National Sun Industries, Inc. v. South Dakota Farm Bureau Ins. Co., 20718

Decision Date26 April 1999
Docket NumberNo. 20718,20718
Citation596 N.W.2d 45,1999 SD 63
PartiesNATIONAL SUN INDUSTRIES, INC., a North Dakota corporation, Plaintiff and Appellant, v. SOUTH DAKOTA FARM BUREAU INSURANCE COMPANY, a South Dakota corporation, Defendant and Appellee, and Max Chester, Defendant. . Considered On Briefs
CourtSouth Dakota Supreme Court

Daniel R. Fritz of Fritz, Hogan & Johnson, Aberdeen, South Dakota, and Douglas R. Archibald of Terhaar, Archibald, Pfefferle & Griebel, Minneapolis, Minnesota, Attorneys for plaintiff and appellant.

Roy A. Wise of Richardson, Groseclose, Wyly, Wise & Sauck, Aberdeen, South Dakota, Attorneys for defendant and appellee.

MILLER, Chief Justice.

¶1 The trial court granted summary judgment in favor of South Dakota Farm Bureau Insurance Company (Farm Bureau). National Sun Industries, Inc. (National) appeals and we affirm.


¶2 On September 16, 1992, National entered into a sunflower storage and handling agreement with L & O Acres, Inc. On May 23, 1993, sunflowers owned by National and stored in a bin owned by L & O were destroyed by fire. 1 At the time of the incident, Farm Bureau was L & O's insurer.

¶3 National sought to recover damages for its loss from L & O and, on September 8, 1994, brought suit in federal district court. Farm Bureau refused to defend the claim. In a September 27, 1994 letter to L & O, Farm Bureau denied providing liability coverage on the property. Shortly thereafter, in a November 7, 1994 letter, Farm Bureau stated that the policy exclusions excluded coverage for National's loss; therefore, it was tendering back the defense.

¶4 In February 1996, L & O brought suit in state court against Farm Bureau seeking declaratory relief directing Farm Bureau to defend its claim and cover National's losses and damages. While the state court action was pending, National and L & O entered into a stipulated judgment, wherein the parties agreed that National's damages were valued at $408,000. A judgment in that amount was then entered against L & O. L & O agreed to pay $155,000 of the total judgment, and National agreed it would not collect the remainder of the judgment from L & O, but would seek satisfaction from Farm Bureau.

¶5 On October 24, 1996, National filed a motion to intervene in the state court proceedings and on October 31 became the named plaintiff in the action. On September 19, 1997, Farm Bureau moved for summary judgment and the trial court granted its motion. National appeals.

¶6 On appeal, National raises the following issues:

1. Whether the loss was excluded as a "business pursuit."

2. Whether, given the terms of the contract between L & O and National, the parties intended for L & O to benefit from the insurance policy National had previously purchased on its sunflower seeds, preventing it from seeking recovery from L & O or Farm Bureau.


¶7 Our review of a trial court's granting of summary judgment is well settled.

In reviewing a grant or a denial of summary judgment under SDCL 15-5-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Millard v. City of Sioux Falls, 1999 SD 18, p 8, 589 N.W.2d 217, 218 (quoting Walther v. KPKA Meadowlands Ltd. Partnership, 1998 SD 78, p 14, 581 N.W.2d 527, 531 (citations omitted)). In addition, "[w]hen interpreting insurance contracts, we have uniformly held them reviewable as a matter of law under the de novo standard." Opperman v. Heritage Mut. Ins. Co., 1997 SD 85, p 3, 566 N.W.2d 487, 489 (citations omitted). "This includes determining whether an insurance contract is ambiguous." Id. (citing Rogers v. Allied Mut. Ins. Co., 520 N.W.2d 614, 616 (S.D.1994)).


¶8 The "business pursuits exclusion" excluded coverage for National's loss.

