Rogers v. Allied Mut. Ins. Co., 18594

Citation520 N.W.2d 614
Decision Date24 May 1994
Docket NumberNo. 18594,18594
PartiesDoug ROGERS and LeEtta Rogers, Plaintiffs and Appellants, v. ALLIED MUTUAL INSURANCE COMPANY, Defendant and Appellee. . Considered on Briefs
CourtSupreme Court of South Dakota

Ronald A. Wager, Bantz, Gosch, Cremer & Peterson, Aberdeen, for plaintiffs and appellants.

Charles B. Kornmann, Richardson, Groseclose, Kornmann & Wyly, Aberdeen, for defendant and appellee.

WUEST, Justice.

Doug and LeEtta Rogers appeal the trial court's grant of summary judgment in favor of Allied Mutual Insurance Company (Allied). We affirm.


Doug and LeEtta Rogers are husband and wife. (Hereinafter in this opinion they shall be referred to collectively as "Rogers," and individually as "Doug" and "LeEtta.") The Rogers were formerly residents of Aberdeen, South Dakota although they now reside in the state of Washington. On November 7, 1985, LeEtta was driving the Rogers' vehicle, which was insured by Allied. Another driver, Ed Koth (Koth) was driving his vehicle which was insured by Aetna Casualty Insurance Company (Aetna), when he failed to obey a stop light and struck the Rogers' vehicle. LeEtta suffered serious injuries as a result of the accident and Doug suffered a loss of consortium with his wife LeEtta.

Rogers commenced an action against Koth in October 1988, seeking to recover damages caused by the accident. Koth's insurance policy with Aetna was a single limit policy with limits of $50,000. LeEtta's injuries alone exceeded said limits. The action against Koth was settled by Aetna paying the policy limits. With Allied's consent, Rogers entered into a release with Koth. The consent to the release reserved any and all claims and defenses that Allied and the Rogers may have under the Allied policy.

The Rogers looked to the underinsured motorist (UIM) coverage portion of their policy with Allied to recover additional damages. The UIM portion of the Allied policy was subject to split limits of $50,000 per person and $100,000 per accident. Pertinent language of the UIM portion of the policy provides:


We will pay damages which a covered person is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury:

1. Sustained by a covered person; and

2. Caused by an accident.

. . . . .

We will pay under this coverage only after the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements.

"Covered person" as used in this endorsement means:

1. Your [sic] or any family member.

. . . . .


The limit of liability shown in the Schedule or in the Declarations for "each person" for Uninsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one accident. Subject to this limit for "each person", the limit of liability shown in the Schedule or in the Declarations for "each accident" for Uninsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury resulting from any one accident. This is the most we will pay regardless of the number of:

1. Covered persons;

2. Claims made;

. . . . .

(Emphasis shown as in original.)

Allied took the position that it owed the Rogers nothing under the UIM portion of their policy. This conclusion was reached by Allied's reasoning that since $50,000 was already paid by Aetna, that amount would be deducted from the $50,000 UIM "per person" limit on the Allied policy, leaving a difference of zero. See Farmland Ins. Co. v. Heitmann, 498 N.W.2d 620, 625 (S.D.1993) (holding that under SDCL 58-11-9.5, UIM coverage "is limited to the difference between the underinsured motorist coverage limits on the vehicle of the insured less the amount paid by the liability insurer of the underinsured motorist."). Conversely, the Rogers' position was that the $100,000 "per accident" limit should apply because Doug's loss of consortium claim was an injury separate from LeEtta's. Thus, Rogers expected that Allied should pay $50,000, the difference between their UIM coverage limits ($100,000) and the $50,000 already paid by Aetna, Koth's liability insurer.

Rogers brought a declaratory judgment action against Allied to resolve this question. After entering into a stipulation of facts, both Rogers and Allied moved for summary judgment. After a hearing, the trial court rendered its decision denying Rogers' motion and granting summary judgment to Allied. Specifically, the court determined "that there is no ambiguity in the insurance policy in question and that no underinsured motorist coverage is available from [Allied] to [Rogers]." From the judgment and order of the court, Rogers appeal.


In reviewing a grant of summary judgment under SDCL 15-6-56(c) we must determine whether the moving party has demonstrated there is no genuine issue of material fact and he is entitled to judgment as a matter of law. Wilson v. Great Northern Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968). See Farmland, 498 N.W.2d at 622; Taggart v. Ford Motor Credit Co., 462 N.W.2d 493, 498 (S.D.1990). As there appears to be no genuine issue of material fact in this case, our task on this appeal is to determine whether the law was correctly applied. Farmland, 498 N.W.2d at 622; Taggart, 462 N.W.2d at 498.

