Kaiser Trucking, Inc. v. Liberty Mut. Fire Ins. Co., 29612-r-JMK

CourtSupreme Court of South Dakota
Writing for the CourtKERN, JUSTICE
Citation2022 S.D. 64
PartiesKAISER TRUCKING, INC. and DAVID SIMONS, Plaintiffs and Appellants, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant and Appellee.
Docket Number29612-r-JMK
Decision Date26 October 2022

2022 S.D. 64

KAISER TRUCKING, INC. and DAVID SIMONS, Plaintiffs and Appellants,
v.

LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant and Appellee.

No. 29612-r-JMK

Supreme Court of South Dakota

October 26, 2022


CONSIDERED ON BRIEFS NOVEMBER 8, 2021

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE JOSHUA HENDRICKSON Judge

ROBERT J. GALBRAITH JARED D. NOONEY OF NOONEY & SOLAY, LLP RAPID CITY, SOUTH DAKOTA ATTORNEYS FOR PLAINTIFFS AND APPELLANTS.

JACK H. HIEB ZACHARY W. PETERSON OF RICHARDSON, WYLY, WISE, SAUCK & HIEB, LLP ABERDEEN, SOUTH DAKOTA ATTORNEYS FOR DEFENDANT AND APPELLEE.

OPINION

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KERN, JUSTICE

[¶1.] David Simons, an agent of Kaiser Trucking, Inc., was in an automobile accident with an insured of Liberty Mutual Fire Insurance Company. Kaiser Trucking and Simons received default judgments against the insured and, after the judgments were returned unsatisfied, pursued an action against Liberty Mutual to indemnify the judgments against its insured. Liberty Mutual moved to dismiss Kaiser Trucking and Simons's complaint under SDCL 15-6-12(b)(5), alleging they failed to plead a condition precedent to coverage under the policy, which required prompt notification to Liberty Mutual of the accident or of the lawsuit against its insured. The circuit court ruled in Liberty Mutual's favor and dismissed the complaint. We reverse and remand for further proceedings.

Factual and Procedural Background

[¶2.] On September 8, 2015, Bianca Spotted Thunder was in an automobile accident with David Simons, an agent of Kaiser Trucking. Simons was driving a semi-truck and trailer on a highway in Oglala Lakota County. Spotted Thunder was a permissive user of the vehicle she was driving, an SUV owned by her father, Charles Spotted Thunder. He was insured under a Liberty Mutual policy. The police report indicates that Spotted Thunder's vehicle crossed over the center line and hit the semi-truck Simons was driving. At the accident scene, law enforcement observed that Spotted Thunder had a strong odor of an alcoholic beverage on her breath and, after a preliminary breath test, her blood alcohol content registered above 0.1. Some of Spotted Thunder's statements at the scene suggested that the accident may have been an attempted suicide.

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[¶3.] On July 19, 2017, Kaiser Trucking and Simons commenced an action against Spotted Thunder, alleging she was negligent in the operation of her motor vehicle and seeking to recover damages from the accident. She failed to answer, and they received a default judgment against her on December 6, 2019. Kaiser Trucking was awarded $36,977.06 and Simons $146,619.80, and the court awarded both plaintiffs pre- and post-judgment interest. These judgments remain unsatisfied.

[¶4.] On December 1, 2020, Kaiser Trucking and Simons (for simplicity, hereinafter Kaiser Trucking) filed a complaint against Liberty Mutual Group, Inc. requesting a declaration that Liberty Mutual be ordered to "pay the Judgment entered against its insured, Bianca Spotted Thunder," and requesting indemnification for the amount of the judgments levied against Spotted Thunder.[1]

[¶5.] On December 30, 2020, Liberty Mutual moved to dismiss Kaiser Trucking's complaint under SDCL 15-6-12(b)(5) for failure to state a claim upon which relief may be granted. Liberty Mutual asserted that, under SDCL 58-23-1, an injured party may only bring an action for an unsatisfied default judgment against an insurer "under the terms of the [insurance] policy . . . ." Liberty Mutual then argued that the complaint did not allege facts showing that the accident with

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Spotted Thunder came within the coverage of its policy or that Spotted Thunder complied with her obligations under the policy, which Liberty Mutual alleged were conditions precedent to its obligation to defend and indemnify the claim. Specifically, Liberty Mutual emphasized that Kaiser Trucking failed to allege that Spotted Thunder, or Kaiser Trucking itself, provided notice of the accident to Liberty Mutual.

[¶6.] In support of its motion to dismiss, Liberty Mutual attached a copy of Charles Spotted Thunder's insurance policy in effect at the time of the accident, noting that the policy had been referenced in Kaiser Trucking's complaint. The Spotted Thunder policy, numbered AO22484037547058 (hereinafter the Policy), was in effect from August 4, 2015, to August 4, 2016. In Part E, the Policy sets forth the insured's duties after an accident or loss, providing:

We have no duty to provide coverage under this policy unless there has been full compliance with the following duties
A. We must be notified promptly of how, when and where the accident or loss happened. Notice should also include the names and addresses of any injured persons and of any witnesses.
B. A person seeking any coverage must:
1. Cooperate with us in the investigation, settlement or defense of any claim or suit.
2. Promptly send us copies of any notices or legal papers received in connection with the accident or loss.

