Not legal advice. This page summarizes South Dakota Codified Laws as published by the South Dakota Legislature and one South Dakota Supreme Court decision. It does not cover Division of Insurance rules or later case law.
Three South Dakota features worth knowing
- Interest starts at death, not at proof of loss (SDCL 58-15-26.2).
- A fee-shifting statute for vexatious or unreasonable refusals, which expressly preserves tort and contract remedies (58-12-3).
- Fraud survives the contest period under the standard incontestability provision (58-15-10).
When payment is due, and interest
A policy must say that a death claim is settled once the company has due proof of death, plus, if it chooses, the policy or proof of the claimant’s interest. If the policy names a deadline, it cannot be longer than two months after the proof arrives (58-15-26).
Separately, sections 58-15-26.1 to 26.5 require an admitted life insurer to pay interest on proceeds owed to a beneficiary under an individual or group policy issued for delivery in South Dakota:
- Period. From the date of death until the date of payment.
- Rate. The greater of 4% a year or the insurer’s current rate on death proceeds left with it under an interest settlement option (58-15-26.2).
- Notice. The company must tell the named beneficiaries, at their last known address, that interest will be paid and at what rate (58-15-26.4).
- Exceptions. No interest is required if the beneficiary chooses, in a writing delivered to the insurer, to take the money other than as a lump sum (58-15-26.3). The rules cover deaths on or after July 1, 1987 (58-15-26.5). Private placement policies have their own timing.
The two-year contest period and its fraud exception
South Dakota’s required clause makes the policy incontestable after it has been in force for two years during the insured’s lifetime, measured from the issue date. It carves out nonpayment of premium, health and accidental-death benefits, and fraud on the part of the applicant or insured (58-15-10). So a company may still argue fraud after two years; an honest mistake on the application is a different matter. Policy exclusions stay enforceable regardless (58-15-11).
Other standard terms:
- Grace. Thirty days for every premium after the first; coverage continues, and an unpaid premium can be taken out of the death benefit (58-15-13).
- Age misstatement. Benefits are adjusted to what the premium would have bought at the correct age (58-15-9).
Exclusions and what is paid when one applies
Section 58-15-45 permits life policies to exclude or restrict death only for:
- war or military action, but only if the applicant is affirmatively told at delivery that the policy has war clause exclusions;
- aviation, air travel or flight;
- named hazardous occupations;
- suicide within two years of issue, sane or insane;
- any other exclusion the director adopts by rule as being in the best interest of the insurance-buying public.
If an excluded event causes the death, the insurer must return all premiums received, adjusted for indebtedness and dividend credits (58-15-46).
Statements in the application
Application statements are representations rather than warranties (58-11-44; see also 58-15-8). A misstatement, omission, concealment or wrong answer blocks recovery only if it was:
- fraudulent, or an intentional misrepresentation of a material fact;
- material to accepting the risk or to the hazard the insurer took on; or
- something that would have led the insurer, acting in good faith, to decline, charge a higher rate, issue a smaller amount, or leave out the hazard behind the loss, had the true facts been disclosed.
The statute also bars asking an applicant to warrant or certify that he or she is insurable.
Attorney fees: 58-12-3
In a suit on any type of insurance policy, if the evidence shows the company refused to pay the full loss and the refusal was vexatious or without reasonable cause, the court shall award the winning plaintiff a reasonable attorney fee as costs. Two qualifications:
- No fee is allowed if the company tendered before suit an amount the judgment did not exceed.
- The fee is decided at a separate hearing after judgment, which must be requested within ten days of entry (58-12-3.1).
The statute adds that it does not bar any other tort or contract remedy the insured may have.
Claim-handling rules and the Division’s role
SDCL 58-33-67 lists unfair practices “in dealing with the insured or representative of the insured,” among them:
- not acknowledging and acting on claim communications within thirty days, and lacking reasonable standards for prompt investigation (1);
- paying a beneficiary without a statement of the coverage the payment is made under (2);
- not promptly giving a reasonable explanation, tied to the policy and the facts or law, for a denial or compromise offer (3).
Under 58-33-68 the director need not prove a general business practice, but may act only after notifying the insurer of the violation and the insurer refuses to correct it. Section 58-33-69 says these sections create no private right of action.
Champion: the bad-faith tort
In In re Certification of a Question of Law (Champion v. United States Fidelity & Guaranty Co.), 399 N.W.2d 320 (S.D. 1987), the South Dakota Supreme Court answered a federal court’s certified question about a workers’ compensation carrier. It held that the Workers’ Compensation Act’s exclusivity provision did not bar the employee’s intentional-tort suit for bad-faith refusal to pay. The court:
- pointed to 58-12-3’s “shall not be construed to bar” language as recognizing that a bad-faith claim may exist;
- adopted the test that bad faith requires the absence of a reasonable basis for denying benefits and the insurer’s knowledge or reckless disregard of that lack;
- noted that a company may challenge claims that are fairly debatable.
Champion arose from workers’ compensation benefits, not life insurance. Whether a particular beneficiary can bring the tort is a question for a South Dakota lawyer.
Group life conversion
- Losing eligibility. When group coverage ends because employment or class membership ends, the person may get an individual policy without proving insurability. It must be applied for and the first premium paid within thirty-one days, on any non-term form the company customarily issues (58-16-39).
- Plan termination. If the group policy itself ends, people insured for at least five years have a conversion right (58-16-40).
- Death in the window. Section 58-16-41 covers a death during the conversion period.
For employer plans governed by federal law, see employer group life.
Deadline to sue
Unless another statute sets a different period, an action on a contract must be started within six years after it accrues (SDCL 15-2-13(1)). Check the policy for a suit clause and get advice on when the claim accrued.
Killers and ex-spouses
- Homicide. South Dakota’s 29A-2-803 revokes a revocable beneficiary designation in favor of a person who feloniously and intentionally kills the decedent. Without a conviction, the court may make the finding by a preponderance of the evidence. An insurer that pays before receiving written notice of a claimed forfeiture is protected. The notice must go by registered or certified mail, return receipt requested, to its main office or home, or be served like a summons.
- Divorce. Under 29A-2-804, a divorce or annulment generally revokes a revocable designation of the former spouse or the former spouse’s relatives, unless the governing instrument, a court order or a property settlement provides otherwise. Federal law can override this for employer plans.
Example
A Sioux Falls widow submits a claim on her husband’s $250,000 policy three weeks after his death in February. The company pays in late May. Because interest runs from the date of death, she should check that the payment includes interest for the whole period at the greater of 4% or the insurer’s deposit rate, and that she received the rate notice required by 58-15-26.4.
Complaints
The Division of Insurance in the Department of Labor and Regulation explains its complaint process here: Division of Insurance Complaint Process. A complaint does not stop the six-year clock.
Sources
- South Dakota Codified Laws, South Dakota Legislature: sdlegislature.gov.
- South Dakota Division of Insurance: dlr.sd.gov.
- In re Certification of a Question of Law (Champion v. USF&G), 399 N.W.2d 320 (S.D. 1987) (full opinion, CourtListener): courtlistener.com. Read November 3, 2026.
Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.