Wheeler v. Farmers Mut. Ins. Co. of Neb.

• Decision Date: 05 December 2012
• Docket Number: No. 26261.,26261.
• Citation: 2012 S.D. 83,824 N.W.2d 102
• Parties: Megan E. WHEELER, Plaintiff and Appellant, v. FARMERS MUTUAL INSURANCE COMPANY OF NEBRASKA, Defendant and Appellee.
• Court: South Dakota Supreme Court

824 N.W.2d 102

2012 S.D. 83

Megan E. WHEELER, Plaintiff and Appellant,

v.FARMERS MUTUAL INSURANCE COMPANY OF NEBRASKA, Defendant and Appellee.

No. 26261.

Supreme Court of South Dakota.

Argued Aug. 28, 2012.

Decided Dec. 5, 2012.

Ronald A. Parsons, Jr. of Johnson, Heidepriem & Abdallah, LLP, Sioux Falls, South Dakota and Jami J. Bishop, A. Russell Janklow of Janklow Law Firm, Prof. LLC, Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.

Eric D. Denure, Richard L. Travis of May & Johnson, PC, Sioux Falls, South Dakota, Attorneys for defendant and appellee.

GILBERTSON, Chief Justice

[¶ 1.] While driving a car owned by her divorced parents, Megan Wheeler was hit and severely injured by an uninsured drunk driver. Both her mother and her father had automobile insurance policies. Megan's father's policy with Progressive Insurance Company (Progressive) specifically covered Megan's car and paid Megan $100,000 in uninsured motorist benefits. However, this amount did not fully compensateMegan for her injuries. Thus, Megan filed a claim under her mother's policy with Farmers Mutual Insurance Company of Nebraska (Farmers), which did not specifically cover Megan's car but covered Megan as an “insured.” Per an “owned-but-not-insured” exclusion, Farmers denied Megan's claim for uninsured motorist benefits. Megan then filed this action, seeking a declaration that she is entitled to uninsured motorist benefits under the Farmers policy. Both Megan and Farmers filed motions for summary judgment. The circuit court held a hearing and subsequently granted Farmers' summary judgment motion. Megan appeals.

FACTS

[¶ 2.] The facts of this case are not in dispute. Megan is the daughter of Daniel Wheeler and Maria Wheeler, who divorced in 2008 when Megan was a minor. At the time of the divorce, Daniel and Maria owned a 2005 Honda Accord, which Megan used as her personal vehicle. As required by the divorce judgment, Daniel continued insuring the 2005 Honda Accord while Maria was responsible for paying the balance due on the vehicle loan. The car remained titled in the names of both Daniel and Maria.

[¶ 3.] Daniel insured the 2005 Honda Accord through Progressive. The Progressive policy provided a $100,000 limit for uninsured motorist coverage on the Accord. After the divorce, Maria purchased her own automobile insurance policy through Farmers. The Farmers policy covered Maria's 1999 GMC Suburban and provided a $250,000 limit for uninsured motorist coverage. It is undisputed that Megan qualifies as an “insured” under the Farmers policy.

[¶ 4.] In March 2011, an uninsured drunk driver ran a red light and crashed into Megan while she was driving the 2005 Honda Accord. Megan was severely injured, suffering a broken collar bone and multiple fractures in her pelvis. At the time, Megan was attending the University of South Dakota on an athletic scholarship for the University's Division I golf team. Due to the injuries Megan sustained in the accident, Megan was forced to withdraw from her classes and forfeit her athletic scholarship.¹ The parties agree that Megan was not at fault in the accident.

[¶ 5.] After the accident, Progressive paid Megan the full $100,000 in uninsured motorist benefits. For purposes of this appeal only, it is undisputed that the $100,000 did not fully compensate Megan for her injuries. Thus, Megan filed a claim with Farmers seeking recovery of the $250,000 in uninsured motorist benefits provided under Maria's policy.

[¶ 6.] Farmers denied Megan's claim based on what is commonly called an “owned-but-not-insured” exclusion in Maria's policy. The exclusion appears under an “Exclusions for Uninsured Motor Vehicle Coverage” heading and reads: “[t]here is no coverage ... [f]or bodily injury to any insured while occupying, or through being struck by, a motor vehicle or trailer of any type owned by you, your spouse or any relative if it is not insured for this coverage under this policy.” Therefore, because the 2005 Honda Accord was owned by Maria but not insured under the Farmers policy, Farmers denied Megan's claim for uninsured motorist benefits.

