Employers Mutual v. State Auto and Amer. Fam. Ins.
Annotate this CaseEmployers Mutual Casualty Company, Inc.
Plaintiff and Appellee
v.
State Auto Insurance, Inc.
Defendant and Appellant
and
American Family Insurance Companies, Inc.;
Harold Orr, Individually and D/B/A Dale's Service;
Marcia Orr; Roxann Orr; Susan Sigdestad; Rachel Herrick;
Christine Benson; and Clark County, State of South Dakota
Defendants
[2001 SD 34]
South Dakota Supreme Court
Appeal from the Circuit Court of
The Third Judicial Circuit
Clark County, South Dakota
Hon. Robert L. Timm, Judge
Talbot J. Wieczorek
Gunderson, Palmer, Goodsell & Nelson
Rapid City, South Dakota
Attorneys for plaintiff and appellee
Employers Mutual Casualty Company, Inc.
Robert B. Anderson
May, Adam, Gerdes & Thompson
Pierre, South Dakota
Attorneys for defendant and appellant
State Auto Insurance, Inc.
Thomas M. Tobin
Tonner, Tobin & King
Aberdeen, South Dakota
Attorneys for defendant Rachel Herrick.
Vincent Purtell
American Family Insurance Companies, Inc.
Sioux Falls, South Dakota
Attorneys for defendant
American Family Insurance Companies, Inc.
Roy A. Wise
Richardson, Groseclose, Wyly, Wise and Sauck
Aberdeen, South Dakota
Attorneys for defendant
Clark County South Dakota.
Lee Schoenbeck
Schoenbeck Law
Watertown, South Dakota
Attorneys for defendant
Harold Orr individually
and d/b/a Dale's Service,
Marcia Orr, and Roxann Orr.
Christine Benson
Bristol, South Dakota
Defendant pro se.
Leon J. Vander Linden
Delaney, Vander Linden & Delaney
Webster, South Dakota
Attorneys for defendant
Susan Sigdestad.
Considered on Briefs November 27, 2000
Opinion Filed 3/14/2001
#21381
CALDWELL, Circuit Judge
[¶1.] State Auto Insurance, Inc. appeals from a judgment determining that 1) Roxann Orr was a named insured under an automobile insurance policy issued to her parents Harold and Marcia Orr, and that 2) State Auto is the primary insurer. We reverse issue 1 and affirm issue 2.
FACTS AND PROCEDURE[¶2.] This action arose from a one-car accident that occurred in rural Clark County on February 14, 1998. The vehicle involved was a 1990 Plymouth Acclaim titled in the name of Dale's Service. This vehicle was part of an inventory of a used car lot owned by Dale's Service. Harold and Marcia Orr own Dale's Service.
[¶3.] Roxann Orr, the daughter of Harold and Marcia Orr, picked up the Plymouth Acclaim from the used car lot at Dale's Service sometime after her shift ended, around 3:00 p.m., on February 14, 1998. In the past, Roxann had often used the car for personal trips. Later that same day, Roxann met with some friends and the decision was made to travel to a dance in Clark. Because Roxann did not know the way to Clark and was uncomfortable driving on gravel roads, she let Christine Benson drive the vehicle. Before they could reach Clark, they were involved in an accident. At the time of the accident, Susan Sigdestad, Rachel Herrick, and Roxann Orr were passengers. Each of the passengers filed personal injury actions against Benson and Clark County.
[¶4.] Orrs insured Dale's Service with Employers Mutual Casualty Company (Employers). This policy covered the inventory on the car lot. In addition, Orrs had a personal automobile liability policy with State Auto Insurance, Inc. (State Auto). Both policies cover the car in question. American Family Insurance Co. (American Family) provided automobile liability coverage to Benson's family; Benson was insured pursuant to that policy.
[¶5.] Employers commenced this declaratory action alleging that it owed no duty to defend or indemnify Benson in regard to the claims arising from the February 14, 1998 accident. State Auto filed an answer to the complaint and included a counterclaim and separate cross claims alleging that it had no duty to defend or indemnify Benson. State Auto further sought to have American Family declared the primary insurer.
[¶6.] Orr's personal automobile liability provided by State Auto contained a family exclusion clause. State Auto maintains that this clause excluded coverage to Roxann Orr, as she was living in the same household with her parents, Harold and Marcia Orr. State Auto did not dispute the claims against Benson asserted by Sigdestad and Herrick; Benson became an insured under the policy by driving the car with the permission of the owner.
[¶7.] The trial court held that Roxann Orr was a named insured on the State Auto policy and is therefore covered up to $25,000. The court also found that State Auto's coverage is first, American Family's coverage is second, and Employers' last.
[¶8.] State Auto appeals two issues from the judgment entered by the circuit court on December 1, 1999. The issues to be decided on appeal are:
Whether the trial court erred in finding coverage for Roxann Orr as a named insured; and
Whether the trial court erred in naming State Auto as primary insurer.
STANDARD OF REVIEW
[¶9.] The construction of a written contract is a question of law. Where an insurance policy is susceptible to different interpretations, the interpretation most favorable to the insured must be adopted. The trial court's construction of an insurance contract is a question of law that is reviewed de novo. The burden of showing no duty is on the insurer. Colonial Ins. Co. of California v. Lundquist, 539 NW2d 871, 873 (SD 1995) (citations omitted).
