Jack Hammonds v. Hartford Fire Ins.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________

No. 06-3549
___________

Jack Hammonds, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* District of South Dakota.
Hartford Fire Insurance Company, *
*
Appellee. *

___________

Submitted: April 4, 2007
Filed: September 7, 2007
___________

Before LOKEN, Chief Judge, BEAM, and BYE, Circuit Judges.
___________

BEAM, Circuit Judge.

Jack Hammonds appeals the district court's1 grant of summary judgment to
Hartford Fire Insurance Company (Hartford). Hammonds claims that Hartford acted
in bad faith by delaying payments due to him under a settlement agreement and filing
a petition to terminate current benefits. Because Hammonds cannot establish loss
arising from the only basis for bad faith that he might be able to prove, we affirm.

1
The Honorable Richard H. Battey, United States District Judge for the District
of South Dakota.
I. BACKGROUND

In October 1990, Hammonds fell from a roof while working for his employer,
Megman Corporation. Having suffered serious injuries, Hammonds filed a worker's
compensation claim on a policy issued by Hartford. Hammonds and Hartford entered
into a settlement agreement in July 1993 (the 1993 Agreement) which was approved
by the South Dakota Department of Labor later that month, as required by state
statute. S.D. Codified Laws § 62-7-5.2

The 1993 Agreement contained two provisions relevant to this litigation. The
first provision, Section 2.B, titled "Attendant Care" and subtitled "Future Care" stated
that:

From and after the date of the execution of this Agreement and
continuing for so long as Angela Hammonds continues to provide full-
time attendant care to Jack Hammonds, Angela agrees to accept and
Hartford agrees to pay Angela for twenty four (24) hours of care per day,
at the rate of $6.00 per hour ($144.00 per day), and for seven (7) days
per week.

This totaled $4,180.92 per month. Section 2.D, again titled "Attendant Care" and
subtitled "Continuing Jurisdiction" stated:

The parties acknowledge and agree that the [South Dakota] Department
of Labor shall have continuing jurisdiction in the future with regard to
attendant care and may, upon a change of circumstances and proper
application, consider requests by either party to change the foregoing.

2
Such compromise agreements, once accepted by the Department of Labor,
have the same force and effect as if the award was actually adjudicated. Sopko v.
C&R Transfer Co., Inc., 575 N.W.2d 225, 229 (S.D. 1998).

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The Agreement also included various payment and release clauses that have no
bearing on the relevant legal inquiry in this case.

After a few years, the Hammonds began experiencing difficulty in their
marriage. In August 1996, Angela and Jack separated and Angela moved out of the
house.3 Jack found other individuals–normally employees from his roofing
business–to provide the care that Angela was no longer providing.

Shortly thereafter, Hammonds notified Hartford that his wife was no longer
providing his attendant care as the 1993 Agreement anticipated and that he would
prefer the checks be sent directly to him, so that he could select his own care givers.
As he affirmed under oath in his Statement of Material Facts, Hammonds was
amenable at this time to "whatever the insurance company want[ed] him to do" for
attendant care going forward. Hartford App. 131. Hartford reviewed the request and,
in February 1997, agreed to write the checks directly to Hammonds. Hartford
contends that this decision was conditioned upon Hammonds' willingness to provide
documentation of his attendant care. While nothing in the record definitively confirms
the existence of this condition, there appears to be no dispute that Hammonds was
advised that selecting his own attendant care givers would require a large amount of
record keeping and other documentation.

At some point in 1997–perhaps as early as February–Hartford began requesting
documentation from Hammonds to prove he was using the checks for attendant care.
Despite Hammonds' earlier assurances that he would do "whatever the insurance
company want[ed] him to do," in a subsequent July 1999 phone conversation, he told

3
Hammonds cites various dates of separation ranging from 1995 in his divorce
decree to 1997 in his briefs. Because the August 1996 date comes from Hammonds'
deposition taken under oath, we rely on it, though the date is not dispositive of any
issue.

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Hartford he would not provide the documentation because he preferred to pay his
attendants in cash. Hartford never received any documentation.

In October 1998, Hartford began a program called the "large case initiative" or
the "large loss initiative" which administered claims over $1 million. This was an
attempt to produce "an overall savings on loss costs." Hammonds argues that this
program (which he calls the "million dollar list") was the impetus for Hartford's
alleged bad faith handling of his claim.

Having received no documentation concerning Hammonds' attendant care
needs, Hartford initiated an investigation in early 1999. This included requesting
Nurse Frances Nichols to outline Hammonds' attendant care requirements. In doing
so, she contacted Hammonds' attending physician and learned that attendant care was
"not needed." Nurse Nichols, however, felt that six hours of attendant care per day
was appropriate, rather than the twenty-four hour care currently provided under the
1993 Agreement.4 Hartford also hired a private investigator to perform surveillance
on Hammonds to determine how much care Hammonds actually used.

Having received no documentation for two years, and having been told in the
July 1999 telephone conversation that Hammonds did not intend to provide
documentation, Hartford withheld Hammonds' September 1999 attendant care check
until November 1999. Hartford also withheld Hammonds' October 1999 check until
February 2000. The district court found that Hammonds had admitted these delays
were caused by his refusal to provide documentation. Hammonds v. Hartford Fire Ins.
Co., No. 04-5055, Order at 9 (D. S.D. Sept. 14, 2006).

4
Hammonds addresses the need for and amount of attendant care as it supports
his argument that Hartford had no reasonable basis to "terminate" his benefits
altogether. However, as we discuss in Section II.B, under the circumstances of this
case, this argument presents a question of law and not a genuinely disputed material
fact preventing the entry of summary judgment.

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 On October 27, 2000, Hartford petitioned the South Dakota Department of
Labor for review, citing both the provision that gave the Department of Labor
jurisdiction in cases of changed circumstances and the provision that Angela
Hammonds was to be paid for the attendant care. The petition alleged that neither
Angela Hammonds nor anyone else provided full-time attendant care and that full-
time attendant care was not medically necessary. Hartford requested an order
"terminating [Hartford's] obligation to pay the attendant care benefit currently paid to
[Hammonds]."

