Leafgreen v. American Family Mutual Insurance Co.

(1) section Rensch’s election under

statute, pre- awarded him trial court

judgment rate of interest at the 18% conversion, i.e.,

the time of October entry judgment. until the time of light guidelines set forth SDCL

21-3-3(1), abuse of discretion. we find no

FOSHEIM, C.J., MORGAN

HENDERSON, JJ., concur.

WUEST, J., specially. concurs

WUEST, (concurring specially). Justice opinion

I majority except concur in the

to footnote 4. an article Cost of

may not be at the market fair value. The $2,495 paid large

fact that Rensch for the

ring prove does not fair market value at it, purchased

the time he nor does it estab-

lish the fair now. market value

Floyd Joyce “Bud” LEAFGREEN and Leafgreen,

M. Plaintiffs and

Appellants,

AMERICAN FAMILY MUTUAL INSUR CO.,

ANCE Life In Co.,

surance Standard Appel Defendants

lees.

No. 15156.

Supreme Court of Dakota.

Argued March 1986. Sept.

Decided 22, 1981, May

On Arndt went Leafgreen apparent pur- for the residence pose correcting descriptions certain lot writing liability insurance for them. providing descriptions, In lot Leaf- greens produced their hidden lockbox to thereby a deed and disclosed examine to Mueller, Chamberlain, plain- Paul A. jewelry Arndt the existence of their appellants. tiffs and Leafgreens other claim Arndt valuables. Adam, May May, Gerdes Warren W. really getting was this information to as- Pierre, Thompson, for defendants and & professional burglars, sist two who later appellees. burglarized the residence. undisputed It is that Arndt and the Leaf- WUEST, Justice. greens personal Friday, friends. were On (Leafgreens) Floyd Joyce Leafgreen 26, 1981, Leafgreens went to Arndt’s June grant summary judgment appeal from a office and invited Arndt and his wife on a Family In- charging American an action trip Rapid City Saturday. Floyd on to Le- (American Family) Company surance afgreen phoned Saturday Arndt on morn- liability for conversion committed 27, 1981, ing, June and asked Arndt and Family Leafgreens by American join his wife had decided to them. Arndt Agent K. Arndt Edmund Leafgreen plans. he told had made other (Arndt). We affirm. Leafgreen burglarized home was Rapid day City. while were 1968, Family and February American agreement whereby 3, 1983, DeFea, Arndt entered into an On March Jack American independent agent Arndt became an for the Family’s Rapid City Manager, District policies by of insurance Ameri- secretary, sale issued Kem- advised Arndt’s Donna Family. agreement, Amer- ery, Prior to the that a search warrant had been issued investigated belong- ican Arndt’s back- for Arndt’s home and that ground. individuals were inter- ing Several to had found in the been investigation, viewed connection with the home. DeFea consulted with American and, all of Arndt for the Family May whom recommended counsel on executives and position. security performed by 16, 1983, A check Arndt was advised that his con- Minnesota, in- Minneapolis, Retail Credit termi- tract with American dicated Arndt had no criminal record and May April on 1983. On nate driving Hughes record showed no offense other County Jury Grand filed a three- speeding After the against April than a 1963 violation. count indictment Arndt. On Department con- pleaded South Dakota Insurance III guilty Arndt to Count investigation, indictment, Arndt aiding abetting ducted its own sec- insur- issued a license the State to sell ond-degree burglary under 22-32-3 SDCL ance. presently He and SDCL 22-3-3. incar- Penitentiary. cerated in the South Dakota through

From 1968 Arndt had an 18, 1984, Leafgreens extremely good April record for insurance sales On filed During period, complaint against Family, con- and service. alleged: Amer- exemplary. duct Affidavits and exhib- Arndt used his status as an gain entry Family insurance its reflect that Arndt was one of American ican 22, 1981; Leafgreen May Family’s top agents. only Not was he an into the home on concerning outstanding Rapid City gathered Leaf- sales leader information pro- greens’ District and whole Dako- valuables with the intent State ta, burglary; years but in some months and Arndt mote and facilitate the crime company’s the information to advise two was considered one of the out- and used felons—who standing throughout co-conspirators salesmen the nation. —convicted burglary Saturday, set committed the June out in the Restatement Leafgreens argued 1981. The that Agency.3 imputed Arndt’s tortious conduct should general law, Under rules agency placed it because him, may be held

