797 N.W.2d 779
S.D.2011Background
- Zoo Properties, LLP and Aberdeen Zoo, Inc. filed a claim under a business owner's policy for repairing a sagging ceiling caused by cracked joists.
- Midwest Family Mutual Insurance Co. denied coverage, arguing the policy only covers total collapse, not cracking.
- Engineers determined joists were cracked and collapse was imminent or inevitable without repair; ceiling had not fallen.
- Circuit Court granted summary judgment for Midwest Family Mutual, holding no coverage under the policy language.
- Zoo Properties appealed seeking coverage for the cracked-joist damage; the Supreme Court reversed and remanded for further proceedings.
- Policy language at issue covers direct physical loss involving collapse, with an exclusion for cracking.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the term 'collapse' ambiguous in the policy? | Zoo argues 'collapse' is ambiguous and could include imminent collapse. | Midwest Family Mutual contends 'collapse' means actual, total collapse. | Yes, ambiguous; court adopts imminent-collapse interpretation. |
| Should imminent collapse be covered under the policy? | Zoo contends imminent collapse should trigger coverage. | Midwest argues only actual collapse triggers coverage. | Imminent collapse constitutes coverage under the policy. |
| Does the cracking exclusion defeat coverage for cracked joists? | Zoo argues cracking exclusion does not preclude imminent-collapse coverage. | Midwest treats cracking as excluded, limiting coverage. | Cracking exclusion does not undermine imminent-collapse coverage. |
| What interpretive standard applies to 'collapse' in this policy? | Zoo seeks broader interpretation favorable to insured. | Midwest advocates narrow interpretation favoring insurer. | Moderate first approach adopted: collapse includes imminent collapse. |
Key Cases Cited
- Ocean Winds Council of Co-owners, Inc. v. Auto-Owner Insurance Co., 565 S.E.2d 306 (S.C. 2002) (recognizes ambiguity in 'collapse' and endorses imminent-collapse construct)
- Island Breakers v. Highlands Underwriters Ins. Co., 665 So.2d 1084 (Fla. App. 1995) (supports substantial impairment approach as one option)
- Rankin v. Generali-U.S. Branch, 986 S.W.2d 237 (Tenn. Ct. App. 1998) (illustrates substantial impairment approach in collapse analysis)
- Gloe v. Union Ins. Co., 694 N.W.2d 252 (S.D. 2005) (cites SD precedent re collapse interpretation)
- Zochert v. Nat’l Farmers Union Prop. & Cas. Co., 576 N.W.2d 531 (S.D. 1998) (establishes de novo review and liberal construction for insured)
- Alverson v. Nw. Nat’l Cas. Co., 559 N.W.2d 234 (S.D. 1997) (discusses ambiguity and construction rules for policies)