Heitmann v. American Family Mut. Ins. Co.

#27549-a-JMK
2016 S.D. 51
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****
BRODY HEITMANN, Plaintiff and Appellant,
v.
AMERICAN FAMILY MUTUAL
INSURANCE COMPANY, Defendant and Appellee.
****
APPEAL FROM THE CIRCUIT COURT OF
THE THIRD JUDICIAL CIRCUIT
CODINGTON COUNTY, SOUTH DAKOTA
****
THE HONORABLE CARMEN A. MEANS
Judge
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NANCY J. TURBAK BERRY
SEAMUS W. CULHANE of
Turbak Law Office, PC
Watertown, South Dakota Attorneys for plaintiff
and appellant.
TIMOTHY A. CLAUSEN
RYLAND DEINERT of
Klass Law Firm, LLP
Sioux City, Iowa Attorneys for defendant
and appellee.
****
CONSIDERED ON BRIEFS
ON MARCH 21, 2016
OPINION FILED 07/20/16
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KERN, Justice
[¶1.] An individual injured in an incident with a handgun obtained a
judgment against Shooter. Injured also obtained, by stipulation, an assignment
from Shooter of Shooter’s right to enforce coverage under an insurance policy.
Injured filed a declaratory judgment action in circuit court against insurance
company, seeking a ruling that Shooter was an insured under the policy. Injured
and Insurance Company filed cross-motions for summary judgment. The circuit
court granted Insurance Company’s motion, finding Shooter was not an insured and
dismissed Injured’s action. Injured appeals. We affirm.
BACKGROUND
[¶2.] On May 1, 2013, Dusty Groom and Brody Heitmann were in Dusty’s
truck in the Britton High School parking lot. Dusty had a handgun, which
discharged, shooting Heitmann in the head. Heitmann survived and sued Dusty to
recover compensation for his injuries. In December 2014, Heitmann and Dusty
entered into a settlement agreement. Dusty confessed to a judgment of $1,100,000
for compensatory damages in favor of Heitmann. Pursuant to the settlement, Dusty
agreed “to assign to Brody Heitmann any and all claims or related causes of action
[Dusty] may have against American Family [Mutual Insurance]” under an
insurance policy issued to Dusty’s grandmother Bonnie Buhl. 1 Heitmann also
1. American Family determined that Dusty was not an insured under the
policy, as he “was not a resident of [Buhl’s] household at the time of the
loss[.]” American Family refused to defend or indemnify Dusty in Heitmann’s
lawsuit against Dusty.
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agreed that he and his heirs would not “execute against or otherwise seek to
collect . . . the judgment entered against Dusty [personally.]”
[¶3.] In February of 2015, Heitmann filed a declaratory judgment action
against American Family. Heitmann sought a ruling that, on the date of the
shooting, Dusty was an insured under Buhl’s policy for purposes of liability
coverage. As Dusty’s assignee, Heitmann also sought damages for breach of
contract and for American Family’s alleged bad-faith refusal to defend and
indemnify Dusty under Buhl’s policy.
[¶4.] American Family had issued Buhl a farm/ranch insurance policy (the
Policy) for the period of March 15, 2013 to March 15, 2014. The Policy insured land
and a farm house owned solely by Buhl. Section II, Coverage E provided personal
liability coverage with a $1,000,000 (one million dollars) policy limit. Tammy
Groom, Buhl’s adult daughter, resided on the insured premises with her son, Dusty.
Buhl lived on a separate farm, not insured under the Policy, with her husband
Jerome. The Policy defined Buhl as an insured and provided that “Insured also
means your spouse and relatives if residents of your household. It also means any
other person under the age of 21 in your care or in the care of your resident
relatives.”
[¶5.] During the course of the lawsuit, the parties filed cross-motions for
summary judgment. No material facts were in dispute. The parties agreed that
Tammy and Dusty resided on the insured premises at the time of the shooting, that
Tammy and Dusty are Buhl’s relatives, and that neither Tammy nor Dusty resided
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with Buhl in her home off the insured premises. The parties also agreed that Dusty
was under the age of 21 and in Tammy’s care at the time of the incident.
[¶6.] The competing motions centered on differing interpretations of the
Policy with the parties agreeing that the only issue was whether Tammy was a
resident relative under the Policy. The circuit court found that, because Tammy
and Dusty did not reside in Buhl’s home at the time of the incident, Tammy was not
Buhl’s resident relative. The court held, therefore, that Dusty was not an insured
under the Policy, and that American Family had no duty to defend or indemnify
him. The circuit court granted American Family’s motion for summary judgment
and dismissed Heitmann’s claims.
