#27794-r-JMK
2017 S.D. 41
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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THE STANDARD FIRE INSURANCE
COMPANY, A SUBSIDIARY OF
TRAVELERS INSURANCE, Plaintiff and Appellant,
v.
CONTINENTAL RESOURCES, INC., Defendant and Appellee.
****
APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA
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THE HONORABLE MARK BARNETT
Judge
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THOMAS J. VON WALD of
Boyce Law Firm, LLP
Sioux Falls, South Dakota
Attorneys for plaintiff
and appellant.
MICHAEL F. SHAW of
May, Adam, Gerdes & Thompson LLP
Pierre, South Dakota Attorneys for defendant
and appellee.
****
CONSIDERED ON BRIEFS
NOVEMBER 7, 2016
OPINION FILED 06/28/17
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KERN, Justice
[¶1.] Standard Fire Insurance Co. appeals from a circuit court order
dismissing its case against Continental Resources Inc. Standard Fire sued
Continental Resources for reimbursement or in the alternative subrogation of
workers’ compensation benefits paid to an employee between 2009 and 2013. The
circuit court dismissed the case pursuant to SDCL 15-6-12(b)(5), finding that the
terms of a settlement agreement barred further litigation and that res judicata
applied. We reverse and remand.
Facts and Procedural History
[¶2.] Dale Denzin sustained a work-related injury while employed at one of
Koch Industries’ oilfields. The accident occurred on March 23, 1983, and crushed
Denzin’s pelvis. Standard Fire, a subsidiary of Travelers Insurance, provided Koch
Industries workers’ compensation insurance and paid Denzin temporary total
disability and permanent partial disability (PPD) benefits. Denzin resumed work in
January 1984. In 1995, Continental Resources acquired Koch Industries’ interest in
the oilfield and became Denzin’s employer. Denzin underwent hip-replacement
surgeries in 2009 and 2010. Standard Fire agreed to pay for the operations.
Following the surgeries, Denzin received a permanent partial impairment rating of
50% in both the lower-right and lower-left extremities.
[¶3.] In May 2012, Denzin filed a workers’ compensation petition against
Continental Resources with the Department of Labor and Regulation. Denzin
sought PPD benefits related to his hip-replacement surgeries. Under SDCL 62-4-6,
Denzin qualified for the maximum weekly benefit of $620 per week and was entitled
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to 160 weeks of compensation, totaling $99,200 in permanent partial impairment
payments.
[¶4.] On June 22, 2012, Continental Resources filed a third-party petition
against Koch Industries and Standard Fire. Continental Resources claimed that
Koch Industries—as Denzin’s employer at the time of the accident—was responsible
for any benefits that were then due and owing. Standard Fire answered and denied
any obligation to pay Denzin additional workers’ compensation benefits, claiming
that Continental Resources was responsible for payment of any such benefits.
[¶5.] In December 2013, Denzin, Standard Fire, and Continental Resources
entered into a settlement agreement. The agreement, entitled “Settlement
Agreement and Dismissal of Petition for Hearing,” reprised the foregoing facts and
stipulated that Continental Resources would accept Denzin’s claim, pay a lump sum
of $99,200, and dismiss its third-party action against Koch Industries and Standard
Fire. The agreement further provided that “the parties agree to settle this matter
without further litigation[.]” The Department of Labor and Regulation approved
the agreement, dismissed Continental Resources’ claim against Koch Industries and
Denzin’s workers’ compensation petition for hearing, and ordered Continental
Resources to pay Denzin within ten days.
[¶6.] On November 10, 2014, Standard Fire commenced a civil action
against Continental Resources seeking reimbursement or subrogation for workers’
compensation benefits paid to Denzin between 2009 and 2013. Standard Fire
claimed that it paid $82,276.26 in medical bills on Denzin’s behalf and $4,676.20 in
indemnity benefits directly to Denzin. Standard Fire sought reimbursement
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pursuant to SDCL 62-7-38 for these amounts, which totaled $86,952.46. Standard
Fire alleged that Continental Resources stipulated in the settlement agreement
that Denzin’s work duties after Continental Resources’ acquisition of the oilfield in
1995 contributed independently to Denzin’s need for medical treatment in 2009 and
beyond. Standard Fire also asserted an alternative claim for equitable subrogation.
