American Family Insurance Group v. Robnik

2010 S.D. 69

AMERICAN FAMILY INSURANCE

GROUP, Appellee, Plaintiff and ROBNIK,

Heather Defendant Appellant,

Shirley Hunter, Defendant.

No. 25334.

Supreme Court of South Dakota.

Argued March Aug.

Decided Deibert, Cadwell,

Douglas Sanford, M. Garry, LLP, Falls, Deibert & Sioux South Dakota, Attorneys plaintiff for appel- lee.

Michael A. Wilson of Barker Wilson Firm, LLP, Law Rapid City, South Dako- ta, Attorneys for defendant appellant. ZINTER, Justice.

[¶ 1.] Insurance initi- ated declaratory this action to determine whether its homeowner’s policy covered damages against awarded its insured underlying tort action for negligent mis- representation. The circuit court underlying action found damages that the were by negligent caused acts. Notwith- standing findings, those the circuit court in declaratory concluded there was no coverage misrepresenta- because the tions were intentional and because there causally were no damages related which there policy. under the judgment We affirm the because there was no dispute allegedly negligent of fact that acts caused expected damages; expect- ed issue was not and could not have been tried tort action; and, under own Robnik’s line of authorities, negligent misrepresentation resulting is not an for which there is cov- erage policy. under the History Facts and Procedural Shirley Hunter a home in owned Rapid City. In connection her with sale of home, completed Hunter a property disclosure as required statement SDCL statement, ch. 43-4. In the disclosure Hunter following answered “No” to the question: you any problems “Are aware of blockage backup, past with the sewer present?” Hunter also indicated “plumbing “working,” and fixtures” were system/drains” and that the “sewer and, Hunter committed the reviewing bodily injury; the disclosure After “working.” negligent misrepresentation. tort of statement, purchased Robnik Heather home. Hunter’s homeowner’s provided liability coverage bodily for policy years Approximately prior two [¶ 3.] by an injury property damage and caused sale, plumbing had hired a the Hunter An occurrence was defined “occurrence.” blockage in repair contractor to a sewer accident, including exposure to as: “an the home. The contractor discovered de- conditions, which, during policy results than fixing in the sewer line. Rather fects bodily injury; property in: a. or b. period, Hunter had the drain problem, shower damage.” The term “accident” was not also had the capped. in the basement She policy. policy defined also con- capped. This information was toilet drain exclusion, tained an intentional acts which Robnik, and it conflicted disclosed provided: in the representations with the disclosure Injury. Intentional We will cover statement. bodily injury property damage caused or home, purchasing After Rob- [¶ 4.] intentionally by or at the direction of nik uncapped the shower and toilet drains any bodily insured even if the actual began using those facilities. and Less injury property damage is different year closing, experi- than a after Robnik than that which was or intend- sewage up, including standing enced back standpoint ed from the insured.1 incident, expe- In a water. second Robnik entry judgment After [¶ 7.] full sewage rienced a basement sink and action, underlying Family American feces. and Robnik filed cross motions for sum- mary judgment already pending in the de- subsequently Robnik initiated the [¶ 5.] claratory Judge Delaney action. denied underlying against per- Hunter for summary judgment Robnik’s motion for injury damage. sonal Rob- property and granted Family’s motion. initially premised nik’s action was on alter- Notwithstanding Judge findings Trimble’s negligence native theories of and deceit. misrepresentations that Hunter’s appear, Hunter and American did not Delaney negligent, Judge found that provide intervened to a defense. acts were intentional and there was no court, At the of a trial to conclusion coverage under the intentional acts exclu- Robnik dismissed her claim for deceit and sion.2 allegations all of intentional misconduct. Judge findings

