North Star Mut. Ins. Co. v. Peterson

Decision Date07 May 2008
Docket NumberNo. 24449.,24449.
Citation749 N.W.2d 528,2008 SD 36
PartiesNORTH STAR MUTUAL INSURANCE COMPANY, Plaintiff and Appellee, v. Brad PETERSON, Lenny Peterson, and Danny Peterson, d/b/a Peterson Farms; Jeb Peterson, Mitchell Peterson, Defendants and Appellees, and Milbank Insurance Company, Defendant and Appellant.
CourtSouth Dakota Supreme Court

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

Rodney Freeman, Jr. of Churchill, Manolis, Freeman, Kludt, Shelton & Burns, Huron, South Dakota, for appellees Peterson.

Robert B. Anderson of May, Adam, Gerdes & Thompson, LLP, Pierre, South Dakota, for defendant and appellant.

MEIERHENRY, Justice.

[¶ 1.] This case involves a question of automobile insurance coverage for injuries sustained when a gun discharged while deer hunters were waiting to be transported to the fields. The circuit court found that the automobile liability policy covered the gunshot injuries.

[¶ 2.] Milbank Insurance Co. (Milbank) issued the automobile liability policy in question to Peterson Farms. Brad, Lenny and Danny Peterson were general partners in Peterson Farms.1 In addition to the Milbank automobile liability policy, Peterson Farms had an umbrella liability policy from North Star Mutual Ins. Co. (North Star). The circuit court found coverage under Milbank's personal automobile liability policy. Milbank appeals. The court found no coverage under North Star's umbrella policy because of exclusions specified in the policy.2 The ruling as to North Star's coverage has not been appealed.

[¶ 3.] In a trial to the court, the parties stipulated to most of the relevant facts. The day before the accident, Brad Peterson had been deer hunting with his sons Jeb and Shane. Eleven-year-old Jeb was using his father's Winchester Model 94, .30-.30 lever action rifle to hunt varmints such as coyote or fox. While the hunting party was loading the rifles into the pickup at the conclusion of the hunt, a friend drove up and assisted young Jeb with loading the rifle into the vehicle. The friend ejected the round out of the chamber and opened the lever. The open lever made the rifle safe from discharge; however, its magazine still held ammunition. The friend placed the rifle into the back seat of the Peterson's vehicle. He propped it near the middle of the backseat of the pickup with the barrel end on the floor and the butt leaning against the back of the seat. The hunting party then returned to Brad's home driving through fields and over country roads. The rifle remained in the vehicle.

[¶ 4.] The next morning, Brad, Shane and Lenny's fourteen-year-old son, Mitch again went deer hunting. While hunting, they walked through a slough and got their clothing wet. They removed and threw the wet hunting clothes in the pickup's backseat on top of the rifle. The hunting party then returned to Brad's home. Later that afternoon, Brad, Shane, Mitch and Jeb prepared to go hunting again. They got into the pickup: Brad and Shane in the front seat, Mitch and Jeb in the backseat. The rifle was still in the backseat situated between Jeb and Mitch. Jeb noticed that the wet hunting clothes were lying on the rifle and that the barrel had moved sideways and was unsafely pointed at Mitch's leg. Jeb grasped the rifle in an attempt to reposition it away from Mitch's leg. As he moved the rifle, it discharged and struck Mitch's left ankle and grazed his right ankle.

[¶ 5.] The pickup engine was on and idling but the pickup was not moving at the time of the accident. The hunting party assumed that the vehicle's movement over the two days had jostled the rifle causing the lever to close and that their wet hunting clothing on top of the gun had caught and pulled the trigger. There was no evidence that anyone had handled the gun since its placement in the pickup the day before.

[¶ 6.] Milbank brought a declaratory judgment action asking the circuit court to determine whether its automobile liability policy with Peterson Farms covered Mitch's bodily injuries arising from this hunting accident. The dispute centers on the language in Milbank's insurance policy defining coverage. The terms of the policy provide that "[Milbank] will pay damages for `bodily injuries' or 'property damage' for which any insured becomes legally responsible because of an auto accident ...." The policy further defines an "insured" as "you or any family member for the ownership, maintenance or use of any automobile or trailer."

