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Western National Mutual Insurance Co. v. Gateway Building Systems, Inc.

Supreme Court of South Dakota

November 30, 2016

WESTERN NATIONAL MUTUAL INSURANCE COMPANY, Plaintiff and Appellee,
v.
GATEWAY BUILDING SYSTEMS, INC., Defendant and Appellant, and DAKOTA MILL & GRAIN, INC., Defendant.

          CONSIDERED ON BRIEFS ON NOVEMBER 8, 2016

         APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT STANLEY COUNTY, SOUTH DAKOTA THE HONORABLE JOHN L. BROWN Judge

          JAMES E. MOORE JORDAN J. FEIST of Woods Fuller Shultz & Smith P.C. Sioux Falls, South Dakota Attorneys for plaintiff and appellee.

          TERRY G. WESTERGAARD of Bangs, McCullen, Butler, Foye & Simmons, LLP Sioux Falls, South Dakota Attorneys for defendant and appellant.

          SEVERSON, Justice

         [¶1.] Western National Mutual Insurance Company filed a complaint for declaratory judgment against Gateway Building Systems, Inc. The circuit court granted summary judgment in favor of Western National, finding that several exclusions in the insurance agreement between Western National and Gateway applied to defeat coverage for an underlying suit between Gateway and Dakota Mill & Grain, Inc. Gateway appeals. We reverse and remand.

         Background

         [¶2.] Dakota Mill & Grain, Inc., contracted with Gateway Building Systems, Inc., for the construction of three 136, 611 bushel grain bins, a top fill system (overhead fill conveyors), and a reclaim system (reclaim conveyors). The reclaim and fill conveyor systems were to be integrated with a pre-existing leg and support tower. The new grain bins were built in the same location where Dakota Mill previously had four 43, 000 bushel bins. Gateway contracted to provide the steel, concrete, labor, anchors, and rebar for the project, but it was not responsible to pay for site preparation or fill gravel as part of its contract. The parties dispute whether Gateway acted as a general contractor for the overall project.

         [¶3.] B & B Excavation performed excavation on the site of the grain bins. BMS Concrete, a subcontractor of Gateway was involved in locating, staking, and pouring the bin foundations. However, Gateway conceded that its employees "staked the center point of the first bin." Construction was substantially completed on or about July 1, 2009.

         [¶4.] After Dakota Mill had filled the bins with grain, each of the three bins began to tip towards the west and became unstable. Local engineers determined that the bins were in danger of imminent collapse, forcing Dakota Mill to empty them and relocate or short sell the grain that had been placed in the bins. Dakota Mill decided to level the bins using a process of "compaction grouting." The support tower and overhead grain conveyor had pulled away from the bins requiring those to be taken down and/or reattached. Finally, the overhead grain conveyor system did not perform as promised.

         [¶5.] Dakota Mill filed suit against Gateway, alleging that Gateway negligently performed its engineering and surveying services, breached implied warranties, and breached its contract. Gateway purchased a Commercial General Liability insurance policy from Western National Mutual Insurance Company, which was in effect during the period at issue. Accordingly, Western National provided Gateway with a defense in the action filed by Dakota Mill, but it issued a reservation of rights letter. The underlying liability action is still pending in circuit court.

         [¶6.] This coverage dispute followed, and Western National filed a complaint for declaratory judgment on March 1, 2011, regarding coverage under the policy. On July 10, 2014, Western National moved for summary judgment. The circuit court held a hearing on the motion on August 11, 2014. From the record, no further activity appeared to take place on the case until March 2015 when Western National submitted a supplemental brief in support of its motion for summary judgment. An attorney for Western National submitted an affidavit in support of the supplemental brief. The affidavit attached a "true and correct copy of [an] expert report produced by Dakota Mill and Grain Company, dated December 2, 2014, and later provided to Western National[.]" The circuit court granted summary judgment in favor of Western National on March 28, 2016. In its memorandum opinion, the court relied upon the expert report to find that the policy between Gateway and Western National provided an initial grant of coverage but that exclusions defeated coverage. Gateway appeals the circuit court's grant of summary judgment. On appeal to this Court, Gateway alleges that the court erred by determining that exclusions apply and further alleges that there are genuine issues of material fact precluding summary judgment on those two exclusions. Through notice of review, Western National alleges that the court erred by not determining that an additional exclusion bars coverage.

         Standard of Review

         [¶7.] We review a circuit court's grant of summary judgment to determine whether genuine issues of material fact exist and whether the law was applied correctly. Swenson v. Auto Owners Ins. Co., 2013 S.D. 38, ¶ 12, 831 N.W.2d 402, 406. "When the material facts are undisputed, this Court's review 'is limited to determining whether the trial court correctly applied the law.'" Id., 831 N.W.2d ...


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