#27658-r-JMK

2016 S.D. 53

                            IN THE SUPREME COURT
                                    OF THE
                           STATE OF SOUTH DAKOTA

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RICHARD PAPOUSEK and
LORAYNA PAPOUSEK,                           Plaintiffs and Appellants,

      v.

DE SMET FARM MUTUAL
INSURANCE COMPANY
OF SOUTH DAKOTA,                            Defendant and Appellee.

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                  APPEAL FROM THE CIRCUIT COURT OF
                    THE SEVENTH JUDICIAL CIRCUIT
                  PENNINGTON COUNTY, SOUTH DAKOTA

                                     ****
                     THE HONORABLE WALLY EKLUND
                                Judge

                                     ****

SARAH BARON HOUY
MICHAEL M. HICKEY of
Bangs, McCullen, Butler,
 Foye & Simmons, LLP
Rapid City, South Dakota                    Attorneys for plaintiffs
                                            and appellants.


JESSICA L. LARSON of
Beardsley, Jensen & Lee, Prof. LLC
Rapid City, South Dakota                    Attorneys for defendant
                                            and appellee.

                                     ****
                                            CONSIDERED ON BRIEFS
                                            ON MAY 23, 2016

                                            OPINION FILED 07/20/16
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KERN, Justice

[¶1.]         Insured’s cattle died in 2013 during Winter Storm Atlas. Insurer

declined coverage, claiming a plain and ordinary construction of the insurance

policy providing indemnification for loss of livestock by drowning precluded

recovery. A circuit court agreed and granted summary judgment in favor of insurer.

We reverse.

                            Facts and Procedural History

[¶2.]         Richard and Lorayna Papousek own and operate a crop-and-livestock

ranch in Quinn, South Dakota. A massive, record-breaking storm named Winter

Storm Atlas struck the area October 3–5, 2013. The storm began as rain and then

turned into snow. After the storm subsided, Papouseks discovered that 93 of their

yearling heifers (cattle) were dead. Papouseks hired Dr. Jim McConaghy, DVM, to

ascertain the cause of the cattle’s death. Dr. McConaghy conducted postmortem

examinations (necropsies) on 8 to 10 of the cattle. Dr. McConaghy determined the

cause of the cattle’s death was drowning.

[¶3.]         At the time of the storm, Papouseks had in effect a Farmowner–

Ranchowner Policy (Policy) purchased from De Smet Farm Mutual Insurance

Company of South Dakota (De Smet). The Policy, as it relates to the cattle, is a

named-peril policy that transferred the risk of loss from 12 identified perils to

De Smet. One of the perils insured “against direct physical loss to [cattle] caused




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by . . . [d]rowning.” 1 Papouseks filed a claim under the drowning provision, but

De Smet denied the claim because none of the 93 cattle were found submerged in

water.

[¶4.]          Papouseks filed an action for declaratory judgment in circuit court, per

SDCL chapter 21-24, seeking a decision as to whether the Policy covered the cattle

losses. Following deposition testimony by Richard Papousek and Dr. McConaghy,

De Smet and Papouseks filed cross-motions for summary judgment. The circuit

court issued a written opinion holding that the plain meaning of drowning is “the

deprivation of life by immersion in water or other liquid.” Since none of the cattle

were found submerged in water, the court granted summary judgment in favor of

De Smet. Papouseks appeal the court’s interpretation of the drowning provision.

Papouseks argue the drowning provision is ambiguous and, therefore, should be

construed in their favor. See Zoo Props., LLP v. Midwest Family Mut. Ins. Co., 2011

S.D. 11, ¶ 5, 797 N.W.2d 779, 780. Whether an insurance contract is ambiguous is a

question of law reviewed de novo. Ass Kickin Ranch, LLC v. N. Star Mut. Ins. Co.,

2012 S.D. 73, ¶ 7, 822 N.W.2d 724, 726.




1.       The Policy stated:
               This policy insures against direct physical loss to [the cattle]
               caused by the following perils:
               ...
               12. Electrocution, Drowning, Attack by Animals and
               Accidental Shooting of Livestock. When this policy covers
               livestock, it shall include loss of said livestock by electrocution,
               drowning . . . .

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                                       Decision

[¶5.]        “Drowning” is undefined in the Policy, and both De Smet and

Papouseks offer reasonable interpretations of the term. De Smet points out that a

common understanding of the term requires some form of submersion or immersion

in water or other liquid. See De La Cruz v. Combined Am. Ins. Co., 527 S.W.2d 820,

821 (Tex. Civ. App. 1975) (referring to drowning “as meaning to deprive of life by

immersion in water or other liquid”); Webster’s Third New International Dictionary

695 (4th ed. 1976) (defining drowning in part as “to suffocate by submersion in

water or some other liquid”). Papouseks point out, however, that reasonable people

understand that the hallmark of drowning is not the presence of water outside the

body; rather, it is death caused by water or fluid within the body. See Int’l Inv’rs

Life Ins. Co., Inc. v. Utrecht, 536 S.W.2d 397, 399 (Tex. Civ. App. 1976) (referring to

drowning as “death resulting from inhalation of water or some other fluid into the

lungs”); Webster’s Third New International Dictionary 695 (4th ed. 1976) (defining

drowning in part as “to suffocate because of excess body fluid that interferes with

the passage of oxygen from the lungs to the tissue”); see also Saunders

Comprehensive Veterinary Dictionary 362 (2d ed. 1998) (defining drowning as

“suffocation resulting from aspiration of water . . . or fluid. Drowning occurs

because the liquid prevents breathing.”). Because we agree with Papouseks that

the undefined term is susceptible to these two reasonable interpretations, the

provision indemnifying loss caused by drowning is ambiguous. We therefore

construe the provision liberally in Papouseks’ favor. See Zoo Props., LLP, 2011 S.D.