Arndt which enabled liable for fraud deceit apparently while within authori- committed within his ty Family, apparent of American though even the agent upon Leafgreens; commit a fraud1 name- acts solely to benefit himself. American 27, 1981, ly, burglary the June of their Eng’rs. Soc. Hydrolevel v. Corp., of Mech. home.2 556, 102 456 U.S. S.Ct. 72 L.Ed.2d 330 (1982); Gleason v. Seaboard Air Line Ry. Family On American June filed Co., 278 U.S. 49 S.Ct. 73 L.Ed. 415 summary judgment, a motion for contend- (1929); see Nat. Acceptance also Etc. ing Leafgreens’ complaint contained no Ass’n, (7th Coal Prod’rs 604 F.2d 540 genuine issue of fact material and that Cir.1979); Fletcher, Cyclopedia W. of Family to judgment American was entitled ¶ 4886, the Law Corporations of Private p. as of a matter law because Arndt was not (rev. 1978); Seavey, ed. W. scope employment within the of his Law of (1964). conspired burglarize Agency “Apparent when he to authority Leaf- § greens’ is granted power The the legal home. trial court to affect the relations of in summary judgment person by favor another transactions with third Family persons, on the issue of vicarious liability, professedly agent other, as the for stating in its memorandum decision that arising in from and accordance with the acts were not reasonably tortious other’s pers manifestations to such third by and, Family foreseeable con- ons.”4 Restatement of Agency sequently, inequitable it would be to im- (1958). 8§ pute company. Arndt’s conduct to the Le- (Second) Agency afgreens appeal. provides: for our is issue determination wheth- puts A principal who or servant other er respondeat superior doctrine agent in a which enables the Family warrants that American be held agent, apparently acting while within his vicariously liable in tort for burglary upon to commit fraud third home, Leafgreens’ because Arndt used his persons subject is to liability such Family status as an American insurance persons third for the fraud. agent gain regarding information Comment section a to 261 states: burglary. stolen The issue impression is subject one of first The principal is under Dakota guided, part, by we are various although rules in this rule stated Section complaint, Leafgreens 1. In their use the term "bad conduct” cited the dissents would have fraud; however, really allege the facts state negligence been relevant in action. a conversion. 3."The Restatement normative Leafgreens’ complaint contained a second principles determining statement of when a alleging cause of action that American principal master or for the tor- liable duty owed them a to exercise reasonable care in tious or acts of a other criminal servant or selection, Arndt, retention and review of actually when has ... autho- agent, resident and that American rized or ratified unlawful conduct.” Kasner v. duty by negligently retaining breached 149, Gage, 281 Minn. 161 N.W.2d Arndt when it knew or should have known he untrustworthy However, and dishonest. granted summary judgment the trial on also court 4. Apparentauthority analogous to "ostensi negligence appel- this cause action for authority ble” which defined in SDCL59-3-3 appeal portion judg- lants did not authority principal intentionally, as as a “such argument, they very ment. At oral made it care, ordinary or allows a want of person causes plain they theory had abandoned that and were possess." third to believe the relying upon liability. Possibly, innocent, greens’ gained home and information has received no con- entirely he is transaction, and, cerning as the location their from the valuables benefit 262, although purporting scope to act within the stated Section Lia- purposes. solely powers acted own as an American insurance bility agent, Leafgreens. the fact is based without loss to transaction, however, agent’s position facilitates was used to facilitate consum-. fraud, from the burglary approximately mation occurred person third point of view of the five weeks later. regular seems on its face and transaction foreign A review of several cases demon- acting in agent appears to strates the manner in which courts of other confided ordinary course of business jurisdictions applied foregoing have to him. principles. v. Home In- Bowman principal’s lia- boundaries of a America, While the Company 243 F.2d surance drawn, easily

bility under this rule are not (3rd Cir.1957), a male field underwriter sug- Reporter’s Notes to section masqueraded company’s physician, as the gest, they do exist: physical and conducted intimate examina- upon plaintiffs, had definitely tions the female who state more

