Opinion ID: 2137469
Heading Depth: 1
Heading Rank: 2

Heading: Coverage for Punitive Damages

Text: Summary judgment is proper where there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law. Breen v. Dakota Gear & Joint Co., Inc., 433 N.W.2d 221, 223 (S.D.1988); Koeniguer v. Eckrich, 422 N.W.2d 600, 601 (S.D.1988); SDCL 15-6-56(c). All parties agree that there is no material issue of fact and that the question is one of law for which summary judgment is proper. Wyant's policy with Dairyland does not employ broad, categorical language such as all damages arising from a car accident to describe the scope of its coverage. Instead, it promise[s] to pay damages for bodily injury or property damage for which the law holds [Wyant] responsible because of a car accident involving a car [it] insure[s]. (Emphasis added). The policy defines damages as the cost of compensating those who suffer bodily injury or property damage from a car accident. (Emphasis omitted). Elsewhere the policy states: This insurance covers bodily injury, including loss of services, sickness, disease or death which results from the injury, caused by a car accident and suffered by any person.... This insurance covers property damage that results from a car accident. Property damage means any injury to or destruction of physical property, including the loss of use of that property. (Emphasis omitted). The policy goes on to specify the kinds of medical and property repair or replacement expenses which are covered under its terms. The language of the policy is consistent with and no broader than its basic limitation, repeated throughout the policy, of damages for bodily injury or property damage ... because of a car accident. On three occasions the policy states: We also promise to pay additional benefits. Each time the phrase appears, it is immediately followed, under the boldface heading Additional Benefits, by an itemized list of such benefits, which include the payment of investigatory and legal expenses, substitute transportation, salvage charges, first aid costs, compensation for personal effects lost by fire or lightning and waiver of the deductible if both cars in a collision are insured by Dairyland. There is no mention of punitive or exemplary damages anywhere in the policy, nor is there any allusion to a miscellaneous category of damages into which punitives might conceivably fit. In short, the policy confines its coverage to compensatory or actual damages. Such damages differ from punitive damages. In South Dakota, punitive damages are awarded not to compensate an injured party for a loss but for the sake of example, and by way of punishing the defendant. SDCL 21-3-2. They are distinct from and in addition to the actual damage. Id. They may be awarded only when there is a showing of malice on the part of the party from whom damages are sought. Yankton Prod. Credit Ass'n v. Jensen, 416 N.W.2d 860, 863 (S.D.1987); SDCL 21-1-4.1. Wyant's basis for claiming that punitive damages are included under her Dairyland policy is that they are not expressly excluded, and therefore she reasonably expected that they would be covered. The reasonable expectations doctrine means that [t]he objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations. Keeton, Insurance Law Rights At Variance With Policy Provisions, 83 Harv.L.Rev. 961, 967 (1970) (cited in Perrine v. Prudential Ins. Co., 56 N.J. 120, 265 A.2d 521, 524-525 (1970)). Whether an insured's expectations are reasonable about policy coverage is normally a question of fact. 20 Proof of Facts 2d 59 (1979). Although this doctrine governs the construction of insurance contracts in nearly twenty states, id. at 68-71, it has not been declared law in South Dakota. We express no judgment whether the reasonable expectations doctrine would govern the construction of an insurance contract whose terms were ambiguous or whose coverage was described in broad, categorical language that might lead a policyholder to incorrectly but reasonably conclude she had a particular kind of coverage. That issue is not before us because there is nothing ambiguous about this policy in this context. This policy confines its coverage, in plain and unmistakable terms, to compensatory damages arising from car accidents, and it would be unreasonable to expect that punitive damages might be covered merely because they were not expressly excluded. Because we conclude that this policy provides no coverage for punitive damages, we need not reach Dairyland's second contention that South Dakota's public policy prohibits indemnification for punitive damages. This court has recently stated that [w]ere a person able to insure himself against [the] economic consequences of his intentional wrongdoing, the deterrence attributable to financial responsibility would be missing. Ft. Pierre v. United Fire & Cas. Co., 463 N.W.2d 845, 849 (S.D.1990) (quoting Ambassador Ins. Co. v. Montes, 76 N.J. 477, 388 A.2d 603, 606 (1978)) ( Henderson and Sabers, J.J., dissenting on other grounds). However, that statement could be considered dicta because the Ft. Pierre majority already reached the same result in the case under a different rationale. The application of this principle of public policy to insurance contracts purporting to extend coverage for punitive damages is best left for a case where the question is squarely presented. Reversed. WUEST and AMUNDSON, JJ., concur. MILLER, C.J., concurs specially. HENDERSON, J., dissents.