South Dakota Federal Court Denies Insurance Company's Motion to Dismiss "Bad Faith" Claim


In Haney v. American Family Mutual Insurance Company, the South Dakota Federal District Court denied a motion to dismiss a bad faith and punitive damages claim against the insurer.

In June of 2014, a hailstorm damaged numerous homes and other property in and around Sioux Falls, South Dakota. Soon thereafter, After the storm, Steve Haney submitted a claim for hail damage sustained on his home to American Family.

In July of 2014, Adam Palace, an authorized agent of American Family, inspected Haney's home. Based on that inspection, Mr. Palace concluded that there was little to no hail damage to the roof and listed $3,890.15 as a reasonable amount to repair the damage. Two years later, in July of 2016, Haney provided American Family with a report from a roofer that indicated that there was hail damage to the entire roof and that $68,259.61 was needed to repair the damage.

On August 3, 2016, American Family conducted another inspection of Haney's roof and found that hail damage was evident on all the slopes of the roof. On August 8, 2016, American Family issued a letter to Haney indicating that nothing additional would be paid on the claim.

On August 11, 2016, Haney filed a lawsuit in federal court against American Family alleging breach of contract, bad faith, punitive damages, and vexatious refusal to pay. American Family moved to dismiss Haney’s claims of bad faith and punitive damages.

In denying American Family’s motion, the Court found that Haney’s claims were viable and denied American Family’s motion to dismiss.