Continental Resources answered, denying these claims and asserting various
affirmative defenses. Continental Resources filed a motion to dismiss pursuant to
SDCL 15-6-12(b)(5) on October 9, 2014, arguing that res judicata barred Standard
Fire’s claims and that any equitable claims were “barred by the Settlement
Agreement of the parties, Plaintiff’s available remedies at law, and Plaintiff’s
voluntary payment of workers’ compensation benefits to Dale Denzin.”
[¶7.] On January 19, 2016, the circuit court set the matter for hearing.
Because Continental Resources moved to dismiss under SDCL 15-6-12(b)(5), the
parties asked the court to consider the complaint and attached pleadings and
documents from the administrative proceeding. The parties did not ask the circuit
court to take judicial notice of the administrative record and agreed that there were
no material facts in dispute.
[¶8.] After oral argument, the circuit court observed that both the identity of
the parties and the issues of “who’s on the risk, [and] who’s got to pay for the hips”
were identical to those resolved in the settlement agreement. The court noted that
the agreement stated that “the parties agree to settle this matter without further
litigation,” and deemed this language a “shotgun clause.” The court refused “to
surgically interpret . . . ‘this matter’ . . . as dissecting out disability from medicals,”
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which the court viewed as calling for “a mighty fine scalpel.” The court then orally
granted Continental Resources’ motion to dismiss. It concluded that the language
of the settlement agreement resolved all the issues concerning workers’
compensation benefits related to Denzin’s hip surgeries, including the benefits
previously paid and the most-recently-requested impairment benefits. In its
written order, the court found that Standard Fire’s “case involves identical parties
[and] identical issues”; that the Department of Labor entered a final judgment on
the merits; that “both parties had a full and fair opportunity to litigate the issues
involved in this matter”; and that “the parties entered into a Stipulation settling the
matter without reimbursement to [Standard Fire] for any reason and agreed to a
settlement ‘without further litigation.’” The court concluded that “the parties’
settlement agreement and [dismissal of the workers’ compensation case] was a valid
contract that fully resolved the workers’ compensation issues between” Denzin,
Standard Fire, and Continental Resources, and “which preclude[d] further litigation
between” Standard Fire and Continental Resources “regarding this matter.”
[¶9.] Standard Fire appeals, raising the following issue for our review:
Whether the circuit court erred when it determined that the
workers’ compensation settlement agreement fully resolved all
claims between Standard Fire and Continental Resources.
Decision
[¶10.] We review de novo whether the circuit court properly dismissed
Standard Fire’s complaint under SDCL 15-6-12(b)(5). Total Auctions & Real Estate,
LLC v. S.D. Dep’t of Revenue & Regulation, 2016 S.D. 95, ¶ 8, 888 N.W.2d 577, 580.
“A complaint need only contain a short plain statement of the claim showing the
pleader is entitled to relief and a demand for judgment for the relief to which the
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pleader deems himself entitled.” Nooney v. StubHub, Inc., 2015 S.D. 102, ¶ 9,
873 N.W.2d 497, 499. Here, the court considered the pleadings, the attachments to
the pleadings, and documents incorporated by reference in the pleadings. See id.
¶ 8 (explaining that a court may consider documents incorporated by reference in
the complaint). We consider the same.
[¶11.] In its complaint, Standard Fire asserted claims for statutory
reimbursement or equitable subrogation. In particular, Standard Fire alleged that
it paid Denzin $86,952.46 in medical and indemnity benefits between 2009 and
2013. Standard Fire cited to the parties’ settlement agreement and claimed that
Continental Resources stipulated that “Denzin’s work duties after 1995 contributed
independently to his need for medical treatment in 2009 and beyond and that
payment for such treatment (and subsequent impairment rating) is Continental’s
responsibility instead of Standard Fire’s (via Travelers Insurance) responsibility.”
In its answer, Continental Resources did not dispute that it entered into a
settlement agreement with Standard Fire. It, however, alleged in its motion to
dismiss that the settlement agreement barred Standard Fire’s right to recover
under any theory advanced by Standard Fire.
[¶12.] Before the circuit court and on appeal, the parties contend that the
settlement agreement is unambiguous. The agreement reads in part:
8. That based upon Claimant’s earnings at the time of his
hip replacements in 2009, he qualified for the maximum weekly
benefit under South Dakota law which was $620.00 per week
and he would thereby be entitled to a total permanent partial
impairment payment of Ninety Nine Thousand Two Hundred
Dollars and no cents ($99,200.00).