Hartford later filed an amended petition that was similar to the original petition
but instead sought a determination of the amount of attendant care required by
Hammonds rather than an outright termination of Hartford's obligation to pay the
current benefits specified in the 1993 Agreement. Hammonds moved for summary
judgment, arguing that there was no genuine dispute of material fact over whether
there had been a change of circumstances. The administrative law judge denied
Hammonds' motion for summary judgment, finding, among other things, that the
cessation of Angela's services amounted to a significant change of circumstances. In
January 2003, Hammonds and Hartford entered into a new settlement agreement (the
2003 Agreement) which included a new attendant care plan that provided Hammonds
$3500 per month. This new agreement was also formally approved by the South
Dakota Department of Labor.

Eighteen months later, Hammonds instituted this federal diversity action against
Hartford, alleging seven causes of action. The district court determined that all seven
claims addressed only one central issue–Hartford's bad faith.5 The district court
granted Hartford's motion for summary judgment, finding that Hammonds failed to

5
The interpretation of a pleading is, of course, a question of law for the trial
judge. Lilly v. Grand Trunk W. R.R. Co., 317 U.S. 481, 489-90 (1943).

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establish any denial of required benefits whatsoever or, in the alternative, failed to
identify any action taken by Hartford without reasonable cause. This appeal followed.

II. DISCUSSION

We review de novo the district court's grant of summary judgment. Arp v.
AON/Combined Ins. Co., 300 F.3d 913, 916 (8th Cir. 2002). We will affirm if the
facts viewed in the light most favorable to the nonmoving party–in this case,
Hammonds–demonstrate that there is no genuine issue of material fact, and that the
moving party–Hartford–is entitled to judgment as a matter of law. See Celotex Corp.
v. Catrett, 477 U.S. 317 (1986); Arp, 300 F.3d at 916. Hammonds may not rely solely
on his pleadings, but is "required to create an issue of material fact" concerning
Hartford's alleged bad faith. Arp, 300 F.3d at 917.

Both this circuit, Ulrich v. St. Paul Fire & Marine Insurance Co., 912 F.2d 961,
963 (8th Cir. 1990), and the South Dakota Supreme Court, In re Champion v. United
States Fidelity and Guaranty Co., 399 N.W.2d 320, 322-24 (S.D. 1987), have
recognized a cause of action in tort for bad faith failure to pay an insurance claim.6
South Dakota first recognized the cause of action in Champion, holding that "'for
proof of bad faith, there must be an absence of a reasonable basis for denial of policy
benefits and the knowledge or reckless disregard of [the lack of] a reasonable basis
for denial.'" Id. at 324 (quoting Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1275
(Colo. 1985)).

Integral to the inquiry of whether there was (1) an absence of a reasonable basis
for denial and (2) knowledge or a reckless disregard of the lack of a basis for denial,

6
We apply South Dakota substantive law because this diversity action was
brought in the District of South Dakota, and the district court sitting in diversity
applies the substantive law of the state in which it is located. Erie R.R. Co. v.
Tompkins, 304 U.S. 64 (1938).

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is "whether a claim was properly investigated and whether the results of the
investigation were subjected to a reasonable evaluation and review." Case v. Toshiba
America Info. Sys., Inc. 7 F.3d 771, 773 (8th Cir. 1993) (quotation omitted).
Likewise, "the insurer is still authorized to challenge claims that are fairly debatable."
Id.

In his complaint, Hammonds based his bad faith claim on the fact "[t]hat
Defendant denied benefits to Plaintiff despite the absence of a reasonable basis for
such denial." The 1993 Agreement–a state-approved contract between Hartford and
Hammonds–specified the amount of attendant care benefits that Hammonds would
receive. This Agreement was modified both orally and by practice between 1996 and
1997, after Angela Hammonds quit providing care and Hartford agreed to pay Jack
Hammonds, despite the fact that Angela was no longer providing services as the 1993
Agreement contemplated. Hammonds is not heard to criticize this direct payment
arrangement.

The district court granted summary judgment to Hartford because "[v]iewing
the facts in a light most favorable to plaintiff, it cannot be said that Hartford denied
or withheld benefits." This finding cannot be seriously debated, given that Hammonds
twice admitted in his deposition that "[f]rom the day that the settlement was reached
in 1993, [he had received] all of the attendant care payments that were set out in that
agreement." Hartford App. 33-34. The district court is undoubtedly correct that no
benefits were ultimately denied.

While it is clear that there was no eventual denial of benefits in the sense that
he was deprived of payments, both this court and the South Dakota Supreme Court
have noted that a "'[d]enial of benefits may be inferred from the insurer's failure to
process or pay a claim.'" McDowell v. Citicorp U.S.A., 734 N.W.2d 14, 19 (S.D.
2007) (alteration in original) (quoting Kirchoff v. Am. Cas. Co., 997 F.2d 401, 405
(8th Cir. 1993)). A "failure to process or pay a claim" includes delays in payment, so

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that "if defendants unreasonably delayed payment of [benefits due under the 1993
Agreement] with an absence of a reasonable basis for the delay . . . then such conduct
might support a claim for bad faith." Id.7

At the summary judgment hearing in the district court, Hammonds' attorney
agreed that Hammonds' "bad faith claim essentially goes to the issue of the
methodology used in the settlement claim" and that the "bad faith claim goes to how
the claim was handled." Hartford App. 171. After seeking clarification at oral
argument on appeal, we understand Hammonds to allege that two specific actions
present a genuine issue of material fact on a claim of bad faith: (1) Hartford's
continuous requests for documentation beginning in 1997 and the resulting delays in
payment and (2) Hartford's petition to terminate current benefits in 2000.8 We address
each claim in turn in order to determine if a genuine issue of material fact exists, that
is, whether there was a reasonable basis for the denial and, if not, whether Hartford
knew of or recklessly disregarded the lack of a reasonable basis for its conduct.

7
Despite Hammonds' best attempts to redefine what "bad faith" means in South
Dakota, the South Dakota Supreme Court, exercising its undeniable province to say
what the law in South Dakota is, has already defined the tort of bad faith denial of
insurance claims. Champion could not be more clear: you need a denial, explicit–or
as Kirchoff held–implied; a lack of a reasonable basis for the denial; and knowledge
of (or reckless disregard of) the lack of a reasonable basis. Champion, 399 N.W.2d
at 324. That inquiry and that inquiry alone informs the case before this court.
8
The only other purported bad faith denial of benefits due under the 1993
Agreement involves the denial of payment for a Viagra prescription. When repeatedly
pressed at oral argument to identify the actions constituting bad faith, Hammonds'
counsel did not mention Viagra. Regardless, the question of whether Viagra was
covered under the 1993 Agreement as "future care" involves the interpretation of the
contract and is thus a question of law, not a genuinely disputed question of material
fact.