Circuit Trimble entered appeal, On Robnik contends that negligently completed fact that: Hunter light Family’s of American participation statement; judicata pre- negligence action, the disclosure her in the res proximately property declaratory caused Robnik dam- vented the court from recast- age by accompanied ing emotional distress Hunter’s acts as intentional rather policy. policy 1. The also contained a contract dam- not covered It was under is not age exclusion. Because we conclude there ruling clear whether this was based on the was no under the accident/occur- contract exclusion or the cases disal- provision, rence we need not address the ar- lowing recovery for economic losses. See in- guments appeal regarding coverage on under fra, affirming n. Because we are on the the contract exclusion. issue, we not ad- need parties' arguments appeal dress the re- Judge Delaney alternatively concluded that ruling. garding Judge Delaney's alternative type caused this incident (1996) negligent. Robnik also contends Md. 679 A.2d than negligent misrepresentation example, Hunter’s A.L.R.5th the court triggering coverage negligent misrepresentation held that accidenVoccurrence policy.3 under the would be treated like other forms of negligence are covered as “acci-

Decision if expect dents” the insured does not Accident/Occurrence resulting foresee the damage. Other “occur To be a covered that negligent misrep- courts have held rence,” misrepresentations had to resentation is not an “accident” under have been an “accident” within the mean policy, because the insured intends to ing policy. of the This issue has been induce reliance on the statement4 or courts, by resulting numerous considered negligent misrep- because the nature of split authority. in a of One author has resentation is that of an intentional act. the issue and the two most summarized Brennenstuhl, Annotation, H. Brent Negli- often stated views: gent Misrepresentation as “Accident” or language many policies of Standard Warranting “Occurrence” Insurance Cov- liability provides coverage for (1998). 483, erage, 58 A.L.R.5th 483 We bodily injury property damage or have not had occasion to consider the is- by caused an “occurrence.” “Occur- sue. usually is an “acci- rence” defined as Robnik relies on dent,” Sheets but the term “accident” is itself Co., 634, 657, Brethren Mut. Ins. 342 Md. rarely have defined. Courts differed (1996). 540, 679 A.2d 551 Sheets concluded negligent misrepresenta- over whether notwithstanding the intent to an induce tion can constitute “accident” or “oc- element, negligent reliance policy liability misrepresenta- currence” under a in- tion is an if give surance so as to rise to an insurer’s “the re- accidenVoccurrence duty indemnify sulting damage place to defend or an insured. is an event that takes In foresight expectation.”5 Sheets v. Brethren Mut. Ins. Co. without one’s or presented arguments probable 3. Robnik also other ferred to as the natural and con- element) seeking responding sequences unduly limiting affirmative relief and as Family's general applicability liability policies: defenses. Because Robnik prevail cannot on the is- accidenVoccurrence [the ... those courts which follow [E]ven sue, ap- we need not address Robnik's other foreseeability requirement reasonable rec- pellate arguments. ognize] greatly ... that it so restricts the liability policy insurer’s as to render the Dakota, In South intent to induce reliance is meaningless, or and denies valueless even negligent misrepresentation. an element of predicate for what is the party The tort occurs "whenever one makes likely liability against the insured. As one (1) (2) misrepresentation, a without reason- out, pointed court has the insured himself is grounds believing the be able statement to damage injury not liable where is the true, (3) particular with the intent to induce a negligence; unforeseeable result of his by party, party the other and the other foreseeable, injury where the is (4) changes position justifi- with actual and liable, is so that the insured is his insurer statement, (5) able reliance on the suffers not liable. Muth, damage as a result.” Ehresmann v. Co., 634, 342 Md. Sheets v. Brethren Mut. Ins. ¶ 103, 21, SD N.W.2d 406 2008 757 647-648, (citations (1996) 679 A.2d 546 ¶ Kahler, 30, 10, (quoting Fisher v. dissent, omitted). (citing 28 See also 122, 126-27). infra 641 N.W.2d Co., City Carter Lake v. Aetna Cas. & Sur. of F.2d Sheets, however, (8th Cir.1979) explicitly rejected a 1058 for the rea- 604 (often foreseeability requirement proposition). sonable re- same 772 Surety

