Court Opinion

ID: 9724439
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:56:34.263936+00
Date Added: 2024-06-11T18:25:00.409997
License: Public Domain

SABERS, Justice.
Insurer appeals from a summary judgment requiring it to pay the punitive damages awarded against its insured.

Facts

On the afternoon of January 8, 1988, following a morning of heavy drinking by Sharon Wyant, her vehicle crossed the median of an interstate highway and struck the vehicle of Ian Flockhart which was traveling in the opposite direction. A jury awarded Flockhart $15,516.70 in compensatory damages and $30,000 in punitive damages. The background facts are set forth more fully in Flockhart v. Wyant, 467 N.W.2d 473 (S.D.1991), which upheld the award of punitive damages against Wyant. Neither the underlying facts nor the jury verdict is at issue in this appeal.
The question in this case is whether Wyant’s insurer, Dairyland Insurance Com*515pany (Dairyland), is required under its insurance contract to pay punitive damages. The policy provides that Dairyland “promise[s] to pay damages for bodily injury or property damage for which the law holds you responsible because of a car accident involving a car we insure. We also promise to pay additional benefits.” (Emphasis omitted). These “additional benefits” are specified in the policy and do not include payment of punitive damages. However, punitive damages are not among the exclusions listed in the policy either. Wyant and Flockhart contend that after payment of compensatory damages, which Dairyland does not contest, the balance (approximately $9500) of the policy’s limit of $25,000 should be applied toward the $30,000 in punitive damages awarded against Wyant.
On October 17, 1989, Dairyland commenced a declaratory judgment action against Wyant and Flockhart to establish that it did not have to pay the punitive damages. Both Dairyland and Wyant/Flockhart moved for summary judgment. On December 5, 1990, the circuit court denied Dairyland’s motion but granted the motions of Wyant and Flock-hart, requiring Dairyland to pay the punitive damages up to the policy limit.
Dairyland appeals, claiming:
(1) Wyant’s insurance policy with Dairy-land does not provide coverage for punitive damages; and,
(2) South Dakota public policy prohibits indemnification for punitive damages.

Coverage for Punitive Damages

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 “promisefs] 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 *516party 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 “[wjere 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 & Cos. 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.