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11, ¶ 5, 797 N.W.2d at 780. In turn, the dispositive question is whether Papouseks

established that the cattle died from inhaling water.

[¶6.]        During the postmortem examinations of the cattle, Dr. McConaghy

found the cattle’s lungs were saturated with water and their airways were

obstructed with foam (air trapped in water). In addition, Dr. McConaghy found

clear liquid in all airways and running from the cattle’s noses. Dr. McConaghy

speculated that during the storm, the cattle inhaled large quantities of rain and

then snow, resulting in a lack of oxygen and eventually cardiac arrest and death. In

Dr. McConaghy’s opinion, his findings indicated that the cattle “absolutely died due

to drowning.” De Smet neither refuted Dr. McConaghy’s findings nor contradicted

his opinion with competent evidence. Indeed, De Smet proffered no evidence to the

contrary. Based on this record, we find Papouseks established coverage under the

drowning provision.

[¶7.]        Yet De Smet contends that it proved an exclusion to coverage under a

discrete policy provision. See Ass Kickin Ranch, LLC, 2012 S.D. 73, ¶ 9, 822 N.W.2d

at 727 (insurer has burden to establish exclusion); see supra ¶ 3 n.1 (“This policy

insures against direct physical loss to [the cattle] caused by the following perils.”

(emphasis added)). Under the policy provision covering loss caused by windstorms

or hail, the Policy provides that coverage does not exist for loss “caused directly or

indirectly by frost, cold weather, ice (other than hail), snow or sleet, all whether

wind-driven or not;” and loss to livestock caused by or resulting from “smothering,




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suffocation or asphyxiation” or “freezing in blizzards or snowstorms[.]” 2 De Smet

asserts that because Papouseks proffered evidence that the cattle died—in part—

from the inhalation of snow, this language applies and excludes coverage. But this

is a named-peril policy, and Papouseks only claimed coverage based on the

drowning peril. Importantly, the drowning provision contains no exclusions or

similar explanatory language. See supra ¶ 3 n.1; see also 10 Steven Plitt et al.,

Couch on Insurance § 143:105 (3d ed.), Westlaw (database updated June 2016)

(“Policy provisions may provide explicit coverage for drowning, which may also limit

the recovery allowed when death is by drowning or restrict coverage to drowning

under certain circumstances.”). Furthermore, to the degree that De Smet believes

this explanatory language also modifies the drowning provision, it is mistaken—the

explanatory language of the windstorms-or-hail provision is prefaced by “[t]his does


2.    The Policy stated:
             This policy insures against direct physical loss to [the cattle]
             caused by the following perils:
             ...
                   2. Windstorm or Hail. This does not cover loss:
                           a. caused directly or indirectly by frost, cold
                           weather, ice (other than hail), snow or sleet, all
                           whether wind-driven or not;
                           ...
                           c. to livestock caused by or resulting from:
                                 1) running into streams or ditches or against
                                 fences or other objects;
                                 2) smothering, suffocation or asphyxiation;
                                 3) fright; or
                                 4) freezing in blizzards or snowstorms[.]
      (Emphasis added.)

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not cover loss”, followed by the list explaining the scope of coverage. (Emphasis

added.) Thus, the explanatory language limiting the scope of coverage for losses

caused by windstorms or hail neither applies to this case nor modifies the other

covered perils. De Smet failed to prove that an applicable policy exclusion exempted

Papouseks from coverage.

[¶8.]          The parties concede that the material facts are undisputed as indicated

by their cross-motions for summary judgment. The facts establish coverage based

upon a fair reading of the entire Policy, see SDCL 58-11-39, 3 and specifically under

the drowning provision. Accordingly, we reverse the circuit court’s order granting

summary judgment in favor of De Smet and remand for the circuit court to enter

summary judgment in favor of Papouseks.

[¶9.]          GILBERTSON, Chief Justice, and ZINTER, Justice, concur.

[¶10.]         SEVERSON and WILBUR, Justices, concur in result.



SEVERSON, Justice (concurring in result).

[¶11.]         I concur in the result. The Policy covers named perils including

drowning, and no applicable exclusions apply. The uncontested opinion of Dr.

McConaghy from his postmortem examination, submitted to the court by affidavit

at the summary judgment hearing, was that the cattle died from drowning. I would

not find the term drowning to be ambiguous. The term only became ambiguous



3.       SDCL 58-11-39 provides: “Every insurance contract shall be construed
         according to the entirety of its terms and conditions as set forth in the policy
         and as amplified, extended, or modified by any rider, endorsement, or
         application lawfully made a part of the policy.”

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when the circuit court added words from dictionary definitions to a clear term in the

Policy. The clear terms of the Policy do not limit drowning to submersion in water.

Thus I concur in reversal and remand to the circuit court to enter summary

judgment in favor of Papouseks.

[¶12.]       WILBUR, Justice, joins this special writing.




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