2017 S.D. 83
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and STATE FARM FIRE AND CASUALTY COMPANY, Defendants and Appellees. JODY STREFF and KEVIN STREFF, Plaintiffs and Appellants,
CONSIDERED ON BRIEFS ON APRIL 24, 2017
REASSIGNED ON SEPTEMBER 8, 2017
FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT
MINNEHAHA COUNTY, SOUTH DAKOTA THE HONORABLE MARK SALTER
A. PARSONS, JR. A. RUSSELL JANKLOW of Johnson Janklow
Abdallah, Reiter & Parsons LLP Attorneys for plaintiffs
L. WILLIAMSON WILLIAM P. FULLER of Fuller & Williamson
LLP Attorneys for defendants and appellees.
SEVERSON, JUSTICE (ON REASSIGNMENT).
SDCL 58-11-9.4 requires underinsured motorist (UIM) coverage
in "motor vehicle liability polic[ies]" of
insurance. Jody and Kevin Streff purchased a motor vehicle
liability policy from one insurer. They also purchased a
personal liability umbrella policy from a separate but
related insurer. Both policies provided UIM coverage, but
both excluded coverage for accidents caused by government
vehicles. After Jody was injured in an accident involving a
government vehicle, a dispute arose concerning the
enforceability of the exclusions. The circuit court ruled
that the exclusion was not enforceable in the motor vehicle
liability policy but was enforceable in the umbrella policy.
The Streffs appeal the ruling regarding the umbrella policy.
We reverse, holding that the South Dakota UIM statute is not
limited to primary insurance policies and that the statute
contemplates additional coverage. By extension, umbrella
policies that include UIM coverage are subject to the same
public policy prohibition on the exception of government
vehicles from UIM coverage.
and Procedural History
The facts are not in dispute. The Streffs purchased a motor
vehicle liability policy (auto policy) from State Farm Mutual
Automobile Insurance Company. As required by SDCL 58-11-9.4,
the auto policy included basic UIM coverage. The Streffs paid
an additional premium for additional UIM coverage in the
amount of $250, 000 per person and $500, 000 per accident.
The Streffs also purchased a separate $1 million personal
liability umbrella policy (umbrella policy) from a related
company-State Farm Fire and Casualty Company. The umbrella
policy provided excess liability coverage for exposures
relating to homes, watercrafts, and undesignated automobiles.
The Streffs paid an additional premium to add excess UIM
coverage to the umbrella policy. The umbrella policy's
definitions and exclusions governed the nature and extent of
the UIM coverage.
The umbrella policy's definition of an "underinsured
motor vehicle" excluded coverage for "land motor
vehicle[s] . . . owned by, registered to, or rented to any
government or any of its political subdivisions or
agencies." The auto policy contained the same type of
exclusion. Therefore, both policies excluded UIM coverage for
accidents caused by government vehicles.
In 2012, Jody was injured in an accident caused by a driver
of a government owned vehicle. An Alamosa, Colorado police
officer ran a red light, and his patrol vehicle collided with
a second vehicle passing through the intersection. The second
vehicle struck Jody, causing her injuries.
The Streffs settled their personal injury claims with the
Alamosa Police Department. At the time of the accident,
Colorado law limited the amount of damages recoverable
against a public entity or employee to $150, 000. The Streffs
notified State Farm that they were willing to accept a $120,
000 settlement from the police department. They also notified
State Farm they intended to make a claim for UIM benefits
under both policies. State Farm waived its right of
subrogation and gave the Streffs permission to accept the
$120, 000 settlement. However, State Farm advised the Streffs
that it reserved its right to assert applicable policy
provisions for any UIM claim. The Streffs then filed this
declaratory action to determine the enforceability of the
government vehicle exclusion in both policies. The parties
stipulated to the facts and filed cross-motions for summary
The circuit court granted both parties partial summary
judgment. The court granted the Streffs' motion with
respect to the auto policy. The court ruled that the
government vehicle exclusion in the auto policy violated
South Dakota public policy and was unenforceable because SDCL
58-11-9.4 required UIM coverage in "motor vehicle
liability polic[ies]." However, the court granted State
Farm's motion with respect to the umbrella policy. The
court ruled that the same exclusion was enforceable in the
umbrella policy because SDCL 58-11-9.4 did not require UIM
coverage in such policies.
State Farm did not appeal the court's ruling, and it paid
the Streffs $100, 000 in UIM benefits under the auto policy
(the difference between the $150, 000 the Streffs were deemed
to have recovered from the underinsured driver and the
policy's UIM limits of $250, 000). The Streffs now appeal
the circuit court's decision upholding the government
vehicle exclusion in the umbrella policy.
The question on appeal is whether the public policy
recognized by this Court regarding UIM coverage obtained in a
"motor vehicle liability policy, " see
SDCL 58-11-9.4, extends to the insured's request for
"additional [UIM] coverage" as indicated in SDCL
58-11-9.4. In other words, if our public policy dictates that
an insurer cannot exclude UIM coverage in a "motor
vehicle liability policy" for accidents involving
government vehicles, does not that same public policy apply
when, under SDCL 58-11-9.4, the insured requests additional
UIM coverage through a supplemental umbrella
policy? Although insurance coverage is generally a
matter of contract, UIM coverage is mandated under this
State's public policy as set forth in SDCL 58-11-9.4.
No motor vehicle liability policy of insurance may be issued
or delivered in this state with respect to any motor vehicle
registered or principally garaged in this state, except for
snowmobiles, unless underinsured motorist coverage is
provided therein at a face amount equal to the bodily injury
limits of the policy. However, the coverage required by this
section may not exceed the limits of one hundred thousand
dollars because of bodily injury to or death of one person in
any one accident and, subject to the limit for one person,
three hundred thousand dollars because of bodily injury to or
death of two or more persons in any one accident, ...