Demaray v. De Smet Farm Mutual Insurance Co.
2011 SD 39
S.D.2011Background
- Alvine filed a pollution-related negligence, nuisance, trespass, and res ipsa action against Demaray and Hagemann.
- Demaray and Hagemann are insured by De Smet Farm Mutual Insurance; De Smet declined defense after notice.
- The insureds defended; underlying trial favored them; Alvine’s case was affirmed in Demaray/Hagemann v. Alvine matter (2010 SD 28, 780 N.W.2d 507).
- Alvine alleged repeated, ongoing discharges of pollutants affecting Alvine’s property and waters.
- Policy Exclusion 19 bars coverage for discharge of pollutants, with a Limited Farm Pollution Liability Coverage Endorsement exception for sudden and accidental farming discharges.
- The circuit court held De Smet owed a duty to defend; the supreme court reversed, finding no arguable sudden-and-accidental discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Alvine's complaint arguably alleged a sudden and accidental discharge | Demaray argues no arguable sudden discharge. | Demaray contends complaints show intermittent, repeated discharges. | No arguable sudden-and-accidental discharge alleged. |
| Who bears the burden to prove applicability of the exception | Insurer must prove exclusion clearly outside coverage. | Insured bears burden if exception applies. | Insurer bears burden to show exclusion; insured bears burden to prove the exception. |
| Does the policy's 'sudden' term have a temporal meaning | Court should interpret 'sudden' as abrupt/instant. | Interpretation varies; some treat it as ambiguous, others as temporal. | We construe 'sudden' temporally; requires abrupt/immediate discharge. |
Key Cases Cited
- Hawkeye- Sec. Ins. Co. v. Clifford, 366 N.W.2d 489 (S.D. 1985) (insurer's duty to defend broader than coverage; allegations on face matter)
- State Farm Fire & Cas. Co. v. Harbert, 741 N.W.2d 228 (S.D. 2007) (duty to defend analyzed with complaint and record evidence)
- State Farm Mut. Auto. Ins. Co. v. Wertz, 540 N.W.2d 636 (S.D. 1995) (insurer bears burden to show no coverage)
- Am. Family Mut. Ins. v. Elliot, 523 N.W.2d 100 (S.D. 1994) (contract construction; plain meaning governs)
- S.D. State Cement Plant Comm’n v. Wausau Underwriters Ins. Co., 616 N.W.2d 397 (S.D. 2000) (duty to defend depends on whether allegations fall within coverage)
- Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc., 40 F.3d 146 (7th Cir. 1994) (definition of 'sudden' examined in policy context)