North Star Mutual. Insurance. v. KORZAN

On September 19, 2012, Charles Korzan and his brother, Michael

Korzan, (Korzans) were moving hay bales from Charles’s property in Jones County

to his property in Brule County to feed livestock. The weather and crop conditions

were dangerously dry. To transport the hay bales, Michael drove a 1998

International 9400 series semi-truck, hauling a 48-foot trailer. Charles drove a

similar semi-truck and trailer. Charles owned both semi-trucks and trailers.

Charles drove a load of hay out of the field toward Interstate 90, a distance of about

nine miles, and Michael followed in the other semi-truck which was loaded with

approximately 30 round hay bales secured by straps.

[¶3.] Prior to leaving the field, neither Charles nor Michael noticed any

problems with the hay, including flames or smoke. However, after Michael started

driving, he began to feel heat on his arm through the open window and suspected a

hay bale was on fire. Charles observed the fire, called Michael on his cell phone,

and advised Michael that there was a fire and he should drive to Exit 177. Charles

called 911 to report the fire and asked that the fire department meet them at Exit

177. The semi-truck became inoperable due to the fire approximately three miles

from the spot Charles and Michael first observed the fire, and one mile from

Interstate 90. Michael was unaware that the semi-truck was spreading firebrands

and sparks along either side of the road as he drove. Upon exiting the semi-truck,

Michael observed fire rolling across the prairie. Neither Charles nor Michael knew

what started the fire.

[¶4.] Upon responding to the scene, Fire Chief Rich Sylva observed a semi

truck with a flatbed trailer on fire and three separate fires on land along the route

Michael had just driven. The fires were located near Okaton, South Dakota

(Okaton Fires). It is unknown what ignited the hay; however, officials confirmed

that the source of the Okaton Fires was “determined to have originated with the

burning semi hauling hay.” Officials eliminated all other possible causes of the fire.

The fire burned fencing, hay, power poles, outbuildings, and 2,465 acres of wheat

stubble and grass.

[¶5.] Henry Roghair, Raymond Stotts, and Bork & Sons, Inc., filed a lawsuit

against Charles asserting claims of nuisance, negligence, trespass, and punitive

damages for the Okaton Fires. Roghair and Stotts later amended their complaint to

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include Michael as a defendant and add additional plaintiffs.1 The amendment also

included a claim for wrongful entry.

[¶6.] On February 6, 2014, Charles’s insurance carrier, North Star Mutual

Insurance Company (North Star), filed a separate action for declaratory judgment.

North Star sought a determination as to whether it had a duty to defend and

indemnify the Korzans for the Okaton Fires. The Korzans counterclaimed for

declaratory judgment, asserting North Star had a duty to defend. After completing

discovery, North Star and the Korzans filed cross-motions for summary judgment.

[¶7.] The competing summary judgment motions centered on interpretation

of a farmowners insurance policy (the Policy) issued by North Star to Charles with a

policy period of February 11, 2012, through February 11, 2013. The Policy

contained Coverage L - Personal Liability (Coverage L) which provided:

“We” pay, up to “our” “limit”, all sums for which an “insured” is liable by law because of “bodily injury” or “property damage” caused by an “occurrence” to which this coverage applies. “We” will defend a suit seeking damages if the suit resulted from “bodily injury” or “property damage” not excluded under this coverage.

The Policy also contained exclusions to Coverage L, including an exclusion for

motorized vehicles2 (the Motorized Vehicle Exclusion). The Motorized Vehicle

1. The additional plaintiffs include, David Weber, Brad Roghair, Shawna Roghair, Nathan Vander Schaaf, and Sherri Vander Schaaf.

2. The Policy defined motorized vehicle as “a self-propelled land or amphibious vehicle regardless of method of surface contact.” A “motor vehicle” is defined as “a ‘motorized vehicle’, a trailer, or a semi-trailer, and all attached machinery or equipment, if: a. it is subject to ‘motor vehicle’ registration; or b. it is designed for use on public roads.”