It is difficult to applied for insurance. The insurer fur- the limits of than is done in this section plaintiffs’ nished the with the clear that underwriter liability. It would seem to be cards, application which entitled him to ask agent purporting to act as the many questions. things The underwriter obtained agent doing the which such and physician’s do, bag a which looked like a person black agents normally and the third kit, upon plaintiffs called the at their home agent is has no reason to know that the account, Applying and made the examinations. principal acting on his own the foregoing Pennsylvania law and the Re- he has invited should be liable because rules, of agent statement the Third Circuit Court persons to deal the with- third with what, Appeals that the per- determined underwriter’s in the limits of to such third employ- could to his sons, agent’s au- be attributed would seem to be the though this, however, er. The court noted that even the go beyond thority. To agent further his instructions went than permit persons the third to recover plaintiffs, and committed a tort the agent takes advan- every case where the was “this was the kind of deceit which well tage standing position of his the insignia the of office with which within he principal perpetuate a fraud would had been clothed.” 243 F.2d at 334. go In some cases seem to too far.... ambiguous: agent the situation is the Meyers In Tobacco Liggett Lucas v. & performs primary function as an (1968), the 50 Haw. 442 P.2d 460 agent acting scope the of his ... within cigarette a supermarket owner of a sued powers agent as such without loss to the cigarettes manufacturer for the value itself, other from the transaction but the cigarette representative. by stolen a sales by transaction is used as a means which servicing that while The evidence showed agent may the defraud such other. If in store, representa cigarette rack the the principal such cases the benefits product quantity had stolen a tive act, agent's the to the extent The sto period over an extended of time. If, of the benefits received is clear. how- cigarettes supermar to the len were billed ever, benefited, is not by supplier, to which ket wholesale actually which causes the transaction payments. supermarket owners had made agent pur- loss is not one in which the Rejecting argument the tobacco ports represent principal, liability the sales company was not liable because should not follow. scope of his agent outside thefts, employment in- he committed the present The situation in the case is when held the com- ambiguous. Supreme Court of Hawaii deed Arndt entered Leaf- agent. $12,000 its liable for the The extracted a total pany acts from the two foregoing relied on the plaintiffs. court circumstances, Under the plain- rules, company pointed out that rely tiffs were entitled to on statements to commit the made agent, who purporting to point plaintiffs and that from the thefts apparently act and was acting in the inter- agent’s connected all of the activities view ests of the insurer. rack servicing cigarette ap- were Lou-Con, In Inc. v. Building Ser Gulf principal. parently authorized vices, Inc., (La.App.1973), 287 So.2d 192 company’s emphasized that division court janitorial client service brought an manager accompanied often against action the service and its insurer disapproved no indication gave damages to the customer’s building agent’s activities. janitorial burned down Dudley v. Estate Ins. Co. company’s employee. The employee was America, 220 Va. 257 S.E.2d 871 given the keys building in connection (1979), brought two individuals action janitorial duties without any re a life its against insurer and except strictions that he was to use the in connection with sale of fraud keys perform agreed the services to on premiums policy an interest sold evenings. plaintiff certain cited Re through alleged his agency. Plaintiffs statement su during period question, of time pra, applying and several cases the sec misrepresentations agent made certain including Liggett Myers Lucas & purchase which induced them to “one unit” tion— supra, Company, support Tobacco special type policy of a of life insurance — to pay money contention that large janitorial of the the service sums should agent’s promise would each re- held liable arson for the committed of all percent ceive one-fourth of one insur- employee theory of apparent the under the premiums ance collected from other sales authority. The Appeal Louisiana Court of special policy. alleged of the Plaintiffs the case, held that under facts of the the sec part fact representations were in of a in 261 must tion be read connection with agent scheme which the defrauded section 231 of the Restatement. Supreme Virginia of held them. Court crime, The fact that the servant intends a appeal plaintiffs’ on the issue was whether especially magni if the crime is of some prima established facie that evidence the tude, determining in considered wheth agent apparent scope acted within the of er or employ not the act is within the authority making thereby the insurer ment, responsible since the master is not alleged Applying for the liable fraud. clearly inappropriate for acts which are foregoing principles Restatement in accomplish to or unforeseeable facts, plaintiffs’ the court determined ment of the authorized result. The mas evidence was raise a issue sufficient to anticipate ter can reasonably that ser question agent’s on the of whether vants minor crimes in commit principal. to his conduct attributable prosecution business, of the but serious insurer The court noted that the unexpectable crimes are only but position agent perpetrate a the fraud general are in different from nature that, person’s point from a third of occupation what servants in a lawful are view, with all clothed do.[5] expected selling A ... servant authority necessary product to sell goods may cause for his master the mas to recruit others to salesmen for become deceit, ter to be in an action of Further, liable court the insurer. held the although guilty agent’s servant ob facilitated consumma- whereby taining pretenses tion the fraud false improperly property by quoted paragraph 5. The Louisiana Court ly appears in a to section COMMENT language and cited it as section 231. This actual- cases, 1569.) respects in other In some making the As Rev. ... sale.... degree, a matter of rationale is to that underlying it is akin [the] or conduct is so being liability whether not the the modern doctrine of strict tort products, that it is a sub- unlike that authorized for defective omit- [citations stantially thing. different grounded upon deeply It is ‘a root- ted] enterprise ed sentiment that a business (Second) Agency Restatement § justly responsibility cannot disclaim for COMMENT may fairly said accidents to be Court took the facts The Louisiana characteristic of its activities.’ [citations comment applied section 231 and case omitted]. 231. The held that to section court The court refined a Rodgers test of building janitor’s freedom access to foreseeability liability for set out on the did not form basis for tort Sons, Bushey in Ira S. Inc. v. & United part janitorial because it was service Cir.1968), States, (2nd F.2d stating: that he commit the not foreseeable would way to One determine whether risk is he had simply crime of arson because in, or by, enterprise inherent created gain ac- keys possession in his and could is to ask whether the actual occurrence building. cess to the generally consequence was a foreseeable However, activity. ‘foreseeability’ outrageous startling focuses on or distinguished in this context must be a means of actions of an used as from ‘foreseeability’ negli- as a test achieving an result. The sec authorized gence. In the later sense ‘foreseeable’ foreseeability with the of an tion deals probability means a level of which would agent’s criminal or tortious conduct from prudent person lead a to take effective point sec principal’s of view. Under precautions ‘foreseeability’ whereas as a author theory apparent tion 261 and the respondeat superior merely test however, agent’s ity, seen particu- means that the context through eyes party. the third enterprise employee’s lar conduct is estopped asserting startling not so unusual that it authority lack of because he resulting seem unfair to include the loss authority act, clothed the with the among employ- from it other costs of the party reasonably relied and the third business, er’s omitted] [citations authority to his that detriment. Neverthe words, other where the is one of less, ambiguous in situations like the case inquiry liability, should be us, imparts section 231 before element may whether the risk one ‘that fair- was foreseeability helps of which to delineate regarded ly typical broadly be of or liability the limits of under the doctrine of enterprise incidental’ undertaken respondeat superior done within for acts employer. by the agent’s authority. scope apparent of an 618-19, 50 124 Rodgers, Cal.App.3d at Cal. scope of The theoretical basis and 148-49; Rptr. at Harris v. Trojan see also respondeat superior re doctrine were 157, Co., Cal.App.3d Fireworks 120 174 extensively Kemper in Rodgers viewed v. (1981). Cal.Rptr. 452 Co., 50 Cal.App.3d 124 Const. 143, (1975). Cal.Rptr. prin 148 fairly We think stated that a it cipal by is liable for harm caused doctrine, tortious departs which from the where a sufficient to make nexus principle liability normal tort that follows fault, the harm foreseeable exists between the scope is an ancient its one but and activity agent’s employment which widely stated rationale have varied period, actually injury; caused foreseeable is period to It omitted] [citations employee’s used the sense that the con aptly ‘Respondeat has been stated that long startling not be or superior has been a rule search of duct must so unusual guiding (Note, rationale.’ 82 Harv.L. it would be to include loss unfair

