Schulte v. Progressive Northern Ins. Co.

Decision Date15 June 2005
Docket NumberNo. 23365.,23365.
Citation699 N.W.2d 437,2005 SD 75
PartiesMatthew L. SCHULTE, Plaintiff and Appellant, v. PROGRESSIVE NORTHERN INSURANCE COMPANY and Thomas Hoftiezer, Defendants and Appellees.
CourtSouth Dakota Supreme Court

Stephen C. Landon, Shawn M. Nichols of Cadwell, Sanford, Deibert & Garry, Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.

Patricia A. Meyers of Costello, Porter, Hill, Heisterkamp, Bushnell & Carpenter, Rapid City, South Dakota, Attorneys for defendants and appellees.


[¶ 1.] In this declaratory action dealing with insurance coverage, the plaintiff seeks to recover the policy limits of $100,000 from both the offending driver, for negligent operation of the insured vehicle, and the driver's father, for negligent entrustment. We conclude that under our automobile insurance statutes the policy limits apply to the insured vehicle and do not require separate policy limits for each insured who may be liable in a single accident. We affirm the circuit court.


[¶ 2.] Plaintiff Matthew L. Schulte was seriously injured in an automobile accident in Clay County, South Dakota, on March 24, 2003. The accident occurred when Joshua Hoftiezer drove a truck through the on-coming lane of traffic without yielding the right-of-way and collided with Schulte, who was traveling in the opposite direction. The truck Joshua was operating was owned, licensed, and insured by his father, Thomas Hoftiezer. As the named insured, Thomas Hoftiezer held an "owners policy" issued by Progressive Northern Insurance Company. See SDCL 32-35-68 (1960). Under this policy, Hoftiezer's son, Joshua, was an additional insured. The policy had liability limits of $100,000 per person and $300,000 per accident.

[¶ 3.] At the time of the accident, Joshua was driving with a suspended license, had previously been cited for driving under the influence and failing to stop, and was reputed to be a poor driver.1 Despite his alleged knowledge of Joshua's poor driving record, Thomas Hoftiezer provided the insured vehicle for his son's use.

[¶ 4.] Progressive offered Schulte $100,000 in exchange for a full and final release of any claims against Progressive, Hoftiezer, and Joshua. Although Schulte's damages exceed $100,000, the company maintained that $100,000 was the limit in total liability coverage available to Schulte under Hoftiezer's policy. Schulte brought a declaratory action against Progressive, seeking a determination that Hoftiezer's policy provided separate policy limits for both insureds, Thomas and Joshua Hoftiezer. Each side moved for summary judgment. In granting Progressive's motion, the circuit court concluded that Progressive was under no obligation to pay its policy's liability limits for Hoftiezer's negligent entrustment of the automobile and also pay its policy limits for Joshua's negligent driving. On appeal, Schulte contends that Progressive is required to provide separate policy limits of $100,000 for the independent acts of negligence of each of its insureds.

Standard of Review

[¶ 5.] Under our familiar standard of review in summary judgment cases, we decide only whether genuine issues of material fact exist and whether the law was correctly applied. If any legal basis exists to support the trial court's ruling, we will affirm. Kobbeman v. Oleson, 1998 SD 20, ¶ 4, 574 N.W.2d 633, 635 (citing SDCL 15-6-56(c) (1966)); see De Smet Ins. Co. of South Dakota v. Gibson, 1996 SD 102, ¶ 5, 552 N.W.2d 98, 99. "With the material facts undisputed, our review is limited to determining whether the trial court correctly applied the law." Kobbeman, 1998 SD 20, ¶ 4, 574 N.W.2d at 635. Statutory construction and insurance contract interpretation are questions of law reviewable de novo. Auto-Owners Ins. Co. v. Hansen Housing, Inc., 2000 SD 13, ¶ 10, 604 N.W.2d 504, 509 (citations omitted).

Analysis and Decision

[¶ 6.] Schulte argues that Joshua's negligent driving and his father's negligent entrustment are two active and distinct acts of negligence; therefore, Progressive should be obliged to provide the policy limits of $100,000 for each negligent act. Progressive does not dispute that Schulte's injuries exceed $100,000, but contends that $100,000 is the limit payable for Schulte's damages. Schulte maintains that the circuit court erred in ruling that the limits of automobile liability coverage did not apply separately to Joshua, as an insured permissive user, and to Hoftiezer, as the named insured under the policy.