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 A. The Request for Documentation

Hammonds asserts that Hartford's requests for documentation and the resulting
delays in payment were done in bad faith in order to leverage a superior bargaining
position in the relationship. Hammonds suggests that the requests for documentation,
along with all other alleged bad faith actions, were part of an extensive, nefarious
scheme revolving around the 1998 "large loss initiative."9

Hammonds argues that by requesting documentation and delaying payments
when documentation was not received, Hartford acted in bad faith because "Hartford
admitted it had no right to require documentation." Hartford App. 131. However, the
Champion tort inquiry does not concern itself with a dispute over what "rights"
Hartford had under the parties' contractual agreements. This question, which is a
matter of contract interpretation–determining the rights and obligations arising from
the contract–presents a question of law, rather than a question of fact. Simeone v.
First Bank Nat'l Ass'n, 971 F.2d 103, 106 (8th Cir. 1992).

9
Hammonds has papered the record with documents illustrating bad faith type
acts throughout the entire relationship of the parties, arguing that this general
ambience of unfairness on the part of Hartford violated an implied duty of good faith
and fair dealing. There is no doubt that every contract, including the 1993 Agreement,
carries with it an implied duty of good faith. Garrett v. BankWest, Inc., 459 N.W.2d
833, 841 (S.D. 1990). There is also no doubt that the implied duty "is not a repository
of limitless duties and obligations" akin to "an amorphous companion contract with
latent provisions to stand at odds with or in modification of the express language of
the parties' agreement." Nygaard v. Sioux Valley Hosp. & Health Sys., 731 N.W.2d
184, 194 (S.D. 2007) (quotations omitted). Where the express language of the
contract addresses the matter at issue, there is no need to turn to the implied covenant.
Id. Here, the payment or denial of benefits was expressly provided for in the 1993
Agreement, and any purported breach of contract is actionable through contract
interpretation by a tribunal with jurisdiction or through the bad faith tort recognized
in Champion, making any reference to a free- standing implied duty of good faith
irrelevant.

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 On this question of law, we will assume that the parties agreed to what
Hammonds said they agreed to, namely, that Hartford would continue to pay the
amount agreed upon in the 1993 Agreement directly to Hammonds and that there was
no requirement that Hammonds provide documentation that he was using the money
for attendant care.10 Thus, the focus of our investigation is whether Hartford acted in
bad faith by delaying the transmittal of two payments in retaliation for Hammonds
failure to provide documentation, despite the fact that he was not required to provide
documentation.

Even assuming that Hammonds could successfully prove this tort to a jury's
satisfaction, his claim still suffers a fatal defect. As with any other tort, in addition to
proving that Hartford acted in bad faith, Hammonds also must prove that he "suffered
a compensable loss as a result" of the behavior. McDowell, 734 N.W.2d at 19.
McDowell, like Hammonds, entered into a settlement agreement with an insurance
company, which agreement required that the company pay for necessary medical bills.
She sued the insurer for failure to pay three bills in a timely fashion. Id. The South
Dakota Supreme Court noted that McDowell could not prove loss from the delays, as
"she ma[de] no claim that during the time these three bills were unpaid her medical
providers refused to continue treating her." Id. at 21.

Like McDowell, Hammonds has failed to allege or show that he suffered any
compensable loss of services or attendant care as a result of the delays in payment.
Indeed, he admitted, in a sworn deposition, that at the time of the filing of this action,
all monies owed to him under the 1993 Agreement and the later agreement to pay him
directly had been paid. Hartford App. 33-34. The record only reflects that a certain
number of days passed between the time Hammonds was to receive payment and the
time he actually did receive the payment. There is no proof that Hammonds suffered

10
Hammonds admitted in his deposition that he was not using the full amount
of the monthly payments for attendant care. Hartford App. 102.

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any "loss" as a result of the delay. Thus, the grant of summary judgment on this issue
was proper. McDowell, 734 N.W.2d at 21.

B. Hartford's 2000 Petition

As an initial matter, Hammonds has been unclear as to the gravamen of his bad
faith allegations based on Hartford's petitions to the South Dakota Department of
Labor for either termination or a new determination of Hammonds' attendant care
benefits. To some extent, the parties argue over whether Hartford's initial filing was
actually a petition to terminate all benefits, forever, or a petition to terminate "current"
benefits with revised benefits to follow. This, however, cannot present a material
issue of fact because the interpretation of a pleading is a function that rests with a
court as a determination of law, rather than with a jury. Lilly v. Grand Trunk W. R.R.
Co., 317 U.S. 481, 489-90 (1943).

Assuming, however, that Hammonds means to allege that the filing of a
petition–whatever its meaning–was an act of bad faith, we must again look to
Champion. We will also assume that the filing of a petition to terminate is close
enough to a "failure to process or pay a claim" to be considered a denial of benefits,
though we are doubtful that it can.

We then ask whether there was a reasonable basis for the denial and whether
Hartford knew of or recklessly disregarded the lack of a reasonable basis. The
October 2000 petition sought "an Order terminating Insurer's obligation to pay the
attendant care benefit currently paid" to Hammonds. This was based on the fact that
Angela Hammonds no longer provided the care, that no one provided full-time care,
and that full-time care was not medically necessary.

Addressing only the strongest of reasonable bases upon which Hartford could
have relied, we note first that the 1993 Agreement specifically allowed Hartford to

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take this action when there was a change in circumstances. The 1993 Agreement also
specifically conditioned the continuation of payments "for so long as Angela
Hammonds continues to provide full-time attendant care to Jack Hammonds."
Angela's cessation of attendant care was clearly a change of circumstances that gave
Hartford a reasonable basis for filing the petition.

In addition to Angela's departure, Hartford also conducted an investigation of
Hammonds' situation to support its belief of a change in circumstances. As
mentioned, Nurse Frances Nichols outlined her view of the attendant care needs of
Hammonds, which included an admission by Hammonds' doctor that he needed no
attendant care at all. An additional investigation confirmed that Hammonds might not
have been using full-time attendant care.