See also Aetna Cas. & Co. v. Metro. causing damage has not previously been Church, Baptist F.Supp. seller, 228 encountered (S.D.Tex.1996) (concluding may that under Tex- be considered “[un]anticipated” and law, negligent misrepresentation may misrepresentation may as therefore be if considered to resulting injury be accident have been an accident. is unintended).6 explained: court unexpected or The dissent City relies on Carter Lake v. Aetna Cas. It is conceivable that [the sellers] never (8th Co., & Sur. 604 F.2d Cir. experienced problem system with the 1979), a applying harmonious decision they living while farm with Sheets; same definition as i.e. “whether a therefore, their two children and at the ‘expected’ probabil- result is as a matter of they time represented system that the fact, ity.” In “agrees order, See id. Sheets with in good working did not an- the reasoning Eighth ticipate Circuit in [buyer] Car- would encoun- Sheets, ter Lake.” at ter any Md. difficulties. We hold therefore below, A.2d 540. Ultimately, explained resulting as damage fits within our we do of not decide which view or definition accident specific because it was an may definition to event that have adopt place because Robnik cannot taken without foresight the expectation. [sellers’] establish an as a mat- ter of law under Sheets’s or Carter Lake’s 657-58, Id. at 679 A.2d (emphasis 540 add- definition unexpected damage rule. ed). contrast, In Carter Lake held that Comparing and contrasting Sheets and where an insured has had one prior sew- Carter Lake demonstrates this conclusion. age backup, “floodings subsequent to the first incident unexpected are not and thus In applying the unexpected not [are] accidents occurrences as those rule, coverage Sheets found terms are used in the insurance policy.” negligent misrepresentation in connection Lake, Carter 604 F.2d at 1059. only with the sale of property because that seller experienced had never before a parties in this case problem sewer/septic system with the that agree that there are disputes no of fact the seller had represented in good regarding any coverage issue under the working Maryland order. The Court of policy. facts, Under those undisputed Appeals observed that problem when the Robnik cannot coverage meet the require- Family opposing American relies on the there has been economic loss in the sense that negligent view misrepresentation "that property is not represented. is not as “It has policy, an accident’ under a recognized because the in- been virtually that courts 'are sured intends to induce reliance on the state- holdings damages unanimous their that ment negligent or because the nature of flowing misrepresentation mis- from fraud and/or representation rather, is that of an intentional act.” have no property damage; basis [as] Brennenstuhl, See 58 only cognizable A.L.R.5th at 483. Amer- damages from such torts points ican also out that other courts are economic and contractual in nature and coverage, have concluding neg- found no as such do not scope fall within the of cover- ” ligent misrepresentation species age is a of fraud. afforded policies[.]' [homeowner’s] Inc., e.g., See Agency, Co., Miller v. Western General Aluise v. Nationwide. Mut. Fire Ins. 218 1144, 55, 498, Cal.App.4th 41 Cal.Rptr.2d (2005). 49 58 W.Va. 625 S.E.2d See (1996) (applying Comer, negli- rationale that because Property Casualty also Nationwide & v. gent misrepresentation requires F.Supp.2d (S.D.W.Va.2008) intent to in- 691-92 reliance, subspecies duce it is a fraud (adopting of and negligent rationale that and inten- "occurrence”). therefore not covered as an misrepresentations tional prop- do cause Family finally points yet erty damage out that misrepresentation when the con- other courts have found no existing property). when cerns defects in facts, of Lake. In con- Under ments Sheets or Carter those dissent’s own au thority to the situation in Sheets but like the trast concludes that such incidents are Lake, no dispute facts Carter there is unexpected because “after the first sewage Hunter had block- previously backup,” there is a “substantial probabili and knew of the sewer line. age defective ty” backup problem another unless the Further, Lake, like the insured Carter Lake, repaired. is Carter 604 F.2d at dispute is no that Hunter failed to there Therefore, Lake, under Carter Instead, Hunter repair capped defect. knowledge previous sewer sewer drains and discontinued use of precludes issue Robnik’s from be basement and toilet.7 There- shower ing “unexpected.” When entire record fore, Lake, under both Sheets Carter is devoid of genuine a issue of material Hunter must have be held to fact, summary judgment is appropriate. Robnik would use the basement toilet and Kohler, Fisher v. thereby experiencing shower the unre- N.W.2d 124-25. As noted in another damage. sewer As Carter paired Lake case “to ... grant reverse remand a stated, repair prior sewage the failure to a summary judgment where there are no backup “clearly” creates “substantial genuine issues of material fact is some sewage probability” backup another Tabor, illogical.” what Tipton Town of Accordingly, future. in the Id. words 1997 SD 96 n. 567 N.W.2d 351 n. 29 Lake, sewage backups of Carter Robnik’s (Sabers, J., dissenting). Indeed, this “subsequent incident] [Hunter’s routinely Court determines insurance cov unexpected were not not and thus acci- erage summary judgment issues on when those dents occurrences as terms were there are no disputes e.g., fact. See policy.” in the used See id. Ins., 123, Hoglund v. Fire Dakota 2007 SD Thus, if we were to follow either the Sheets ¶ 28, 853, 860; 742 Pro N.W.2d Schulte v. decision, or the Carter Lake there is no Co., 75, gressive Northern Ins. 2005 SD coverage for Robnik’s incident. ¶¶ 8-9, 437, 440; Family 699 N.W.2d Am. Kostaneski, Mut. Group Ins. v. 2004 SD

