Case Name: Jerry ROSETH, d/b/a Philip Livestock Express, Plaintiff and Appellee, v. ST. PAUL PROPERTY AND LIABILITY INSURANCE COMPANY, Defendant and Appellant, and Black Hills Agency, Inc., Defendant
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1985-09-06
Citations: 374 N.W.2d 105
Docket Number: No. 14608
Parties: Jerry ROSETH, d/b/a Philip Livestock Express, Plaintiff and Appellee, v. ST. PAUL PROPERTY AND LIABILITY INSURANCE COMPANY, Defendant and Appellant, and Black Hills Agency, Inc., Defendant.
Judges: FOSHEIM, C.J., MORGAN, J., and WUEST, Acting J., concur.
Reporter: North Western Reporter 2d
Volume: 374
Pages: 105–111

Head Matter:
Jerry ROSETH, d/b/a Philip Livestock Express, Plaintiff and Appellee, v. ST. PAUL PROPERTY AND LIABILITY INSURANCE COMPANY, Defendant and Appellant, and Black Hills Agency, Inc., Defendant.
No. 14608.
Supreme Court of South Dakota.
Considered on Briefs Feb. 5, 1985.
Decided Sept. 6, 1985.
Thomas C. Barnett, Jr. of Kemnitz & Barnett, Philip, for plaintiff and appellee.
Gene R. Bushnell of Costello, Porter, Hill, Nelson, Heisterkamp & Bushnell, Rapid City, for defendant and appellant.

Opinion:
WOLLMAN, Justice.
This is an appeal by St. Paul Property & Liability Insurance Company (St. Paul) from a judgment entered by the trial court in favor of Jerry Roseth, d/b/a Philip Livestock Express. We reverse.
On November 12,1979, a livestock trailer owned by Roseth and leased to Richard Miller was involved in an accident on U.S. Highway 83 near Mission, South Dakota. Miller was transporting 109 calves for the 720 Cattle Company of Idaho, to a buyer in O'Neill, Nebraska, when the accident occurred. Eleven of the cattle were killed at the scene of the accident and two were missing. Miller immediately contacted Ro-seth by telephone and informed him of the accident.
Miller was transporting the calves from Idaho to Nebraska pursuant to an agree ment with Roseth. Under this agreement, Miller would haul livestock for Philip Livestock Express using Roseth's trailer, with Roseth receiving twenty percent of the trucking charge.
On either the day of the accident or the day after, Roseth reported the accident to the Black Hills Agency (Black Hills). Ro-seth had purchased a cargo insurance policy from St. Paul through Black Hills' agent David Brinkman in 1977. The policy insured against the risk of livestock mortality only, specifically excluding coverage of "any animal able to walk from the conveyance or able to walk after unloading therefrom."
On November 14, 1979, St. Paul adjuster, James Wattleworth, was notified of the mishap by the Black Hills Agency. Wattle-worth called Roseth that same day. Ro-seth informed Wattleworth that the surviving calves, which had been moved to Philip by Roseth, were generally "stiff," "gaunt," and "in pretty tough shape." Roseth also told Wattleworth that he had an all-risk policy that would cover the injured calves. Wattleworth stated to Roseth that he did not have a copy of the policy before him, but assured Roseth that St. Paul would perform in accordance with the provisions of the policy.
Wattleworth and Roseth then discussed alternatives concerning disposition of the surviving calves. Wattleworth advised Ro-seth that he had a duty to minimize his loss. Both parties agreed that this could best be accomplished by selling the calves the next day at an auction sale scheduled at Roseth's sale barn. Accordingly, the injured calves were sold the next day for approximately $20.00 to $22.00 per hundred weight less than the amount brought by similar, but uninjured, calves. The difference between the net value of the calves prior to the accident and the net value obtained from the sale was $8,865.98.
St. Paul issued payment under the policy for only fourteen calves, which included the eleven dead at the scene, one that later died, and the two that were missing. St. Paul denied coverage for the injured calves pursuant to the exclusion in the policy. Roseth brought an action against St. Paul and Black Hills Agency for recovery of the loss he sustained ($8,865.98) in selling the injured calves for less than their market value.
At trial to the court, Roseth contended that he was entitled to recovery under two theories. First, Roseth claimed that Black Hills agent, Brinkman, negligently misrepresented the extent of coverage under the cargo insurance policy.
Roseth testified that he requested full coverage at the time he first procured the cargo policy from Brinkman. Brinkman denied that Roseth had requested full coverage, testifying that Roseth wanted coverage similar to which he previously had through a different agency, but at a better price. Brinkman obtained the maximum coverage available on the market at that time, which limited coverage, as did Ro-seth's previous policy, to livestock mortality only.