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Exclusion provided:

This policy does not apply to: . . . “bodily injury” or “property damage” which results from the ownership, operation, maintenance, use, occupancy, renting, loaning, entrusting, supervision, or “loading or unloading” of “motorized vehicles”, trailers, or watercraft owned, operated, or used by or rented or loaned to an “insured”. [¶8.] North Star contended that this exclusion prohibited coverage under

the Policy as the incident involved the use and operation of a motor vehicle. The

Korzans countered, arguing that the exclusion did not apply because the incident

involved independent acts of negligence that were “wholly separate” from the

operation of the motor vehicle. The Korzans also argued that there were genuine

issues of material fact regarding the cause of the fire and the acts of the Korzans

which precluded summary judgment.

[¶9.] In addition to the exclusions, the Policy also contained an extension to

Coverage L to pay for damages for which an insured is liable by law because of

personal injury. This extension, referred to as the “Personal Injury Endorsement,”

defined personal injury as “false arrest, false imprisonment, wrongful eviction,

wrongful entry, wrongful detention, malicious prosecution, misrepresentation, libel,

slander, defamation of character or invasion of privacy.”

[¶10.] Under this endorsement, North Star alleged that policy coverage did

not extend to wrongful entry or trespass as the incident involved a fire which does

not constitute a personal injury as defined in the Policy or by law. North Star

argued in the alternative that even if the fire was construed to be a wrongful entry

covered by the Personal Injury Endorsement, coverage would be precluded under

the Motorized Vehicle Exclusion. In response, the Korzans submitted coverage was

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proper as the spread of the fire was a wrongful entry which constituted a personal

injury as set forth in the endorsement. The Korzans further argued that the

Motorized Vehicle Exclusion did not apply to the Personal Injury Endorsement as it

was not expressly reincorporated into the endorsement section of the Policy.

[¶11.] On October 23, 2014, the circuit court issued a memorandum decision

denying the Korzans’s motion for summary judgment and granting North Star’s

motion finding no coverage under the Policy. The Korzans appeal.

STANDARD OF REVIEW

[¶12.] We review a court’s denial of a motion for summary judgment under

the de novo standard of review. Titus v. Chapman, 2004 S.D. 106, ¶ 13, 687 N.W.2d

918, 923. Summary judgment is appropriate “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” SDCL 15-6-56(c). The burden rests with

the moving party to clearly demonstrate the absence of genuine issues of material

fact and entitlement to judgment as a matter of law. Titus, 2004 S.D. 106, ¶ 13, 687

N.W.2d at 923. “All reasonable inferences drawn from the facts must be viewed in

favor of the non-moving party.” De Smet Farm Mut. Ins. Co. of S.D. v. Gulbranson

Dev. Co., 2010 S.D. 15, ¶ 16, 779 N.W.2d 148, 155.

[¶13.] “Insurance contract interpretation is [also] a question of law,

reviewable de novo.” Ass Kickin Ranch, LLC v. N. Star Mut. Ins. Co., 2012 S.D. 73,

¶ 7, 822 N.W.2d 724, 726 (quoting De Smet Ins. Co. of S.D. v. Gibson, 1996 S.D.102,

¶ 5, 552 N.W.2d 98, 99). An insurer’s duty to defend and its duty to indemnify are

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separate and independent duties. Hawkeye-Sec. Ins. Co. v. Clifford by Clifford, 366

N.W.2d 489, 490 (S.D. 1985). “The duty to defend is much broader than the duty to

pay a judgment rendered against the insured.” Id. The burden rests with the

insurer “to show the claim clearly falls outside of the policy coverages” and that

“there is no duty to defend.” De Smet Farm Mut. Ins. Co. of S.D., 2010 S.D. 15,

¶ 18, 779 N.W.2d at 155. We look to the pleadings in the action and the language of

the policy to determine if a duty to defend exists. Id. ¶ 19, 779 N.W.2d at 155. If

even one claim is covered by the policy, an insurer must defend. Biegler v. Am.

Family Mut. Ins. Co., 2001 S.D. 13, ¶ 20, 621 N.W.2d 592, 599.