[¶7.] Heitmann raises one issue on appeal:
Is a relative of the insured residing on the insured premises, and
not in the household of the insured, a resident relative under
American Family’s policy?
STANDARD OF REVIEW
[¶8.] We review a circuit court’s entry of summary judgment under the de
novo standard of review. Ass Kickin Ranch, LLC v. N. Star Mut. Ins. Co., 2012 S.D.
73, ¶ 7, 822 N.W.2d 724, 726. When reviewing a grant of summary judgment, we
decide “whether genuine issues of material fact exist and whether the law was
correctly applied.” Id. ¶ 6, 822 N.W.2d at 726 (quoting Zephier v. Catholic Diocese
of Sioux Falls, 2008 S.D. 56, ¶ 6, 752 N.W.2d 658, 662). If no material facts are in
dispute, our “review is limited to determining whether the trial court correctly
applied the law.” Id. (quoting De Smet Ins. Co. of S.D. v. Gibson, 1996 S.D. 102, ¶ 5,
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552 N.W.2d 98, 99). We will affirm a circuit court’s decision so long as there is a
legal basis to support its decision. Id.
ANALYSIS
[¶9.] The parties contend that the sole issue in this case is the
interpretation of the phrase resident relative in the Policy. Their claims can be
summarized as follows—to be classified as a resident relative must the relative
reside on the insured premises as Heitmann contends or in Buhl’s home as
American Family contends? “Insurance contract interpretation is a question of law
reviewed de novo.” W. Nat’l Mut. Ins. Co. v. Decker, 2010 S.D. 93, ¶ 10, 791 N.W.2d
799, 802. This review includes whether an insurance contract is ambiguous. Roden
v. Gen. Cas. Co. of Wis., 2003 S.D. 130, ¶ 6, 671 N.W.2d 622, 625. “The fact that the
parties differ as to the contract’s interpretation does not create an ambiguity.” Id.
[¶10.] Heitmann makes several arguments in support of his contention that
Tammy is a resident relative under the Policy. He asserts that the Policy is
premises-based, as the “purpose of the policy focuses on physical premises, not the
personal whereabouts of the named insured.” Heitmann argues that the liability
endorsement in Section II “specifically ties coverage to the insured premises . . .
explicitly without regard to whether Bonnie Buhl herself occupied those premises.”
Heitmann also refers us to ¶ 14 of the Exclusions to Section II. This paragraph
provides:
14. Non-Resident Insureds. We will not pay for damages due
to bodily injury or property damage under Coverage E –
Personal Liability for any insured who resides off the
insured premises.
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Heitmann reasons that because the Policy excludes “one who does not reside on the
insured premises” it follows that one who resides on the insured premises is a
“resident” under the Policy. Thus, Heitmann concludes that Tammy—a relative
residing on the insured premises—is a resident relative, and Dusty, a person under
21 in Tammy’s care, would be an insured.
[¶11.] In response, American Family contends that the plain language of the
Policy provides that Tammy is not a resident relative because she does not reside in
Buhl’s home off the insured premises. American Family asserts that under the
definition of insured in the Policy, your means Buhl and “directly modifies the
words ‘resident relative.’” Based on this use of resident relative, American Family
concludes that resident relatives must reside within the same home as Buhl.
[¶12.] In order to ascertain the meaning of terms in the Policy, we examine
the Policy in its entirety giving “words their ‘plain and ordinary meaning,’” and we
will not make a forced construction of its language. 2 Section II of the Policy
provides Liability and Medical Expense Coverages. The Policy includes an
endorsement for “[p]remises you own, rent or occupy[.]” It is undisputed that Buhl
owns but does not occupy the premises in which Tammy and Dusty live.
[¶13.] Coverage E of the Policy provides coverage for Personal Liability for
“compensatory damages which any Insured becomes legally obligated to pay as
damages because of bodily injury or property damage to which this insurance
applies.” The definition section of the Policy defines Insured and provides:
2. Gloe v. Union Ins. Co., 2005 S.D. 30, ¶ 29, 694 N.W.2d 252, 260; 2 Couch on
Ins. § 21:19 (3d ed.).
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4. Insured means:
a. You, and if you are shown in the Declarations as:
(1) an Individual, Insured also means your spouse and
relatives if residents of your household. It also means
any other person under the age of 21 in your care or in
the care of your resident relatives.
