North Star Mut. Ins. Co. v. Rasmussen

• Decision Date: 13 June 2007
• Docket Number: No. 24078.,24078.
• Citation: 2007 SD 55,734 N.W.2d 352
• Parties: NORTH STAR MUTUAL INSURANCE COMPANY, Plaintiff and Appellee, v. Glenn L. RASMUSSEN, Defendant and Appellant, and Keith O. Rasmussen, Auto-Owners Insurance Company, Brunswick Corporation, a Delaware Corporation, Mercury Marine, a division of Brunswick Corporation, and Crownline Boats, Inc., an Illinois Corporation, Defendants.
• Court: South Dakota Supreme Court

734 N.W.2d 352

2007 SD 55

NORTH STAR MUTUAL INSURANCE COMPANY, Plaintiff and Appellee, v. Glenn L. RASMUSSEN, Defendant and Appellant, and Keith O. Rasmussen, Auto-Owners Insurance Company, Brunswick Corporation, a Delaware Corporation, Mercury Marine, a division of Brunswick Corporation, and Crownline Boats, Inc., an Illinois Corporation, Defendants.

No. 24078.

Supreme Court of South Dakota.

Considered on Briefs on March 19, 2007.

Decided June 13, 2007.

Michael J. Schaffer of Schaffer Law Office, Prof., LLC, Sioux Falls, South Dakota, Attorney for appellee.

William Fuller of Fuller & Sabers, LLP, Sioux Falls, South Dakota, Attorneys for appellants.

MILLER, Retired Justice.

[¶ 1.] North Star Mutual Insurance Company initiated a declaratory judgment action against Glenn L. Rasmussen seeking a ruling that North Star had no duty to defend or indemnify Rasmussen under an umbrella policy. Each party filed motions for summary judgment. The trial court concluded there was no coverage under the umbrella policy and granted North Star's motion. It held that North Star had no duty to defend claims against Rasmussen. Rasmussen appeals. We affirm.

FACTS AND PROCEDURAL HISTORY

[¶ 2.] Mary Henkel is an insurance agent employed through the Puthoff Insurance Agency at its branch office, The Insurance Store, located in Howard, South Dakota. She was licensed as an insurance agent by the State of South Dakota on May 1, 1984. North Star appointed Henkel as one of its agents on March 7, 1989. Her employer, Puthoff, and North Star had entered into an Agency Agreement in which Puthoff and its agents were allowed to solicit and negotiate insurance on behalf of North Star.

[¶ 3.] On April 8, 2000, Rasmussen purchased a 2000 Crownline boat. Shortly thereafter, he asked Henkel to acquire insurance coverage on the Crownline. She had acquired insurance for Rasmussen on numerous occasions in the past.¹ Under their arrangement, Rasmussen would inform Henkel of the property he wished to have insured, and she would decide, according to Rasmussen's various insurance needs, what type of insurance to obtain and the company with which to place the insurance.

[¶ 4.] Over the course of their relationship, Henkel obtained coverage for Rasmussen from various companies. For instance, in 1990, she acquired a homeowner's insurance policy for him with North Star, and in 1991, a Personal Liability Umbrella Policy (umbrella policy) also through North Star. However, Henkel acquired liability coverage on Rasmussen's automobiles and the Crownline through Auto-Owners Insurance Company. According to Henkel, she had about six different companies from which to select umbrella coverage.

[¶ 5.] Although Henkel had the authority to solicit insureds for North Star, she did not have authority to bind North Star to an umbrella policy. She would merely submit an application on behalf of potential insureds.² However, North Star identified Henkel as "Our Authorized Representative" on the umbrella policy. This language was underneath Henkel's signature. Rasmussen paid the premiums on his policies directly to North Star. Then, North Star made commission payments to Puthoff based on policies acquired by its agents. Puthoff then paid Henkel.

[¶ 6.] On April 10, 2000, Rasmussen completed an application for boat insurance seeking liability coverage for the Crownline in the amount of $500,000. The application completed by Rasmussen and signed by Henkel correctly stated the horsepower of the Crownline as 300. Rasmussen does not recall whether, at this time, he specifically requested that Henkel obtain both liability and umbrella coverage on the Crownline. Henkel admits to knowing that he wanted both coverages. Although Henkel obtained underlying liability coverage on the Crownline from Auto-Owners, she did not specifically obtain umbrella coverage by either adding the Crownline to the umbrella policy currently in place with North Star or by procuring separate umbrella coverage from one of the other insurance companies for which she was authorized to solicit insurance.

