KAYNE R. LARIMER, as Special Administrator of the Estate of Nehemiah J. Larimer, Deceased, Plaintiff and Appellee,
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant and Appellant.
CONSIDERED ON BRIEFS ON JANUARY 7, 2019
FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE HEIDI L.
H. HIEB ZACHARY W. PETERSON of Richardson, Wyly, Wise, Sauck
& Hieb, LLP Aberdeen, South Dakota Attorneys for
defendant and appellant.
REXFORD A. HAGG of Whiting, Hagg, Hagg, Dorsey & Hagg,
LLP Rapid City, South Dakota Attorneys for plaintiff and
Kayne Larimer, as Special Administrator of the Estate of
Nehemiah Larimer, brought an action for declaratory judgment
seeking underinsured motorist benefits under two insurance
policies with American Family Mutual Insurance Co. (American
Family) following Nehemiah's death in an accident.
Pursuant to an "owned but not insured" exclusion in
the Larimers' underinsured motorist benefits endorsement,
American Family denied coverage. The parties filed
cross-motions for summary judgment. The circuit court,
finding the policy language ambiguous, held in favor of
Kayne. American Family appeals. Kayne filed a notice of
review contending the terms of the owned but not insured
exclusion violate public policy. We affirm.
and Procedural History
On March 27, 2015, eighteen-year-old Nehemiah collided with
an automobile while driving his 49cc moped in Rapid City.
Nehemiah suffered fatal injuries and passed away the
following day. The at-fault automobile driver was insured by
American Family under his family's policy. The policy
paid Nehemiah's estate up to its $100, 000 coverage
Nehemiah was also insured under his parents' policies
with American Family, including a South Dakota Family Car
Policy (Car policy) and a Personal Liability Umbrella Policy
(Umbrella policy). Under the Car policy, the Larimers insured
five automobiles, but Nehemiah's moped was not listed as
one of the insured vehicles. Mopeds are exempt from
registration and title requirements; however, owners may
license or title a moped if they wish. SDCL 32-5-1.2; SDCL
32-3-2.3. The Larimers also purchased an Underinsured
Motorists Coverage Endorsement (Endorsement) for the Car
policy. The Endorsement provided "compensatory damages
for bodily injury which an insured person is legally entitled
to recover from the owner or operator of an underinsured
motor vehicle. The bodily injury must be sustained by an
insured person and must be caused by accident and arise out
of the use of the underinsured motor vehicle." The
Umbrella policy also contained a provision for uninsured and
underinsured motorist claims. The coverage applied to
"damages in excess of the primary limit[, ]" and
was "no broader than the underlying insurance."
On August 18, 2015, the Larimers made an underinsured
motorist claim under their Car and Umbrella policies. On
September 17, American Family denied the claim pursuant to an
exclusion contained in the Endorsement providing that
underinsured motorist coverage did not apply to bodily injury
suffered "[w]hile occupying, or when struck by, a motor
vehicle that is not insured under this policy, if it is owned
by you or any resident of your household." This
provision is commonly known as an "owned but not
insured" exclusion. American Family, relying on the
definition of motor vehicle contained in the Endorsement,
determined that "Nehemiah was riding a moped at the time
of the accident, so is considered to have been occupying a
motor vehicle that was not insured under this policy.
Therefore, the Exclusion . . . would apply and there would be
no Underinsured Motorist Coverage." American Family also
denied coverage under the Umbrella policy because that policy
was "no broader than the underlying insurance."
Kayne brought an action for declaratory judgment on May 19,
2016, seeking, in part, a declaration "[t]hat the
underinsured coverage of Defendant's policies is portable
and followed the insured at all times pertinent hereto so as
to provide coverage for the acts of underinsured motorists[,
]" and "[t]hat the clear underinsured coverage is
not negated by any exclusion[.]" Kayne sought relief
"based on the contracts of insurance, with coverage up
to the umbrella underinsured limits of $1, 000, 000."
Kayne moved for summary judgment and American Family made a
cross-motion for summary judgment. After a hearing, the
circuit court, finding the language of the policy ambiguous,
issued a memorandum decision granting Kayne's motion for
summary judgment and denying American Family's motion.
American Family appeals, raising one issue for our review:
1. Whether the language of the underinsured motorist
endorsement is ambiguous.
notice of review, Kayne raises one issue:
2. Whether the owned but not insured exclusion from the
underinsured motorist coverage is void as ...