National Farmers Union Property & Cas. Co. v. Bang

CourtSupreme Court of South Dakota
Citation516 N.W.2d 313
Decision Date18 May 1994
Docket Number18194,Nos. 18173,18195,s. 18173
PartiesNATIONAL FARMERS UNION PROPERTY & CASUALTY COMPANY, a Colorado corporation, Plaintiff and Appellee, v. Sookie S. BANG and American Concept Insurance Company, a South Dakota insurance company, Defendants and Appellants, and Michael L. Bergstresser, John M. Ligtenberg, U.S. West Communications, a Colorado corporation, and Horace Mann Service Corp., an Illinois corporation, Defendants and Appellees, and Brenda J. Carroll, Defendant.

Steven J. Helmers, of Lynn, Jackson, Shultz & Lebrun, Rapid City, for appellee National Farmers Union Property & Cas. Co.

Ronald R. Kappelman, Rapid City, for appellants.

Kenneth E. Barker and Brad A. Schrieber of Quinn, Eiesland, Day & Barker, Belle Fourche, for appellee Michael L. Bergstresser.

Talbot J. Wieczorek and G. Verne Goodsell of Gunderson, Palmer, Goodsell & Nelson, Rapid City, for appellees John M. Ligtenberg and Horace Mann Serv. Corp.

Lon J. Kouri and Martin Oyos of May, Johnson, Doyle & Becker, Sioux Falls, for appellee U.S. West Communications.

MILLER, Chief Justice.

This is an appeal from a declaratory judgment finding:

1) A self-insured entity is required to provide uninsured motorist coverage;

2) A self-insured entity's uninsured motorist coverage limit is $100,000;

3) A vehicle owner is the primary uninsured carrier;

4) Both a self-insured employer and personal UIM carrier are entitled to offsets for worker's compensation benefits paid.

We affirm in part and reverse in part.


Michael J. Bergstresser was involved in three automobile accidents which, he alleges, cumulatively caused him serious personal injury. This declaratory judgment action arises out of the second accident in which Bergstresser, presumably in the course of his employment, was driving a vehicle belonging to his employer, U.S. West Communications (U.S. West), when he was allegedly struck by a vehicle operated by Brenda J. Carroll, an uninsured driver. The drivers of the automobiles involved in all three accidents, John M. Ligtenberg, Brenda J. Carroll, and Sookie S. Bang, are defendants in this action, along with U.S. West and Bergstresser's personal uninsured motorist carrier, National Farmers Union Property & Casualty Company (National Farmers).

U.S. West is self-insured for both worker's compensation and automobile liability insurance. Bergstresser's automobile policy with National Farmers provided uninsured motorist coverage (UIM) up to a limit of $100,000 per person.

National Farmers instituted this action to ascertain the extent of its coverage under Bergstresser's policy and to determine whether U.S. West was required to provide UIM. The trial court held that U.S. West was obligated to provide UIM, that U.S. West's UIM obligation was limited to $100,000, that U.S. West was the primary insurer and National Farmers the secondary or excess carrier, and that both U.S. West and National Farmers were entitled to setoffs for the amount of worker's compensation benefits paid.

Sookie S. Bang and her automobile liability insurance carrier, American Concept Insurance Company, appeal the trial court's determination that the amount of U.S. West's UIM coverage is limited to $100,000 and that U.S. West and National Farmers are entitled to setoffs in the amount of worker's compensation benefits paid to Bergstresser.

U.S. West filed notice of review as to the trial court's finding that it was required to provide UIM and that it was the primary UIM insurer. 1


The construction of statutes is a question of law. Vellinga v. Vellinga, 442 N.W.2d 472, 473 (S.D.1989). Conclusions of law are reviewed de novo. Rusch v. Kauker, 479 N.W.2d 496, 499 (S.D.1991). In construing statutes, this court looks at the intention of the lawmakers as expressed in the plain meaning and effect of the words and phrases used in the statute. SDCL 2-14-1; In re Petition of Famous Brands, Inc., 347 N.W.2d 882, 885 (S.D.1984). The provisions of the uninsured motorist statutes are construed liberally in favor of coverage. Clark v. Regent Ins. Co., 270 N.W.2d 26, 29 (S.D.1978).



