South Dakota Governor Vetoes Subrogation Bill

South Dakota Gov. Mike Rounds vetoed a bill that supporters said would have changed South Dakota insurance law to help give injured people a better chance of receiving compensation for their losses.

The Associated Press reported that while Gov. Rounds agreed that the current system is unfair to some injured people, he believes the bill went too far in limiting the interests of insurance companies.

The so-called subrogation bill was roundly criticized by insurance company trade groups that lobbied the governor to veto it. The American Insurance Association said the bill would have prohibited insurers from recovering funds from liable parties and would have unfairly and unnecessarily increased insurance costs for South Dakotans. The Property Casualty Insurers Association of America (PCI) said Senate Bill 169 would have prohibited subrogation until the injured party is “made whole,” meaning that insurers could not recover any amount unless and until the insured individual receives full compensation for all damages arising from his or her claim against the person who caused the injury.

“Subrogation is an accepted, fair and equitable tool used by insurers to keep costs down for policyholders,” said Steve Schneider, AIA’s Midwest regional vice president of state affairs.

Not everybody is happy with the governor’s veto. The measure’s main sponsor, Sen. Nancy Turbak Berry, D-Watertown, said she believes Rounds had accepted some misleading insurance industry arguments about what kind of damages should be covered.

In his veto message, Rounds said a compromise bill should be presented that would limit “the types of damages that must be fully satisfied as ‘made whole’ prior to a subrogation interest being recovered, some rebuttable presumption that settlements within insurance policy limits leave an injured party ‘made whole,’ or some type of proportionate recovery system.”

Associated Press reports contributed to this story.