Canal Ins. Co. v. Abraham, 20746

Citation1999 SD 90,598 N.W.2d 512
Decision Date27 April 1999
Docket NumberNo. 20746,20746
PartiesCANAL INSURANCE COMPANY, Plaintiff and Appellee, v. Morris ABRAHAM, Defendant and Appellant, and John Neeman, Defendant. . Considered on Briefs
CourtSupreme Court of South Dakota

Mark J. Welter of Woods, Fuller, Schultz & Smith, Sioux Falls, South Dakota, for plaintiff and appellee.

Scott G. Hoy of Scott Hoy and Associates, Sioux Falls, South Dakota, for defendant and appellant.

VON WALD, Circuit Judge

¶1 Morris Abraham (Abraham) was injured in an automobile accident. In this declaratory judgment action, the trial court found that there was no coverage for the accident under the insurance policy issued by Canal Insurance Company (Canal). We affirm.


¶2 Canal issued a policy of insurance to the named insured John Neeman (Neeman). The policy was for basic automobile liability insurance and covered the period of December 16, 1994, to December 16, 1995. The scheduled vehicle under the policy was a 1988 GMC truck owned by Neeman with designated use for commercial purposes.

¶3 The policy had several exclusions or endorsements attached, including an occupant hazard exclusion, 1 underinsured motorist coverage, 2 and a truckman's endorsement. 3 The policy stated that Canal "will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury." Contained in the policy was language as follows: "None of the following is an insured: ... any person while engaged in the business of his employer with respect to bodily injury to any fellow employee of such person injured in the course of his employment." The policy also excluded coverage as to "any obligation for which the insured ... may be held liable under any worker's compensation ... law."

¶4 Neeman was president of Country Side Tires, Inc., a business incorporated in South Dakota since January 1995. The company primarily engaged in the business of buying, repairing, selling, and installing vehicle tires. Neeman and his wife were the sole shareholders of the corporation. Neeman was also an employee of the business and received a salary. Abraham was a full-time employee for Country Side Tires and worked fixing and changing tires.

¶5 Neeman loaned his truck to Country Side Tires for use in the business. The corporation paid for the maintenance, repairs, tires, and fuel for the truck. The truck was also used as collateral for a bank loan to buy tires for the corporation.

¶6 On September 21, 1995, Neeman and Abraham drove the truck to Missouri to pick up a load of tires for Country Side Tires, Inc. Abraham went along to help load the tires and was paid for eight hours of work. This was the first time Abraham had been required to go off the business premises for his job since he began working for the company three weeks earlier. Abraham drove the truck down to Missouri and Neeman drove back to South Dakota. On the return trip, they were involved in a one-vehicle accident on Interstate 29 near Alcester, South Dakota, when Neeman fell asleep while driving. Abraham was asleep in the passenger seat at the time of the accident and sustained injuries when the truck rolled.

¶7 Canal filed a declaratory judgment action on January 29, 1996, asking the trial court to find that no liability coverage existed under the policy of insurance. Neeman disagreed and claimed that the policy issued by Canal covered the injuries Abraham incurred in the accident. 4 Both sides agree that Country Side Tires had elected not to operate under the South Dakota worker's compensation provisions found in SDCL Title 62.

¶8 The matter went to trial on July 23, 1998, and the trial court ruled in favor of Canal, holding there was no coverage under Canal's policy for the accident. The trial court found that Abraham and Neeman were fellow employees of Countryside Tires, Inc. at all times material to this matter. The trial court also found that Abraham and Neeman were operating in the scope of their employment at the time of the accident. The court denied Abraham's motion for reconsideration. Abraham appeals and raises the following issues:

Did the trial court err in applying South Dakota worker's compensation remedies under the facts of this case?

Is Abraham entitled to the benefit of underinsured motorist coverage under this policy?

Did the trial court err in not applying SDCL 58-20-12 to this claim?

Are the exclusions to coverage under Canal's policy void as against public policy, or alternatively applicable?


¶9 Our standard of review in declaratory judgment actions is well established:

In declaratory judgment actions, our standard of review of factual questions is clearly erroneous. Northwestern Bell Telephone Co. v. Stofferahn, 461 N.W.2d 129, 134 (S.D.1990). Conversely, questions of law are reviewed de novo, Schuck v. John Morrell & Co., 529 N.W.2d 894, 896 (S.D.1995), as are mixed questions of law and fact. Paulson v. Black Hills Packing Co., 1996 SD 118, p 7, 554 N.W.2d 194, 196. We also review deposition testimony de novo. Tischler v. UPS, 1996 SD 98, p 23, 552 N.W.2d 597, 602; Hendrix v. Graham Tire Co., 520 N.W.2d 876, 879 (S.D.1994).

