834 N.W.2d 826
S.D.2013Background
- In Dec. 2004 David Busskohl answered "No" to a De Smet homeowner application question asking whether any insurer had "cancelled, refused, restricted, or declined to renew similar insurance," and signed the application.
- De Smet issued a policy; after a Dec. 2005 fire De Smet paid $476,350 under the policy.
- During unrelated litigation, De Smet discovered testimony (from Busskohl’s ex-wife and an American Family agent) that American Family had verbally refused to insure the Busskohls after a 1990 fire; no written refusal or formal American Family application was produced.
- De Smet rescinded the policy, tendered the premium refund, demanded return of claim payments, and sued to recover amounts paid; De Smet moved for summary judgment.
- The circuit court granted summary judgment to De Smet, finding (as a matter of law) Busskohl misrepresented the prior refusal and that the misrepresentation was material; the Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Busskohl’s "No" was a misrepresentation | Busskohl: he did not submit an application to American Family and withdrew any offer; the prior conversation was not a refusal | De Smet: undisputed testimony shows American Family (via agent & underwriter) refused to insure verbally; written form not required | Court: "No" was a misrepresentation as a matter of law—verbal, unequivocal refusal suffices (Strong governs) |
| Whether the misrepresentation was material so as to permit rescission under SDCL 58-11-44 | Busskohl: De Smet routinely issued policies despite affirmative answers, so the answer would not reasonably influence underwriting | De Smet: question aims to elicit risk info; prior refusal would have prompted investigation revealing prior fires/arson suspicion and would have affected acceptance | Court: misrepresentation was material as a matter of law; it would reasonably have influenced De Smet’s underwriting/acceptance of the risk |
Key Cases Cited
- Brandt v. County of Pennington, 827 N.W.2d 871 (S.D. 2013) (summary judgment standard)
- Jacobson v. Leisinger, 746 N.W.2d 739 (S.D. 2008) (precedent on appellate review of summary judgment)
- Braaten v. Minnesota Mut. Life Ins. Co., 302 N.W.2d 48 (S.D. 1981) (a false representation in application voids policy even absent intent to deceive)
- Strong v. State Farm Mut. Ins. Co., 78 N.W.2d 828 (S.D. 1956) (insurer refusal need not be in particular form; clear, unequivocal indication suffices)
- Herdman v. National Life Ins. Co., 209 N.W.2d 364 (S.D. 1973) (materiality is a question of law when reasonable minds cannot differ)
- Ivory v. Reserve Life Ins. Co., 101 N.W.2d 517 (S.D. 1960) (materiality measured by probable and reasonable influence on insurer)
- Trouten v. Heritage Mut. Ins. Co., 632 N.W.2d 856 (S.D. 2001) (insurer’s good-faith and fiduciary-like obligations)