[¶ 7.] North Star routinely submitted personal umbrella renewal questionnaires to agents and insureds who currently possessed umbrella coverage with it. On January 10, 2001, both Henkel and Rasmussen signed the personal umbrella renewal questionnaire issued by North Star concerning Rasmussen's policy. In that renewal questionnaire, immediately above their signatures, was a list of the underlying policies covered by the North Star umbrella policy currently in effect. That list did not include the underlying policy from Auto-Owners on the Crownline. Rather, it contained only the home and auto underlying policies.

[¶ 8.] On August 12, 2001, Rasmussen and his son, Keith, were involved in a boating accident with the Crownline. When Rasmussen reported the accident to Henkel, she informed him that the Crownline had not been added to the North Star umbrella policy, so there was no coverage under that policy. However, Henkel later sent a letter to North Star questioning why the Crownline was not added to Rasmussen's umbrella policy. This was the first time North Star was aware that Rasmussen owned the Crownline.

[¶ 9.] On September 28, 2001, Henkel requested that the Crownline be added to the North Star umbrella policy. Although aware of the August 12, 2001, accident at this time, she did not so inform North Star. Also, she misinformed North Star of the size of the Crownline's motor by incorrectly stating that it had a 135 horsepower inboard/outboard motor rather than a 300 horsepower motor.³ Based upon the information provided by Henkel, North Star agreed to provide umbrella coverage on the boat effective October 4, 2001. It billed Rasmussen for the full annual premium of $25 for this added coverage.

[¶ 10.] As a result of the August 12, 2001, accident, Rasmussen's son, Keith, suffered severe injuries and filed suit against his father, alleging that he negligently operated the Crownline at the time of the accident. The damages sought exceeded the policy limits of Rasmussen's underlying insurance with Auto-Owners; therefore, Rasmussen sought coverage under his North Star umbrella policy.

[¶ 11.] North Star denied coverage, claiming the watercraft exclusion in the umbrella policy precluded coverage, because the underlying Auto-Owners policy on the Crownline was not added to the declarations page in the umbrella policy. North Star filed an action seeking declaratory relief. Both parties filed motions for summary judgment.

[¶ 12.] The trial court granted North Star's motion for summary judgment. The court concluded there was no coverage on the Crownline under the umbrella policy in effect at the time of the accident and that Henkel was Rasmussen's agent rather than North Star's; therefore, any negligence or fault of Henkel in procuring umbrella coverage on the Crownline was not imputed to North Star.

[¶ 13.] Rasmussen appeals, raising two issues:

1. Whether the North Star umbrella policy provides coverage for the accident on August 12, 2001.

2. Whether Henkel was North Star's agent for purposes of imputing her negligence to North Star.

STANDARD OF REVIEW

[¶ 14.] Our standard of review for summary judgment is well established: In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we determine whether the moving party has 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. When reviewing a grant of summary judgment, we must undertake an independent review of the record. The burden of proof is upon the movant to show clearly that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law. Rumpza v. Donalar Enterprises, Inc., 1998 SD 79, ¶ 9, 581 N.W.2d 517, 520 (internal citations and quotations omitted).

ANALYSIS AND DECISION

[¶ 15.] 1. Whether the North Star umbrella policy provides coverage for the accident on August 12, 2001.

[¶ 16.] Rasmussen argues that North Star effectively backdated umbrella coverage on the Crownline to the beginning of the policy period (February 2001) when, in October 2001, it charged Rasmussen the full $25 annual premium. North Star, however, claims that Rasmussen was charged the full annual premium for four months of coverage according to North Star's standard billing policies.

[¶ 17.] According to North Star's billing policies, if a new risk is added to an umbrella policy that is already in place within ten months after a renewal, a flat rate is charged and the premium is not prorated. However, if the new risk is added within the two-month period before the umbrella policy is up for renewal, there is no premium charged for the added risk. The existing umbrella policy was renewed on February 6, 2001 and would not be up for renewal until February 6, 2002. Rasmussen sought to add the Crownline to the existing policy on October 4, 2001. Because this was within ten months of the renewal date of February 6, 2001, North Star charged Rasmussen the full $25 premium, despite the fact that only four months of coverage would be provided.

[¶ 18.] Rasmussen claims that by accepting his $25 premium, North Star voluntarily backdated coverage to February 6, 2001, and thus assumed coverage for any obligation from the accident occurring on August 12, 2001. Rasmussen relies on Trefethen v. New Hampshire Ins. Group as authority supporting his argument for retroactive application. 138 N.H. 710, 645 A.2d 72, 75 (N.H.1994). However, in Trefethen, the agent specifically requested ...