9. That this case has been in litigation where there has been
a genuine dispute existing as between Continental Resources
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and Koch Industries as to the responsibility for payment of this
impairment benefit.
10. That the parties agree that based upon the applicable
medical testimony and opinions Claimant’s work duties after
1995 contributed independently to his need for the hip
replacements and thus the permanent partial impairments as
spelled out above.
11. That the parties agree to settle this matter without
further litigation as follows:
A. Continental Resources will agree to accept
Claimant’s claim and pay a lump sum payment to him
and his counsel of Ninety Nine Thousand Two Hundred
Dollars and no cents ($99,200.00).
B. Continental Resources will dismiss its Third Party
action against Koch Industries upon approval of this
settlement agreement by the South Dakota Department of
Labor and Regulation.
C. Claimant agrees to dismiss the current Petition for
Hearing and to waive any claim for interest or penalties
in exchange for payment of the impairment benefits in a
lump sum, all of which will take place within ten (10)
days after approval of this agreement by the South
Dakota Department of Labor and Regulation.
The parties dispute whether “this matter” should be read broadly, so as to resolve
all workers’ compensation benefit matters related to Denzin’s hip surgeries, or
narrowly, such that it refers only to the PPD payments referenced in the foregoing
paragraphs. Because we find that the settlement agreement “is capable of more
than one meaning when viewed objectively by a reasonably intelligent person who
has examined the context of the entire integrated agreement,” Dowling Family
P’ship v. Midland Farms, 2015 S.D. 50, ¶ 13, 865 N.W.2d 854, 860), we reverse and
remand.
[¶13.] Settlement agreements are subject to the same rules of construction as
contracts. In re Estate of Neiswender, 2003 S.D. 50, ¶ 15, 660 N.W.2d 249, 252.
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“Thus, whether a settlement agreement is ambiguous is a question of law.” Lewis v.
Benjamin Moore & Co., 1998 S.D. 14, ¶ 9, 574 N.W.2d 887, 889. We may not “go
beyond the four corners of the contract” unless we first determine that the
settlement agreement is ambiguous. Dowling Family P’ship, 2015 S.D. 50, ¶ 14,
865 N.W.2d at 861. Even so, ambiguity does not arise merely because different
interpretations of the contract are offered. Roden v. Gen. Cas. Co. of Wis., 2003 S.D.
130, ¶ 10, 671 N.W.2d 622, 625. Rather, “[a] contract is ambiguous when
application of rules of interpretation leave a genuine uncertainty as to which of two
or more meanings is correct.” Alverson v. Nw. Nat’l Cas. Co., 1997 S.D. 9, ¶ 8, 559
N.W.2d 234, 235. Here, two reasonable, competing interpretations of the settlement
agreement exist.
[¶14.] In Standard Fire’s view, the terms of the settlement agreement did not
bar its claim for reimbursement or subrogation. Standard Fire argues that
paragraph 9 of the settlement agreement narrows the subject of “this matter” by
providing that “there has been a genuine dispute existing . . . as to the
responsibility for payment of this impairment benefit.” (Emphasis added.)
Standard Fire contends that “this impairment benefit” is limited to the PPD
payment of $99,200 referenced in paragraph 8 of the settlement agreement.
Standard Fire thus concludes that the medical and indemnity benefits it now seeks
are outside the scope of the foregoing paragraphs.
[¶15.] While the circuit court described the task of “dissecting out disability
from medicals” as unwieldly and requiring “a mighty fine scalpel,” this distinction is
well established in workers’ compensation law. Impairment benefits and medical
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benefits are separate scheduled benefits governed by different statutes. PPD
benefits are provided under SDCL 62-4-6, whereas medical benefits are governed by
SDCL 62-4-1. Compare Streeter v. Canton Sch. Dist., 2004 S.D. 30, ¶ 25, 677
N.W.2d 221, 226 (applying SDCL 62-4-1 to payment of medical expenses), with
Cozine v. Midwest Coast Transp., Inc., 454 N.W.2d 548, 551 (S.D. 1990) (“SDCL 62-
4-6 specifies the amount of compensation an employee shall receive for the loss of a
part of the body or its loss of use.”). Further, the settlement agreement lacks the
kind of language typical in an agreement providing a broad release from future
claims. See, e.g., Gores v. Miller, 2016 S.D. 9, ¶ 10, 875 N.W.2d 34, 37 (involving
settlement agreement that released party from “all ‘additional claims’ of ‘any kind
or nature whatsoever’ against ‘all other persons’ for ‘all injuries’ that had or might
‘result from,’ ‘develop’ from, or ‘arise out of’ [an] accident”). Also notably absent is
any language dismissing the matter with prejudice.