In conclusion, Hartford had multiple reasonable bases for moving to terminate
the current benefits paid to Hammonds. We need not find that Hartford's conclusion
about Hammonds' situation was correct. We need only to find that the issue was fairly
debatable. Case, 7 F.3d at 773 (citing Savio, 706 P.2d at 1275). In light of all of the
undisputed facts, we conclude that Hartford did not act in bad faith under South
Dakota law.

III. CONCLUSION

We affirm the judgment of the district court.

BYE, Circuit Judge, dissenting.

I respectfully dissent. Our responsibility in reviewing the grant of summary
judgment is to look at the facts in the light most favorable to the non-moving party.
We are obligated to consider the non-movant's version of the facts and all of its
reasonable inferences. Sadly, the Court fails to undertake this fundamental task.

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Much of the Court's opinion reads like a closing argument Hartford may have given
after trial – construing facts in Hartford's favor and wholly ignoring facts which favor
Hammonds. In affirming the district court because "Hammonds cannot establish loss
arising from the only basis for bad faith that he might be able to prove," the Court
ignores the "loss" Hammonds actually claimed in these proceedings, and substitutes
its own view of the alleged loss. I therefore feel compelled to set forth Hammonds's
side of the case so as to allow the readers of this decision to decide for themselves
whether a reasonable jury could find Hartford acted in bad faith in handling
Hammonds's claim.

I

The level of severity of Hammonds's injuries is highly relevant to his claim of
bad faith, and yet the Court says nothing more than he "suffered serious injuries." In
fact, Jack Hammonds is an incomplete quadriplegic who uses a wheelchair.
Incomplete quadriplegia is paralysis that affects all four of a person's limbs, even
though there is some preservation of sensory or motor function below the level of
lesion. In Hammonds's case, his work injury left him unable to use his left limbs, and
limited the use of his right limbs. Appellee's App. 11.

In addition, the Court fails to disclose salient facts contained in a February 1997
report prepared for Hartford by Intracorp regarding the attendant care Hammonds
requires because of his quadriplegic condition:

[H]is personal needs . . . require 24 hour monitoring and assisting the
patient with activities of daily living, preparing his food, washing and
ironing his clothes and bed linen[.]

...

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 Patient needs assistance to get in and out of bed, dress and undress
himself, shave, brush teeth with set up, comb his hair and other related
personal hygiene. He needs assistance in bathing or showering. He has
a tub bench. The patient must have enemas every other day for his
bowel program and assistance is needed. He has a special commode seat
that makes it easy to give the enema while he is sitting on the commode.
He needs assistance in managing his bowel program.

The patient is catheterized 3-4 times a day, more often if he needs to be.
He has some feeling in his bladder and can tell if his bladder is full. He
tries at times to self catheterize himself with assistance, but his sterile
technique is not perfected and he is prone to develop bladder infections.
He uses a special condom/disposable catheterization set.

During the week days, his assistant drives him to roofing job sites.11 He
returns home for lunch which is prepared for him, as are all his meals.
His meals are served with a special set up so that he can do as much as
possible for himself.

The patient requires range of motion exercises to be done once a day.
The patient cannot open his medication bottles and needs someone to
give him his medicine.

Appellant's App. 12, 14 (emphasis added).

While Hammonds minimized his own need for attendant care, the professional
opinions set forth in the Intracorp report must be viewed in Hammonds's favor. This
evidence indicates the change of circumstance which occurred when Hammonds's
wife, Angela, quit providing attendant care was not about whether Hartford could
terminate attendant care, but only about how the change of circumstance would affect
the extent to which Hartford was required to satisfy its continuing obligation to
provide attendant care. Hartford acknowledged as much, another fact favorable to

11
Despite his physical limitations, Hammonds works as a roofing contractor,
supervising others.

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Hammond which the Court ignores. Hartford supervisor Lynn McDonald testified as
follows:

Q. And a quadriplegic, your understanding of a person who is
quadriplegic, what does that mean?

A. They sustained a spinal cord injury, cervical, and it has resulted in
affecting their extremities, upper and lower.

Q. That's one of the catastrophic injuries, right, listed in the manual?

A. Yes.

Q. I mean, it is a catastrophic injury?

A. Yes.

Q. Have you ever in your life known a quadriplegic who did not need
some attendant care?

A. No.

Q. Can you even imagine a situation where a quadriplegic would not
need some attendant care?

A. No.

Id. at 39.

Moreover, the change of circumstance occasioned when Angela quit providing
attendant care inured not to Hartford's benefit, but to its detriment. The 1993
Agreement provided Hammonds would be paid future attendant care at the reduced
rate of $6 per hour, or $144 per day, for Angela's care. By contrast, professional
attendant care would have cost $273.40 per day. Id. at 11. Over the course of

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Hammonds's expected lifetime, the reduced rate paid by the insurance company under
the 1993 Agreement would save it $1,888,840, id., or close to $47,000 per year.

Faced with this economically unfavorable change of circumstances, Hartford
understandably chose not to petition the South Dakota Department of Labor to modify
the 1993 Agreement. Instead, Hartford initially chose to pay Hammonds directly for
attendant care under the same terms required by the 1993 Agreement, leaving him
responsible for finding his own caregivers. As a consequence, Hartford continued to
save a substantial amount of money for its attendant care obligations.

These facts, again not considered by the Court, are critical because they support
the premise of Hammonds's bad faith claim. Hammonds claims Hartford deliberately
engaged in a course of conduct aimed at turning this detrimental change of
circumstance to its favor. Hartford intended to make life difficult for Hammonds and
weaken his resolve so he would accept less than full value for his future attendant care
when Hartford finally discussed settlement with him. Hammonds further claims
Hartford acted with its own economic self interest in mind when it engaged in this
course of conduct because Hammonds's file was on the "million-dollar list," a
tabulation of files involving catastrophically injured claimants with a potential
exposure exceeding $1 million. Hartford planned to pursue "aggressive" settlement
tactics in order to reduce its exposure in files on its "million-dollar list." Id. at 54.

The following is a discussion of further evidence the Court fails to discuss or
address, which supports Hammonds's theory.

