926 N.W.2d 472
S.D.2019Background
- Nehemiah Larimer (18) died in 2015 while riding an unregistered/unlisted 49cc moped after a collision with an underinsured motorist; the tortfeasor’s insurer paid its policy limits ($100,000).
- Nehemiah was an insured under his parents’ American Family policies: a Family Car Policy (with an Underinsured Motorists Endorsement) and a Personal Liability Umbrella Policy.
- The Endorsement excluded underinsured motorist (UIM) benefits for injuries suffered "while occupying...a motor vehicle that is not insured under this policy, if it is owned by you or any resident of your household" (an "owned but not insured" exclusion).
- American Family denied UIM benefits, treating the moped as a motor vehicle not insured under the policy; it also denied Umbrella coverage as "no broader than" underlying insurance.
- Kayne Larimer (Special Administrator) sued for declaratory relief seeking UIM coverage (including umbrella limits). The circuit court found the policy ambiguous and granted Kayne summary judgment; American Family appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Endorsement’s definition of "motor vehicle" and the owned-but-not-insured exclusion are ambiguous | Kayne: Policy language is ambiguous when read as whole; moped should not be excluded; UIM coverage applies | American Family: Endorsement defines "motor vehicle" to include land motor vehicles, so moped is excluded and UIM does not apply | Court: Ambiguous — insurer failed to show exclusion clearly applies; interpret in favor of insured, UIM applies |
| Whether the owned-but-not-insured exclusion violates public policy | Kayne (notice of review): Exclusion conflicts with SDCL 58-11-9.5 and public policy favoring UIM protection | American Family: Exclusion is permissible and applies under policy definitions | Court: Did not decide public-policy challenge because ambiguity resolved in insured’s favor; affirmed on ambiguity ground |
Key Cases Cited
- Harvieux v. Progressive N. Ins. Co., 915 N.W.2d 697 (S.D. 2018) (summary judgment standard and de novo review)
- Oxton v. Rudland, 897 N.W.2d 356 (S.D. 2017) (no deference on de novo review)
- Ass Kickin Ranch, LLC v. N. Star Mut. Ins. Co., 822 N.W.2d 724 (S.D. 2012) (ambiguities construed for insured; insurer bears burden to prove exclusion)
- State Farm Fire & Cas. Co. v. Harbert, 741 N.W.2d 228 (S.D. 2007) (insurer meets burden when claim clearly falls outside coverage)
- Cornelius v. Nat'l Cas. Co., 813 N.W.2d 167 (S.D. 2012) (definition of ambiguity: genuine uncertainty between meanings)
- Lowery Constr. & Concrete, LLC v. Owners Ins. Co., 901 N.W.2d 481 (S.D. 2017) (contract must be read in entirety)
- BAC Home Loans Servicing, LP v. Trancynger, 847 N.W.2d 137 (S.D. 2014) (appellate affirmation permissible on any correct basis)
- Phen v. Progressive N. Ins. Co., 672 N.W.2d 52 (S.D. 2003) (policy conditions must conform to public policy)
- De Smet Ins. Co. v. Pourier, 802 N.W.2d 447 (S.D. 2011) (addressing owned-but-not-insured exclusions; factual limits on its holding)
- Wheeler v. Farmers Mut. Ins. Co., 824 N.W.2d 102 (S.D. 2012) (invalidated an owned-but-not-insured exclusion in uninsured motorist context)