281 injury among costs of caused resulted from insurance plac company employer’s ing agent, (the business. the insurance Arndt tort- feasor), Leafgreens’ into home while he Applying this test facts be acting within his authority; acting, so us, propriety with a view toward the fore upon he facilitated the fraud Leaf- summary judgment, we there believe greens. complaint Plaintiffs’ sounds vi not such a connection Arndt’s between liability carious under the theory respon- Family employment as an American insur superior. deat burglary actually ance and the which 261, (1958) at provides: “A Leafgreens, caused the harm to as to make puts who servant or other the harm foreseeable. Arndt’s conduct in a which agent, enables the while and, outrageous as the trial court stat apparently within his ed, Family unforeseeable American or upon a fraud persons commit third is sub else for anyone that matter. It would be ject liability persons to such third impute unfair to American Fami also, fraud.” Phillips See Petroleum Co. ly for Arndt’s felonious acts for various 559, (Fla. Royster, v. 256 So.2d 560-61 First, reasons. we note American 1972). exist, And numerous cases well, Family was defrauded Arndt as recognize principal’s liability as the stolen was cover inasmuch extorting acts cus defrauding policies. ed American In under See, money. e.g., tomers of v. Berkovitz deed, no received benefit Co., 154, Morton-Gregson Neb. transaction; but, rather, from the in it 868, (1924); N.W. 33 A.L.R. 85 Wilmerd Second, liability. burglary curred ing Telegraph Co., v. Postal Cable some five weeks Arndt occurred after used (1907); A.D. 103 N.Y.S. 594 Birkett v. employment with American as a Postal Telegraph Cable 107 A.D. subterfuge Leafgreen to enter the home (1905); Billups N.Y.S. 918 Petroleum gather burgla information used in the Corp., Co. v. Hardin’s Bakeries 217 Miss. it ry. While be said entrance (1953); Cleaney 63 So.2d into home was employ incidental to his Parker, Ala. So. 140 Am. Family, burglary ment St.Rep. 21 clearly Thirdly, was not. Arndt learned Rapid City would agent, Enter SDCL 58-30-23. An day burglary through friendship Dakota, shall be “trustworthy, Leafgreens, and not because good reputation morals, character as to status as an American Family insurance integrity, and financial responsibility....” agent. Finally, extending we believe liabil zeroing in When on the bottom rationale ity to a situation such as this opinion, majority apparent it becomes prescribing liability upon a form of strict opinion majority that the relies “fore- under employers responde- the doctrine of seeability” pegs then a definition of superior. employers at To hold liable in i.e., foreseeability to an “unfair” concept, doing such situations as a cost of business company that a loss an insurance caused be unfair. would injury agent of its should not employer’s borne as costs business. Accordingly, judgment affirmed. Who the fox the hen house? State FOSHEIM, MORGAN, C.J., J., con- requires agents law these to be honest. leap cur. such Would it a of unreasonable logic company that an insurance assume SABERS, JJ., HENDERSON and dis- honesty the conduct would monitor sent. fair- agent? standpoint its And from a HENDERSON, (dissenting). Justice ness, it not be more fair for would company was a securing This tortious of mon- to bear the loss than insurance ey/property from the home. victim? victims’ It the innocent down, drop. When ship closed sales would friends of the Leafgreens were

