APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA HONORABLE THOMAS L. TRIMBLE Judge
The opinion of the court was delivered by: Konenkamp, Justice
[¶1.] An insured was seriously injured in an automobile accident, suffering damages in excess of $250,000. After receiving $25,000 from the tortfeasor's liability carrier and $100,000 in underinsured motorist coverage from her primary insurer, she sought an additional $100,000 in underinsured coverage from her excess carrier. But the excess carrier denied coverage, asserting that an exclusion in the policy precluded coverage. On cross motions for summary judgment, the circuit court declared that the excess carrier's exclusion was valid and enforceable. Because the policy exclusion is not against public policy, we affirm.
[¶2.] Tabitha Pourier was seriously injured in an automobile accident on October 11, 2006, when a vehicle driven by Jamie Yellow Horse struck Pourier's Plymouth Neon. Pourier incurred medical expenses in excess of $250,000. Yellow Horse was insured through Dairyland Insurance with a $25,000 liability policy limit. Dairyland paid Pourier $25,000. Pourier's Neon was insured by GEICO through an insurance policy issued to her mother, Susan Pourier. The GEICO policy contained underinsured motorist coverage at $100,000 per person. After deducting the $25,000 received from Dairyland, GEICO paid Pourier $75,000 in underinsured benefits.
[¶3.] At the time of the accident, Pourier was a minor. Her parents were divorced, and she resided with her father, Doug Pourier. Doug owned an insurance policy through De Smet Insurance Company of South Dakota. Pourier was also an insured under the policy. The De Smet policy provided underinsured motorist coverage at $100,000 per person. The parties do not dispute that Pourier suffered at least $250,000 in damages as a result of the accident. Because she had $150,000 left in uncompensated damages, Pourier requested $100,000 in underinsured motorist coverage from De Smet. De Smet refused to pay, asserting that an exclusion in the policy precluded coverage. That exclusion states, "We do not provide Underinsured Motorist Coverage for 'bodily injury' sustained by any person:
1. While 'occupying,' or when struck by, any motor vehicle owned by you or any 'family member' which is not insured for this coverage under this policy." This provision is commonly referred to as an "owned-but-not-insured" clause. It is undisputed that Pourier (any person) was occupying a vehicle owned by her (a family member of Doug), which was not insured for underinsured coverage by De Smet, invoking the exclusion.
[¶4.] In September 2007, De Smet brought a declaratory action, asking that the court determine the rights of the parties under the insurance policy. De Smet argued that coverage did not apply because Pourier was driving an owned-but-not-insured vehicle, which was excluded from underinsured coverage by the policy. It also asserted that South Dakota law prohibits Pourier from stacking underinsured motorist coverages from two separate policies. The parties filed cross motions for summary judgment. The circuit court issued a letter decision, finding that De Smet's policy exclusion was valid against Pourier, and also that South Dakota law prohibited stacking. The court granted De Smet's motion for summary judgment. Pourier appeals asserting that De Smet's policy exclusion is void as against public policy, and South Dakota law allows Pourier's recovery under De Smet's underinsured motorist coverage.*fn1
[¶5.] Pourier asks this Court to declare De Smet's owned-but-not-insured exclusion void under these facts as against South Dakota's public policy. She argues that the Legislature's purpose in requiring underinsured motorist coverage under SDCL 58-11-9.5 is to protect an insured who is injured by an underinsured motorist. In Pourier's view, it should be immaterial whether she was riding in a vehicle owned by her but insured by another company. She argues that she is not asking that De Smet be the primary insurer, as would be the case if she had no insurance on the vehicle she drove. Instead, she emphasizes that she has at least $150,000 in uncompensated damages and was driving an insured vehicle. She asks this Court to allow a claim for excess - secondary - coverage. For example, in cases where there is no insurance on the insured's vehicle, then the exclusion would be valid. But because here Pourier's vehicle was insured and she has uncompensated damages, De Smet should have to pay as the secondary insurer, consistent with South Dakota law and public policy.
