State News : South Dakota

 In Pham v. Smithfield Foods, 2025 S.D. 41, the South Dakota Supreme Court affirmed that an Insurer may accept an injury as compensable without waiving the right to later deny benefits.  In this case, the claimant, Jody Pham, was injured while working for Smithfield Foods. Smithfield voluntarily paid Pham workers’ compensation benefits for over two years.  Then Smithfield ceased payments upon belief and evidence that Pham’s work injury was no longer a major contributing cause of her condition.  

Pham petitioned the Department of Labor for benefits, and the Department denied her claim.  On appeal, the circuit court reversed.  The Circuit Court stated that, under SDCL 62-7-33, once Smithfield accepted compensability of Pham’s claim, Smithfield was bound to continue to pay Pham workers’ compensation benefits unless Smithfield showed that Pham had a change in condition allowing for termination of benefits under SDCL 62-7-33.

The South Dakota Supreme Court reversed the Circuit Court and affirmed the Department.  The Supreme Court held that SDCL 62-7-33 applies only after the Department issues an order determining that an injury is compensable, either through a voluntary settlement or after a contested hearing.  Importantly, the Supreme Court further affirmed that, as a matter of public policy, an Insurer should not be penalized for voluntarily accepting a claim as compensable then later denying that claim.  

Put differently, an Insurer’s voluntary acceptance of a claim does not shift the burden of proof onto an Insurer to show that a claim is no longer compensable before the Insurer can deny benefits.  Instead, under South Dakota law, the burden to establish a compensable injury remains with the claimant at all times until a final order declaring that an injury is compensable is issued by the Department.  Only after the Department issues an order establishing that an injury is compensable does the burden shift to an Insurer to show a change in condition under SDCL 62-7-33. A settlement agreement adopted by the Department also constitutes a final order that shifts the burden to an Insurer to show a change in condition under SDCL 62-7-33.

The Pham decision is a significant victory for Insurers and workers in this state.  The Pham decision rightfully recognizes that South Dakota law does not penalize an Insurer for voluntarily paying benefits. This decision allows Insurers and Employers to effectively and quickly administer claims and provide injured workers the care they need without first requiring claimants to fully litigate their claims.

The Pham decision also overruled a South Dakota federal district court decision, Hollow Horn v. Firstcomp Ins. Co., No. CIV. 17-5016-JLV, 2021 WL 1909707 (D.S.D. May 12, 2021).  In Hollow Horn, a claimant raised a similar argument to the Circuit Court in Pham.  The claimant argued that because his insurer initially accepted his work injury as compensable, then his insurer had a continuing obligation to continue to provide workers’ compensation benefits.  The federal district court accepted this argument, which effectively penalized the insurer for voluntarily providing workers’ compensation benefits.  Now, however, the Pham decision shows that Hollow Horn was erroneous. In South Dakota, an insurer suffers no penalty for voluntarily accepting a workers’ compensation claim as compensable.