That the agent goes of a majority insurance to the home Is an totally immaterial. agent is customer, insignia has an type prospective con- he is some suggesting that this Likewise, company; if he approval by his insurance tributory negligence? cheats, deceives, only a capital goes sour and or even fellow Arndt was offense, majority opinion upon knowl- burglarizes as the that home based speeding Leaf- probative edge gained by getting no force.1 he into the front suggests, has deceived, burglarized, door, taken company say: greens were the insurance wants friendship in of, advantage this hint him I boy. but “He’s not our We claim not.” contributory opinion is not a majority Pilate say: “It's too late for that Pontius negligence defense. company cannot attitude.” The insurance part of its hands. It clothed him with an negligence on the wash

Contributory respectability. Arndt generally honesty not rec- aura of person is the deceived However, hired, agent if agent he was its ognized as a defense. was its when insurance, agent otherwise its person should know or he tried to sell third when acting agent for to obtain a has notice that he went into the home when violating sale, purposes agent money or is otherwise for own its when obtained them, not liable. its when he surveilled the burglar-friends, its home for his § of the steel lockbox and when he learned c, (1958). Contributory comment at contents,2 acting as its and was still negligence is a defense to an action conspired the insur- agent when he to have negligence, not a willful tort. Carroll burglarized. company’s ance customer Lincolnwood, Bank First Nat’l Insurance not advo- does denied, Cir.1969), cert. (7th F.2d agent when he cate that Arndt was not its 552, 24 L.Ed.2d 494 90 S.Ct. 396 U.S. Leafgreens May on the called also, Bank v. Omaha Nat’l See insurance trusted this Co., 213 Neb. Ins. Mfrs. all, a name like Ameri- agent. After Keeton, (1983); D. and W. N.W.2d Company, surely can Insurance Prosser and Dobbs, Owen, D. R. Keeton & any company would want insurance (5th ed. the Law Torts Keeton on it can trust family to know that 1984). field, right? agents in the it and also its per- result from of insurance Contracts surely per- Choosing such a name was no prospects at by agents upon calls sonal happenstance. chance companies know their home. judicial blinders. We salesmanship game. Let us take off our part is a deciding if American Insur- companies are not Unquestionably, insurance liable; deciding if Company is we are agents did not enter ance not fare well so that a salesman- of fact exists privacy of homes. Were this battery, sim- Arndt was arrested for assault and indicates that Arndt 1. The settled record fellow, conduct, assault, capital disorderly con- ple not that Arndt’s was duct was not can exemplary, that Ameri- it; open container violation. further, Family Insurance knew Family expressed written dis- that American pleasure Leafgreens produced their doc- 2. When Arndt. As concerns Arndt’sbusi- unto legal descriptions for correct uments to Arndt practices, let- ness the settled record contains company the insurance which express superiors Amer- ters from Arndt’s coverage upon, Arndt had issued Family’s disappointment with how ican American Fami- as an disap- conducting agency. This Arndt was pointment ly we allocate the risk Insurance. Should ownership Arndt’s concerned cir- under these of the servant’s misbehavior tavern; insur- his failure to attend a beer ance Surely, question ex- of fact cumstances? a meetings; non-sufficient liability question is hur- once the vicarious ists problem. Arndt’s ex- funds check As concerns Sons, Bushey Inc. v. Unit- See Ira S. & dled. prior burglary on emplary conduct States, (2nd Cir.1968). 167 ed 398 F.2d 27, 1981, the record also reveals that June