A. Self-insurers are required to provide UIM coverage.

The trial court found as a matter of law that self-insurers are required to provide UIM. U.S. West is a self-insurer under SDCL ch. 32-35. SDCL 32-35-113 provides in relevant part:

Every driver or owner of a motor vehicle shall at all times maintain in force one of the forms of financial responsibility on the motor vehicle by one of the following methods:

* * * * * *

(4) Having a certificate of self-insurance, as provided in Secs. 32-35-90 and 32-35-91, supplemented by an agreement by the self-insurer that, with respect to accidents occurring while the certificate is in force, he will pay the same amounts that an insurer would have been obligated to pay under an owner's motor vehicle liability policy if it had issued such a policy to said self-insurer[.] (Emphasis added.)

All insurance policies issued in South Dakota must include uninsured motorist coverage. SDCL 58-11-9 provides in relevant part:

No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle may be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto in limits for bodily injury or death equal to the coverage provided by such policy for bodily injury and death, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom. However, the coverage required by this section may not exceed the limits of one hundred thousand dollars ... unless additional coverage is requested by the insured.

The question of whether a self-insured entity under SDCL ch. 32-35 is required to provide uninsured coverage is a question of first impression in this jurisdiction. There is a decided split of authority in other jurisdictions as to whether self-insured entities are required to provide UIM absent specific statutory mandates. While courts in a slight majority of states have determined statutes requiring uninsured motorist coverage are not applicable to self-insurers, 2 we find that under the liberal construction given South Dakota's uninsured motorist statutes, self-insurers must provide uninsured protection. Clark, 270 N.W.2d at 29.

SDCL 32-35-113 mandates that a self-insurer pay the same amounts it would have paid had it purchased a motor vehicle liability policy. It is clear that if U.S. West had chosen to obtain commercial liability insurance, SDCL 58-11-9 would mandate UIM coverage. Because UIM is statutorily mandated under an "owner's motor vehicle liability policy" and SDCL 32-35-113 requires self-insurers to pay as if "an owner's motor vehicle liability policy" were in force, UIM must be provided by a self-insured entity.

The obligation to pay the same amount it would be obligated to pay under a motor vehicle liability policy is exactly what U.S. West agreed to in its application for self-insurance. On December 30, 1986, it sent a signed and notarized application for self-insurance to the South Dakota Department of Commerce and Regulation and stated:

The undersigned agrees to pay the same amounts with respect to accidents occurring while the certificate is in force that an insurer would be obligated to pay under an owners motor vehicle liability policy if issued to the self-insurer.

Accord McClain v. Begley, 465 N.W.2d 680, 681-82 (Minn.1991) (where application for self-insurance stated entity retained excess coverage, it would be held liable up to limits it represented in application).

Furthermore, the legislature did not exempt self-insured entities who establish proof of financial security from providing UIM. It did specifically exempt policies on government-owned vehicles from the requirement of UIM. SDCL 58-11-9; Simpson v. Tobin, 367 N.W.2d 757, 763-64 (S.D.1985) (declaring where legislature provided only one statutory exception, it intended only one).

In addition, this reasoning is consistent with courts in other jurisdictions which have concluded self-insurers should be put in the same position as those who purchase liability policies.

The sole purpose of self-insurance is to relieve self-insurers of the burden of expending their assets on insurance premiums; self-insurance is not a means by which self-insurers may avoid the claims of those individuals for whose protection the insurance laws have been enacted.

Modesta v. Southeastern Pa. Transp. Auth., 503 Pa. 437, 469 A.2d 1019, 1022 (1983). 3

Thus, we agree with the trial court and hold that unless specifically exempted by statute, self-insurers in South Dakota must provide UIM as well as coverage for motor vehicle liability.

B. Worker's Compensation is not the exclusive remedy for an injured employee.

The trial court found as a matter of law that U.S. West must provide both worker's compensation and UIM to Bergstresser. U.S. West asserts that even if self-insurers in South Dakota are required to provide UIM, the exclusivity of worker's compensation prevents an employee covered by worker's compensation from recovering UIM from his employer. SDCL 62-3-2 provides:

The rights and remedies herein granted to an employee subject to this title, on account of personal injury or death arising out of and in the course of employment, shall exclude all other rights and remedies of such employee, his personal representatives, dependents, or next of kin, on account of such injury or...

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