City of Colton v. Schwebach, No. 19509

CourtSupreme Court of South Dakota
Writing for the CourtAMUNDSON
Citation557 N.W.2d 769,1997 SD 4
PartiesCITY OF COLTON, South Dakota, Plaintiff and Appellant, v. Marie SCHWEBACH, d/b/a Schwebach Insurance Agency, and Employers Mutual Casualty Company, a corporation, Defendants and Appellees.
Docket NumberNo. 19509
Decision Date20 February 1997

Page 769

557 N.W.2d 769
1997 SD 4
CITY OF COLTON, South Dakota, Plaintiff and Appellant,
v.
Marie SCHWEBACH, d/b/a Schwebach Insurance Agency, and
Employers Mutual Casualty Company, a corporation,
Defendants and Appellees.
No. 19509.
Supreme Court of South Dakota.
Argued Sept. 12, 1996.
Decided Jan. 8, 1997.
Rehearing Denied Feb. 20, 1997.

F.M. Smith of Woods, Fuller, Shultz & Smith, Sioux Falls, for plaintiff and appellant.

Mark F. Marshall of Johnson, Heidepriem, Miner & Marlow, Sioux Falls, for defendant and appellee Schwebach.

Douglas M. Deibert of Cadwell, Sanford, Deibert & Garry, Sioux Falls, for defendant and appellee Employers Mutual.

Page 770

AMUNDSON, Justice.

¶1 City of Colton, South Dakota (City), appeals the circuit court's judgment in favor of Marie Schwebach, d/b/a Schwebach Insurance Agency (Schwebach), and Employers Mutual Casualty Company (Employers). We affirm.

FACTS AND PROCEDURAL HISTORY

¶2 City employed Linda Westberg (Westberg) as Finance Officer for sixteen years. Between October 1, 1991, and October 1, 1992, Westberg admitted to misappropriating City's funds in the amount of $64,700 through various transactions. After the losses and embezzlements were discovered in January of 1993, City filed a claim with Employers under the employee dishonesty provision in the liability insurance policy issued to City.

¶3 Employers' policy contained two exclusions applicable to City's claim:

...

c) Bonded Employee: Loss caused by any "employee" required by law to be individually bonded.

d) Treasurer or Tax Collector: Loss caused by a treasurer or tax collector by whatever name known....

These provisions specifically excluded coverage for the activities of Westberg because she was considered to be the city treasurer. In addition, SDCL 9-14-6 requires Westberg to be individually bonded in her capacity as Finance Officer and the record discloses she was not bonded. * After considering the policy exclusions as well as the bonding requirement imposed by South Dakota law, Employers denied City's claim.

¶4 Prior to Employers insuring City, Great American Insurance Company (Great American) provided the insurance package for City (from October 1, 1983, to October 1, 1990). The policy issued by Great American contained the identical exclusions as Employers' policy regarding bonded employees and treasurers. Great American's coverage concluded during the summer of 1990, when City was advised Great American would not provide continuing coverage because City owned and operated a swimming pool with a diving board.

¶5 Since the swimming pool is a significant source of entertainment in City, the council decided to obtain coverage elsewhere. During June of 1990, City Mayor Cornelius Van Helden (Van Helden) contacted Schwebach to request a coverage quote for identical policy coverage as previously provided by the Great American policy. Schwebach reviewed the current policy and provided a quote, with coverage to be written through Employers. Neither Van Helden nor any other officer, agent or employee of City requested any further review of coverage, or any recommendations on coverage from Schwebach. Schwebach was simply instructed to provide a quote for the same coverage which had previously been in force under Great American's policy. In fact, Van Helden used the phrase "apples to apples," requesting identical coverage. At no time does the record disclose a specific request by City for employee dishonesty coverage to be extended to cover Westberg. City accepted the quote from Employers and a policy was issued, effective October 1, 1990, insuring City for two policy years through October 1, 1992, providing identical coverage as the Great American policy which included the same exclusions for bonded employees and treasurers as Employers' policy.

