Gregerson v. Farm Bureau Prop. & Cas. Ins. Co.
| Decision Date | 27 May 2020 |
| Docket Number | CIV. 18-5044-JLV |
| Parties | Patricia GREGERSON, Plaintiff, v. FARM BUREAU PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of South Dakota |
Daniel K. Brendtro, Robert D. Trzynka, Hovland, Rasmus, Brendtro & Trzynka, Prof. PLLC, Sioux Falls, SD, for Plaintiff.
Mark J. Arndt, Evans Haigh & Hinton LLP, Sioux Falls, SD, for Defendant.
Plaintiff Patricia Gregerson brought this diversity action, both individually and on behalf of the estate of her late husband, Leonard Gregerson, alleging defendant Farm Bureau Property and Casualty Insurance Company breached an insurance contract and processed her claim in bad faith.1 (Docket 1). The parties filed cross-motions for summary judgment. Plaintiff moves for partial summary judgment on her breach of contract claim. (Docket 23). Defendant moves for summary judgment on plaintiff's breach of contract and bad faith claims. (Docket 29). The court grants summary judgment to defendant in part on the breach of contract claim, but otherwise concludes genuine questions of material fact remain for trial.
This factual recitation is derived from each party's statement of undisputed material facts and the supporting record materials. (Dockets 24, 26, 32, 32, 34 & 35). The court views these facts in the light most favorable to plaintiff, as the nonmoving party on the bad faith claim. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Plaintiff operates a ranch near Fairburn, South Dakota. (Docket 31 at ¶ 1). She currently maintains approximately 400 head of cattle, with the assistance of her son, Kyle Gregerson. (Docket 26-1 at p. 7). Each year, plaintiff summers "a large portion" of her herd away from her ranch at other pastures. Id. at pp. 20-21. In 2014, plaintiff arranged with Karl Knutson to care for approximately 135 pregnant cows during the spring and summer of that year at his family ranch in Vale, South Dakota.2 Id. at pp. 23-24, 27. Mr. Knutson was friends with Kyle Gregerson. Id. at p. 26. Plaintiff considered Mr. Knutson an experienced rancher. Id. at p. 24. Mr. Knutson was willing to take the cows in the early spring "and calve them out for a very, very decent price." Id. at p. 24. The Gregersons "thought [they] had stepped on a gold mine[.]" Id. They "never heard a bad thing" about Mr. Knutson and "thought that this would be a good deal." Id. The Gregersons and Mr. Knutson did not reduce their arrangement to writing. Id. at p. 33.
The Gregersons became suspicious of Mr. Knutson as 2014 progressed. Before they delivered their cows to Mr. Knutson, they asked if he carried insurance. Id. at p. 31. He showed them a paper that "wasn't actually an insurance policy" and refused to let them photograph it. Id. The Gregerson men wanted to check on their cows, but Mr. Knutson made excuses to prevent their visits. Id. at p. 35. Plaintiff's daughter Kaycie Gregerson heard Mr. Knutson had been telling others he had 11 sets of twin calves, which she and plaintiff found outlandish. (Dockets 26-1 at p. 37 & 26-3 at p. 4). At some point while Mr. Knutson had possession of the cows, Ms. Gregerson investigated his background and found he had "prior arrests" and that people "had made actual complaints" about him in relation to livestock issues. (Docket 26-1 at p. 53).
According to a letter from Leonard Gregerson to defendant, Mr. Knutson shot one of the approximately 135 pregnant cows in February 2014 because it was injured. (Docket 26-4 at p. 65). In March, Mr. Knutson told the Gregersons that five of the cows lost their calves. Id. The Gregersons took the five cows back to their ranch. Id. On May 29, Mr. Knutson, the Gregersons and others branded approximately 125 calves.3 (Docket 26-3 at p. 2). With approximately 129 pregnant cows in Mr. Knutson's custody, Mr. Gregerson believed there should have been more calves. (Docket 26-4 at p. 66). Mr. Knutson claimed "he still had a few cows up at the calving pasture." Id. According to an e-mail summary authored by Ms. Gregerson, Mr. Knutson hauled the calves to the branding site, preventing "an accurate count of the precise head of cattle." (Docket 26-3 at p. 2).
On September 15, according to Ms. Gregerson's e-mail, the Gregerson men, Mr. Knutson and others vaccinated the cattle. (Docket 26-3 at p. 3). The Gregersons believed "quite a few" of their cattle were missing during the vaccination
. (Docket 26-1 at p. 26). They returned on September 22 to search for the missing cattle. (Docket 26-3 at p. 3). Mr. Knutson said he would hire a pilot to conduct an aerial search for the cows, which he thought could be hiding in treed areas. Id. The Gregersons found this odd, since the Knutson land "is pretty flat" with "almost no trees" and "no deep gulleys or treed areas where cattle could get lost[.]" (Dockets 26-3 at p. 3 & 26-4 at p. 66). On October 4, the Gregersons returned to Mr. Knutson's land without him present to search for the cattle. (Docket 26-3 at p. 3). Kyle Gregerson and two friends searched the area and surrounding pastures on four-wheelers. (Docket 26-4 at p. 66). Plaintiff estimated they searched 20-30,000 acres. (Docket 26-1 at p. 62). They found no cattle, downed fences or carcasses. Id.