[¶ The dissenters would re 13.] ¶ 114, 24, 410, 415; 688 N.W.2d State Ce and circuit court verse remand for the ment Plant Comm’n v. Wausau Under “finding” and address make a whether the ¶ Co., 116, 24, writers Ins. 2000 SD 616 damages would been anticipated have 397, 407; N.W.2d Alverson v. Northwest meaning within the of Carter Lake. See ¶ ¶ dissent, Co., 9, 15, But ern Nat’l Cas. 1997 SD parties 27. both 559 infra Gibson, 234, 237; judgment N.W.2d DeSmet v. 1996 summary arguing moved ¶ 10, 98, 102, 101; that there was no of fact SD 552 N.W.2d Econ. dispute regarding And, Club, Inc., Co., appeal, Aero v. Avemco Ins. 540 issues. nei 644, (S.D.1995); Family party requested has a remand to cir N.W.2d Am. ther 646 Co., Elliot, 100, parties agree cuit court. Both Mut. Ins. v. 523 we N.W.2d (S.D.1994); a should decide this issue as matter of law 103-04 Am. Mut. Ins. (S.D. 197, on the record That Co. v. Purdy, before us. record in 483 N.W.2d 201 1992); an agreement pre Dairyland Wyant, cludes that Hunter had v. 474 N.W.2d 514, viously experienced backup (S.D.1991); but Klatt v. capped 516 Cont’l Ins. Co., 366, (S.D.1987); fixing problem. the drains instead of 409 370-71 N.W.2d summary judgment hearing Okay.” responded: At 7. the court Robnik’s counsel "That's question: “They problems had asked and all true.” they capped They it. not did disclose that. 774 Roemmich, relitigation of a foreclosing in ment v. Ins. Co. Cent.