283 Family summary judgment, is liable. In decide whether American the burden of Negligent hiring In proof moving has been abandoned. party is to show alleged fraud my opinion, fraud is is clearly genuine that there no issue of question on fraud— alive. Is there a fact material fact and that he is entitled to that is the issue. American Insur- judgment as a matter of law. The evi- chargeable obviously ance with knowl- be favorably dence must viewed most to edge conduct of its in factual nonmoving party and reasonable apparently outraged situations them. against doubts should be resolved early This buttresses cases I moving party. Summary judgment is an cited, Further, have collected and infra. remedy extreme and is not intended as a majority opinion, as I the au- review for a substitute trial. appear thorities to sustain this dissent as Railway Wilson v. Great Northern Com opinion. is, majority much as the That pany, 83 S.D. N.W.2d until as we reach “foresee- academicians ability” responsibility and the affixation of summary In judgment, pleadings, af appli- based It is in the “unfairness.” fidavits, depositions, every reasonable cation of to facts these authorities at arising inference therefrom must be in hand we differ. The fox wherein viewed favorably most toward the nonmovr placed hen there insur- house ing Moreover, party. appellate court is company family. ance American an—not not fairness, findings bound the factual question it is a Bottomed Instead, trial party fact if who the fox in the court. it must hen conduct an responsible independent house should held for what review of the record. Hurney Accordingly, Locke, (S.D.1981); fox does. under facts 308 N.W.2d case, herein, of this and authorities cited Trapp Pacific, v. Madera N.W.2d to family entitled trial. I (S.D.1986). would therefore reverse. Family urges that Arndt’s out- standing period attainments over thir-

SABERS, (dissenting). Justice gave years teen no notice to American I dissent. it would be characteristic for question presented first is: impart him to to information others that facilitated theft friend Leaf- 1. WAS SUMMARY JUDGMENT fact, green. In asserted PROPER? that, appointment February “from 27,1981, summary through June determining judg- day whether [the proper theft], exemplary.”1 ment was Hamaker v. Kenwel- Jackson, (S.D.1986), simply entirely This is not true and raises N.W.2d we stated: material of fact.2 supervisor strong apparent- language 1. Arndt’s stated that from the note the ly used and very beginning agent. "exemplary” Arndt’s record was outstand- needed "reform" this salesman, ing, he excelled as a a mem- and sis early August As ly as American Fami- training ber ther “sales He staff." fur- advis- Insurance’s State Director was only that Arndt leader stated an outstand- Arndt, ing writing, copies ing Rapid City sales in the District manager, Arndt’sdistrict that: Dakota, and the State of but also major problems separat- some —Arndt had company’s held the record as one out- business, ing from beer himself a concerned, standing throughout salesmen the nation. they were it had to far as supervisor also the time testified at no done. “Just so there is misunderstand- discharge agent, of his as an Arndt was servic- you ing, Ed of what I told —within ing policies some 3300 in central South Dakota. going you to have to de- twelve months are yourself you really get cide whether problems disappoint- 2. In addition to the even associa- out of the beer business tion, ments referred in footnote one Jus- can’t, you going dissent, we are ,tice because important Henderson’s it is Sound, Inc., hired, v. Feather Williams In three weeks after he was Carter’s (Fla.2d 1980), occupant changed departmen- So.2d 1238 DCA duties as a result of a developer, assigned Feather of a townhouse sued tal transfer. He was work inside Inc., (Feather Sound), injuries given Sound the condominium units. He was ac- she one sustained when was assaulted passkeys cess to to the townhouses and employees, developer’s James Carter permission gain to use them in order to (Carter). The trial court summa- necessary repairs. awarded Id. at entrance to make ry judgment to Feather Sound. revers- 1239.