[¶7.] Kaiser Trucking moved to amend its complaint on January 25, 2021, to change the defendant from Liberty Mutual Group, Inc. to Liberty Mutual Fire Insurance Company. In its motion, Kaiser Trucking stated that it did not have a copy of the insurance policy provided with Liberty Mutual's motion to dismiss at the time it filed its complaint. Kaiser Trucking attached a copy of the accident report

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from the September 8, 2015 accident as an exhibit to its motion to amend the complaint. The accident report listed Spotted Thunder's insurance company as "23043 - Liberty Mutual Ins. Company" and the policy number as "A02-248-403754-70 4 8."[2]

[¶8.] Also on January 25, 2021, Kaiser Trucking filed its response to Liberty Mutual's motion to dismiss. Kaiser Trucking argued that the issues raised by Liberty Mutual-whether the accident came within coverage of the policy and whether Spotted Thunder provided notice to Liberty Mutual-were invocations of policy exclusions, which the insurer had the burden to prove, not conditions precedent, which Liberty Mutual argued must be pled in the complaint. Kaiser Trucking further argued that it had no obligation to notify Liberty Mutual of the proceeding it filed against Spotted Thunder in which it obtained a default judgment.

[¶9.] Liberty Mutual filed a reply brief on January 28, 2021. It argued that providing notice of the accident to Liberty Mutual was a condition precedent, not an exclusion. Therefore, Kaiser Trucking had the duty to allege in its complaint that notice had been given. Liberty Mutual contended that Kaiser Trucking's "intentional failure to contact Liberty Mutual was done at their own peril." Liberty Mutual also emphasized that whether the accident was within the scope of the Policy's coverage was another condition precedent that was not sufficiently pled in the complaint due to the potentially intentional nature of Spotted Thunder's actions in causing the accident.

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[¶10.] A hearing on Liberty Mutual's motion to dismiss was held on February 1, 2021. The circuit court granted Kaiser Trucking's motion to amend its complaint to state the correct defendant, which Liberty Mutual did not contest. The circuit court heard the arguments of counsel for Kaiser Trucking and for Liberty Mutual regarding Liberty Mutual's SDCL 15-6-12(b)(5) motion to dismiss and took the matter under advisement.

[¶11.] The circuit court announced its decision on February 22, 2021, granting Liberty Mutual's motion to dismiss. The circuit court issued a written order on March 3, 2021, finding that:

notice of suit against an insured is a prerequisite to a liability insurer's duty to indemnify, and there is no allegation in the Amended Complaint that Defendant Liberty Mutual Fire Insurance Company was ever provided with notice of the lawsuit against Bianca Spotted Thunder, 51CIV17-001270. Therefore, plaintiffs have failed to state a plausible claim for relief.

Judgment of dismissal was filed on March 5, 2021.

[¶12.] Kaiser Trucking appeals, raising one issue which we restate as follows: whether the circuit court erred in finding that notice to Liberty Mutual of a claim against its insured was a condition precedent under Liberty Mutual's insurance policy that must have been alleged in the complaint in order to state a claim upon which relief could be granted.

Standard of Review

[¶13.] Whether a complaint fails to state a claim upon which relief can be granted "is a question of law we review de novo." Nooney v. Stubhub, Inc., 2015 S.D. 102, ¶ 9, 873 N.W.2d 497, 499. "While a complaint attacked by a Rule 12(b)[(5)] motion to dismiss does not need detailed factual allegations, a plaintiff's

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obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions . . . . Factual allegations must be enough to raise a right to relief above the speculative level." Sisney v. Best Inc., 2008 S.D. 70, ¶ 7, 754 N.W.2d 804, 808 (second alteration in original) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007)). We test a motion to dismiss under SDCL 15-6-12(b)(5) for "the legal sufficiency of the pleading, not the facts which support it." Hallberg v. South Dakota Bd. of Regents, 2019 S.D. 67, ¶ 10, 937 N.W.2d 568, 572 (quoting N. Am. Truck & Trailer, Inc. v. M.C.I. Commc'n. Servs., 2008 S.D. 45, ¶ 6, 751 N.W.2d 710, 712). Therefore, we "accept the material allegations as true and construe them in a light most favorable to the pleader to determine whether the allegations allow relief." Sisney, 2008 S.D. 70, ¶ 8, 754 N.W.2d at 809.

[¶14.] SDCL 15-6-8(a) sets forth the requirements for a pleading, specifically, that a pleading shall contain a "short and plain statement of the claim showing that the pleader is entitled to relief"...

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