¶6 Prior to awarding Schwebach and Employers the coverage, neither Van Helden

Page 771

nor any other officer, agent or employee of City had ever read any of the insurance policies in their entirety. The subject of extending the coverage for employee dishonesty to the City Finance Officer never arose between or among any City employees before Schwebach issued the policy. In addition, no officer, employee, or agent of City had any contact with anyone from Employers prior to January of 1993, concerning this issue of extending coverage.

¶7 City claimed Schwebach owed a duty to City of exercising reasonable care as a soliciting agent, breached that duty, and proximately caused damages. City also...

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62 practice notes
  • Fin-Ag v. Pipestone Livestock Auction, No. 23982.
    • United States
    • Supreme Court of South Dakota
    • 18 Junio 2008
    ...107, ¶ 8, 669 N.W.2d 126, 129 (citations omitted) (alteration in original). We decide issues of law de novo. City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 1. SDCL 57A-9-609.1 [¶ 14.] Before commencing an action for conversion against an innocent purchaser or a livestock aucti......
  • Benson v. State, No. 23492.
    • United States
    • Supreme Court of South Dakota
    • 24 Enero 2006
    ...court's conclusions of law. Sherburn v. Patterson Farms, Inc., 1999 SD 47, ¶ 4, 593 N.W.2d 414, 416 (citing City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 771). [¶ 40.] Challenges to the constitutionality of a statute face a significant and heavy burden. Meinders v. Weber, 200......
  • In re Sd Microsoft Antitrust Litigation, No. 23506.
    • United States
    • Supreme Court of South Dakota
    • 16 Noviembre 2005
    ...by this Court de novo. Sherburn v. Patterson Farms, Inc., 1999 SD 47, ¶ 4, 593 N.W.2d 414, 416 (citing City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 771). However, a trial court's decision based on an error of law can be by definition an abuse of discretion. State v. Vento, 1......
  • Kobbeman v. Oleson, No. 19915
    • United States
    • Supreme Court of South Dakota
    • 11 Septiembre 1997
    ...¶5 Insurance agents are usually obligated to obtain the type and amount of insurance applicants request. See City of Colton v. Schwebach, 1997 SD 4, p 10, 557 N.W.2d 769, 771; Rumpza v. Larsen, 1996 SD 87, p 12, 551 N.W.2d 810, 813; Trammell v. Prairie States Ins. Co., 473 N.W.2d 460, 462 (......
  • Request a trial to view additional results
62 cases
  • Fin-Ag v. Pipestone Livestock Auction, No. 23982.
    • United States
    • Supreme Court of South Dakota
    • 18 Junio 2008
    ...107, ¶ 8, 669 N.W.2d 126, 129 (citations omitted) (alteration in original). We decide issues of law de novo. City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 1. SDCL 57A-9-609.1 [¶ 14.] Before commencing an action for conversion against an innocent purchaser or a livestock aucti......
  • Benson v. State, No. 23492.
    • United States
    • Supreme Court of South Dakota
    • 24 Enero 2006
    ...court's conclusions of law. Sherburn v. Patterson Farms, Inc., 1999 SD 47, ¶ 4, 593 N.W.2d 414, 416 (citing City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 771). [¶ 40.] Challenges to the constitutionality of a statute face a significant and heavy burden. Meinders v. Weber, 200......
  • In re Sd Microsoft Antitrust Litigation, No. 23506.
    • United States
    • Supreme Court of South Dakota
    • 16 Noviembre 2005
    ...by this Court de novo. Sherburn v. Patterson Farms, Inc., 1999 SD 47, ¶ 4, 593 N.W.2d 414, 416 (citing City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 771). However, a trial court's decision based on an error of law can be by definition an abuse of discretion. State v. Vento, 1......
  • Kobbeman v. Oleson, No. 19915
    • United States
    • Supreme Court of South Dakota
    • 11 Septiembre 1997
    ...¶5 Insurance agents are usually obligated to obtain the type and amount of insurance applicants request. See City of Colton v. Schwebach, 1997 SD 4, p 10, 557 N.W.2d 769, 771; Rumpza v. Larsen, 1996 SD 87, p 12, 551 N.W.2d 810, 813; Trammell v. Prairie States Ins. Co., 473 N.W.2d 460, 462 (......
  • Request a trial to view additional results

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