LEROY L. JAMES, JR., Plaintiff and Appellee,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellant.
CONSIDERED ON BRIEFS ON OCTOBER 1, 2018
FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE ROBERT A.
L. WILLIAMSON OF FULLER & WILLIAMSON, LLP SIOUX FALLS,
SOUTH DAKOTA ATTORNEYS FOR PLAINTIFF AND APPELLEE.
STANTON DORSEY KIMBERLY PEHRSON OF WHITING, HAGG, HAGG,
DORSEY & HAGG, LLP RAPID CITY, SOUTH DAKOTA ATTORNEYS FOR
DEFENDANT AND APPELLANT.
Melissa Rivers rear-ended LeRoy James Jr., causing him
personal injury. State Farm insured both parties. Immediately
following the accident, State Farm paid a portion of
James's medical expenses under the medical payment
provisions of his policy. Acting on behalf of Rivers, State
Farm then settled with James. Once James released Rivers from
liability, State Farm demanded James use his settlement
proceeds to reimburse it for paying his medical expenses
under his policy. James sued for declaratory relief, arguing
State Farm had no right to reimbursement or subrogation. The
circuit court denied State Farm's motion for summary
judgment and entered a judgment in favor of James. State Farm
appeals. We affirm.
and Procedural History
The automobile accident occurred on July 22, 2016, on Highway
16 near Rapid City. At the time, State Farm insured both
Rivers and James under separate auto insurance policies.
Rivers's policy provided $100, 000 in liability coverage.
James's policy contained a $5, 000 benefit for medical
payments coverage. State Farm immediately paid $5, 000 on
James' behalf to medical services providers for treatment
of James's injuries.
Ultimately, James settled his claim against Rivers. Rivers
did not personally fund any of the settlement proceeds.
Instead, State Farm paid James $43, 000 on Rivers's
behalf in exchange for a full and complete release from
liability. After paying his attorney a one-third contingency
fee plus costs and sales tax, James's net settlement was
James's policy contained both a reimbursement clause and
a subrogation clause. Following the settlement, State Farm
demanded reimbursement from James for the $5, 000 payment it
made on James's behalf to cover medical expenses under
the reimbursement clause. State Farm did not reduce its
request to account for the attorney fees and costs James
incurred to obtain his recovery from Rivers. James refused to
reimburse State Farm for any amount; instead, he sued State
Farm, seeking a declaratory judgment to determine his
contractual rights under the policy. The parties filed
cross-motions for summary judgment based on stipulated facts.
The circuit court concluded that State Farm could not
subrogate against its own insured. It further held that the
reimbursement clause was ambiguous. As a consequence, the
court construed the policy against State Farm, the drafter,
granting summary judgment to James. State Farm appeals,
raising one issue and several sub-issues restated as follows:
1. Whether the language of the reimbursement clause is
2. Whether requiring James to reimburse State Farm implicates
the anti-subrogation rule or offends public policy.
3. If State Farm is entitled to reimbursement, whether James
is entitled to a portion ...