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North Star Mut. Ins. v. Korzan

Supreme Court of South Dakota

December 16, 2015

NORTH STAR MUTUAL INSURANCE, Plaintiff and Appellee,
v.
CHARLES KORZAN and MICHAEL KORZAN, Defendants and Appellants, and HENRY ROGHAIR; RAYMOND STOTTS; BORK & SONS, INC.; WEST CENTRAL COOPERATIVE, INC.; TERRY DOWLING and DAVID WEBER, Defendants

Considered on Briefs August 31, 2015.

Page 58

APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT JONES COUNTY, SOUTH DAKOTA. THE HONORABLE MARK BARNETT, Judge.

MARCUS J. CHRISTIANSON of Maschka, Riedy & Ries, Mankato, Minnesota, Attorneys for plaintiff and appellee.

JOHN W. BURKE of Thomas, Braun, Bernard & Burke, LLP, Rapid City, South Dakota and JASON M. SMILEY of Gunderson, Palmer, Nelson & Ashmore, LLP, Rapid City, South Dakota, Attorneys for defendants and appellants.

KERN, Justice. GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and WILBUR, Justices, concur.

OPINION

Page 59

KERN, Justice

[¶1] Insurance company sought declaratory judgment to determine whether an insurance policy provided coverage to insured and his brother for an incident in which a semi-trailer transporting a load of hay ignited and spread fire to nearby lands. Insured counterclaimed for declaratory judgment. After discovery, both parties filed cross-motions for summary judgment seeking a determination regarding insurance company's duty to defend and indemnify the insured. The circuit court denied insured's motion for summary judgment and granted insurance company's motion finding no coverage existed under the policy. The insured and his brother appeal. We affirm.

BACKGROUND

[¶2] On September 19, 2012, Charles Korzan and his brother, Michael Korzan, (Korzans) were moving hay bales from Charles's property in Jones County to his property in Brule County to feed livestock. The weather and crop conditions were dangerously dry. To transport the hay bales, Michael drove a 1998 International 9400 series semi-truck, hauling a 48-foot trailer. Charles drove a similar semi-truck and trailer. Charles owned both semi-trucks and trailers. Charles drove a load of hay out of the field toward Interstate 90, a distance of about nine miles, and Michael followed in the other semi-truck which was loaded with approximately 30 round hay bales secured by straps.

[¶3] Prior to leaving the field, neither Charles nor Michael noticed any problems with the hay, including flames or smoke. However, after Michael started driving, he began to feel heat on his arm through the open window and suspected a hay bale was on fire. Charles observed the fire, called Michael on his cell phone, and advised Michael that there was a fire and he should drive to Exit 177. Charles called 911 to report the fire and asked that the fire department meet them at Exit 177. The semi-truck became inoperable due to the fire approximately three miles from the spot Charles and Michael first observed the fire, and one mile from Interstate 90. Michael was unaware that the semi-truck was spreading firebrands and sparks along either side of the road as he drove. Upon exiting the semi-truck, Michael observed fire rolling across the prairie. Neither Charles nor Michael knew what started the fire.

[¶4] Upon responding to the scene, Fire Chief Rich Sylva observed a semi-truck with a flatbed trailer on fire and three separate fires on land along the route Michael had just driven. The fires were located near Okaton, South Dakota (Okaton Fires). It is unknown what ignited the hay; however, officials confirmed that the source of the Okaton Fires was " determined to have originated with the burning semi hauling hay." Officials eliminated all other possible causes of the fire. The fire burned fencing, hay, power poles, outbuildings, and 2,465 acres of wheat stubble and grass.

[¶5] Henry Roghair, Raymond Stotts, and Bork & Sons, Inc., filed a lawsuit against Charles asserting claims of nuisance, negligence, trespass, and punitive damages for the Okaton Fires. Roghair and Stotts later amended their complaint to include Michael as a defendant and add additional plaintiffs.[1] The amendment also included a claim for wrongful entry.

[¶6] On February 6, 2014, Charles's insurance carrier, North Star Mutual Insurance Company (North Star), filed a

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separate action for declaratory judgment. North Star sought a determination as to whether it had a duty to defend and indemnify the Korzans for the Okaton Fires. The Korzans counterclaimed for declaratory judgment, asserting North Star had a duty to defend. After completing discovery, North Star and the Korzans filed cross-motions for summary judgment.

[¶7] The competing summary judgment motions centered on interpretation of a farmowners insurance policy (the Policy) issued by North Star to Charles with a policy period of February 11, 2012, through February 11, 2013. The Policy contained Coverage L - Personal Liability (Coverage L) which provided:

" We" pay, up to " our" " limit", all sums for which an " insured" is liable by law because of " bodily injury" or " property damage" caused by an " occurrence" to which this coverage applies. " We" will defend a suit seeking damages if the suit resulted from " bodily injury" or " property damage" not excluded under this coverage.

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