Hanson v. North Star Mut. Ins. Co.

• Decision Date: 12 November 1999
• Docket Number: No. CIV. 99-3014.,CIV. 99-3014.
• Citation: 71 F.Supp.2d 1007
• Parties: 1999 D.S.D. 34 Robert HANSON, Plaintiff, v. NORTH STAR MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of South Dakota

71 F.Supp.2d 1007

1999 D.S.D. 34 Robert HANSON, Plaintiff, v. NORTH STAR MUTUAL INSURANCE COMPANY, Defendant.

No. CIV. 99-3014.

United States District Court, D. South Dakota, Central Division.

November 12, 1999.

Lee C. "Kit" McCahren, Olinger, Lovald, Robbennolt, McCahren & Reimers, Pierre, SD, for Plaintiff.

Michael J. Schaffer, Davenport, Evans, Hurwitz & Smith, Sioux Falls, SD, for Defendant.

ORDER GRANTING SUMMARY JUDGMENT

KORNMANN, District Judge.

BACKGROUND

[¶ 1] On May 10, 1997, defendant North Star Mutual Insurance Company ("North Star"), issued a renewal of a so-called farmowners (sic) insurance policy to the plaintiff, Robert Hanson ("Hanson"). The policy provided coverage for Section 34, Township 112, Range 71, in Hyde County, South Dakota. No one resided on the property insured by North Star. Instead, Hanson resided in a mobile home on land (not on Section 34) located a mile north of the North Star insured premises. Hanson's residential property was insured by Central Farm Mutual, the status of which is uncertain to the Court. Such policy apparently did not provide, in any event, any liability coverage. What motor vehicle policy or policies Hanson had is also not in the record.

[¶ 2] On August 2, 1997, Beverly Reisdorff and her ten year old daughter, Elizabeth Reisdorff ("Elizabeth"), visited Hanson's mobile home to use his computer for a 4-H project. Neither of the Reisdorffs were performing duties for Hanson nor were they Hanson's employees. While at Hanson's mobile home, Elizabeth asked to use his Polaris four-wheeler and Hanson granted permission. The four-wheeler motor has a 300 cubic inch displacement (which would allow the vehicle to be registered as a motor vehicle in South Dakota because of the displacement), was normally kept at Hanson's residence, and was generally used to travel to fields or similar activities. Hanson did not ever actually register the vehicle so it could be legally operated on public highways. Hanson never informed North Star or his North Star insurance agent about the four-wheeler.

[¶ 3] Elizabeth drove the four wheeler from Hanson's home to the farm land insured by North Star. While returning to Hanson's home, Elizabeth drove the vehicle on a county gravel road. She lost control of the vehicle, went into a ditch, then went through or over a woven wire fence where the vehicle tipped over and Elizabeth was injured. The tip-over and personal injuries occurred on ranch land which was part of the Eagle Pass Ranch, property which is not owned or controlled in any manner by Hanson.

[¶ 4] After learning of the claim, North Star had its adjuster investigate the claim and take a statement from Hanson. Hanson told the adjuster about the events surrounding the accident, consistent with what is set forth above. Based on the adjuster's investigation, North Star denied coverage on the basis that Hanson's policy did not contain a so-called incidental motorized vehicle endorsement and, in addition, the accident had occurred off the insured premises. Approximately two weeks after the accident, Hanson purchased a special endorsement to the North Star policy for incidental motorized vehicle coverage to add the four wheeler.

[¶ 5] In November of 1997, Hanson was sued in South Dakota Circuit Court, Hyde County, for Elizabeth's injuries and her mother's payment of the medical bills. The complaint alleged that Hanson had been negligent in entrusting the four-wheeler to Elizabeth. Hanson, through counsel, contended that the lawsuit was covered by the North Star policy. Hanson claimed that the alleged negligent entrustment, if any, occurred on the insured premises (which is clearly not accurate since the entrustment occurred at the mobile home site) and, therefore, according to Hanson the place of the personal injuries was not material. In this same letter, the defense of the state court action was tendered to North Star. The tender was rejected. In March of 1999, Hanson entered into a stipulation with Elizabeth's mother, individually (the mother being the party responsible for Elizabeth's medical bills) and as guardian ad litem for Elizabeth, agreeing to pay $15,592.84 for medical expenses. In exchange, the lawsuit against Hanson would not be pursued unless his insurance would ultimately cover the matter. North Star had no participation in such stipulation.