ing judgment, the court held: The evidence showed that Carter used a employer give employ- If an wishes to passkey gain entry apartment into the authority ee the indicia of to enter into which he assaulted Williams. The evidence others, living quarters of it has the history further showed that Carter had a making responsibility of first some in- problems. criminal and mental There was quiry respect with to whether it is safe to no any indication that Feather Sound had do so. knowledge psychiat- of Carter’s criminal or Id. at 1240. Although this case deals with Id. Feather Sound conducted ric record. aspect negligent of the doctrine of hir- check, background no nor contacted the here, ing, is not an it is issue never- prior employers references or the two list- pertinent. theless job application ed on Carter’s before hired him. Id. The court stated: initially Feather Sound hired Carter as jurisdictions recognize an outdoor Most laborer without access to the ... in- Approximately dependent interior of the townhouses. respondeat the doctrine of 15, 18, —August 1981 and Ar- November 1981: you replace to have to look for someone to DWI; rests for agent." as 30, 9, 1978, early manag- Levy wages As June —June 1982: IRS Notice of as Arndt's district on wrote, due; copies er with to Dakota State Di- for taxes rector, —September that: prob- 1982: Substantial check writing you —"Ed—-Iam disappointment with lems customers and other insurance you how conducting your are agency companies; in the past few months." —September 1982: Arrest for failure to file —Concerning evade; meetings, missed sales tax return "... You you with intent to never attended, —January and concerning no word from of 1983: Non-sufficient funds check $4,854.17 you." same until I called in the amount of to American —Concerning personal Family; calls to Arndt’s office in Pierre, past "... This you delinquencies week I —March of 1983: Account talked with with 3rd, Saturday, on you June know Insurance in the I amount [sic] $13,531.47; coming Wednesday, over on June 7th. message When I came over prob- no or notice on —March of 1983: Substantial civil debt me, phone the door—no call including levy; etc. This not lems another IRS only.bothers me, your relationship me —April as to perjury, retaining 1983: Arrests for your your (the but policy aiding concern to abetting holders ..." stolen theft); —"Ed, you 31,1983: also —May have had a non-sufficient funds termination as an Amer- problem your hope Agent checks—-I this is ican insufficient past problem May but had a letter dated checks. concerning 22nd a check dated prior problems March were an accu- Whether these hope 1978—I this has been taken care of.” problems is diffi- of the future rate indicator —"Ed, you you know have family a serious prior problems clear- determine. These cult to problem too—.” control, losing ly person his con- indicate problems —“These must be solved before I can others, responsibili- and his sense cern for turn over you additional business to ...” dishonesty. deception ty. lead to This can problems, along All of these with Arndt’s ar- case, hindsight prob- us that these In this tells battery May rests for assault and on things accurately to come. indicated lems 1977, simple disorderly assault and prior problems made the later Whether these February open container theft), reasonably (specifically problems, 16, 1981, predate on June 27, the theft of June Family is discussed in for American foreseeable They things preview were a question 2. to come: continuing problems; —Arndt’s alcohol

285 is employer summary judgment liable the Since superior, appropriate an employee dispose legal, of his committed questions, willful tort to not factual it person if against inappropriate a third he knew or was this case. Trapp, su- employee known that the pra. Although should have this case should be re- a threat to others.... more and versed remanded without considering question, which this issue, difficult case any question other the second what, any, presents, responsibility presented is: employer the have to to try does learn concerning

pertinent employee’s his facts DID THE FACTS PRESENT A character. QUESTION? JURY Id. at 1239-1240. test is: Could reasonable minds dif recognizing