[¶ 7.] After Farmers denied Megan's claim, Megan filed suit against Farmers seeking a declaration that Farmers' “owned-but-not-insured” exclusion was void and that Megan was entitled to recoveruninsured motorist benefits from Farmers. Farmers answered. Megan moved for partial summary judgment and Farmers also moved for summary judgment. After a hearing, the circuit court denied Megan's motion and granted Farmers' motion, generally relying on two South Dakota Supreme Court cases dealing with underinsured motorist coverage. In one of the two cases, this Court specifically considered the validity of an “owned-but-not-insured” exclusion in the context of underinsured motorist coverage and found the exclusion to be valid and enforceable. Megan appeals, arguing the circuit court erred as a matter of law in concluding that the “owned-but-not-insured” exclusion was valid and enforceable in relation to uninsured motorist coverage.

STANDARD OF REVIEW

[¶ 8.] When reviewing a circuit court's grant of summary judgment, this Court only decides “whether genuine issues of material fact exist and whether the law was correctly applied.” Zephier v. Catholic Diocese of Sioux Falls, 2008 S.D. 56, ¶ 6, 752 N.W.2d 658, 662 (quoting Bordeaux v. Shannon Cnty. Sch., 2005 S.D. 117, ¶ 11, 707 N.W.2d 123, 126). In this case, “[t]he material facts are undisputed, and ‘therefore, our review is limited to determining whether the trial court correctly applied the law.’ ” De Smet Ins. Co. of S.D. v. Pourier, 2011 S.D. 47, ¶ 4 n. 1, 802 N.W.2d 447, 448 n. 1 (quoting Kobbeman v. Oleson, 1998 S.D. 20, ¶ 4, 574 N.W.2d 633, 635). “Statutory construction and insurance contract interpretation are questions of law reviewable de novo.” Id. (quoting Demaray v. De Smet Farm Mut. Ins. Co., 2011 S.D. 39, ¶ 8, 801 N.W.2d 284, 287).

ANALYSIS

[¶ 9.] In South Dakota, uninsured motorist coverage and underinsured motorist coverage are addressed in two separate statutes. SeeSDCL 58–11–9, –9.4, –9.5. South Dakota's uninsured motorist statute provides:

No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle may be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, except for snowmobiles, unless coverage is provided therein or supplemental thereto in limits for bodily injury or death equal to the coverage provided by such policy for bodily injury and death, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom. However, the coverage required by this section may not exceed the limits of one hundred thousand dollars because of bodily injury to or death of one person in any one accident and, subject to the limit for one person, three hundred thousand dollars because of bodily injury to or death of two or more persons in any one accident, unless additional coverage is requested by the insured. Any policy insuring government owned vehicles may not be required to provide uninsured motorist coverage.

SDCL 58–11–9. Additionally, the underinsured motorist statute relevant to this appeal provides:

Subject to the terms and conditions of such underinsured motorist coverage, the insurance company agrees to pay its own insured for uncompensated damages as its insured may recover on accountof bodily injury or death arising out of an automobile accident because the judgment recovered against the owner of the other vehicle exceeds the policy limits thereon. Coverage shall be limited to the underinsured motorist coverage limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against.

SDCL 58–11–9.5.

[¶ 10.] In granting summary judgment in favor of Farmers, the circuit court acknowledged that the language used in these two statutes was distinct. However, the circuit court found that the case law dealing with uninsured motorist coverage and underinsured motorist coverage could be applied interchangeably. Because this Court had previously upheld the validity of an “owned-but-not-insured” exclusion in the context of underinsured motorist coverage under SDCL 58–11–9.5, the circuit court concluded that Farmers' “owned-but-not-insured” exclusion was valid and enforceable under SDCL 58–11–9.

[¶ 11.] As mentioned above, the circuit court primarily relied on two cases in reaching this conclusion. These two cases were De Smet Insurance Co. of South Dakota v. Pourier, 2011 S.D. 47, 802 N.W.2d 447, and Gloe v. Iowa Mutual Insurance Co., 2005 S.D. 29, 694 N.W.2d 238.

[¶ 12.] In Pourier, this Court specifically ruled on the validity of an “owned-but-not-insured” exclusion. See2011 S.D. 47, 802 N.W.2d 447. The facts of Pourier are nearly identical to the facts of this case. However, the one notable difference is that in Pourier the minor was involved in an accident with an underinsured motorist whereas in this case Megan was hit by an uninsured motorist.² Therefore, in Pourier, this Court analyzed the validity of the “owned-but-not-insured” exclusion under South Dakota's underinsured motorist statute ( SDCL 58–11–9.5) as opposed to its uninsured motorist statute ( SDCL 58–11–9). Id. ¶ 5, 802 N.W.2d at 448–49. Ultimately, in Pourier, this Court concluded that the “owned-but-not-insured” exclusion was valid and enforceable under SDCL 58–11–9.5. Id. ¶ 12, 802 N.W.2d at 451–52. As a result, the minor in Pourier was precluded from recovering under the insurance policy that covered the minor as an insured but did not cover the car she was driving. Id.

[¶ 13.] In Gloe, this...