[¶16.] Nevertheless, Continental Resources provides a competing view,
interpreting “this matter” broadly to encompass medical and indemnity benefits.
According to Continental Resources, paragraph 9 does not define “this matter.” In
Continental Resources’ view, paragraph 9 refers to but one component of a larger
dispute between Denzin, Standard Fire, and Continental Resources. Continental
Resources highlights the language used in paragraph 9, “[t]hat this case has been in
litigation where there has been a genuine dispute existing as between Continental
Resources and Koch Industries as to the responsibility for payment of this
impairment benefit.” (Emphasis added.) The settlement agreement could be
interpreted as resolving “this case.” The language “where there has been” could be
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read to mean that “this case” involved a disagreement over responsibility for
Denzin’s PPD payments. However, it does not necessarily limit the scope of “this
case” and in turn, “this matter” exclusively to the contents of that particular
dispute.
[¶17.] As “this matter” could be read broadly or narrowly, the circuit court
erred when it determined that the plain language of the settlement agreement
barred Standard Fire’s claim. We reverse and remand for further proceedings.
[¶18.] GILBERTSON, Chief Justice, and ZINTER, Justice, concur.
[¶19.] WILBUR, Retired Justice, and SEVERSON, Justice, dissent.
WILBUR, Retired Justice (dissenting).
[¶20.] The resolution of this case should not turn on the interpretation of only
one phrase within the agreement: “whether ‘this matter’ should be read broadly, so
as to resolve all workers’ compensation benefit matters related to Denzin’s hip
surgeries, or narrowly, such that it refers only to the PPD payments referenced in
the foregoing paragraphs.” Supra majority opinion ¶ 12 (emphasis added). Such
view is problematic because the phrase “this matter” is one clause within an entire
settlement agreement. The question we must decide is whether the settlement
agreement precludes Standard Fire’s current suit against Continental Resources.
[¶21.] It is well established that we review contracts as a whole and “‘give
effect to the language of the entire contract,’ and ‘particular words and phrases are
not interpreted in isolation.’” Jones v. Siouxland Surgery Ctr. Ltd. P’ship, 2006 S.D.
97, ¶ 15, 724 N.W.2d 340, 345 (quoting Hartig Drug Co. v. Hartig, 602 N.W.2d 794,
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797-98 (Iowa 1999)). Here, “this matter” must be viewed with reference to the
contract language that Continental Resources agreed to dismiss its “Third Party
action against Koch Industries [(Standard Fire)].” If that reference is ignored, then
that would mean the parties intended the settlement agreement to bind only
Denzin and Continental Resources. But the settlement agreement specifically
provides that “the parties agree to settle this matter[.]” (Emphasis added.)
Standard Fire is a party and under the terms of the settlement agreement,
Standard Fire agreed to no further litigation on Continental Resources’ third-party
claim disputing responsibility to pay Denzin’s workers’ compensation benefits
related to the hip surgeries.
[¶22.] We often say that an ambiguity does not arise merely because the
parties offer different interpretations of the contract. See, e.g., Roden, 2003 S.D.
130, ¶ 10, 671 N.W.2d at 625. Instead, “[a] contract is ambiguous when application
of rules of interpretation leave a genuine uncertainty as to which of two or more
meanings is correct.” Alverson, 1997 S.D. 9, ¶ 8, 559 N.W.2d at 235. Because, here,
the settlement agreement unambiguously resolved all workers’ compensation
benefit matters related to Denzin’s hip surgeries, which includes Standard Fire’s
right to seek reimbursement from Continental Resources for benefits paid between
2009 and 2013, I dissent.
[¶23.] SEVERSON, Justice, joins this dissent.
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