Great de- (S.D.1980). litigated been matter that has 772, 775 N.W.2d Restatement, § supra, cided. See Res Judicata is referred to as direct This effect also preclusion estoppel. collateral Claim however, Robnik, relying in judgment of a refers to the effect argues judicata, of res upon the doctrine of a matter foreclosing litigation Family’s that American accident/occur of a litigated, been because never has raised in the may not be rence defense have been that it should determination coverage issues action because declaratory in an earlier suit.... advanced litigated in or could have been either were tort action. This Court at at 77 n. 104 S.Ct. Migra, 465 U.S. applica court’s novo a circuit reviews de Christians, 2001 SD 894. See also judicata. res White tion the doctrine of ¶ 46, at 387. 637 N.W.2d 52, 17, Bain, 752 N.W.2d v. Robnik first invokes col preclusion effect estoppel, lateral issue judicata consists of “Res Judge judicata. argues She of res concepts: preclusion issue preclusion two question Delaney relitigating erred v. preclusion.” claim Christians were misrepresentations whether ¶46, Christians, 637 N.W.2d SD points or intentional. Robnik negligent J., (Konenkamp, concurring spe specific Trimble entered Judge out that City Sch. cially) (citing Migra Warren misrepresentations findings that Hunter’s 75, 77 n. of Educ., Dist. Bd. 465 U.S. merely negligent findings and those were (1984)). 892, 79 L.Ed.2d 56 As the S.Ct. though Judge appealed. Even explained Migra: Supreme Court give preclusive effect to Delaney failed adjudi- findings,8 estop- of former collateral preclusive Judge effects Trimble’s and, Family’s at varying preclude pel cation are discussed did times, terminolo- seemingly conflicting defense this case. pre- gy, attributable to the evolution findings on four Robnik relies years. over the These concepts clusion underly- by Judge Trimble entered collectively by effects are referred to findings action. Those were that: ing most commentators as the doctrine a negligently completed 1. Defendant (Sec- judicata.” See Restatement “res Property Disclosure State- Seller ond) Introductory Note Judgments, 16, 2003, on December con- ment (1982); Wright, ch. 3 18 C. A. before cerning blockage sewer and Defen- Miller, Cooper, & E. Federal Practice knowledge thereof. dant’s (1981). judi- § and Procedure Res to negligently failed cor- analyzed further to consist Defendant cata is often within rect misstatements contained concepts: pre- “issue preclusion of two Disclosure Property that Seller preclusion.” “claim Issue clusion” and concerning sewer block- judg- a Statement preclusion to the effect of refers preclusion issue because Marine on the claim set forth in St. Paul Fire and 8. For the reasons 8, Family at the circuit conceded Engelmann, 2002 SD American Marine Ins. Co. 192, 200-01, ¶ 18, estoppel precluded es- court level that collateral 639 N.W.2d collateral findings and conclu- relitigation of the of fact toppel generally apply when an in- does not underlying tort duty of law entered in the only appeared under its to sions surer has trial. apply We not St. Paul Fire and defend. do age knowledge and Defendant’s that could have been raised in the earlier thereof. proceeding, even though actually raised.” Lee v. Rapid City Area Sch. negligently 3. Defendant failed to Dist., 51-4, (S.D. 738, No. 526 N.W.2d Property amend the Seller Disclo- 1995). Therefore, if prior sure Statement at time to could have raised the issue of whether the closing property February on damages expected, were 18,2004. . it would have precluded been raising from the acci negligent misrepre- 4. The Defendant’s defense in the declaratory dent/occurrence proximate sentation was a cause of party action. litigation “When fails to by damages sustained the Plaintiff. develop all of the issues and evidence out, correctly points As Robnik the first case, available in a party justi is not findings three indicate Hunter’s mis- fied in trying later the omitted issues or representations negligent were rather than facts a second action based the same acts, finding intentional and the fourth in- claim.” Id. negligent dicates acts caused however, damages. Notably, Robnik’s But, to invoke the claim finding there was no preclusive aspect judicata, of res there relating necessary fact for must have been “a full fair opportunity this event to be an accident/occurrence to litigate the issues in the prior proceed view; under the Lake ie. Sheets/Carter ing.” L.S., People ex rel. damages that Robnik’s would have here, 721 N.W.2d question And foresight been incurred without Hunter’s damages whether anticipated or expectation. litigated could not have been this under That significant omission is be- lying action that question because was not preclusion only cause issue bars “a point question relevant. anticipated actually directly [that] was in issue in damages was irrelevant because the meas a former action and judicially passed damages ure of in a tort action “is the upon and determined a domestic court amount which compensate plain will [the jurisdiction....” of competent Sodak for all proximately tiff] the detriment Distributing Wayne, Co. v. 77 S.D. ..., caused whether it could have been (1958). 93 N.W.2d In this (em anticipated or not.” SDCL 21-3-1 case, Judge no finding Trimble made added). phasis Because au Robnik’s own Robnik’s would have been in- require unanticipated damages, thorities curred without foresight or ex- underly an issue that was irrelevant in the pectation. Because that ac- issue was not action, ing preclusion the claim aspect of action, tually litigated in judicata res did not bar American Fami estoppel, preclusion collateral the issue as- ly’s generally defense this action. See pect judicata, of res did not bar American LLC, Murray Crystex Composites, v. 618 Family’s defense in (“The (D.N.J.2009) F.Supp.2d bar declaratory this action. preclusion applies only of claim not to all also, litigated by matters and determined such preclu

