Court: South Dakota Supreme Court; April 10, 2019; South Dakota; State Supreme Court
De Smet had an obligation to defend Geidel based on the argument that the Finks' negligence claims constituted an "occurrence" under the insurance policy, which defined "occurrence" as an accident resulting in bodily injury or property damage that was neither expected nor intended by the insured. The policy's definition included damage from continuous or repeated exposure, not limited to sudden events. The negligence claims focused on Geidel's decision to locate a confinement facility too close to the Finks' residence, despite having alternative sites that could have prevented harm.
The complaint acknowledged that the facility was constructed with county approval and did not violate any regulations, yet it lacked details regarding Geidel's knowledge of the facility's size and operation during the property sale. A negligence claim requires only a showing of unreasonable risk, which is a lower standard than the expectation of harm outlined in the policy.
The majority opinion concluded there was no occurrence because Geidel was aware the Finks would be affected by the facility and had prior objections. However, the claims did not assert that Geidel knew the specific impacts the Finks would experience before selling the property. The complaint merely stated that Geidel knew the facility would be objectionable to the Finks, which does not equate to an expectation or intention to cause harm. The Finks' belief that the facility's location was inappropriate does not meet the requirement that De Smet demonstrate Geidel clearly expected or intended to cause them harm. Thus, the question of Geidel's intent remains complex and fact-intensive.
In Owners Ins. Co. v. Tibke Constr. Inc., the court evaluated if a homeowner's damage claim against a contractor constituted a covered "occurrence" under the contractor's liability insurance. The homeowner alleged that the contractor's failure to perform required soil testing led to structural damage post-construction. The court acknowledged that negligent construction could be viewed as an accident under the policy's definition of "occurrence." It referenced a Texas case stating that a negligent act resulting in unintended harm qualifies as an accident if the outcome would differ if the act had been performed correctly.
The same reasoning applied to the case involving the Finks and Geidel, where the Finks claimed Geidel's negligent site selection for a facility caused them damages. The complaint suggested that Geidel's decision, rather than the facility itself, was the source of harm, but there were insufficient facts to conclude that Geidel expected or intended for his actions to cause damage. Therefore, the insurer, De Smet, had an obligation to defend Geidel based on the negligence claim.
The majority opinion did not address additional exclusions De Smet cited to deny coverage. One exclusion involved personal liability for property damage related to premises sold by Geidel. Although Geidel no longer owned the property, the court noted the Finks did not claim their damages stemmed from the condition of the property at the time of sale. Instead, their damages arose after the facility's construction, which did not exist when Geidel sold the property, indicating the exclusion did not apply.
The "premises alienated" exclusion, as analyzed in Prudential-LMI Commercial Ins. Co. v. Reliance Ins. Co., serves to deny coverage to insured parties who neglect to repair property before sale or fail to disclose defects. This exclusion did not warrant De Smet's denial of coverage or defense duty for Geidel. Additionally, De Smet incorrectly invoked the pollution exclusion, which excludes coverage for damage from pollutants. While the circuit court correctly identified odors and manure from hog operations as pollutants, it overlooked the Finks' claims regarding noise and visibility, which do not fall under the pollution exclusion. Consequently, De Smet remained obligated to defend Geidel against these claims. The dissent suggests reversing the circuit court's summary judgment favoring De Smet and remanding for further proceedings. The Finks also included a punitive damages claim, asserting that Geidel was aware of potential harm to them; however, this did not affect De Smet’s duty to defend, as insurers must provide defense even for some uncovered claims. Furthermore, the determination of the hog confinement facility as a nuisance involves a detailed assessment of its impact in relation to surrounding factors, rather than the facility itself being inherently a nuisance.