Construction of a written contract is also a question of law. Dirks v. Sioux Valley Empire Elec. Ass'n, 450 N.W.2d 426, 427-28 (S.D.1990). Further, "[w]hether contract language is ambiguous is a question of law." American State Bank v. Adkins, 458 N.W.2d 807, 809 (S.D.1990) (citing Enchanted World Doll Museum v. Buskohl, 398 N.W.2d 149, 151 (S.D.1986)). We review questions of law de novo. Rusch v. Kauker, 479 N.W.2d 496, 499 (S.D.1991) (citing Permann v. Dep't of Labor, Unemp. Ins. Div., 411 N.W.2d 113, 117 (S.D.1987)).


" '[W]here the provisions of an insurance policy are fairly susceptible of different interpretations, the interpretation most favorable to the insured should be adopted.' " Kremer v. American Family Mut. Ins. Co., 501 N.W.2d 765, 767-68 (S.D.1993) (quoting Prokop v. North Star Mut. Ins. Co., 457 N.W.2d 862, 864 (S.D.1990)). This rule of liberal construction in favor of the insured and strictly against the insurer "applies only where the language of the insurance contract is ambiguous and susceptible of more than one interpretation." Klatt v. Continental Ins. Co., 409 N.W.2d 366, 369 (S.D.1987) (citing Strong v. State Farm Mut. Ins. Co., 76 S.D. 367, 369, 78 N.W.2d 828, 829 (1956)). We have also noted:

'We are mindful of the rule of construction that where the provisions of an insurance contract are not clear and are fairly susceptible of different interpretation that one most favorable to the insured should be adopted. This rule does not mean, however, that the court may seek out a strained or unusual meaning for the benefit of the insured.'

City of Fort Pierre v. United Fire and Casualty Co., 463 N.W.2d 845, 848 (S.D.1990) (quoting Black Hills Kennel Club v. Firemens' Fund Indemnity Co., 77 S.D. 503, 506-07, 94 N.W.2d 90, 92 (1959)).


As this is a case of first impression in South Dakota, it is instructive to consider the reasoning and conclusions of courts in other jurisdictions that have faced the question presented herein. Representative of courts taking the position urged by the Rogers is the reasoning of the Missouri Supreme Court in Cano v. Travelers Ins. Co., 656 S.W.2d 266, 271 (Mo. banc 1983). In Cano, the husband was injured in an accident with an uninsured motorist. 656 S.W.2d at 268. His damages were set at $50,000 and his wife's damages for loss of consortium were $10,000. Id. The couple's insurance policy contained a clause limiting liability for uninsured motorist coverage, "to a total of $10,000 for 'all damages because of bodily injury sustained by any one person as a result of any one accident.' " Id. at 271. The insurance company argued that this language capped the total recovery at $10,000. Id. In a unanimous opinion, seven justices of the Missouri Supreme Court disagreed with the insurer. Id. Analyzing the policy language--which is essentially identical to the language in the case at bar--the court stated:

There is a problem of interpretation in the policy language just quoted. If the participle "sustained" is read as referring to "damages" then [wife's] damages, as well as [husband's], would be covered, inasmuch as a person entitled to damages on account of bodily injury to another is explicitly named as an insured in the policy. If "sustained" is to be read as modifying "bodily injuries," then the conclusion of the Court of Appeals would be correct. It is not unusual to speak both of "damages sustained" and of "injuries sustained." One circumstance is that the participle is closer to "injuries" than it is to "damages." This might indicate that it modifies the nearest noun. But this circumstance is not a very strong one, especially when one considers that [wife] is clearly within the third "insured" classification of the policy and that a limiting construction might dilute or eliminate any effective coverage for persons in her position. A construction which may render a portion of the policy illusory should not be indulged in.

Id. Thus, the court concluded that "there is an ambiguity which should be resolved against the insurer." Id. (citation omitted). Cano was more recently applied by the Eighth Circuit Court of Appeals in American Standard Ins. Co. of Wis. v. Forsythe, 915 F.2d 1212, 1217 (8th Cir.1990) (stating that the policy language under interpretation was identical to that in Cano; thus, such policy language is ambiguous and loss of consortium claim must be allowed under the policy).

The opposite conclusion--as urged by Allied--was reached when the Iowa...

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