“You” and “your” is defined by the Policy as:
9. You and Your refer to the person(s) or organization shown as
Named Insured in the Declarations. These words also refer
to your spouse who is a resident of your household.
Buhl is the only named insured in the Policy’s declarations.
[¶14.] The facts are not in dispute and both parties submitted the question to
the circuit court for a ruling on the interpretation of the phrase resident relative.
“When the relevant facts are undisputed, the question of whether a person is a
resident relative may be decided as a matter of law.” State Farm Fire & Cas. Co. v.
Duel, No. C7-98-208, 1998 WL 531821, at *2 (Minn. Ct. App. Aug. 25, 1998);
McMillin v. Mueller, 2005 S.D. 41, ¶ 9, 695 N.W.2d 217, 221 (undisputed facts
create a question of law).
[¶15.] We find the language of the Policy unambiguous. Although the parties
focus their arguments primarily upon the second sentence of the definition of
insured, an analysis of the first sentence can resolve this case. The first sentence
provides that an insured includes “[y]ou, and if you are shown in the Declarations
as: (1) an Individual, Insured also means your spouse and relatives if residents of
your household.” You refers to Buhl and relatives refers to Tammy and Dusty. The
phrase “if residents of your household,” means that Buhl’s relatives must be
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residents of Buhl’s household. 3 It is undisputed that Tammy and Dusty are Buhl’s
relatives. But neither Tammy nor Dusty claim to be a member of Buhl’s household.
Therefore, neither Tammy nor Buhl is an insured under the first sentence of the
definition.
[¶16.] The second sentence of the definition also precludes coverage. This
sentence defines an insured as “any other person under the age of 21 in your care or
in the care of your resident relatives.” A reading of the Policy as a whole indicates
that resident relatives are those relatives referred to in the definition’s first
sentence who reside in Buhl’s household. As stated above, although Dusty is a
person under 21 in the care of Buhl’s relative (Tammy), neither Tammy nor Dusty
claim to be residents of Buhl’s household.
[¶17.] Heitmann’s argument that coverage is tied to those who reside on the
insured premises is not supported by the plain language of the Policy. Likewise, we
reject Heitmann’s suggestion that we look to the exclusion for non-resident insureds
3. The Policy does not define household. Nor has this Court defined the term. A
review of cases from other jurisdictions reveals that courts have held that an
insured can have more than one household for insurance contract purposes
and the phrase resident of the household has no fixed meaning. State Farm
Fire & Cas. Co. v. Ewing, 269 F.3d 888, 891 (8th Cir. 2001); Am. Family Mut.
Ins. Co. v. Thiem, 503 N.W.2d 789, 790 (Minn. 1993); Erie Ins. Exch. v.
Stephenson, 674 N.E.2d 607, 610 (Ind. Ct. App. 1996). “[W]hether a person is
a resident of a particular household is an elastic concept entirely dependent
upon the context in which the question arises and the facts of the particular
case.” 9A Couch on Ins. § 128:6 (3d ed.). See also State Farm & Cas. Co. v.
Martinez, 893 N.E.2d 975 (Ill. Ct. App. 2008); Mut. of Enumclaw Ins. Co. v.
Pedersen, 983 P.2d 208 (Idaho 1999); AMCO Ins. v. Norton, 500 N.W.2d 542
(Neb. 1993). And under certain circumstances courts have concluded that
“members of a family need not actually reside under a common roof in order
to be deemed part of the same household.” Farmers Mut. Ins. Co. v. Tucker,
576 S.E.2d 261 (W. Va. 2002).
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in Section II. The exclusion in Section II, ¶ 14 excludes coverage for damages due to
bodily injury or property damage under this section of the Policy “for any insured
who resides off the insured premises.” (Emphasis added.) This language excludes
coverage for any bodily injury or property damages sustained by Buhl or any other
insured residing off the premises. See 9A Couch on Ins. § 128:2 (3d ed.) (“[T]he
intent of homeowners’ or farmowners’ liability policies is to protect the insured, as
defined in the policy, against the risk of liability for injuries suffered by others, not
injuries suffered by the insured.”). We decline to address Heitmann’s remaining
arguments as they are meritless.
CONCLUSION
[¶18.] Because Tammy does not claim to be a resident of Buhl’s household,
she is not a resident relative. As she is not a resident relative, Dusty, a person
under the age of 21 in her care, is not an insured. The circuit court was correct in
granting American Family’s motion for summary judgment. We affirm.
[¶19.] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and
WILBUR, Justices, concur.
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