ANALYSIS
[¶10.] Whether the trial court erred in finding coverage for Roxann Orr as a named insured.
[¶11.] In 1992 household exclusions were pronounced invalid as a violation of
public policy. See De Smet Ins. Co. v. Gibson, 1996 SD 102, ¶6, 552 NW2d 98, 99 (citing Cimmarron Ins. Co. v. Croyle, 479 NW2d 881, 884 (SD 1992)). In response to the decision in Cimmarron, the legislature immediately amended South Dakota's financial responsibility law to allow insurers to issue motor vehicle policies with resident family member exclusions. Id. (citing Issac v. State Farm Mut. Auto. Ins. Co., 522 NW2d 752, 756 n1 (SD 1994)). That statute, SDCL 32-35-70, now includes a statement which allows a policy to exclude or limit coverage for a relative residing in the named insured's household.[¶12.] In Cimmarron, the family exclusion stated "[w]e do not provide liability coverage for any person for bodily injury to you or any family member." Cimmarron, 479 NW2d at 882. In amending the financial responsibility statute it was clear that the legislature intended to overrule the decision in Cimmarron and allow family exclusions. See De Smet Ins. Co., 1996 SD 102 at ¶7, 552 NW2d at 100. To the extent that the exclusion here is similar in wording to the exclusion in Cimmarron, it is valid.
[¶13.] We look to the wording of the policy to determine coverage. State Auto claims that the trial court erred in finding coverage for Roxann Orr by classifying her as a named insured. The policy contains a family exclusion that states:
We do not provide Liability Coverage for any person:
For 'bodily injury' to you or any 'family member.' However, this exclusion does not apply for 'bodily injury' to you to the extent that this coverage provides the limits of liability required by the Financial Responsibility Law of the State of South Dakota.
The definition section goes on to define the term you.
[¶14.] Throughout this policy, 'you' and 'your' refer to:
The 'named insured' shown in the Declarations, and
The spouse if a resident of the same household.
[¶15.] The policy does not define "named insured" so the trial court turned to
SDCL 58-23-6(5) for guidance. Under this section, "named insured" is defined as "the individual or individuals designated by name as specifically insured in the policy declaration." This section was intended to be used with regard to SDCL 58-23-6 to 58-23-8 inclusive. SDCL 58-23-6(5). Statutory authorization for the family exclusion does not fall within those sections and as such it is not binding but merely a guide to the terms used in the policy.
[¶16.] The insurance policy in this case contains similar language to SDCL 58-23-6(5), stating that the named insured is the person shown in the declarations. The declaration page contains a box labeled "Named Insured and Address." Within that box the names of Harold and Marcia Orr are specifically listed. The trial court found, however, that because Roxann Orr was listed below as a driver, she was also a named insured. This finding is at odds with the named insureds specifically identified, Harold and Marcia Orr. If indeed Roxann was to be a named insured she could easily have been listed in the named insured box, however, she was not. Moreover, the Orr's other children; Paul and Rachel were also listed as drivers. If in fact they too were named insureds, the family exclusion set out in this policy would have little or no effect.
[¶17.] While not addressing the issue of listed drivers, various jurisdictions have dealt with similar factual situations. In Prudential Property & Casualty Co. v. Piotrowski, 501 NE2d 250 (IllCtApp 1986), a permissive driver was involved in an accident in which a member of the vehicle owner's family was a passenger. The family exclusion in the policy stated "[w]e won't pay, under this part, for any injuries suffered by you or any relatives living in your household. Nor will we defend you in any suits arising from such injuries." Id. at 251, 253. The definition section defined the word "you" as "the person shown as the named insured on the Declarations Page [or Continuation Certificate] of this policy, and your spouse, if he or she lives in your household." Id. at 253. The court found that the definition was clear and unambiguous. Id. Such clauses exclude coverage where a permissive driver injures a member of the car owner's household in an accident. Id.; Prudential Property and Casualty v. Scott, 514 NE2d 595 (IllCtApp 1987) (holding the term "you" does not apply to the named insured's permissive drivers); State Farm Mut. Auto. Ins. Co. v. Fitzpatrick, 817 SW2d 918 (MoCtApp 1991) (25-year-old daughter not covered due to family exclusion).
[¶18.] Based on the language of the State Auto policy, Roxann Orr was excluded from coverage and we reverse the trial court on this issue.
[¶19.] Whether the trial court erred in naming State Auto as primary insurer.
[¶20.] State Auto and Employers both agree that Employers' coverage should be last in line.[1] The trial court states in conclusion 8:
State Auto and American Family both provide insurance coverage for persons using the vehicle, which coverages shall be primary. As between the two, State Auto insures the vehicle and American Family insures the driver, so State Auto's coverage is first and American Family's coverage is second, both of which are followed by the coverage of EMC.
1. American Family did not file a brief in regard to this appeal.
2. State Auto agrees that it should provide coverage for Herrick and Sigdestad because Benson was an insured under the State Auto policy. State Auto only disputes the order in which it was to provide coverage.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.