ANALYSIS

1. Whether the circuit court erred when it granted North Star’s motion for summary judgment and determined that it does not have a duty to defend or indemnify the Korzans. [¶14.] The circuit court, finding that there were no genuine issues of material

fact, denied coverage under the Policy on three grounds. First, the circuit court

found that under the facts of the case the Motorized Vehicle Exclusion applied to

Coverage L. Second, the circuit court found no coverage under the Personal Injury

Endorsement of the Policy as the court determined that the term wrongful entry

was not a personal injury and could not be construed to include property damages

caused by a fire. Third, the court found that the Personal Injury Endorsement

extended Coverage L and was therefore subject to the entire policy, including the

Motorized Vehicle Exclusion which prevented coverage.

a. Motorized Vehicle Exclusion

[¶15.] The Korzans first argue that the circuit court erred by finding North

Star had no duty to defend in light of the Motorized Vehicle Exclusion to Coverage

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L. The exclusion provided, in pertinent part, that the Policy did not apply to

“‘property damage’ which results from the ownership, operation, maintenance, use,

. . . or ‘loading or unloading’ of ‘motorized vehicles’, [or] trailers . . . .” In granting

summary judgment, the circuit court noted that the pleadings contained numerous

acts that directly involved the use, loading, maintenance, and operation of a motor

vehicle. Citing to the allegations contained in the complaint, the circuit court listed

acts in which the motor vehicle was directly involved in the Okaton Fires. The

Korzans “loaded and began hauling the hay from Charles’[s] field with two semi

tractor-trailer trucks”; conducted an activity that presented a risk of fire in

dangerous weather conditions and continued to operate the “truck while on fire”;

after noticing the fire coming from Michael’s truck, “continue[d] to operate his semi

tractor-trailer truck along the planned route”; “dropping firebrands on either side of

the road, causing the ignition of fires along the entire distance they were traveling”;

and after Michael “abandoned the truck, the fire ignited vegetation at that location

as well.” The circuit court also referred to the September 19, 2012, report of Chief

Sylva, which provided in part, “[t]he major issue with the large number of burned

acres was the fact that the driver kept driving after he discovered that his load was

on fire. The semi spread fire for over 3 miles along both sides of the road.”

[¶16.] In response, the Korzans contend that the fact that they were

operating motor vehicles is not, in and of itself, determinative of the scope of

coverage. The Korzans cite 9 Couch on Insurance 127.35 for the proposition that

“[c]overage will often be afforded where an independent act of negligence is

determined to be the cause of injury, despite the involvement of a vehicle.” The

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Korzans point to a number of alleged independent acts of negligence, as set forth in

the underlying complaint, which they contend are nonvehicle-related and for which

North Star must indemnify and defend.

[¶17.] In support of their argument, the Korzans direct our attention to

several jurisdictions that have considered a motor vehicle exclusion in conjunction

with independent acts of negligence. The Korzans urge this Court to adopt

Minnesota’s divisible concurrent cause doctrine. The divisible concurrent cause

doctrine permits coverage under an insurance policy with a motorized vehicle

exclusion where there are two independent causes, one vehicle-related and one

nonvehicle-related. Waseca Mut. Ins. Co. v. Noska, 331 N.W.2d 917, 921 (Minn.

1983); State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 65 (Minn. 1992) (focusing on

the actual injury or loss suffered, the court narrowed the holding in Noska to

whether the nonvehicle related cause, “could have operated independent of a motor

vehicle to cause the loss”); see Midwest Family Mut. Ins. Co. v. Schmitt, 651 N.W.2d

843, 847 (Minn. Ct. App. 2002) (narrowly interpreting the holding of Noska to

whether the nonvehicle-related act could have caused the actual injuries or

damages without the use of a motor vehicle). See also Kalell v. Mut. Fire & Auto.

Ins. Co., 471 N.W.2d 865, 868 (Iowa 1991) (holding a motor vehicle exclusion in a

homeowners policy inapplicable “when two independent acts of negligence are

alleged, one vehicle-related and one not vehicle-related, coverage is still provided

. . . unless the vehicle-related negligence is the sole proximate cause of the injury”).

