Nationwide Agribusiness v. Fitch

#29784, #29787-a-MES
2022 S.D. 36

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

****

NATIONWIDE AGRIBUSINESS
INSURANCE COMPANY, Plaintiff and Appellee,

v.

BURJES FITCH, CHERYL FITCH,
TRUETT FITCH, THEO FITCH,
FITCH FARMS, BC FITCH PARTNERSHIP, Defendants.

and

HUNTER PETERSON, Defendant and Appellant.

****

APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HAAKON COUNTY, SOUTH DAKOTA

****

THE HONORABLE MARGO D. NORTHRUP
Judge

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MICHAEL J. MCGILL
Beresford, South Dakota

BRET C. MERKLE
Sioux Falls, South Dakota Attorneys for defendant
and appellant.

TERRA M. LARSON
MICHAEL F. SHAW of
May, Adam, Gerdes &
Thompson, LLP
Pierre, South Dakota Attorneys for plaintiff
and appellee.

****
ARGUED
APRIL 26, 2022
OPINION FILED 06/15/22
#29784, #29787

SALTER, Justice

[¶1.] Nationwide Agribusiness Insurance Company (Nationwide) sought a

declaratory judgment regarding its duty to indemnify and defend Burjes and Cheryl

Fitch against a personal injury lawsuit stemming from an accident that occurred on

their farm. Nationwide contends that it has no such duty under the terms of the

Fitches’ farm liability insurance policy. The circuit court granted Nationwide’s

motion for summary judgment, and the injured party has appealed, arguing that

the insurance policy provides coverage for his claim against the Fitches. We affirm.

Facts and Procedural History

[¶2.] Burjes and Cheryl Fitch run a farm and cattle ranch in rural Haakon

County. The operation is conducted with their two adult sons, Truett and Theo

Fitch, and with the occasional assistance of their grandchildren. Nationwide issued

a farm liability insurance policy (the Policy) for the Fitches’ operation, which

provided liability coverage for the Policy period of February 20, 2017 through

February 20, 2018.

[¶3.] On August 13, 2017, Truett called his nephew Hunter Peterson, the

grandson of Burjes and Cheryl, and asked if he was available to come to the farm

and help spray weeds in one of the cattle pastures. Hunter, who was seventeen at

the time, agreed to help and met Truett at the farm. Truett informed Hunter that

he was to use a John Deere Gator utility-terrain vehicle equipped with a spray tank

and hand wand, which would allow him to drive through the pasture and spray

weeds while seated in the Gator. Truett showed Hunter how to operate the spray

wand and identified the weeds he wanted Hunter to spray. Beyond this

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information, however, Hunter claims Truett did not provide him with any

additional training or direction.

[¶4.] The pasture in which Truett told Hunter to spray contained a creek

with banks that Hunter described as “rugged, uneven terrain.” At some point while

spraying weeds along the creek, Hunter lost control of the Gator, which rolled over,

trapping him underneath. The Gator pinned Hunter’s legs to the ground rendering

him unable to move or summon help. Hunter remained trapped for several hours

before he was found. The accident resulted in permanent injuries to his legs.

[¶5.] On August 3, 2020, Hunter filed a personal injury action against

Burjes, Cheryl, Truett, and Theo Fitch. The complaint also named as defendants

two business entities owned by the Fitches—Fitch Farms and BC Fitch Limited

Partnership—and alleged various negligence theories, including failing to train and

supervise Hunter, failing to warn him of the uneven terrain, and failing to provide

him with emergency communication equipment.

[¶6.] Nationwide initially engaged counsel for the Fitches and provided a

defense, but it issued a reservation of rights letter detailing its conclusion that

coverage for Hunter’s injuries was excluded under the language of the Policy.

Nationwide then commenced this declaratory judgment action to determine the

extent of its obligation to defend or indemnify the Fitches.

[¶7.] Nationwide advanced three principal arguments in support of its

denial of coverage. First, citing the Policy’s broad definition of “employee,”

Nationwide claimed Hunter was an “employee” of the Fitches, a class of people

whose claims are excluded under the Policy. Second, Nationwide also characterized

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Hunter as a “farm employee,” a distinct designation that resulted in exclusion from

medical payments coverage. Finally, Nationwide argued that Hunter was an

“insured” and, therefore, unable to seek damages under the Policy’s liability

coverage. Hunter resisted Nationwide’s arguments and asserted that even if the

Policy excluded his claim against the Fitches, his injury could still be covered under

a theory known as the concurrent cause doctrine. 1

[¶8.] The circuit court was not persuaded and granted summary judgment

in favor of Nationwide. Although the court determined that there were disputed

material facts regarding Hunter’s status as an “employee,” “farm employee,” or

“insured,” the court relied upon its own reading of the Policy to conclude that the

terms of an attached “Recreational Vehicle Liability Coverage Endorsement” (the

Recreational Vehicle Endorsement) operated to exclude coverage for the Gator when

it is “used for farming purposes.” 2 The court also declined to apply the concurrent

cause doctrine, reasoning that the negligence claims, ostensibly covered under the

Policy, could not be separated from the exclusion eliminating coverage for incidents

involving the use of the Gator for farming purposes.

[¶9.] Hunter appeals, acknowledging the use of the Gator is excluded under

the Policy but challenging the circuit court’s decision to not apply the concurrent

1. As explained more fully below, the concurrent cause doctrine may permit
insurance coverage, notwithstanding a valid exclusion, where the loss, or part
of it, is also attributable to a covered peril.