Roseth's second claimed basis for recovery was that St. Paul should be estopped from denying coverage on the basis of the exclusion contained in the policy for the reason that Wattleworth had failed to correct his misconception that the policy covered the injured calves. Roseth contended that Wattleworth had reinforced his misconception by instructing him to sell the injured calves immediately, and that he sold the calves on the assumption that St. Paul would reimburse him for the diminished value of the injured calves. Roseth testified that had he been informed that the injured calves were not covered, he would have nurtured them back to a healthier condition and sold them later to obtain a better price.
At the conclusion of the evidence, the trial court dismissed Roseth's claim against Black Hills Agency. Roseth has not appealed from that decision.
With respect to Roseth's claim against St. Paul, the trial court held that St. Paul should be estopped from defending on the basis of the exclusion contained in the policy.
The trial court found that Roseth had told Wattleworth that he believed he had an all-risk policy and that the decrease in value of the livestock would be covered under his policy; that Wattleworth thought at the time that St. Paul did not have an all-risk cargo policy; that Wattleworth nevertheless allowed Roseth to go on thinking that the coverage existed because Wat-tleworth did not want to antagonize Ro-seth; and that Wattleworth told Roseth that he thought it was a good idea to sell the cattle the next day to minimize the loss. The trial court held that it would be inequitable to allow St. Paul to claim the exclusion under the policy.
St. Paul contends on appeal that the trial court erred in applying the doctrine of es-toppel to provide coverage for a risk not covered by the policy where there was no clear and convincing evidence of any misrepresentation or concealment of material fact by Wattleworth. We need not decide this question. Rather, we hold that the doctrine of equitable estoppel is not applicable under the facts of this case.
In Farmers Mutual Automobile Ins. Co. v. Bechard, 80 S.D. 237, 246, 122 N.W.2d 86, 91 (1963), this court held:
[A]n insurance company which in its policy has written the generally broad coverage may be estopped to defend by reason of an exclusionary clause not within the terms the insured ordered and coverage which he was led to believe was contained therein.
This holding was followed in State Automobile Casualty Underwriters v. Ruotsalainen, 81 S.D. 472, 136 N.W.2d 884 (1965). The Bechard-Ruotsalainen rule is contrary to the majority rule, which provides that estoppel is not available to bring within the coverage of a policy those risks not covered by its terms or expressly excluded by the policy. See Batesville Ins. & Finance Co. v. Butler, 248 Ark. 776, 453 S.W.2d 709 (1970); Nat'l Fire Ins. Co. v. Eastern Shore Laboratories, Inc., 301 A.2d 526 (Del.1973); Shannon v. Great American Ins. Co., 276 N.W.2d 77 (Minn.1979); International Chiropractors Ins. Co. v. Gonstead, 71 Wis.2d 524, 238 N.W.2d 725 (1976). See also 1 A.L.R.3d 1139 (1965).
In adopting the minority rule, the New Jersey Supreme Court held that
[wjhere an insurer or its agent misrepresents, even though innocently, the coverage of an insurance contract, or the exclusions therefrom, to an insured before or at the inception of the contract, and the insured reasonably relies thereupon to his ultimate detriment, the insurer is estopped to deny coverage after a loss on a risk from a peril actually not covered by the terms of the policy.
Harr v. Allstate Insurance Co., 54 N.J. 287, 306-307, 255 A.2d 208, 219 (1969) (emphasis added). See also Darner Motor Sales v. Universal Underwriters, 140 Ariz. 383, 682 P.2d 388, 400 n. 10 (1984) (adopting rule of Harr); Peninsular Life Ins. Co. v. Wade, 425 So.2d 1181, 1183 (Fla.App.1983).
The requirement that the estopping conduct occur "before or at the inception of the policy" is consistent with the underlying rationale of the minority rule. The minority rule was born out of the inequities which result where an insured relies to his detriment on an insurer's superior knowledge in purchasing a policy of insurance and consequently is deprived of the opportunity to purchase the desired coverage elsewhere. Harr, supra.
In both Bechard and Ruotsalainen, the insureds sought specific coverage for which they gave consideration based on assurances that such coverage was provided for in the policy. Under the facts of the case before us, Wattleworth at most indirectly perpetuated a misconception held by Roseth concerning the nature of his coverage. We hold that under these facts the remedy of estoppel is not available to expand the terms of the policy.
The judgment is reversed.
FOSHEIM, C.J., MORGAN, J., and WUEST, Acting J., concur.
HENDERSON, J., dissents.