PEPL v. Winger, 1997 SD 77, p 65, 566 N.W.2d 125, 127.

¶10 In addition, interpretation of contracts is a matter of law, and thus we also review them de novo. Schleuter Co., Inc. v. Sevigny, 1997 SD 68, p 15, 564 N.W.2d 309, 313; Olson v. U.S. Fidelity and Guar. Co., 1996 SD 66, p 6, 549 N.W.2d 199, 200; Estate of Thomas v. Sheffield, 511 N.W.2d 841, 843 (S.D.1994).


¶11 The trial court did not err in applying South Dakota worker's compensation laws.

¶12 The first question in our analysis is whether Abraham was acting in the scope of his employment at the time of the accident; if so, then Abraham's injuries may be compensable under South Dakota worker's compensation statutes. SDCL 62-3-2; Roberts v. Stell, 367 N.W.2d 198 (S.D.1985). Abraham argues that he was not acting in the scope of his employment when he was injured; thus, worker's compensation does not apply and the insurance policy issued by Canal should provide Abraham relief. For an injury to arise out of "the employment," it is necessary and sufficient that there be a causal connection between the injury and the employment, but the employment need not be the direct or proximate cause of injury, it being sufficient if the accident had its origin in the hazard to which the employment exposed the employee while doing his work. Anderson v. Hotel Cataract, 70 S.D. 376, 17 N.W.2d 913 [1945]; Bergren v. S.E. Gustafson Construction Co., 75 S.D. 497, 68 N.W.2d 477 [1955]. The words "in the course of" refer to the time, place and circumstances under which the accident took place. The contents of the statute do not limit the application to the periods during which an employee is actually engaged in the work that he is hired to perform.... In other words, an employee is within the course of his employment if what he is doing is naturally related or incidental to his employment or he is doing that which his contract of employment expressly or impliedly authorizes. Wilson v. Dakota Light & Power Co., 45 S.D. 175, 186 N.W. 828 [1922]; Jacobson v. Strong & Waggoner, 66 S.D. 552, 287 N.W. 41 [1939]; Lang v. Board of Education, 70 S.D. 343, 17 N.W.2d 695 [1945].

Krier v. Dick's Linoleum, 78 S.D. 116, 118-19, 98 N.W.2d 486, 487-88 (1959); see also, PEPL v. Winger, 1997 SD 77, 566 N.W.2d 125; Bearshield v. City of Gregory, 278 N.W.2d 164, 166 (S.D.1979).

¶13 We have previously decided several cases factually similar to the matter at hand. In Pickrel v. Martin Beach, Inc., 80 S.D. 376, 124 N.W.2d 182 (1963), the employee had started his employment eleven weeks prior to the accident and was paid based on an eight hour day, six days a week. The employer construction company was based in Huron and primarily built power lines over a wide area, thus maintaining work crews at various project locations. The employer provided bi-weekly transportation to and from the work cites in company-owned vehicles. At the time of the accident, the employee was returning to Huron from a worksite in Kimball, approximately 86 miles away, in the vehicle provided by the employer. Usually, these trips back and forth from the work cites were also used to transport equipment and materials; but, on the trip in which the employee was killed, they were not transporting anything for the employer, nor had they been asked to do so. We found the employee to be acting in the scope of his employment at the time of the accident. Pickrel, 80 S.D. at 378, 124 N.W.2d at 183.

¶14 The facts in Krier v. Dick's Linoleum, 78 S.D. at 118, 98 N.W.2d at 486, were also somewhat similar to Abraham and Neeman's situation. The employee, based out of Pierre, was working on a project in Chamberlain and had to stay overnight. The employer had given him money for meals and expenses. After completing work that evening, the employee drove the employer's truck to a steakhouse a couple miles outside of town to eat dinner. The dining location was the employee's personal and independent choice as the employer had not told him where to eat. On the way back to town after dinner, the employee was injured in a vehicle accident.

¶15 The controlling factor in our analysis in Krier was "whether the claimant was engaged in doing something which he might reasonably be expected to do while in the performance of his duties." We found it could not "be held that he stepped aside from his employment to do some act of his own not connected with or contemplated by the employment." Krier, 78 S.D. at 120-121, 98 N.W.2d at 488.

¶16 We believe a similar conclusion is obvious in this case. Abraham and Neeman were returning from a business trip which naturally started on the business premises in Sioux Falls and concluded when they returned to the premises; Abraham was being paid for his labor on the trip and his...

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