Hartford's Claim Handling Manual directs its adjusters to "move the file to a
scenario where, the claimant and his/her counsel, want to settle the claim. You should
evaluate all the possible mitigation factors available to create the necessary leverage
for a positive settlement result." Appellant's App. 57 (emphasis added). This

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directive, while not malevolent in and of itself, was used to justify conduct which a
reasonable jury could find evinced bad faith in Hammonds's case.

After Hammonds was placed on Hartford's "million-dollar list," Hartford's log
for Hammonds's file contains the following entry dated June 9, 1999: "Essentially we
are looking at creating a controversy12 over the attendant care issue prior to entering
into negotiations." Id. at 29 (emphasis added)

The very next day, Hammonds's file was reassigned to an adjuster with these
instructions:

I am sending to you FYI as this is a SD case headed your way that needs
some immediate attention. It is on the "$1 million" dollar settlement list
for 1999 WC LOB Goals. . . . Mary Herrmann was to address the
attendant care, leverage off the "controversy created," involve Dave
Korch, and proceed with settlement negotiations. She initiated some
steps in the right direction, but has now left the company. Our
experience has shown these large cases take much time and attention to
move. With the attendant care issue, now is the perfect time for HIG
to take action. . . . What we need is a Handler to pick up the case and
aggressively evaluate for settlement . . . My records show HIG is paying
$4,300 monthly ($51,600 year!) on attendant care alone. Dave Korch
notes $36k year. This is substantial dollars and now LCP spoke to
attendant Dr who say figure should be $0?? How do we stop the
bleeding, so to speak?

Id. at 59 (emphasis added).

12
Hartford's Claim Manual merely instructs adjusters to create "leverage" for a
positive settlement result. While using leverage to settle may not be inappropriate in
and of itself, a Hartford representative admitted it would be "inappropriate" to
"purposely create a controversy just for purposes of obtaining leverage over one of
the claimants you were dealing with." Ronald Banning Deposition at 111-12
(Appellant's App. 23) (emphasis added).

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 An internal Hartford memo dated July 26, 1999, contains this discussion about
Hammonds's file:

The very best time to settle a case is when there is a
controversy/conflict. We are headed in that direction on this file once
we have built a defense re: the attendant care. "Give the clmt a reason
to want to settle" is a phrase I often hear. At the present, clmt is very
happy collecting his WC. No need to show receipts, identify tax ID of
attendant provider, money is paid to clmt directly, etc. Clmt needs to be
told we plan to change this easy ride and begin aggressively managing
this file and expenditures. Our Goal should be to posture this claim
before the clmt in such a way that he becomes aware of the down side
he faces (ie: cutting attendant care drastically) to the point where he
finds it more palatable to settle with The Hartford . . . than to leave the
case open and be subject to Hartford's scrutiny of his activities and
benefits.

Id. at 61 (emphasis added).

On August 23, 1999, Hartford's "large case negotiator," David Korch, inquired
about the status of Hammonds's file: "Where do we stand regarding the controversy
that we could leverage off of, i.e., the need for attendant care? Please advise." Id. at
80 (emphasis added).

Significantly, just one month later, Hartford withheld payment of Hammonds's
September 1999 attendant care payment for over two months. Hartford also withheld
payment of Hammonds's October 1999 attendant care payment for an even longer
period of time, until February 2000. Hartford did not resume regular attendant care
payments until April 2000, disrupting Hammonds's receipt of regular payments for
over half a year. The record indicates Hartford knew a delay of months in attendant
care payments could be stressful and difficult for a claimant, as Hartford
representative Ronald Banning admitted in his deposition:

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 Q. And did you find that in your various experiences with The
Hartford that when you're dealing with a claimant in a workers'
compensation case, oftentimes those payments can be their only
stream of income?

A. That's right.

Q. And as a result, a delay of weeks can sometimes be very
significant to a claimant?

A. Yes.

Q. And a delay of months to a claimant can sometimes be very
stressful or very difficult to address financially?

A. Yes.

Q. And that's why The Hartford told you that payments should be
made to a claimant on a timely fashion?

A. Well, not – yes. Not only Hartford, but as the state statute as well.

Id. at 17.

Hammonds contends these payment delays were part of Hartford's plan to
"create a controversy" regarding attendant care payments in order to "leverage off" the
controversy and "posture" the claim to send a message his "easy ride" was over before
Hartford proceeded with settlement negotiations. Certainly, the timing of the payment
delays, occurring shortly after Hartford representatives made damaging statements in
internal documents, supports this claim and raises a genuine issue of material fact for
a jury to resolve.

The Court improperly resolves the payment delay issue against Hammonds by
viewing the facts in the light most favorable to Hartford. The Court accepts and
adopts Hartford's argument the delay in payments was justified because Hammonds

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did not provide documentation of his attendant care. But the 1993 Agreement did not
obligate Hammonds to provide documentation of his attendant care as a condition of
receiving payments. Furthermore, the record indicates Hartford knew it was
inappropriate to withhold payments on this basis. In February 1999, Hartford's
attorney, Richard Travis, specifically advised Hartford that withholding payments due
to lack of documentation was contrary to the 1993 Agreement and improper:

Q. Then in '99 on February 4th, the claims file indicates you gave
them the opinion that to discontinue benefits based on his not
providing documentation would be improper?

A. I told them not to discontinue benefits at that time, that's correct.

...

Q. It appears that the adjuster in this case was not issuing attending
care because documentation had not been provided. Correct?

...

A. That's what the log reflects.

Q. The log reflects that they are not paying him his attending care
based on the fact that he isn't providing documentation; correct?
That's what the log indicates?

A. That's a fair read of that.

Q. That would have been contrary to the opinion you gave them; is
that fair?

A. That would be inconsistent and contrary to that conversation of
February 4, 1999.

Id. at 4.