[¶ 7.] South Dakota's financial responsibility law requires that automobile insurance policies provide vehicle owners with certain liability coverage for acts arising out of the ownership of insured vehicles. SDCL 32-35-70 (1992); Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871, 875 (S.D.1995). Because coverage is mandatory, our state's omnibus clause must be read into every "automobile insurance policy whether or not coverage is explicitly included by the policy language." 8 LEE R. RUSS & THOMAS F. SEGALLA, COUCH ON INSURANCE § 11:23 (3d ed. 2004). Schulte does not contend that Progressives policy provides coverage greater than that required under South Dakota law.2 His argument is that our financial responsibility laws require that the coverage he contends exists must be read into the policy. Thus our analysis centers on SDCL 32-35-70:

An owner's policy of liability insurance referred to in § 32-35-68 shall insure the person named therein and any other person as insured, using any insured vehicle or vehicles with the express or implied permission of the named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle or vehicles within the United States of America or the Dominion of Canada, subject to limits exclusive of interests and costs, with respect to each insured vehicle, as follows: twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and, subject to the limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and twenty-five thousand dollars because of injury to or destruction of property of others in any one accident....

Id. (emphasis added).

[¶ 8.] Under the unambiguous terms of this statute, we cannot sustain plaintiff's interpretation.3 This statute sets a per person limit for each "accident" involving the named or permittee insured using an insured vehicle. The operative language requires liability insurance "for damages arising out of the ownership, maintenance, or use of the vehicle or vehicles ..., subject to limits ... with respect to each insured vehicle ...." Id. (emphasis added). It is clear that the limits apply to each insured vehicle. In fact, under SDCL 32-35-69 "[a]n owner's policy of liability insurance referred to in § 32-35-68 shall designate by explicit description or by appropriate reference all vehicles with respect to which coverage is thereby to be granted." Id. (1960).

[¶ 9.] Each vehicle in South Dakota must be covered by the obligatory liability limits in the event the owner or other person named in the policy uses the vehicle and causes personal injury or property damage.4 Nothing in these statutes suggests that the Legislature intended that the limits of liability should multiply depending on the number of negligent acts by insureds legally liable for causing a single accident. Accordingly, we find no support in our laws to require an insurer to pay policy limits for the permissive vehicle user for negligently causing an accident and the insured owner for negligently entrusting the vehicle, so that one injured party in a single accident may recover the policy limits from each.

[¶ 10.] Affirmed.

[¶ 11.] GILBERTSON, Chief Justice, and SABERS and MEIERHENRY, Justices, concur.

[¶ 12.] ZINTER, Justice, concurs with a writing.

ZINTER, Justice (concurring).

[¶ 13.] I concur and write to address Schulte's argument that declining to require the payment of two liability limits deprives the insureds of coverage in violation of South Dakota's public policy.

[¶ 14.] Schulte is correct that a vehicle operator is required to be insured to the same extent as the owner. "The operation of an omnibus clause creates liability insurance in favor of persons other than the named insured to the same degree as the insured." Estate of Trobaugh ex rel Trobaugh v. Farmers Ins. Exch., 2001 SD 37, ¶ 21, 623 N.W.2d 497, 502. This Court has also specifically held that a policy must cover the operator and one who negligently entrusts the vehicle to another. See Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871 (S.D.1995). Schulte hypothesizes that because his damages exceed the policy limits, if he settled with Joshua Hoftiezer for the policy limits and then brought suit against Thomas Hoftiezer for negligent entrustment, Thomas—the insured who purchased the policy—"would have absolutely no coverage" in violation of these cases. However, the liability limit does not deny coverage to either insured.

[¶ 15.] On the contrary, even though Schulte's damages may exceed the $100,000 liability limit, both Thomas Hoftiezer and Joshua Hoftiezer are provided coverage for the damages sustained as a result of their separate alleged acts of negligence. It is only the...

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