¶9 The trial court determined that no ambiguity existed in the policy. The court stated that the rental of a storage bin was a business pursuit; therefore, the policy excluded it from liability coverage. National, however, claims that Farm Bureau should be estopped from denying coverage to L & O based upon the business pursuits exclusion clause. It specifically argues that Farm Bureau should be estopped from asserting the exclusion, because it did not initially claim the exclusion as the basis for coverage denial. 2 It further argues that, even if Farm Bureau is not estopped from asserting the exclusion as a basis for denial, the business pursuits exclusion clauses in the policies were ambiguous or misleading. We disagree.

¶10 a. Estoppel

¶11 National claims that, because Farm Bureau initially denied providing liability coverage on the property, it should be estopped from later asserting the business pursuits exclusion clauses to deny coverage. We find this argument to be without merit.

¶12 Generally, "where a liability insurer notifies an insured of denial of coverage on a specific basis, the insurer may be estopped from alleging additional bases for noncoverage at a later time." Weekley v. Jameson, 221 Mich.App. 34, 561 N.W.2d 408, 411 (1997) (citation omitted). By denying liability, asserting a defense, or refusing to pay a loss on a specified ground, the insurer

waives or is estopped to assert other grounds relieving it from liability of which it had full knowledge where insured has acted on its position as announced and suffered resultant detriment, or, as the rule is sometimes more broadly stated, when one specific ground of forfeiture is urged against a policy of insurance, and the validity thereof denied on that ground alone, all other grounds are waived.

D.E.M. v. Allickson, 555 N.W.2d 596, 599 (N.D.1996) (citing 46 C.J.S. Insurance § 821 (1993) (footnote omitted)). "The crucial elements of estoppel ... are the insurer's stated reliance upon one ground for denying liability without stating additional known grounds, and resulting prejudice to the claimant." Id. at 601.

¶13 National claims, and the record supports its claim, that Farm Bureau failed to inform L & O, until after the commencement of suit, of the business pursuits exclusion clauses as the basis for denying coverage. 3 It argues that Farm Bureau's late assertion of a second ground for denying coverage caused it prejudice. However, National has failed to establish any prejudice or detriment that resulted from L & O's reliance on Farm Bureau's first ground for excluding coverage. Moreover, it has failed to point to any specific evidence in the record that would support its prejudice claim. 4 We find that a general assertion of "would be" prejudice is insufficient to establish the crucial elements of estoppel. Accordingly, Farm Bureau is not estopped from asserting the business pursuits exclusion as a basis for denying coverage.

¶14 b. Policy ambiguity

¶15 National further claims that, even if Farm Bureau is not estopped from asserting the business pursuits exclusion clauses as a defense, the insurance policy should be construed against Farm Bureau. It argues that the policy language is ambiguous and confusing, 5 thus, the insurer should provide the insured the maximum amount of coverage. Again, we disagree.

¶16 Farm Bureau issued two policies to L & O, a Country Squire liability policy and an umbrella policy. The relevant language in the Country Squire policy provides:

We do not cover under:

1. Coverage L 6 and Coverage M bodily injury or property damage:

* * *

b. arising out of business pursuits of any insured or the rental or holding for rental of any part of any premises by any insured.

The policy defines "business" as "a trade, profession or occupation, other than farming." In addition, it defines "farming" as "the process of investment, management or labor to produce agricultural products."

¶17 The applicable language in the umbrella policy, as stated in the section titled "Exclusion Agreements," provides as follows:

This insurance does not apply to:

* * *

e. Personal injury or property damage arising out of:

(1) any business pursuits or business property (other than farming) of yours[.]

The policy defines business as "a trade, profession or occupation, other than farming, and includes any activities likely or expected to produce an annualized gross income exceeding $1000."

¶18 As this Court has previously stated, "[a]n insurance policy is ambiguous when it 'is fairly susceptible to two constructions.' " Economic Aero Club v. Avemco Ins. Co., 540 N.W.2d 644, 645 (S.D.1995) (quoting American Family Mut. Ins. v. Elliot, 523 N.W.2d 100, 102 (S.D.1994) (citations omitted))....

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