[¶ 19.] So the claim judgment but to all issues aspect judicata sion of also as relevant res did not bar (inter Family’s Concededly, presented[.]” American which could have been defense. omitted) (em preclusion only quotations claim nal and citations “precludes reliti- added)); gation previously of issues Pub. phasis heard and re Nebraska Advocate solved; Com’n, it prosecution also bars of claims v. Nebraska Pub. 279 Neb. Serv. (2010) (noting prior N.W.2d there were no problems); Carter Lake, judicata

that although requires preclu- res 604 F.2d at 1059 (concluding that sive effect for issues could have been because the insured repair declined to raised, applies questions problem incident, the rule after any “rele- the first subse- falling quent sewage vant to and purview backups within the “were not unexpect- added)). original ed and thus were not (emphasis accidents or occur- action[.]” rences as those terms used in the importantly, preclu- [¶ 21.] More policy”). Accordingly, Hunter’s judicata sive effects of res apply do negligent misrepresentation cannot be an type this of situation where the insurer accident/occurrence, and the declaratory participated duty under its to defend. As court did not err in granting noted, previously we have when the insur Family’s summary judgment. motion for participates defend, er duty under its Although the declaratory court entered no the insurer must “defend the insured with conclusion of law on the accident/occur- regard out to the insurer’s interest.” St. issue, rence we affirm summary judgment Paul Fire and Marine Engel Ins. Co. v. if the circuit court was correct for ¶ mann, 8, 18, 2002 SD 639 N.W.2d State, reason. Corp. A-G-E 201 (quoting Restatement [Second] 66, 13, 719 N.W.2d 785. That is a). Judgments § 58 cmt. This creates a especially appropriate here where there conflict of interest for the insurer. “Hence are disputes no regarding fact the al- the usual rule that an preclud is [insurer] leged accident/occurrence. ed the determination of issues which he [¶ Affirmed. 23.] litigates on behalf of an [insured] stated (Second) [Restatement Judgments] GILBERTSON, Justice, [¶24.] Chief § apply should not to an who [insurer] SEVERSON, Justice, concur. defends, compulsion under the of an inde pendent defend, duty to with MEIERHENRY, Justice, [insured] [¶ 25.] whom he has a conflict SABERS, of interest.” Justice, Id. at Retired dissent. ¶ 18, Therefore, 639 N.W.2d 192 at 200. SABERS, Justice, Retired claim preclusion did not bar consideration sitting KONENKAMP, Justice, issue American disqualified. Family’s declaratory action. MEIERHENRY, Justice (dissenting). reasons, For the foregoing we I respectfully dissent. allWe conclude that neither judicata effect of res agree that the circuit court erroneously Family’s barred American accident/occur- decided policy’s exclusions, this case on the rence Further, defense in this action. i.e. intentional conduct and contract. Be- material facts in the declaratory action are cause the circuit court did not address or undisputed. Hunter had experienced pri- make a finding on whether the events con- blockage, sewer and she capped the stituted an occurrence or accident that was shower and sewer drains rather than re- covered under the terms of the policy, I pairing the defective sewer line in her would reverse and remand with directions home. Because she had previously experi- on what apply. definition to enced problem the but declined to have it repaired, both Robnik’s and the dissent’s majority The opinion does not authorities permit do not coverage. clearly See state which definition of “occur- Sheets, 657-58, 342 Md. at 679 A.2d at 552 rence” or “accident” adopting this Court is (concluding coverage was available because for future reference. I submit that we probability a substantial that certain con- definition dis- Eighth the Circuit’s adopt sequences Lake v. Aetna will result from his actions.” City in Carter cussed of (8th Co., F.2d 1052 Cir. Id. That determination is based on the Cas. & Sur. 1979). in Lake was The issue Carter totality of the circumstances each case. cov- City’s policy insurance whether the Eighth explained: Id. The Circuit that backup. argued Aetna sewage ered If the insured knew or should have sewage backups “were some of the that there was a known substantial as those terms occurrences or accidents probability that certain results would policy because the [] used the [were] his acts or omissions then there follow ” ‘expected.’ Id. at 1056. backups were has not been an occurrence or accident rejected Aetna’s “at- Eighth The Circuit type policy as defined this of when with reason- tempt[] equate expected actually pass. such results come to The Eighth The Cir- foreseeability.” Id. able results cease to be and cover- cuit reasoned: age present probability is as the interpretation that an adopt To Aetna’s consequences will follow and decreases by accident because injury is not caused proba- becomes less than a substantial injury reasonably is foreseeable Keeton, bility. See R. Basic Text on only in a rare instance would mean 5.4(c), § at Insurance Law 298-300 general liabili- comprehensive would the (1971). of benefit to Carter ty policy be Id. at 1059. policy Enforcement of the this Lake. Eighth The Circuit further not- minimal would afford such cov- manner probability is a matter ed substantial patently disproportionate erage as to be degree expectability: and would be in- premiums paid to the “reasonably The difference between expecta- with the reasonable consistent probabili- foreseeable” and “substantial poli- purchasing tions of an insured A ty” degree expectability. is the Appleman, 7A Insurance cy. See J. reasonably foreseeable if there result is § Practice at 16 n26 Law and which would lead a rea- are indications (1972). Aetna’s construction of Under that the sonably prudent man to know damage if policy language follow from his particular results could liable, then the insured is foreseeable probability is more acts. Substantial if the coverage, there is no and but The indications must be than this. foreseeable, is not there is cov- reasonably pru- strong enough to alert a is liable. erage, but the insured only possibility dent man not function of an This is not the law. The occurring indications the results but the that of company is more than him be sufficient to forewarn also must premium receiver. highly likely to oc- that the results are at 1058. Id. cur. indicated Eighth The Circuit Lake significance 4. The of Carter Id. n. a result is question that the is “whether what “ex- analysis and is its rationale ‘expected’ probability” as a matter of determining whether means when pected” is ex- rejected concept “that a result coverage for “acci- is insurance there it reason- pected simply ... because was adopting Eighth Circuit’s By dents.” not mean ably Id. This does foreseeable.” definition, this would Court rationale are covered. Id. at negligent that all acts the courts standard for provide a workable Eighth applied Circuit 1058-59. “acci- in future cases where of our state actor “expected” to mean “that the term policy. undefined in the that there was dent” is knew or should have known case, on Based the facts that 2010 S.D. 70 that ultimately Carter Lake determined SYSTEMS, ADVANCED RECYCLING sewage backups that occurred after LLC, Appellee, Plaintiff and unexpected first “were not incident thus were not accidents or occurrences as those terms were used the insurance SOUTHEAST PROPERTIES LIMITED us, In policy.” Id. the case before PARTNERSHIP, Defendant and circuit court did decide whether “the Appellant. insured knew should have known probability was a there substantial No. 25304. certain results would [her] follow acts Supreme Court of South Dakota. The circuit court omissions.” Id. did consider whether Hunter knew or should Argued April have known that there was substantial Aug. Decided probability that uncap Robnik would sewage backup basement sewer and have result

as a of Hunter’s declaration

real estate disclosure form. Under Carter

Lake, Hunter had to have been “fore- highly

warn[ed] that results [were]

likely to occur.” Id. parties Neither the

nor circuit court addressed this issue. court, instead, circuit decided

Hunter’s conduct was not in- covered

surance it because was intentional or con-

tractually excluded. Consequently,

circuit court did not determine whether occurrence constituted

or accident that was covered under the

policy’s terms. split authority 32.] Because of the

on the definition of “occurrence” or “acci- precedent

dent” and lack of from this

Court, it seems reasonable remand this given inherently

case factual determi-

nation whether there is a prob- substantial

ability person’s that a actions will result in Thus,

harm. I would remand this case Lake’s,

with instructions to apply Carter

definition of “accident.” SABERS, Justice, joins Retired

this dissent.

Case Details

Case Name: American Family Insurance Group v. Robnik

Court Name: South Dakota Supreme Court

Date Published: Aug 11, 2010

Citation: 787 N.W.2d 768

Docket Number: 25334

Court Abbreviation: S.D.