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Dakota Trailer Mfg., Inc. v. United Fire & Cas. Co.

Supreme Court of South Dakota

July 1, 2015

DAKOTA TRAILER MANUFACTURING, INC., Appellee,
v.
UNITED FIRE & CASUALTY COMPANY, Appellant

Considered on Briefs: March 24, 2015.

As Amended September 22, 2015.

APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT YANKTON COUNTY, SOUTH DAKOTA. THE HONORABLE CHERYLE W. GERING, Judge.

J. G. SHULTZ, CALEB J. VELDHOUSE of Woods, Fuller, Shultz & Smith, PC, Sioux Falls, South Dakota, Attorneys for appellee.

DANIEL K. BRENDTRO, DENNIS L. DUNCAN of Zimmer, Duncan & Cole, LLP, Sioux Falls, South Dakota, Attorneys for appellant.

ZINTER, Justice. GILBERTSON, Chief Justice, and SEVERSON and KERN, Justices, and PALMER PERCY, Circuit Court Judge, concur. PALMER PERCY, Circuit Court Judge, sitting for WILBUR, Justice, disqualified.

OPINION

Page 546

ZINTER, Justice.

[¶1] As a part of Dakota Trailer Manufacturing's business, it makes radiator components for an unrelated company. The component work is performed in one of Dakota Trailer's locations that the National Council on Compensation Insurance (NCCI) originally classified as a " machine shop" for workers compensation insurance rating purposes. After an inspection, NCCI changed the location's classification to " welding or cutting." Dakota Trailer appealed, and both the Workers' Compensation Appeals Board (Board) and the South Dakota Department of Labor (Department) affirmed the new classification. The circuit court, however, reversed. United Fire & Casualty Company, Dakota Trailer's workers' compensation insurer, appeals. We affirm the circuit court.

Facts and Procedural History

[¶2] Dakota Trailer manufactures trailers at its plant in Yankton. It also manufactures component parts (radiator subassemblies) for L& M Radiators at a separate location. The radiator subassemblies are manufactured in a portion of L& M Radiators' shop that Dakota Trailer subleases.

[¶3] NCCI is a rating organization that establishes statewide workers' compensation rates in South Dakota and thirty-seven other states. It gathers payroll and loss data from insurance companies and uses that information to create risk classifications (codes) and insurance rates for the codes. NCCI publishes a guidebook called the " Scopes Manual" that aids in interpretation and selection of the appropriate codes. NCCI also performs random inspections to make sure classification codes are properly applied.

[¶4] NCCI determined that Dakota Trailers had both a primary operation (trailer manufacturing) and a secondary operation (production welding) that were conducted at three locations.[1] The issue in this case involves the work performed at " Location 3," where employees make the radiator subassemblies. Employees at this location cut, form, bend, shape, drill, weld, and turn raw materials into the subassemblies. Upon completion, the subassemblies are taken to L& M Radiators' adjacent room where its employees finish and incorporate the subassemblies into radiators.

[¶5] After a 2011 inspection, NCCI assigned the classification code 3365, " Welding or Cutting NOC [(not otherwise classified)] & Drivers," for Location 3. Before the inspection, the classification code was 3632, " Machine Shop NOC." The actual ...


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