[¶18.] In response, North Star argues that the divisible concurrent cause

doctrine should not be adopted; however, even if adopted, the Korzans have not

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established an independent act of negligence necessary to overcome the Motorized

Vehicle Exclusion. We agree that even if we were to adopt some form of this

doctrine, the Korzans could not prevail under these facts. In order for the divisible

concurrent cause doctrine to apply and defeat application of the Motorized Vehicle

Exclusion, the Korzans must establish that they committed at least one act of

negligence that could have caused the Okaton Fires without the use of the motor

vehicle. The independent acts of negligence which the Korzans claim are “entirely

distinct from the use of a motor vehicle” include failing to “contain or suppress the

fire” upon discovery; “negligently directing the fire [department] to meet at I-90”;

failing “to properly, adequately and reasonably inspect the truck and its mechanical

equipment”; negligently deciding to haul hay when “weather conditions were

conducive to wildland fire”; and “negligently allowing the unauthorized and

wrongful entry of fire from the Korzan truck to property” of others.

[¶19.] None of these acts are distinct from the use of a motor vehicle; rather,

each act is inextricably intertwined with its use. As the Schmitt court stated, “the

district court may consider theoretical possibilities to explain how the accident

could have occurred without a motor vehicle in determining whether to apply the

divisible, concurrent-cause doctrine. But if those possibilities are too remote, the

doctrine will not be applied.” 651 N.W.2d at 849. The Korzans have failed to put

forth a viable or cognizable theory as to how any of these acts could have led to the

fire without the use of the motor vehicle.

[¶20.] The Korzans also contend that the circuit court erred in granting

summary judgment because what caused the hay to ignite on the semi-trailer is

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unknown, which they submit creates a genuine issue of material fact. The Korzans

point to an affidavit from Chief Sylva dated June 16, 2014, modifying the content of

his original report in which he opined that, “[i]t is possible that whatever ignited

the hay on the semi-trailer also ignited the surrounding land.” The Korzans submit

in their Statement of Undisputed Material Facts that they do not know how the fire

started and that “Charles Korzan has been told the Okaton Fires could have been

the result of exhaust, lightning or static electricity.”

[¶21.] Other than speculation, the Korzans have not presented any factual

cause for the fire and its spread other than the semi-truck being driven down the

road with a flaming load of hay dropping sparks and firebrands as it traveled. Mere

speculation and general assertions, without some concrete evidence, are not enough

to avoid summary judgment. Stern Oil Co. v. Brown, 2012 S.D. 56, ¶ 8, 817 N.W.2d

395, 398 (quoting Tolle v. Lev, 2011 S.D. 65, ¶ 8, 804 N.W.2d 440, 444).

[¶22.] Upon our independent review of the record, we find that the circuit

court correctly determined that no genuine issues of material fact exist to prevent

application of the Motorized Vehicle Exclusion. The language of the Exclusion is

clear and unambiguous. It precludes coverage as the property damage from the

Okaton Fires resulted from the ownership, operation, use, supervision or loading or

unloading of a motorized vehicle or trailer. Even if we were to adopt and apply the

divisible concurrent cause doctrine, each of the alleged independent acts of

negligence necessarily arose from the use of the motor vehicle and could not have

operated independently of the semi-truck to cause the actual injuries that occurred.

As the circuit court aptly stated, “[w]hen and how the Korzans operated that truck

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are part, parcel, and the essence of the underlying action. No truck, no fire, no

lawsuit.” The circuit court correctly determined that the Motorized Vehicle

Exclusion applied to Coverage L.

b. Personal Injury Endorsement [¶23.] The Personal Injury Endorsement defined personal injury as any one

of eleven listed tortious acts including wrongful entry. The Korzans contend that

the Okaton Fires constitute a wrongful entry. They submit that the Okaton Fires

were also a trespass upon the land because the plain meaning of the term trespass

is synonymous to wrongful entry. The Korzans cite to Black’s Law Dictionary’s

definition of trespass3 as well as several cases outside of our jurisdiction which have

found trespass and wrongful entry to be synonymous. The Korzans then point to

Chudy v. Larkin for the proposition that fire can trespass upon the land of another.

