South Dakota Senate Panel Rejects Bill Challenging Insurer Subrogation

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A bill aimed at changing South Dakota’s insurance law to give some injured people a better chance of receiving full compensation for their losses has been rejected by a state Senate panel. However, one of the bill’s main sponsors, Sen. Joni Cutler, R-Sioux Falls, said she might ask the full Senate to override the committee and debate the issue.

The measure is similar to one vetoed a year ago by then-Gov. Mike Rounds.

HB 1184 deals with situations in which people are injured as the result of someone else’s fault. An injured person’s own insurance company typically pays medical bills and covers property damage until compensation is received from the person at fault. South Dakota law now allows the victim’s own insurance company to be first in line to get money from that compensation to recover its expenses.

The bill would require that injured people be fully compensated for all their losses, including lost income, before their own insurance companies could receive any of the money paid by those at fault. Lobbyists for insurance companies said the measure would increase premiums for health, automobile and property insurance because insurance companies would have to offset the loss of money they now recover in the process known as subrogation.

“Subrogation helps insurers hold the party responsible for damages accountable while ensuring policyholders’ claims are paid,” said Kelly Campbell, vice president of the Property Casualty Insurers Association of America.

Subrogation is used by insurers in most states to appropriately balance damage awards and claims, according to the American Insurance Association.

“Subrogation is an accepted, fair and equitable tool used by insurers to keep costs down for policyholders,” said Steve Schneider, AIA’s Midwest Region vice president. “This bill would have needlessly and unwisely placed obstructions on this standard practice.”

Cutler said studies indicate that insurance rates do not increase in states with laws giving victims priority over insurance companies in recovering losses. A majority of states have such a law, she said.

“This bill will help end suffering for the real people of South Dakota. It really, for me, is a moral issue,” Cutler said.

The bill rejected by the Senate panel was passed by the House. A similar measure was approved by the Senate last year only after then-Lt. Gov. Dennis Daugaard, presiding over the chamber, cast a vote to break a tie. The bill later died after the Senate failed to override Rounds’ veto.

Daugaard now is governor.