] On April 26, 1997, Olson prepared a report for Milbank which characterized all of the interviews he conducted and which included the tape recording of his interview with Delano. Additionally, the report noted that Agent Bob Schuchardt of the Division of Criminal Investigation recorded two telephone calls DuMarce made to Brooks. During these conversations, Brooks adamantly denied any complicity in the burning of the house. However, the recordings were not attached to Olson’s report for Milbank’s review.

[¶ 6.] On April 28, 1998, Brooks submitted to a polygraph examination wherein he denied conspiring with DuMarce to burn the home. The polygraph examiner’s report states that Brooks’ responses revealed “significant criteria that would indicate deception.” 2

[¶ 7.] By letter dated June 9, 1997, Mil-bank denied Brooks’ claim for the house fire. The letter stated that “our investigation has disclosed that there exists a factual basis on which to decline coverage for this loss on the basis of ‘concealment or fraud.’ ” Milbank had also sought the advice of its attorney as to whether there was a good faith legal basis for the denial of Brooks’ claim. On June 11, 1997, Mil-bank’s attorney issued an opinion letter extrapolating the facts for the denial, con-eluding “I think you have a good faith basis for denying the claim and probably have a compelling reason to do so.”

[¶ 8.] Because of the denial of his claim, Brooks initiated this suit alleging two causes of action: (1) breach of contract, and (2) first party bad faith refusal to pay. Pursuant to SDCL 15 — 6—12(b)(5), Milbank filed a motion to dismiss the bad faith claim for failure to state a claim on which relief could be granted. The trial court granted the motion stating “[n]o specific facts are pled to support the claim of bad faith, and therefore, the allegation of bad faith is dismissed.”

[¶ 9.] During a later deposition by Brooks’ attorneys, DuMarce again stated that both he and Brooks agreed to cause the fire. Despite DuMarce’s deposition, Brooks sought leave of the trial court to amend his complaint per SDCL 15-6-15(a) to again include the bad faith claim. The trial court denied the motion. Six days later, DuMarce signed an affidavit prepared by Brooks’ attorneys claiming that he did not start the fire and that he was never asked by Brooks to start the fire. DuMarce further claimed that the reason he said he started the fire at Brooks’ behest was because Mr. Olson, the interviewer, led him to believe that he would be prosecuted for arson and sent back to jail if he did not cooperate. Based on this affidavit and the affidavits of certain members of the Sisseton Volunteer Fire Department, Brooks’ attorneys filed a motion to reconsider the trial court’s denial of the motion to amend the complaint. This motion was also denied. Thereafter, Milbank deposed DuMarce on two occasions prior to the jury trial.

[¶ 10.] A five day jury trial was conducted in October, 1998. By special interrogatory, the jury found that Brooks had not procured the fire and awarded him $15,-000, its determination of the value of the *177 house. After trial, Brooks filed a motion requesting attorney’s fees in accordance with SDCL 58-12-3 on the basis that Mil-bank’s refusal to pay his claim was vexatious or without reasonable cause. Brooks’ counsel sought $77,287.50 in attorney’s fees based on 618.30 hours spent prosecuting the case at his firm’s standard rate of $125 per hour. The number of hours and hourly rate were asserted in the motion for attorney’s fees, the brief in support of the motion and in an affidavit by Brooks’ counsel, John Burke. However, documentation of each hour spent on the case was not detailed for the court’s review.

[¶ 11.] The hearing on Brooks’ motion for attorney’s fees was set for November 3, 1998. No one appeared for Milbank or secured a continuance in advance of the hearing. Although Milbank’s attorney 3

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Cite This Page — Counsel Stack

Bluebook (online)
2000 SD 16, 605 N.W.2d 173, 2000 S.D. LEXIS 16, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brooks-v-milbank-insurance-co-sd-2000.