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 To make matters worse, in order to justify resolving this disputed fact in
Hartford's favor rather than Hammonds's favor, the Court misconstrues the evidence
in the record. According to the Court, Hammonds admitted the payment delays "were
caused by his refusal to provide documentation." Ante at 4. In fact, this alleged
admission is nowhere to be found in the evidence submitted in the record on appeal.
To the contrary, when Hartford included a claim in its Statement of Material Facts in
Support of its Motion for Summary Judgment that "[d]espite Plaintiff's failure to
provide the necessary documentation, Hartford nonetheless continued to comply with
the 1993 Agreement," Hammonds's objected and stated in his response : "The records
produced in this case document numerous month long delays in paying Hammonds.
(Ex. 13: Todd Dep. p. 77:5-9). These delays were part of the creation of a
controversy, as well as taking away Plaintiff's 'easy ride.' Such delays, as Hartford
admitted, were stressful and brought about financial difficulties to Hammonds. (Ex.
4: Banning Dep. p. 13:3-9)." Appellee's App. 144.

To support its conclusion Hammonds admitted the payment delays were
attributable to his refusal to provide documentation, the Court cites the order granting
summary judgment, indicating the district court "found" Hammonds admitted to being
the cause of the delays. Ante at 4. This "finding" by the district court is not, however,
supported by the record. District courts should not make findings on disputed issues
of fact in summary judgment proceedings, they should view the evidence in the light
most favorable to the non-moving party. When a district court grants summary
judgment on purportedly undisputed facts, our job as an appellate court is to determine
"whether those facts are indeed undisputed." Osborn v. United States, 918 F.2d 724,
730 (8th Cir. 1990). When a district court relies "on its own determination of disputed
factual issues, the appellate court must then review those findings under the 'clearly
erroneous' standard," id., not rely upon and thereby perpetuate the district court's error.
The district court clearly erred in "finding" Hammonds admitted to being the cause of
the delays because such a finding is not supported by the record.

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 In addition, the Court concludes it was reasonable for Hartford to request
documentation (and thus reasonable to withhold and delay payments) because "[a]s
he affirmed under oath in his Statement of Material Facts, Hammonds was amenable
. . . to 'whatever the insurance company want[ed] him to do' for attendant care going
forward." Ante at 3. The Court ignores, however, the fact that Hammonds's
Statement of Material Facts specifically refers to the source of the statement as the
"IntraCorp Report attached as Ex. 3." Appellee's App. 131. A review of the IntraCorp
Report reveals that Hammonds never represented to Hartford he would do whatever
the insurance company wanted him to do. Gary Eberhardt – not Hammonds – made
the statement in the IntraCorp when discussing Hammonds's desire to hire his own
personal caregivers, rather than having Hartford pay an outside agency for attendant
care. Specifically, Eberhardt states Hammonds "is willing to let an agency handle the
hiring of his personal aides but would prefer to do it himself. He said that it would be
okay with him, whatever the insurance company wants to do." Appellant's App. 13.

Thus, the statement the Court relies upon is merely Eberhardt's paraphrase of
what Hammonds actually said. More importantly, the context of the paraphrased
statement is clearly limited to the choice between: 1) allowing an outside agency to
handle the hiring of the attendant caregivers, or 2) allowing Hammonds to hire
attendant caregivers directly. Using this paraphrased statement of Eberhardt, the
Court creates the impression Hammonds, specifically in the context of requiring
documentation for attendant care, directly assured Hartford he would "do whatever
the insurance company wants to do." Nothing in the record – not even the fact that
Hammonds adopted the statement in his Statement of Material Facts – suggests any
connection between the statement and the provision of documentation; the Court
simply creates such a connection out of whole cloth.

In fact, the record indicates the parties dispute the extent to which
documentation for attendant care was discussed between Hammonds and Hartford.
In its Statement of Material Facts in Support of its Motion for Summary Judgment,

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Hartford claims to have advised Hammonds "he would be required to support the
benefits with evidence of his expenses" from February 1997 going forward.
Appellee's App. 15. In his response, Hammonds objected to that statement and
indicated:

It is undisputed that it was Hartford's decision to pay Hammonds directly
to continue being the beneficiary of a large annual savings and make him
find his own caregivers. . . . Regarding documentation, Hartford may
have started asking for it, but the testimony of its own representatives
clearly dictates, as does the advice of its attorney, it had no basis for
doing so.

Id. at 142.

Hammonds also disputes the contents of the July 1999 phone conversation
between himself and a Hartford representative. According to Hartford's Statement of
Material Facts, during the phone call Hammonds "refused to provide any
documentation for his attendant care, stating that he preferred to pay his attendants in
cash so that the money would not be reported as taxable income to them." Id. at 15.
In his response, Hammonds disputed that characterization of the phone call, indicating
instead he "admits that he told Hartford that the contract that he signed with Hartford
in 1993 did not require him to produce documentation because the amount negotiated
in 1993 was a negotiated, and drastically reduced, amount." Id. at 144.

Instead of construing this disputed fact in Hammonds's favor, as the Court is
required to do for purposes of summary judgment, the Court's opinion adopts almost
verbatim Hartford's version of the dispute. Ante at 3-4 ("[I]n a subsequent July 1999
phone conversation, he told Hartford he would not provide the documentation because
he preferred to pay his attendants in cash.").

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 The Court also ignores Hammonds's claim about Hartford engaging in low-ball
settlement tactics when it finally discussed settlement of the attendant care issue with
him. We previously acknowledged, in a case involving a bad faith failure to pay a
workers' compensation claim under South Dakota law, an insurance company acts in
bad faith by extending a settlement offer well below the actual value of a claim, i.e.,
engages in low-ball settlement tactics. See Arp v. AON/Combined Ins. Co., 300 F.3d
913, 916 n.4, 918-19 (8th Cir. 2002) (reversing the summary judgment dismissal of
a bad faith claim after concluding, in part, the insurer's offer to settle a claim for
$12,151.16 was "further evidence of bad faith" where the insurer had "concluded that
James would require a payment of approximately $1,900,000.00 in disability benefits
over the course of his lifetime[,]" i.e., set the reserve on the file for that amount); see
also Kirchoff v. Am. Cas. Co., 997 F.2d 401, 405 (8th Cir. 1993) (affirming a jury's
finding that an insurer's offer of $8,000 was made in bad faith where the claim was
valued at $300,000). Hammonds contends the facts of his case are close enough to
those involved in Arp to create a submissible issue for a jury as to whether Hartford
engaged in bad faith when it offered him $400,000 for a global settlement of his case,
even though Hartford's reserve on his file was $3,000,000.

