Colonial Ins. Co. of California v. Lundquist, 18969

• Court: Supreme Court of South Dakota
• Citation: 539 N.W.2d 871
• Docket Number: No. 18969,18969
• Parties: COLONIAL INSURANCE COMPANY OF CALIFORNIA, Plaintiff and Appellant, v. Chadd A. LUNDQUIST, Defendant, and Carol Allen, Garry Allen, and Garry Allen as Special Administrator of the Estate of Sharon Allen, Defendants and Appellees.
• Decision Date: 15 November 1995

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539 N.W.2d 871 COLONIAL INSURANCE COMPANY OF CALIFORNIA, Plaintiff and Appellant,
v.
Chadd A. LUNDQUIST, Defendant,
and
Carol Allen, Garry Allen, and Garry Allen as Special
Administrator of the Estate of Sharon Allen,
Defendants and Appellees. No. 18969. Supreme Court of South Dakota. Submitted on Briefs May 22, 1995.
Decided Nov. 15, 1995.

Michael J. Schaffer, Davenport, Evans, Hurwitz & Smith, Sioux Falls, for plaintiff and appellant.

Albert Steven Fox, Larson, Sundall, Larson, Schaub & Fox, Chamberlain, for defendants and appellees.

David A. Gerdes of May, Adam, Gerdes and Thompson, Pierre, for Amicus Curie National Association of Independent Insurers.

RUSCH, Circuit Judge.

Colonial Insurance Company of California (Colonial) brought this action pursuant to SDCL 21-24 for a declaratory judgment to determine its rights and obligations in connection with a lawsuit brought against Chadd Lundquist (Lundquist) by the estate of Sharon Allen (Estate). Colonial moved for summary judgment. The trial court denied the motion for summary judgment and Colonial appealed. We affirm.

FACTS

Colonial issued an automobile liability insurance policy to Lundquist on June 28, 1990. The policy specifically covered Lundquist's vehicle, a 1980 Jeep CJ5. The policy provided liability coverage, uninsured and underinsured motorist coverage, medical payments, and car damage (collision and comprehensive) coverage.

On July 13, 1990, Lundquist, who was nineteen years old, Sharon Allen (Allen), who was fourteen years old, and four others left Chamberlain and drove to a nearby lake for a party which included underage consumption of alcohol. ¹ After the weather turned cool, Allen asked Lundquist for permission to drive the Jeep back to town so that she and others could get jackets. After several requests, Lundquist agreed to let Allen drive his vehicle. On the way back to town, the Jeep tipped over and Allen was killed.

Allen's estate sued Lundquist for negligent entrustment of the Jeep to Allen. Estate claims that Lundquist negligently entrusted his Jeep to a young, inexperienced driver who had been drinking, who did not have a valid driver's license and who was unfamiliar with the handling characteristics of high-center off road vehicles. ²

Colonial claims that the policy does not cover bodily injury or death of the named policyholder or any other "insured person." The insurance company further contends that "insured person," as defined by the policy, includes any person using Lundquist's car with his permission. ³ Since Allen was using

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the Jeep with Lundquist's permission, Colonial claims she was an "insured person" and therefore she is excluded from recovery for bodily injury under the policy. ⁴ DECISION

I. STANDARD OF REVIEW

This case involves construction of the Colonial insurance policy. The construction of a written contract is a question of law. Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752, 755 (S.D.1994). Where an insurance policy is susceptible to different interpretations, the interpretation most favorable to the insured must be adopted. Prokop v. North Star Mutual Ins. Co., 457 N.W.2d 862, 864 (S.D.1990). The trial court's construction of an insurance contract is a question of law which is reviewed de novo. State Farm Mutual Auto. Ins. Co. v. Vostad, 520 N.W.2d 273, 275 (S.D.1994). The burden of showing no duty to defend rests on the insurer. Hawkeye-Security Insurance Co. v. Clifford, 366 N.W.2d 489, 492 (S.D.1985); Fort Pierre v. United Fire and Cas. Co., 463 N.W.2d 845, 847 (S.D.1990).

II. SUMMARY JUDGMENT

In this case Colonial moved for summary judgment. Summary judgment is an extreme remedy which should be awarded only when the truth is clear. It is not a substitute for a trial when there are genuine issues of material fact. The burden of proof is upon the moving party to show clearly that there are no genuine issues of material fact and that they are entitled to judgment as a matter of law. A mere surmise that a party will not prevail at trial is not a sufficient basis to grant summary judgment. In deciding a motion for summary judgment, the evidence must be viewed most favorably to the non-moving party. However, where there are no genuine issues of material fact, summary judgment is looked upon with favor and is particularly adaptable to expose sham claims and defenses. Wilson v. Great Northern Railway Co., 83 S.D. 207, 157 N.W.2d 19 (S.D.1968).

III. EXCLUSIONS FROM POLICY COVERAGE

The trial court held that SDCL 58-11-9.3 authorizes the exclusion of named persons or classes of persons from coverage by an insurance policy, but that the policy still must provide the minimum amount of insurance required by SDCL 32-35-70. ⁵ However, after that decision by the trial court, this Court held that SDCL 58-11-9.3 authorizes complete exclusion from coverage for a named person and that no minimum amount of coverage is required for excluded persons. National Farmers v. Universal, 534 N.W.2d 63 (S.D.1995). ⁶

Although we find that the expressed reason for the trial court's decision is not correct, we believe that it reached the correct result.

IV. NEGLIGENT ENTRUSTMENT

This case is different from the usual "insurance coverage" case. Although Allen was driving the Jeep at the time of the accident, the suit instituted by her Estate does not claim negligence on her part. This is not a "negligent operation" case. The suit claims negligence on the part of Lundquist in allowing Allen to use the car. It alleges negligent entrustment and seeks to hold Lundquist, who is the policyholder or "named insured," liable for his own negligence in

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allowing Allen to drive his car. As pointed out above, South Dakota has recognized negligent entrustment as a cause of action. The essence of the suit is not a claim that Colonial should pay Allen's Estate for Allen's negligent driving but rather that it should pay for Lundquist's negligence in entrusting his high-centered off road vehicle to a young and inexperienced driver who had been drinking. The negligence at issue is Lundquist's negligence, not Allen's negligence.

Clearly Allen cannot claim that she (Allen) was negligent in driving the car and that she can sue herself for her own negligence and that Colonial will be responsible for paying any resulting judgment. ⁷ We do not agree with Colonial's argument that SDCL 58-11-9.3 allows them to write an exclusion which excludes coverage for the negligent actions of the "named insured."

V. LIABILITY COVERAGE

Colonial claims that under SDCL 58-11-9.3, it can exclude Allen from any coverage under the policy. ⁸

SDCL 58-11-9.3 provides:

An insurance...