Court Opinion

ID: 9724441
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:56:34.278943+00
Date Added: 2024-06-11T18:25:00.412629
License: Public Domain

HENDERSON, Justice
(dissenting).
Insurance company knew that Appellee Wyant’s driving record was bad. This record consisted of previous DWI convictions. Knowing this, insurance company issued her policy and adjusted her rates upward. She was a “high-risk” driver and insurance company knew it. This insurance company solicited “high-risk” insurance clients, clients who had been involved in alcohol related accidents. Insurance company actually bargained for, and assessed the risk of claims made against these high risk drivers. It begot high premiums to place in its corporation coffers.
Reasoning that “the fine print did not take it away,” because punitive damages were not excluded, the trial court held that they must be included. SDCL 32-35-70 establishes the legal responsibility that an insurer shall insure against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle. Such coverage is required of every driver or owner of a motor vehicle by SDCL 32-35-113(1).
SDCL 32-35-70 also establishes minimum policy limits. These minimum policy limits are the policy limits of Appellee Wyant’s insurance policy.
It therefore appears this insurance company is writing insurance policies to avoid the intent of the State Legislature. Whose intent is dominant — the Legislature speaking as the will of the people of this state? Or the insurance company making contracts to escape the Legislative will? In construing the purpose of the Financial Responsibility Act, we stated, in dicta, in Novak v. State Farm Mutual Auto Insurance Co., 293 N.W.2d 452 (S.D.1980):
The purpose behind this law is to protect against financially irresponsible persons from using our highways.
When considered in their entirety, the statutes in question establish a broader scheme of financial responsibility than the majority contemplate.
The policy before us expresses: “damages;” “damages” can be compensatory or punitive, as the majority points out. Obvi*518ously, it can be both. Therefore, the distinction, due to the generic term, is blended together by the policy’s terms of addressing “damages.”
Interpretation and construction principles are to be controlled by the same rules applicable to contracts generally. Brown v. Maxey, 124 Wis.2d 426, 369 N.W.2d 677 (1985). “As a matter of law insurance contracts should be construed like any other contract, giving effect to the expressed intentions of the parties so far as that intention is legal.” National Farmers Union Property and Cas. Co. v. Iverson, 346 F.Supp. 660 (D.S.D.1972) (citing Bergholm v. Peoria Life Ins. Co., 284 U.S. 489, 52 S.Ct. 230, 76 L.Ed. 416 (1932) and, W. Vance, Handbook on the Law of Insurance 808 (3d ed. 1951)). The test for governing interpretation and construction of a contract is to determine what a reasonable person in the position of the insured would have understood the words to mean. Wyant obviously believed, as a lay person, that there was coverage for “damages.” It is instructive that, while differing in the precise language used, there are cases supporting the proposition that if there is an ambiguity in an insurance policy, the policyholder prevails in the interpretation of the ambiguity. The following cases support this proposition: McGriff v. U.S. Fire Ins. Co., 436 N.W.2d 859, 862 (S.D.1989) (we recognize the general proposition that if a contract of insurance is fairly susceptible to two constructions (ambiguous), one of which is more favorable to the insurance than the other, the construction most favorable to the insurance should be adopted. Id. at 862. See also, O’Neill v. Blue Cross of Western Iowa and South Dakota, 366 N.W.2d 816 (S.D.1985) (ambiguous provision in policy is construed in favor of insurance and against the one who drafted the contract.. Id. at 818). Wyant did not draft this insurance policy; it was drafted by the insurance company. See further, Vern Eide Buick v. U.S.F. & G, 273 N.W.2d 116, 117 (S.D.1978) construed in manner most favorable to insured). Accord: Dairyland Ins. Co. v. Kluckman, 86 S.D. 694, 201 N.W.2d 209 (1972); Presentation Sisters, Inc. v. Mutual Benefit Life Ins. Co., 85 S.D. 678, 189 N.W.2d 452 (1971).
In Brown v. Maxey, cited above, the Court discussed their problem in very relevant terms:
We now turn to the issue of whether Maxey’s insurance policy provides coverage for punitive damages. Actually, there are two questions involved: (1) Whether this State Farm policy provides coverage for punitive damages under the express language of the contract, and (2) Whether such coverage, if it exists, is contrary to public policy of this State.
The decision in Maxey was the same as rendered by Judge Davis, namely that the issued policy provided coverage for punitive damages and that such coverage was not contrary to public policy.
In Skyline Harvestore Sys. v. Centennial Ins., 331 N.W.2d 106 (Iowa 1983), the Court held that no public policy existed which prevented the interpretation of an insurance contract as including coverage of punitive damages. Id. at 109. The Court based this decision on the harmonization of two competing public policies: the freedom to contract and punitive damages. Id. The Court believed that the public policy purposes underlying punitive damages— punishment and deterrence — were not contravened. The Court did not believe that those public policy reasons would override other considerations favoring coverage of punitive damages; namely, the freedom to contract. The Court was concerned about the danger of too freely invalidating private contracts on the basis of public policy.
The Court quoted a U.S. Supreme Court case, Waters v. The Merchants’Louisville Ins. Co., 36 U.S. (11 Peters) 213, 221, 9 L.Ed. 691, 695 (1837). “There is nothing unreasonable, unjust, or inconsistent with public policy, in allowing the insured to insure himself against all losses from any perils not occasioned by his own personal fraud.”
The Iowa Court concluded that if insurance companies do not wish to provide punitive damages coverage, then they must exclude coverage of punitive damages spe*519cifically. Same reasoning followed by Judge Davis.
I have, heretofore, by dissent in City of Fort Pierre, repudiated the holding as contained in headnote 7 of that majority opinion.
Judge Davis’ decision favors the will of the State Legislature. An exclusion not having been inserted, the Supreme Court of this state now adds it on. I would uphold the trial court.