2025 S.D. 20
S.D.2025Background:
- Rebecca Earll was killed in a car accident caused by an underinsured motorist; she was not at fault.
- Rebecca’s insurer paid UIM benefits under her own policy, but her parents, David and Marcia Earll, also sought UIM benefits under their separate policy with Farmers Mutual Insurance, covering vehicles not involved in Rebecca’s accident.
- Rebecca qualified as an "insured" under her parents’ policy because she was a relative living with them.
- Farmers Mutual denied the claim, citing an “owned but not insured” exclusion (excluding coverage if the insured is in a vehicle they own but is not listed on the policy).
- The Earlls sued for declaratory judgment, alleging the exclusion was void as against South Dakota public policy; the trial court granted summary judgment for Farmers Mutual.
- On appeal, the Supreme Court of South Dakota reversed, finding the exclusion violated South Dakota public policy and overruled its prior precedent allowing such exclusions.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the “owned but not insured” exclusion to UIM coverage valid under South Dakota law? | Exclusion violates public policy; UIM is meant to protect insured individuals, not depend on vehicles; prior case should be overruled. | Exclusion is valid; statutory language (“subject to terms and conditions”) allows it; relied on earlier Pourier case. | Exclusion invalid; violates South Dakota public policy; Pourier overruled. |
Key Cases Cited
- Gloe v. Iowa Mut. Ins. Co., 694 N.W.2d 238 (S.D. 2005) (recognizes the personal nature of UIM/UM protections and the shared public policy intent for both coverages)
- De Smet Ins. Co. v. Gibson, 552 N.W.2d 98 (S.D. 1996) (UM/UIM statutes intended to protect the consumer, not the insurer)
- Wheeler v. Farmers Mut. Ins. Co., 824 N.W.2d 102 (S.D. 2012) (invalidates the identical "owned but not insured" exclusion in the context of UM coverage)
- Streff v. State Farm, 905 N.W.2d 319 (S.D. 2017) (public policy undergirding UIM coverage applies even to exclusions in umbrella policies)