[¶ 6] Hanson instituted this action on May 13, 1999, asserting jurisdiction pursuant to 28 U.S.C. § 1332. In his complaint, Hanson alleged that North Star acted in bad faith by denying coverage and failing to defend the Reisdorff lawsuit in state court. North Star filed a counterclaim for a declaratory judgment and later a motion for summary judgment, Doc. 10. North Star claims it is entitled to summary judgment because Hanson has failed to show any bad faith. Specifically, North Star argues that bad faith cannot exist since the insurance policy clearly and unambiguously does not cover the claim, this claim being excluded under the express and unambiguous terms of the policy.

[¶ 7] North Star filed a statement of undisputed material facts (Doc. 12). Hanson did not file any "separate, short, and concise statement of the material facts as to which it is contended that there exists a genuine issue to be tried" as permitted by D.S.D.LR 56.1(C). "All material facts set forth in the statement required to be served by the moving party will be deemed to be admitted unless controverted by the statement required to be served by the opposing party." D.S.D.LR 56.1(D). Thus, all facts set forth in Doc. 12 are established for the purpose of the summary judgment motion under consideration.

DECISION

[¶ 8] Summary judgment is proper where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Donaho v. FMC Corp., 74 F.3d 894, 898 (8th Cir.1996). The United States Supreme Court has held that:

The plain language of Rule 56(c) mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265

(1986). "A material fact dispute is genuine if the evidence is sufficient to allow a reasonable jury to return a verdict for the non-moving party." Landon v. Northwest Airlines, Inc., 72 F.3d 620, 624 (8th Cir. 1995). In considering the motion for summary judgment, this Court must view the facts in the light most favorable to Hanson and give Hanson the benefit of all reasonable inferences that can be drawn from the facts. Donaho, 74 F.3d at 897-898.

I. Defending the Lawsuit

[¶ 9] Hanson argues that North Star had a duty to defend the Reisdorff lawsuit in state court and failure to do so is bad faith. In support of his argument, Hanson cites North Star Mut. Ins. Co. v. Kneen: "[I]f it is clear or arguably appears from the face of the pleadings in the action against the insured that the alleged claim, if true, falls within policy coverage, the insurer must defend." 484 N.W.2d 908, 912 (S.D.1992). In response, North Star argues that the insurance policy clearly did not cover the claim; therefore, bad faith cannot exist. See Stene v. State Farm Mutual Auto. Ins., 583 N.W.2d 399, 403 (S.D.1998).

[¶ 10] North Star has the burden of showing that it had no duty to defend Hanson and that the claim clearly falls outside of coverage provided by the policy. North Star Mut. Ins. Co. v. Kneen, supra, at 912, citing City of Fort Pierre v. United Fire & Cas. Co., 463 N.W.2d 845, 847 (S.D.1990), Bayer v. Employers Reinsurance Corp., 383 N.W.2d 858, 861 (S.D. 1986), and Hawkeye-Security Ins. Co. v. Clifford, 366 N.W.2d 489, 492 (S.D.1985)). "If, after considering the complaint and where appropriate, other evidence of record, doubt exists whether the claim against the insured arguably falls withing the policy coverage, such doubts must be resolved in favor of the insured." Id. For the purposes of interpreting insurance polices, state law governs. TNT Speed & Sport Ctr., Inc. v. Am. States Ins. Co., 114 F.3d 731, 732 (8th Cir.1997). South Dakota law controls matters of substantive law in this action.

[¶ 11] North Star argues that the claim is not covered by the insurance policy because the policy specifically excludes coverage for bodily injury resulting from the use or entrusting of motorized vehicles absent an incidental motorized vehicle endorsement. The Reisdorff claims and lawsuit were about claimed negligent entrustment and nothing else. The policy explicitly states:

This policy does not apply to:

* * * * * *

3. bodily injury or property damage which results directly or indirectly from the ownership, operation, maintenance, use, occupancy, renting, loaning, entrusting, supervision, loading or unloading of motorized vehicles or watercraft owned, operated, or used by, or rented or loaned to an insured. We do pay:

a. for bodily injury to a person in the course of performing duties as a domestic employee; or

b. if coverage is provided for by an Incidental Motorized Vehicle or Watercraft Coverage;

* * * * * *

5. bodily injury or property damage which results from liability imposed by law upon an insured for the use of a motorized vehicle, aircraft or watercraft, except if coverage is provided by an Incidental Motorized Vehicle or Watercraft Coverage.

Schaffer affidavit, exhibit B, policy form NS-3, page 10 (emphasis in original).

[¶ 12] The language set forth above is found in a section of the policy entitled "EXCLUSIONS THAT APPLY TO LIABILITY COVERAGES." Beneath this heading is the following subheading: ...