RICHARD PAPOUSEK and LORAYNA PAPOUSEK, Plaintiffs and Appellants,
DE SMET FARM MUTUAL INSURANCE COMPANY OF SOUTH DAKOTA, Defendant and Appellee.
CONSIDERED ON BRIEFS ON MAY 23, 2016
FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE WALLY EKLUND
BARON HOUY MICHAEL M. HICKEY of Bangs, McCullen, Butler, Foye
& Simmons, LLP Rapid City, South Dakota Attorneys for
plaintiffs and appellants.
JESSICA L. LARSON of Beardsley, Jensen & Lee, Prof. LLC
Rapid City, South Dakota Attorneys for defendant and
Insured's cattle died in 2013 during Winter Storm Atlas.
Insurer declined coverage, claiming a plain and ordinary
construction of the insurance policy providing
indemnification for loss of livestock by drowning precluded
recovery. A circuit court agreed and granted summary judgment
in favor of insurer. We reverse.
and Procedural History
Richard and Lorayna Papousek own and operate a
crop-and-livestock ranch in Quinn, South Dakota. A massive,
record-breaking storm named Winter Storm Atlas struck the
area October 3–5, 2013. The storm began as rain and
then turned into snow. After the storm subsided, Papouseks
discovered that 93 of their yearling heifers (cattle) were
dead. Papouseks hired Dr. Jim McConaghy, DVM, to ascertain
the cause of the cattle's death. Dr. McConaghy conducted
postmortem examinations (necropsies) on 8 to 10 of the
cattle. Dr. McConaghy determined the cause of the
cattle's death was drowning.
At the time of the storm, Papouseks had in effect a
Farmowner–Ranchowner Policy (Policy) purchased from De
Smet Farm Mutual Insurance Company of South Dakota (De Smet).
The Policy, as it relates to the cattle, is a named-peril
policy that transferred the risk of loss from 12 identified
perils to De Smet. One of the perils insured "against
direct physical loss to [cattle] caused by . . .
[d]rowning." Papouseks filed a
claim under the drowning provision, but De Smet denied the
claim because none of the 93 cattle were found submerged in
Papouseks filed an action for declaratory judgment in circuit
court, per SDCL chapter 21-24, seeking a decision as to
whether the Policy covered the cattle losses. Following
deposition testimony by Richard Papousek and Dr. McConaghy,
De Smet and Papouseks filed cross-motions for summary
judgment. The circuit court issued a written opinion holding
that the plain meaning of drowning is "the deprivation
of life by immersion in water or other liquid." Since
none of the cattle were found submerged in water, the court
granted summary judgment in favor of De Smet. Papouseks
appeal the court's interpretation of the drowning
provision. Papouseks argue the drowning provision is
ambiguous and, therefore, should be construed in their favor.
See Zoo Props., LLP v. Midwest Family Mut. Ins. Co.,
2011 S.D. 11, ¶ 5, 797 N.W.2d 779, 780. Whether an
insurance contract is ambiguous is a question of law reviewed
de novo. Ass Kickin Ranch, LLC v. N. Star Mut. Ins.
Co., 2012 S.D. 73, ¶ 7, 822 N.W.2d 724, 726.
"Drowning" is undefined in the Policy, and both De
Smet and Papouseks offer reasonable interpretations of the
term. De Smet points out that a common understanding of the
term requires some form of submersion or immersion in water
or other liquid. See De La Cruz v. Combined Am. Ins.
Co., 527 S.W.2d 820, 821 (Tex. Civ. App. 1975)
(referring to drowning "as meaning to deprive of life by
immersion in water or other liquid"); Webster's
Third New International Dictionary 695 (4th ed. 1976)
(defining drowning in part as "to suffocate by
submersion in water or some other liquid"). Papouseks
point out, however, that reasonable people understand that
the hallmark of drowning is not the presence of water outside
the body; rather, it is death caused by water or fluid within
the body. See Int'l Inv'rs Life Ins. Co., Inc. v.
