National Farmers Union Property and Cas. Co. v. Universal Underwriters Ins. Co., 18892

Decision Date14 February 1995
Docket NumberNo. 18892,18892
Citation534 N.W.2d 63
PartiesNATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, Plaintiff and Appellee, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Defendant and Appellant. . Considered on Briefs
CourtSouth Dakota Supreme Court

Chester A. Groseclose of Richardson, Groseclose, Wyly, Wise & Sauck, Aberdeen, for plaintiff and appellee.

Rodney Freeman, Jr. of Churchill, Manolis, Freeman, Kludt and Kaufman, Huron, for defendant and appellant.

MILLER, Chief Justice.

Appellant Universal Underwriters Insurance Company (Universal) appeals the trial court's decision upholding a "driver restriction" in an automobile insurance policy issued by National Farmers Union Property and Casualty Company (National Farmers). We affirm.

FACTS

The parties stipulated to the facts before the trial court. In Aberdeen, South Dakota, on June 24, 1990, an automobile driven by Kelvin Elsing (Kelvin) collided with an automobile driven by Andrew Merkel and also occupied by Merkel's wife and daughter. The accident resulted in bodily injuries to the Merkels and property damage to their automobile. Kelvin's negligence caused the accident.

E.O. Johnson Motor Company (Johnson), an auto dealership, owned the automobile Kelvin had been driving at the time of the accident. Johnson carried automobile insurance from Universal. Universal's policy included liability coverage for persons who are strangers to the policy, if they are operating an insured automobile with the permission of the insured. Johnson had given Kelvin permission to operate the vehicle involved in the accident.

At the time of the accident, Kelvin was living with his father, Henry Elsing (Henry). National Farmers had issued a policy of insurance to Henry, as the named insured, that provided automobile liability coverage to Henry and others. 1 This policy contained a "Driver Restriction" endorsement, signed by both Henry and Kelvin, that denied liability coverage to Kelvin while he was operating any vehicle to which the policy might apply, except for certain farm trucks.

Both National Farmers and Universal contributed sums toward final settlement of the various claims the Merkels brought against Kelvin. National Farmers then filed a declaratory action in circuit court, seeking reimbursement from Universal for the amounts which National Farmers contributed to the settlement. National Farmers contended it had been under no obligation to provide liability coverage to Kelvin, because the "Driver Restriction" in its policy specifically excludes Kelvin from coverage. Alternatively, in the event it was obligated to provide coverage, National Farmers argued its coverage was secondary to that of Universal. Universal countered that, pursuant to SDCL 58-11-9.3, the "Driver Restriction" was void to the extent of the minimum liability coverage mandated by South Dakota's Financial Responsibility Law. Universal further argued SDCL 58-23-4 operated to establish National Farmers as the primary insurer. The trial court upheld the validity of the "Driver Restriction" and named Universal the primary insurer. The trial court ordered Universal to reimburse National Farmers for the amounts it expended in settlement of the Merkels' claims against Kelvin. Universal appeals.

DECISION

The primary issue in this appeal is whether SDCL 58-11-9.3 allows the "Driver Restriction" endorsement in National Farmers' policy to effectively exclude Kelvin Elsing from liability coverage under the policy. Construction of a statute is a question of law, reviewable de novo. Rural Pennington County Tax Ass'n v. Dier, 515 N.W.2d 841, 843 (S.D.1994).

At the time of the accident, SDCL 58-11-9.3 provided:

An insurance policy covering a private passenger automobile or other motor vehicle registered or principally garaged in this state may by written agreement with the named insured exclude a named individual from coverage or contain a restrictive endorsement reducing the limits of liability or collision coverage when the vehicle is operated by a named person or class of persons, provided, however, that the liability coverage may not be less than the minimum prescribed by chapter 32-35 as amended. 2

National Farmers interprets the requirement of minimum liability coverage in SDCL 58-11-9.3 to apply only in cases where coverage has been reduced, as opposed to totally eliminated. According to this interpretation, no minimum level of liability insurance is required when an individual has been entirely excluded from coverage. Universal counters that the minimum level of coverage prescribed by Chapter 32-35 applies not only to reductions in coverage but also to attempts to exclude named drivers.

In resolving this case, we first turn to the rule of statutory construction known as the doctrine of the last antecedent. Under this doctrine, "a modifying clause is confined to the last antecedent." Rogers v. Allied Mutual Ins. Co., 520 N.W.2d 614, 617 (S.D.1994) (citing Kaberna v. School Bd. of Lead-Deadwood Sch. Dist. 40-1, 438 N.W.2d 542, 543 (S.D.1989); Lewis v. Annie Creek Mining Co., 74 S.D. 26, 33, 48 N.W.2d 815, 819 (1951)). The modifying clause in SDCL 58-11-9.3 is the language "provided, however, that the liability coverage may not be less than the minimum prescribed by chapter 32-35 as amended." The last antecedent before this clause is the phrase "a restrictive endorsement reducing the limits of liability or collision coverage when the vehicle is operated by a named person or class of persons." Therefore, under the doctrine, the minimum liability coverage limits of Chapter 32-35 should be imposed only when the restrictive endorsement reduces the liability limits available to the named person, not when the person has been entirely excluded from coverage.

In general, the doctrine of the last antecedent applies "unless there is something in the subject matter or dominant purpose which requires a different...

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