In Arp, the $12,151.16 offer represented a 99% reduction in the total estimated
value of the case, i.e., the insurer's reserve for the file. In Kirchoff, the $8,000 offer
represented a 97% reduction in the estimated value of the case. Here, the $400,000
offer represents an 86% reduction in the estimated value of the case when compared
to Hartford's reserve on the file. Thus, while the amount of the offer is not as
egregious as the amounts involved in Arp and Kirchoff, the question still remains
whether Hartford's low offer creates a submissible issue of fact for a jury to determine
whether Hartford engaged in bad faith settlement tactics. While this case may fall on
the borderline in that regard, it is nevertheless preferable to allow a jury to determine
the issue, rather than a judge. While my colleagues on the panel may disagree with
me in that regard, what I find most disappointing is the Court's failure to even
acknowledge and address this issue in its opinion.

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 When I consider this record in its entirety,13 and actually undertake the task of
viewing the evidence in the light most favorable to Hammonds, it is clear to me
summary judgment was inappropriate. Not only should this case be submitted to a
jury for resolution, it appears Hammonds has a very strong case. Our court has clearly
usurped the role of the jury in this case.

13
Additional evidence offered by Hammonds in support of his bad faith claim,
which I have not even discussed, includes the following:
1) Hartford refused to pay for Hammonds's prescription for Viagra, even though
his impotency was related to his quadriplegia and Hartford's internal documents, as
well as deposition testimony from its representatives, confirm it knew it had no
medical basis for refusing to pay for the prescription (Appellant's App. 22, 26, 82);
2) Hartford sent a private investigator into Hammonds's home under the false
pretenses of wanting to buy a vehicle in order to conduct surveillance;
3) Hartford threatened Hammonds with Medicare and Social Security fraud for
allegedly taking "overpayments" for the amounts Hartford was obligated to pay
Hammonds pursuant to the 1993 Agreement, even though there was evidence Hartford
had been warned by an attorney that it "had better not threaten fraud complaint to Soc
Sec Ad to enhance its negotiating position." (Id. at 60); and
4) the Hartford attorney who flatly denied in his deposition having ever seen the
"million-dollar" list (id. at 78), is specifically identified in Hartford internal documents
as the "lead" person on the project – distributing the list to others via email, and giving
instructions on the use of the spreadsheet which generated the list (id. at 48-50).

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 II

The Court accuses Hammonds of attempting to "redefine" what bad faith means
in South Dakota, ante at 8 n.7, and then concludes Hammonds failed to prove bad
faith because he did not suffer a compensable loss. To the contrary, Hammonds's
claim satisfies the elements of a bad faith claim under South Dakota law, and it is the
Court which "redefines" his alleged loss in order to justify affirming the grant of
summary judgment.

I have no quarrel with the Court's premise South Dakota requires a plaintiff to
show a denial of benefits in a workers compensation bad faith claim. See In re
Champion v. United States Fid. & Guar. Co., 399 N.W.2d 320, 324 (S.D. 1987).
Citing McDowell v. Citicorp U.S.A., 734 N.W.2d 14, 19 (S.D. 2007), the Court
further acknowledges a denial of benefits may be inferred from the failure to process
or pay a claim, and also acknowledges South Dakota equates unreasonable delays in
the payment of benefits with the failure to process or pay a claim. Ante at 7-8. The
Court even acknowledges there were delays in the payment of benefits in this case, but
nevertheless concludes Hammonds suffered no compensable loss because he
ultimately received the delayed payments. Id. at 10-11.

Setting aside for a moment the fact there is a material dispute about whether
Hartford's payment delays were reasonable (and thus the unreasonable delay itself
would be the compensable loss Hammonds suffered), the quarrel I have with the
Court's opinion is its absolute failure to address the actual loss claimed by Hammonds.
Hammonds contends his loss is the difference between the full value of his future
attendant care benefits and the reduced value he accepted because Hartford engaged
in bad faith settlement tactics. Hammonds relies upon Hartford's payment delays as
just one of the many bad faith tactics Hartford engaged in prior to negotiating a
settlement with him.

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 The loss at issue satisfies Champion's requirement that there be a denial of
benefits. The denied benefits are the portion of Hammonds's future attendant care
benefits Hartford failed to pay when it allegedly coerced Hammonds into accepting
a reduced settlement by engaging in bad faith tactics. South Dakota clearly recognizes
a bad faith claim can arise during the settlement process. See Champion, 399 N.W.2d
at 323 ("The Compensation Act should not be a 'shield' which will insulate those who
would engage in intentional wrongdoing in the settlement and investigation of
workers' claims.") (quoting Hayes v. Aetna Fire Underwriters, 609 P.2d 257, 262
(Mont. 1980)); see also Hein v. Acuity, 731 N.W.2d 231, 235 (S.D. 2007) ("A bad
faith claim related to workers' compensation . . . exists when an insurer breaches its
duty to deal in good faith and fairly when processing a workers' compensation
claim.").

In Kirchoff, and again in Arp, the Eighth Circuit specifically recognized a
denial of benefits can be inferred from the manner in which an insurer conducts itself
during settlement negotiations. In Kirchoff, the insurer, CNA, claimed it had not
denied benefits because it made a settlement offer, albeit a low one. 997 F.2d at 405.
We rejected CNA's argument, stating "[b]ut Kirchoff testified that she believed CNA's
offer to pay only its estimated defense costs was effectively a denial of her claim.
While that might not be the conclusion one would expect of an experienced insurance
claims representative such as Kirchoff, it could be the conclusion of a reasonable
person." Id. The Court further concluded "the jury easily could have found CNA had
no reasonable basis for refusing to settle with Kirchoff . . . CNA had a duty to
negotiate settlement in good faith, and the jury's conclusion that CNA's offer of $8000
was not in good faith is sufficiently supported by the evidence." Id.

Similarly, in Arp, we relied upon Kirchoff for the proposition a denial of
benefits can be inferred from bad faith settlement tactics. See Arp, 300 F.3d at 918-19.
Thus, the Court's conclusion Hammonds did not suffer a compensable loss as a result
of Hartford's bad faith settlement tactics conflicts with the Eighth Circuit's previous

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interpretation of the elements of a bad faith claim under South Dakota law.
Furthermore, it matters not that the plaintiffs in Kirchoff and Arp refused the insurers'
low-ball offers, while Hammonds accepted Hartford's. Under South Dakota law,
Hartford could not require Hammonds to waive his potential bad faith claim when it
settled the underlying claim for future attendant care benefits. See Athey v. Farmers
Ins. Exch., 234 F.3d 357, 362 (8th Cir. 2000) ("Under South Dakota law, an insurer's
attempt to condition the settlement of a breach of contract claim on the release of a
bad faith claim may be used as evidence of bad faith.").