After the rule is not facts, fer disputed under these toas wheth clear, altogether the court stated the er the actions of part Arndt were a of or responsibility to out employer’s check an incidental to the business of American background necessarily applicant’s de- Family Company. Rodgers See: pendent upon type of work to be done Kemper Co., Construction 50 Cal. Thus, prospective employee. by the when App.3d 143, Cal.Rptr. was hired to do outside work on the Carter (1975): question is one of “[W]here grounds development, of the townhouse liability, inquiry should be during only which he would have incidental whether risk was one ‘that fairly tenants, contact with the the court found regarded typical of broadly or inci that Feather Sound did have obli- enterprise to dental’ undertaken gation independent inquiry to (cid:127) con- make employer.” omitted]; Dudley v. [citation However, cerning past. Carter’s court America, Estate Ins. Co. 220 Va. duty found that Feather Sound’s to amake (1979): princi S.E.2d “[A] inquiry reasonable about Carter’s back- pal is liable for fraudulent and deceitful ground they arose before transferred him agents acts ‘committed as an incident gave to work and him inside access to the during performance to and of an act passkeys. Id. townhouse at 1240. The scope which is within the ” held: court authority.’ omitted]; Harris v. [citation permitted Feather Sound Carter [W]hen Trojan Cal.App.3d Fireworks townhouses, to have access to the Feath- (1981): Cal.Rptr. “lia chargeable er Sound was with such infor- bility attaches where a nexus exists be concerning background mation as it employment or activity tween upon could have obtained reasonable in- an inquiry which results in that is foreseea quiry. here ble ... Foreseeable is used employee’s sense that the conduct is not so Id. at 1241. startling unusual or it would seem Here, the indicates that evidence Ameri- resulting to include the loss from it unfair knowledge had ample among employer’s other costs professional personal prob- Arndt’s business.” record, lems, part of his criminal even Thus, prior they to the theft. Yet allowed him if reasonable minds could differ as to employment imputed continue his when knew to whether Arndt’s conduct liabili- authority private ty enter under the tests had to American set dwellings above, light presented jury others. forth Family’s sterling improper it for the trial insistence character, court, court, usurp questions exist that function. concerning fact this majority, Dudley the extent that American As mentioned chargeable plaintiffs’ with information about Arndt’s court held that evidence prior problems, questions determina- fore- raised fact seeability The insurance thereof. tion. 257 S.E.2d at 876. Leafgreens friendship than from misrepre- sonal made fraudulent

agent Dudley Whether procure per- employer’s business. to the insureds sentations from the friendship since arose argued that The insurer gain. sonal Family or vice versa solely for the of American committed business fraud was from this limited record. gain without benefit is not clear agent’s personal insurer, committed the fraud was then engage in the decision to others Arndt’s scope of outside the during was made these valuables theft of from liabili- relieved and thus Family, and employment with American his unpersuad- The court at 874. ty. Id. fact theft itself. The so was the and stated: argument by this ed Family at the damaged Arndt suffi- evidence was plaintiffs’ think [W]e loss, causing an insurance time same on the jury issue raise a cient to neces- important consideration but is not attributa- [agent’s] conduct was whether sarily determinative. Estate principal. [insurer] ble to impor- analysis of these summary This enabled position which [agent] in a me to conclude that questions leads tant acting within him, apparently while Therefore, could differ. reasonable minds perpetrate the frauds authority, to jury de- entitled to have a Leafgreens are evidence, we And on [plaintiffs]. proper in- questions under termine these plain- matter of law that say as a cannot remand should reverse and structions. We [agent] was notice that tiffs had jury for a trial. to the trial court purposes.3 his own at 876. Id. law, can we rule as a matter

Similarly, nexus between was no

that there May Leafgreen home on to the

visit capacity as an in his and the liability insurance

agent to review 27,1981? I think subsequent theft on June OIEN, Kay L. Ad Litem Guardian point of Leafgreens’ From the we cannot. Child, Oien, for her Minor Casie view, all the au- was clothed with Arndt Appellant, Plaintiff and Com- Family Insurance thority of American product. He pany necessary sell FALLS, The CITY OF SIOUX relationship the Leaf- cultivated Appellee. Defendant and period of time extended greens over an effect, them into a false lulled No. 14763. presence at the security. Arndt’s sense of Supreme Court of South Dakota. home, learning of the exist- Leafgreen cash, valuables, and the box with ence of April 1985. Considered Briefs learning which room important papers, and Sept. Decided part of or in were all a was stored box Rehearing 16, 1986. Ameri- Denied Oct. directly incidental to the business Surely Company. Family Insurance question under the Dud- exists a there Leafgreens as to whether

ley rationale acting for his Arndt was

had notice that purposes.

own knowledge key appears

It that Arndt’s Rapid City per- more from his day

an entire resulted part upon cited the authorities Dudley in substantial interesting deci- to note that the 3. It is majority opinion. principal based in the sion attributed

Case Details

Case Name: Leafgreen v. American Family Mutual Insurance Co.

Court Name: South Dakota Supreme Court

Date Published: Sep 3, 1986

Citation: 393 N.W.2d 275

Docket Number: 15156

Court Abbreviation: S.D.