Utrecht, 536 S.W.2d 397, 399 (Tex. Civ. App. 1976)
(referring to drowning as "death resulting from
inhalation of water or some other fluid into the
lungs"); Webster's Third New International
Dictionary 695 (4th ed. 1976) (defining drowning in part
as "to suffocate because of excess body fluid that
interferes with the passage of oxygen from the lungs to the
tissue"); see also Saunders Comprehensive Veterinary
Dictionary 362 (2d ed. 1998) (defining drowning as
"suffocation resulting from aspiration of water . . . or
fluid. Drowning occurs because the liquid prevents
breathing."). Because we agree with Papouseks that the
undefined term is susceptible to these two reasonable
interpretations, the provision indemnifying loss caused by
drowning is ambiguous. We therefore construe the provision
liberally in Papouseks' favor. See Zoo Props.,
LLP, 2011 S.D. 11, ¶ 5, 797 N.W.2d at 780. In turn,
the dispositive question is whether Papouseks established
that the cattle died from inhaling water.
During the postmortem examinations of the cattle, Dr.
McConaghy found the cattle's lungs were saturated with
water and their airways were obstructed with foam (air
trapped in water). In addition, Dr. McConaghy found clear
liquid in all airways and running from the cattle's
noses. Dr. McConaghy speculated that during the storm, the
cattle inhaled large quantities of rain and then snow,
resulting in a lack of oxygen and eventually cardiac arrest
and death. In Dr. McConaghy's opinion, his findings
indicated that the cattle "absolutely died due to
drowning." De Smet neither refuted Dr. McConaghy's
findings nor contradicted his opinion with competent
evidence. Indeed, De Smet proffered no evidence to the
contrary. Based on this record, we find Papouseks established
coverage under the drowning provision.
Yet De Smet contends that it proved an exclusion to coverage
under a discrete policy provision. See Ass Kickin Ranch,
LLC, 2012 S.D. 73, ¶ 9, 822 N.W.2d at 727 (insurer
has burden to establish exclusion); see supra ¶
3 n.1 ("This policy insures against direct physical loss
to [the cattle] caused by the following
perils." (emphasis added)). Under the policy
provision covering loss caused by windstorms or hail, the
Policy provides that coverage does not exist for loss
"caused directly or indirectly by frost, cold weather,
ice (other than hail), snow or sleet, all whether wind-driven
or not;" and loss to livestock caused by or resulting
from "smothering, suffocation or asphyxiation" or
"freezing in blizzards or
snowstorms[.]" De Smet asserts
that because Papouseks proffered evidence that the cattle
died-in part- from the inhalation of snow, this language
applies and excludes coverage. But this is a named-peril
policy, and Papouseks only claimed coverage based on the
drowning peril. Importantly, the drowning provision contains
no exclusions or similar explanatory language. See
supra ¶ 3 n.1; see also 10 Steven Plitt et
al., Couch on Insurance § 143:105 (3d ed.),
Westlaw (database updated June 2016) ("Policy provisions
may provide explicit coverage for drowning, which may also
limit the recovery allowed when death is by drowning or
restrict coverage to drowning under certain
circumstances."). Furthermore, to the degree that De
Smet believes this explanatory language also modifies the
drowning provision, it is mistaken-the explanatory language
of the windstorms-or-hail provision is prefaced by
"[t]his does not cover loss",
followed by the list explaining the scope of coverage.
(Emphasis added.) Thus, the explanatory language limiting the
scope of coverage for losses caused by windstorms or hail
neither applies to this case nor modifies the other covered
perils. De Smet failed to prove that an applicable policy
exclusion exempted Papouseks from coverage.
The parties concede that the material facts are undisputed as
indicated by their cross-motions for summary judgment. The
facts establish coverage based upon a fair reading of the
entire Policy, see SDCL 58-11-39,  and specifically under the drowning
provision. Accordingly, we reverse the circuit court's
order granting summary judgment in ...