[¶6.] De Smet concedes that underinsured motorist coverage is generally portable: it follows the insured rather than the vehicle. But De Smet contends that it is not against public policy for an insurance company to exclude coverage in certain situations. See Cimarron Ins. Co. v. Croyle , 479 N.W.2d 881, 886 (S.D. 1992), superseded by statute, SDCL 32-35-70 (insurance companies have statutory right to place conditions on underinsured motorist coverage). De Smet further argues that SDCL 58-11-9.5 contemplates that an insurer will include terms and conditions limiting underinsured motorist coverage, as SDCL 58-11-9.5 starts with, "Subject to the terms and conditions of such underinsured motorist coverage. . . ." [¶7.] We have never ruled on the validity of an owned-but-not-insured provision. Many courts from other jurisdictions have, however, and the majority of those courts have found the exclusion valid and enforceable.*fn2 In the majority of courts, the exclusion is upheld as a way to prevent insureds from purchasing insurance for one car only, and then attempting to apply the underinsured coverage from that insured vehicle to an accident occurring in an uninsured vehicle or from a vehicle insured by a different company. LeMars Mut. Ins. Co. v. Joffer , 574 N.W.2d 303. 309-10 (Iowa 1998); see also Lefler v. Gen. Cas. Co. , 260 F.3d 942, 945 (8th Cir. 2001) (interpreting Iowa law). One court reasoned that invalidating the exclusion would "permit an owner to buy excess coverage under one policy for one vehicle at a relatively small premium and coverage under a separate policy for his other vehicles at a lesser cost, and have the excess coverage of the first policy apply to the vehicles covered under the subsequent policies."*fn3 Powell v. State Farm Mut. Auto. Ins. Co. , 585 A.2d 286, 291 (Md. Ct. Spec. App. 1991). Moreover, "[i]t is scarcely the purpose of any insurer to write a single [underinsured] coverage upon one of a number of vehicles owned by an insured, or by others in the household, and extend the benefits of such coverage gratis upon all other vehicles - any more than it would write liability, collision, or comprehensive coverages upon one such vehicle and indemnify for such losses as to any other vehicle involved." IDS Prop. Cas. Ins. Co. v. Kalberer , 661 N.E.2d 881, 884-85 (Ind. Ct. App. 1996) (quoting John A.
Appleman & Jean Appleman, 8C Insurance Law and Practice § 5078.15 at 179 (1981)). Thus, the reasoning is that it is up to insureds to decide which vehicles they want to insure and at what limits: if they want greater protection, then they can pay for it.
[¶8.] On the other hand, those courts adopting the minority view have deemed the exclusion void, focusing on the purpose of underinsured motorist coverage. Underinsured motorist coverage is intended to protect injured insureds who are legally entitled to recover damages. Jaimes v. State Farm Auto Mut. Ins. Co. , 53 P.3d 743, 746-47 (Colo. Ct. App. 2002); Mikelson v. United Services Auto. Ass'n , 111 P.3d 601, 616-17 (Hawaii 2005) (citing Kau v. State Farm Mut. Auto. Ins. Co ., 564 P.2d 443 (Hawaii 1977)); Beddard v. McDaniel , 645 S.E.2d 153, 153-54 (N.C. Ct. App. 2007). For these courts, the status of the insured at the time of the accident is immaterial: the coverage follows the person, not the vehicle. In Kau, which involved a similar exclusion for uninsured coverage, the court noted that such exclusion went against the statute mandating coverage. 564 P.2d at 444 n.1. The court took into account the fact that the insured would have been covered had she been a passenger in a vehicle owned by someone not a member of her household, or been driving a vehicle not her own. Therefore, "[i]t would be anomalous, and certainly inconsistent with the legislative intent, to hold that in those situations the statute would allow recovery but in the present situation it would not." Id.
In Colorado, a court interpreted its underinsured motorist statute language, "for the protection of persons insured," to mean that the "operative event for coverage under the statute is an injury to an insured arising from an accident involving an at-fault, uninsured or underinsured motor vehicle," and the status of the insured "is not ...