27 S.D. 86, 129 N.W. 755 (1911) (affirming a judgment for damages in a complaint

for “trespass for injury to the premises” caused when a fire set by defendant,

escaped to plaintiff’s property).

[¶24.] North Star, agrees that the Policy provides coverage for personal

injuries including wrongful entry; however, North Star argues the fire was not a

wrongful entry. North Star argues that wrongful entry in the context of the Policy

is limited to an offense against a person, not property damage, and does not include

trespass, which is not the equivalent of wrongful entry.

3. “An unlawful act committed against the person or property of another; esp., wrongful entry on another’s real property.” Black’s Law Dictionary 1642 (9th ed. 2009).

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[¶25.] The term wrongful entry is undefined in the Policy and has not been

defined by this Court or by statute. We decline to address this issue, however, as

even if the Okaton Fires were determined to be a wrongful entry covered under the

Personal Injury Endorsement, coverage is excluded by the Motorized Vehicle

Exclusion.

c. Extension of Motorized Vehicle Exclusion to Personal Injury Endorsement [¶26.] The Korzans argue that the Motorized Vehicle Exclusion of Coverage L

does not extend to the Personal Injury Endorsement because the exclusion is not

expressly reincorporated or directly included in the endorsement. By this

argument, the Korzans necessarily contend the endorsement is separate from the

rest of the Policy and provides stand-alone coverage. The Korzans’s argument is

contrary to well-established law and the plain language of the Policy.

Endorsements or riders on a policy become a part of the policy, and must be construed with it. Such provisions in the body of the policy are not to be abrogated, waived, limited, or modified by the provisions of an endorsement or rider unless expressly stated therein that such provisions are substituted for those in the body of the policy, or unless the provisions in the policy proper and in the rider or endorsement are conflicting.

Pete Lien & Sons, Inc. v. First Am. Title Ins. Co., 478 N.W.2d 824, 827 (S.D. 1991)

(quoting 13A J. Appleman Insurance Law and Practice § 7538 (1976)).

[¶27.] “The existence of the rights and obligations of parties to an insurance

contact [sic] are determined by the language of the contract, which must be

construed according to the plain meaning of its terms.” Biegler, 2001 S.D. 13, ¶ 20,

621 N.W.2d at 598-99. Coverage L provided coverage for bodily injury or property

damage covered by the Policy. The Personal Injury Endorsement began with the

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statement that “this endorsement changes the policy.” The endorsement then

extended the coverage to include personal injury as defined in the Policy, including

injury for wrongful entry. The Personal Injury Endorsement specifically stated,

“Coverage L is extended to pay for damages for which an ‘insured’ is liable by law

because of ‘personal injury’.” It is undisputed that Coverage L included the

Motorized Vehicle Exclusion. Therefore, even if the Okaton Fires were classified as

a personal injury by wrongful entry, the Motorized Vehicle Exclusion applies to

preclude coverage.

[¶28.] If an insurer attempts to apply a policy exclusion to avoid coverage, the

burden rests with the insurer to prove such exclusion applies. Ass Kickin Ranch,

LLC, 2012 S.D. 73, ¶ 9, 822 N.W.2d at 727. North Star has met this burden as the

Personal Injury Endorsement is subject to the Motorized Vehicle Exclusion.

2. Whether the circuit court erred when it denied the Korzans’s motion for summary judgment and determined that North Star does not have a duty to defend or indemnify the Korzans. [¶29.] As set forth above, North Star has established that the claims asserted

against the Korzans clearly fall outside of the Policy’s coverage. North Star has no

duty to defend or indemnify the Korzans. The circuit court did not err by granting

summary judgment to North Star and denying the Korzans’s cross motion for

summary judgment.

We hold that the Motorized Vehicle Exclusion, which applies to both

Coverage L and the Personal Injury Endorsement, precludes coverage under the

Policy. Accordingly, we affirm the circuit court’s grant of North Star’s motion for

summary judgment.