On October 9, the Gregersons retrieved their remaining cattle, 113 cows and 95 calves in all. (Dockets 26-3 at p. 4 & 26-4 at p. 66). They believed they should have had 129 cows and at least 122 calves, so they calculated a loss of 16 cows and 27 calves. Id. On October 30, the Gregersons reported their cattle as stolen to the Meade County Sheriff's Office.4 (Docket 26-4 at p. 143). The Gregersons believed Mr. Knutson stole the cattle. (Docket 26-1 at p. 36). After making their police report, they learned other suspicious information about Mr. Knutson. Mr. Knutson's hired man told them Mr. Knutson had been claiming they sold him the cattle. (Docket 26-4 at p. 67). Another rancher, Karen Bryan, claimed Mr. Knutson reneged on an agreement to pasture her cattle. Id. Leonard Gregerson reported they "heard about a lot of other shady deals [Mr. Knutson] got into" but did not provide further details. Id.
On May 19, 2015, Mr. Knutson was indicted for lying to the federal government in a matter unrelated to this case. United States v. Knutson, CR. 15-50064 (Docket 2) . He pled guilty, admitting to falsely claiming in an application for federal disaster aid that he lost 129 head of cattle in a blizzard. Id. at Dockets 24 & 26 (D.S.D. Oct. 28, 2015).
The Gregersons held a "farm policy" with defendant.5 (Docket 24 at ¶ 1). The policy covered loss " ‘caused by’ theft or attempted theft." (Docket 31-3). However, the theft coverage is subject to a number of exclusions. At issue here, loss caused by "losing, misplacing, mysterious disappearance or where the only evidence of loss is a shortage disclosed upon taking inventory" is excluded. Id.
The Gregersons filed a claim with defendant on November 21, 2014. (Docket 26-4 at pp. 124-34). Mike Elliott, apparently an adjuster for defendant, took statements on November 24 by telephone from Leonard Gregerson and Carl Oberlitner, who loaned Mr. Gregerson the money to purchase the cattle. Id. at pp. 107-11, 141-42, 149-58. The statements were transcribed. Id. Mr. Gregerson told Mr. Elliott plaintiff discovered Mr. Knutson had "a few charges" against him. Id. at p. 152. He also said his son and "a bunch of his buddies" searched the area around Mr. Knutson's pasture and didn't find the cattle. Id. at p. 153. Mr. Gregerson noted "[t]hat many dead cattle" should have been easily located because of their smell. Id. at p. 155. He told Mr. Elliott they "rode a lot of that country[,] probably 25, 30,000 acres up there and never saw nothin’." Id. at p. 156. He believed Mr. Knutson stole the cattle. Id. at p. 155.
According to defendant's claim notes, an adjuster left a message for Mr. Knutson on January 7, 2015, but apparently did not succeed in contacting him.6 Id. at p. 140. On January 13, the adjuster spoke to an agent at Mr. Knutson's insurance company. Id. The agent reported that Mr. Knutson "ha[d] gone into hiding and [wa]s not returning phone calls." Id. The adjuster also spoke to officers at the Meade County Sheriff's Office multiple times. Id. at pp. 138-40. The claim file contains a letter, dated February 3, from Investigator Christopher Williams stating that the Gregersons were not suspects in the theft but that "[t]he information that has been collected indicates other persons involved[.]" Id. at p. 143. On February 27, an officer advised the adjuster he believed the Gregersons were victims of "cattle rustling" but "was unable to prove it[.]" Id. at p. 138.
On February 25, the adjuster spoke with Mr. Gregerson again. Id. Mr. Gregerson "agree[d]"—presumably with the adjuster—that Mr. Knutson likely "converted the livestock to his own use." Id. The adjuster "explained" the inventory discovery exception to coverage. Id. The adjuster wrote the claim "should be concluded" shortly. Id.
Defendant first denied the Gregerson claim in a letter dated February 17. Id. at p. 52. The letter stated, "The facts, as confirmed to date, indicate that you had turned your livestock over to a custom feeder and then notified us of a significant shortage upon the taking of an inventory on the date of the loss indicated above." Id. The letter reproduced the inventory discovery exception. Id. at p. 55. Defendant sent an identical letter to the Gregersons on March 24. (Docket 26-6).
The denial letters also reproduced a policy module which was not in the policy plaintiff purchased. See Docket 26-4 at pp. 56-58 (); Docket 26-12 at p. 21 (...
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