On January 10, 2018, the South Dakota Supreme Court served strong notice to those who make a habit of seeking to quickly resolve claims following an injury.  The case was Kathy A. Schaefer v. Sioux Spine and Sport, Prof. LLC, and Nathan J. Flanders v. Herbert Tollefson.  2018 S.D. 5.  In Schaefer, the Plaintiff, a passenger, was injured in an auto accident in June of 2013 when the vehicle she was riding in was rear-ended by Defendant Flanders.  The Plaintiff was transported from the scene by ambulance.  At the hospital, she had an x-ray which revealed no injury.  She was diagnosed with a neck sprain and chest contusion and released.  Two days after the accident, the Plaintiff was contacted by an adjuster for Defendant Flanders’ insurer and within two weeks the adjuster asked for a demand and made an offer to resolve the claim.

The Plaintiff had no prior claims experience and said she had no idea what amount to demand.   Unbeknownst to the adjuster, the Plaintiff also had an intellectual disability for which she was receiving SSDI benefits.  Ultimately, she agreed to accept $3,500; $3,000 attributable to her medical bills and $500 for pain and suffering.  The agreement was struck before the adjuster had all of the Plaintiff’s medical bills and was for an amount below the $5,000 the Plaintiff had actually been billed.  After learning the bills totaled over the $3,000 contemplated by the release, they agreed upon a second release which increased the medical bill portion of the settlement to $8,000.

Shortly after signing the second release, the Plaintiff sought chiropractic care for her unresolved neck pain.  During a treatment on July 10, 2013, she experienced sharp pain in her shoulder and neck.  She went to the hospital where testing revealed a sternal fracture.  After being admitted, she developed a staph infection and abscess that forced her to stay in the hospital for a month, generating around $400,000 in medical bills.

The Plaintiff sued the chiropractor for malpractice and later included Defendant Flanders in the suit.  Defendant Flanders moved for summary judgment based upon the second release.  The circuit court granted his motion.  The South Dakota Supreme Court took the issue up on an intermediate appeal and reversed based upon two theories.

Undue Influence

Per SDCL 53-11-2, the Plaintiff argued she was unfairly persuaded (aka unduly influenced) to sign the release, making it rescindable.  The Court concluded that a fact question existed as to whether or not the Plaintiff was susceptible to undue influence based upon her intellectual disability, the fact she first signed a release that did not even cover her known medical bills, the fact that she signed every release put in front of her, and based upon her testimony that she had no understanding as to what the release meant.  With regard to the undue influence analysis, the Court was also critical of the adjuster for approaching the Plaintiff within two days of the collision, asking for a demand after he found out she had no claims experience, and making an offer before he even had all of the medical bills.  It used these factors to conclude that a jury could find the adjuster had an opportunity and the disposition to unduly influence the Plaintiff.

Unknown Claim

The Plaintiff also argued the release was rescindable because of a mistake of fact as to the extent of her injury (SDCL 53-11-2) and, relatedly, because she claimed her chest injury was unknown at the time she signed the released (SDCL 20-7-11).  The Court noted that this analysis comes down to the simple question of whether or not the Plaintiff knew of the injury when she signed the release.  The Court clarified that under this law, an unknown injury is different from a known injury with unexpected consequences and also different from a known but misdiagnosed injury.  In reviewing the facts, the Court noted that the Plaintiff admitted to having some initial chest pain, but the chest pain resolved by the time the release was executed.  The Court concluded that a jury could determine the Plaintiff did not know of her sternum fracture prior to signing the release, which was a material mistake under the circumstances.

Concerningly, the Court’s decision ignored the terms of the release on this issue.  Specifically, the opinion quoted a section of the release which stated the intent of the release was to release all claims which are “in any way related to” the accident.  Moreover, an even more pertinent section of the release, which the Court failed to discuss altogether, provided:

The Undersigned acknowledges and declares that his/her injuries caused by the accident above are or may be permanent, and that the extent of recovery from those injuries is/may be uncertain and indefinite.  With that acknowledgement and understanding, the Undersigned declares and represents that he/she/they is(are) entering into this Release agreement wholly in reliance on his/her/their judgment, belief and knowledge of the nature, extent, effect, and duration of his/her injuries, and liability for those injuries.

In addition to ignoring the terms of the release, the unknown claim analysis was puzzling because the Court muddled the settled law. In the older cases cited within Schaefer, having pain in a certain area of the body, while not knowing the extent of an injury, was enough to put a plaintiff on notice of the claim and to bind him/her to a release.[1]  Here, the Plaintiff appeared to have the same type of notice as the plaintiff discussed in the case found in FN2 below.

To reach its holding on the unknown claim analysis, the Court took a result’s oriented approach in both ignoring the terms of the release and in distinguishing the prior case law.  This conclusion again appears to have been driven by an unlikely set of facts and an overzealous adjuster.

The Schaefer opinion can be reviewed at:


[1] For example, in the Parkhurst v. Burkel case cited in the Schaefer opinion, the plaintiff signed a release after telling her physicians she had hip pain, but before she knew she actually had a chip fracture in her hip.  Even though the physicians told her the pain was related to her pregnancy and nothing else, the South Dakota Supreme Court found that the release barred her ability to bring suit for the hip fracture because she had discovered her injury prior to signing the release.  1996 S.D. 19, 544 N.W.2d 210.