[¶ 7.] The circuit court determined that Milbank was liable under the terms of the insurance policy. The court reached that conclusion by finding ambiguity in the term "auto accident," in part because it was undefined in the policy. The court then applied the rules of construction for insurance contracts and interpreted the ambiguous term in the insured's favor. Milbank argues that the circuit court erroneously found that the term, "auto accident," was ambiguous solely because it was undefined in the policy. Milbank claims that the plain meaning of the policy's term "auto accident" does not cover the accidental shooting. Milbank raises the following issue on appeal:

ISSUE

Whether the circuit court erred in holding that the shooting incident of November 24, 2001, was the result of an "auto accident" as that term is used in the Milbank insurance policy.

[¶ 8.] Our standard of review is de novo. We review a declaratory judgment under SDCL 21-24-13 "as we would any other judgment or order." Gloe v. Union Ins. Co., 2005 SD 30, ¶ 7, 694 N.W.2d 252, 256. "When 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, ¶ 3, 566 N.W.2d 487, 489 (citing De Smet Ins. Co. v. Gibson, 1996 SD 102, ¶ 5, 552 N.W.2d 98, 99) (other citations omitted).

[¶ 9.] The circuit court determined that since the Milbank policy did not define the term "auto accident," the term was ambiguous and construed the term broadly in favor of the insured to find coverage. Milbank argues that the absence of a definition in the policy does not render the term ambiguous, and that the plain meaning of the term excludes coverage. Generally, we agree that the mere absence of a definition does not alone create ambiguity.

[¶ 10.] Ambiguity is created when the language in an insurance contract "is fairly susceptible to two constructions." Nat'l Sun Indus., Inc. v. South Dakota Farm Bureau Ins. Co., 1999 SD 63, ¶ 18, 596 N.W.2d 45, 48 (citing Econ. Aero Club v. Avemco Ins. Co., 540 N.W.2d 644, 645 (S.D.1995) (citations omitted)). Ambiguity is "determined with reference to the policy as a whole and the plain meaning and effect of its words." Id. By the terms of the policy, Milbank agreed to "pay damages for `bodily injuries' or `property damage' for which any insured becomes legally responsible because of an auto accident...." Although the parties disagree on the meaning of the terms, their meaning can be determined without resorting to an ambiguity analysis.

[¶ 11.] Milbank argues that the accidental discharge of the firearm in the backseat of the vehicle cannot be considered an "auto accident" as that term is defined under any common sense analysis. Milbank views the situation as one where an accident took place in an automobile and did not constitute an automobile accident. Milbank claims that the auto was merely the site of the occurrence and that there was no causal connection between the vehicle's use and the injury-producing event.

[¶ 12.] Nevertheless, Milbank does not dispute that the policy covers accidents arising out of the "ownership, maintenance and use" of the vehicle. Milbank conceded during oral arguments that the statutory language covering "damages arising out of the ownership, maintenance, or use of the vehicle," must be considered when interpreting the insurance policy and that the language was, in effect, part of the policy. SDCL 32-35-70. Additionally, the policy uses these terms in its definition of insured. The Milbank policy defines "insured" as "you or any family member for the ownership, maintenance or use" of a vehicle. The policy also provides that "[w]hen this policy is certified as future proof of financial responsibility, this policy shall comply with the law to the extent required." South Dakota law of financial responsibility requires insurance "against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle or vehicles...." SDCL 32-35-70. Thus, a fair interpretation of the term "auto accident" would be an accident arising out of the "ownership, maintenance and use" of the automobile.

[¶ 13.] In Lyndoe v. American Standard Ins. Co., we analyzed insurance coverage of an accidental shooting in an automobile. 90 S.D. 644, 245 N.W.2d 273 (1976). In that case, Loren Lyndoe was riding through downtown Custer in a truck driven by his brother, James. Lyndoes pulled their vehicle over to the side of the road to talk to an acquaintance in another vehicle. Id. at 645, 245 N.W.2d at 273-74. While the vehicles were parked side by side, the acquaintance attempted to hand a .38 caliber pistol through his driver's side window to Loren. Loren reached for the gun through his window. Before Loren touched the gun, it discharged and struck Loren in the mouth.

[¶ 14.] The policy language in Lyndoe provided as follows:

The company shall pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

Coverage A — bodily injury caused by accident and arising out of the ownership, maintenance or use of the automobile.

`(U)se' of the automobile includes loading and unloading.

Id. at 647, 245 N.W.2d at 275.

[¶ 15.] Although much of the analysis in Lyndoe centered on whether passing the gun into the window constituted "loading or unloading" the vehicle, the basic...

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