I am at a loss to understand the Court's failure to address the actual loss alleged
by Hammonds. Notably, even the district court was not as myopic as our Court in
describing Hammonds's alleged loss, and understood Hammonds claimed the benefits
Hartford denied him were reflected by the reduced value of the final settlement. See
Hammonds v. Hartford Fire Ins. Co., No. 04-5055, Order at 11 (D. S.D. Sept. 14,
2006) ("Hammonds further alleges that under such pretenses, Hartford coerced him
into reducing the amount of benefits to be paid to him."); see also id. at 14
("Hammonds argues that under this [million dollar] initiative, Hartford 'created'
leverage to force him to settle.").

In addition, Hammonds's appellate brief contains numerous references
reflecting the loss being claimed. See, e.g., Appellant's Brief at i ("Ultimately,
Hartford intimidated Hammonds into settling for a substantially reduced amount.");
id. at 28 ("Instead of receiving $4,320.00 per month pursuant to the 1993 Agreement,
Hammonds agreed to accept $ 3,500.00 in the 2003 Agreement, a savings of
$369,000.00 over Hammond's (sic) life expectancy. It was a savings to Hartford of
over $2,400,000.00 if, instead of the 1993 Agreement, the cost of 24 hour 7 day a
week professional care is used as the basis for comparison."); id. at 37 ("In addition,
the 'structured settlement' offered by Hartford in this case was a low ball offer of
$400,000 – an offer that Hartford's Korch admitted constituted less than half of the
attendant care currently provided, and nothing for future medical care of this
quadriplegic.").

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 In sum, the loss being claimed by Hammonds was clear to everyone involved
in this proceeding, except, apparently, the Court. As a result, I can only surmise the
Court's need to "redefine" the alleged loss stemmed from its inability to justify
affirming the grant of summary judgment if it had chosen to address the actual loss
claimed by Hammond.

III

I have not yet discussed what may be the most compelling reason why summary
judgment was inappropriate in this case, and once again, it involves an issue which the
Court ignores. The primary ground upon which the district court granted summary
judgment was its conclusion Hammonds waived any potential bad faith claims he may
have had against Hartford when he signed the 2003 Agreement. The Court chose to
ignore this issue in its opinion, focusing solely on the district court's alternative
ground for granting summary judgment, i.e., even if the claim was not waived,
Hammonds failed to present a submissible case of bad faith. Hartford's contention
that Hammonds waived his bad faith claim is significant because the very contention
is evidence of bad faith under South Dakota law. An explanation follows.

The 1993 Agreement included a broad release under which Hammonds agreed
to release Hartford

from any and all additional liability for damages arising out [of] the work
related injury of October 6, 1990, whether in the form of workmen's
compensation benefits, bad faith handling of workmen compensation
claims, or otherwise; it being intended by Hammonds that . . . Hartford's
future liabilities and responsibilities be limited to those set forth above.

Appellant's App. 90 (emphasis added).

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 The 2003 Agreement generally reincorporated this provision of the 1993
Agreement in a clause which stated "[e]xcept as modified herein, the parties reaffirm
and incorporate all terms and conditions of the [1993] Settlement Agreement."
Addendum 23.

Throughout this litigation, both in the district court and before our court,
Hartford's primary argument for dismissing Hammonds's bad faith claim is the
contention he released Hartford from the bad faith claim pursuant to the 2003
Agreement's reincorporation of the bad-faith release from the 1993 Agreement.
Hartford's contention is absurd and simply cannot stand.

Between 1993 and 2003, the South Dakota Supreme Court decided two cases
which, when read together, conclusively demonstrate any release signed in 2003
which purports to cover the intentional tort of bad faith is invalid. See Isaac v. State
Farm Mut. Auto. Ins. Co., 522 N.W.2d 752, 760 (S.D. 1994) ("[T]he tort of bad faith
is an intentional tort"); Holzer v. Dakota Speedway, Inc., 610 N.W.2d 787, 793 (S.D.
2000) ("[R]eleases that are construed to cover . . . intentional torts are not valid and
are against public policy." ); see also S.D. Codified Laws § 53-9-3 ("All contracts
which have for their object, directly or indirectly, to exempt anyone from
responsibility for his own fraud or willful injury to the person or property of another
or from violation of law whether willful or negligent, are against the policy of the
law."). Thus, while it may have been permissible to ask Hammonds to release his bad
faith claims in 1993, it clearly was not permissible to do so in 2003.

More significantly, under South Dakota law, an insurer's attempt to condition
settlement of a claim on the release of a bad faith claim is itself evidence of bad faith.
See Isaac, 522 N.W.2d at 763; see also Athey, 234 F.3d at 362 ("Under South Dakota
law, an insurer's attempt to condition the settlement of a breach of contract claim on
the release of a bad faith claim may be used as evidence of bad faith.").

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 Thus, the mere fact Hartford reincorporated the bad-faith release of the 1993
Agreement into the 2003 Agreement, standing alone, provides Hammonds with
evidence which both this court and the South Dakota Supreme Court have recognized
as evidence of bad faith. The fact that Hartford has continued to insist, both in the
district court and in proceedings before our court, that it had a right to request
Hammonds to waive his bad faith claim, and did so in the 2003 Agreement, only
makes Hartford's bad faith conduct all the more egregious. As a consequence, I find
it incomprehensible for the Court nonetheless to ignore this issue in concluding
summary judgment was appropriate.

IV

For our system of jurisprudence to work properly its standards must be applied
even-handedly in all cases. An appellate court must not cherry-pick the facts in a
summary judgment case, but must adhere to the rule of viewing the facts in the light
most favorable to the non-moving party. Nor can an appellate court misconstrue the
record in order to justify an outcome, or completely ignore issues raised by the
appellant which may be dispositive. I cannot allow myself to stand idly by while the
Court glosses over the record so as to achieve its desired result. I therefore am
respectfully compelled to dissent.
______________________________

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