2. The Gator was listed on the Policy’s schedule of recreational vehicles, and the
parties have not litigated the question whether the Gator was, in fact, a
recreational vehicle, either before the circuit court or on appeal. We make no
separate determination in this regard.
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cause doctrine. Though they opposed Nationwide’s efforts to deny coverage before

the circuit court, the Fitches have not participated in this appeal. 3

Standard of Review

[¶10.] We review the grant or denial of a motion for summary judgment de

novo. N. Star Mut. Ins. v. Korzan, 2015 S.D. 97, ¶ 12, 873 N.W.2d 57, 61.

“Summary judgment is appropriate ‘if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.’” Id. (quoting SDCL 15-6-56(c)).

[¶11.] “Insurance contract interpretation is [also] a question of law,

reviewable de novo.” Id. ¶ 13, 873 N.W.2d at 61 (quoting Ass Kickin Ranch, LLC v.

N. Star Mut. Ins. Co., 2012 S.D. 73, ¶ 7, 822 N.W.2d 724, 726). “[T]he issue of

whether the duty to defend or indemnify exists under a policy is particularly

amenable to summary judgment.” Grovenburg v. Homestead Ins. Co., 183 F.3d 883,

885 (8th Cir. 1999) (citation omitted).

Analysis and Decision

[¶12.] As a legal backdrop for our discussion, we offer some basic and

germane principles of insurance law. An insurance company has a duty to defend

“if it is clear or arguably appears from the face of the pleadings in the action against

the insured that the alleged claim, if true, falls within policy coverage.” Hawkeye-

3. Nationwide sought review of the circuit court’s determination that there were
disputed issues of material fact surrounding Hunter’s status as an
“employee” or “farm employee.” Given our disposition of the principal issue
relating to the concurrent cause doctrine, however, it is unnecessary to reach
the notice of review issues.
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Security Ins. Co. v. Clifford, 366 N.W.2d 489, 491 (S.D. 1985). In order to avoid a

duty to defend, the insurer “must show the claim clearly falls outside of policy

coverage.” Lowery Constr. & Concrete, LLC v. Owners Ins. Co., 2017 S.D. 53, ¶ 8,

901 N.W.2d 481, 484. Although not directly implicated by the issues presented

here, our cases recognize that the duty to defend is independent and far broader

than the duty to indemnify judgments or settlements. N. Star Mut. Ins. Co. v.

Kneen, 484 N.W.2d 908, 912 (S.D. 1992).

Concurrent Cause Doctrine

[¶13.] The parties agree that coverage for Hunter’s injury is excluded under

the provisions of the Recreational Vehicle Endorsement. See Korzan, 2015 S.D. 97,

¶ 26, 873 N.W.2d at 64 (citation omitted) (“Endorsements or riders on a policy

become a part of the policy and must be construed with it.”). The Recreational

Vehicle Endorsement states that “[t]his insurance, including any duty we have to

defend ‘suits’, does not apply to any ‘recreational vehicle’: . . . [w]hile being used for

any ‘business’ or ‘farming’ purposes[.]” 4

[¶14.] Notwithstanding this exclusion, Hunter claims that his injury was the

result of two independent and discernable causes—one a covered peril and the other

not. Hunter concedes that at least a portion of his injury was the result of his use of

the recreational vehicle and, therefore, excluded. However, he also contends that

his injury was caused in part by the Fitches’ negligence. Invoking what is

commonly referred to as the concurrent cause doctrine, Hunter argues his claims

against the Fitches should be covered by the Policy.

4. It is undisputed that Hunter was using the Gator for “‘farming’ purposes[.]”
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[¶15.] Although courts differ in their precise formulations, the concurrent

cause doctrine describes a theory used to obtain insurance coverage “where an

injury was proximately caused by two events—even if one of these events was

subject to an exclusion clause—if the differing allegations of causation are

independent and distinct.” Am. Fam. Mut. Ins. Co. v. Parnell, 478 S.W.3d 489, 492

(Mo. Ct. App. 2015) (internal quotations omitted). Where it applies, the rule

generally states that “coverage should be permitted whenever two or more causes

do appreciably contribute to the loss and at least one of the causes is a risk which is

covered under the terms of the policy.” 7 Couch on Ins. (3d ed.) § 101:55; cf. Dallas

Nat’l Ins. Co. v. Calitex Corp., 458 S.W.3d 210, 222 (Tex. App. 2015) (“Under the

doctrine of concurrent causes, when covered and non-covered perils combine to

create a loss, the insured is entitled to recover that portion of the damage caused

solely by the covered peril.”). 5

5. The concurrent cause doctrine is distinct from a related rule known as the
“efficient proximate cause doctrine,” which contemplates a sequence of causal
events rather than two independent causes occurring at once. A leading
treatise on insurance describes the efficient proximate cause doctrine in the
following terms:

The efficient proximate cause rule permits recovery under the
insurance policy for a loss caused by a combination of a covered
risk and an excluded risk only if the covered risk was the
efficient proximate cause of the loss. The efficient proximate
cause of the loss is the one that sets the other causes in motion
that, in an unbroken sequence, produced the result for which
recovery is sought.

7 Couch on Ins. (3d ed.) § 101:55 (footnote omitted). See also Cain v. Fortis
Ins. Co., 2005 S.D. 39, ¶ 25, 694 N.W.2d 709, 714 (discussing the efficient
proximate cause doctrine). The parties have not asserted that the efficient
proximate cause doctrine is implicated here, which is generally reserved for
application to first-party coverage. See 7 Couch on Ins. (3d ed.) § 101:56.
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[¶16.] Though we have stopped short of expressly adopting the concurrent

cause doctrine, we have discussed its operation in previous cases. See, e.g., Lummel

v. Nat’l Fire Ins. Co. of Hartford, Conn., 50 S.D. 502, 210 N.W. 739, 742 (1926);

Korzan, 2015 S.D. 97, ¶¶ 18–19, 873 N.W.2d at 62. Most notably, in Korzan, we

explained that coverage is available under the doctrine only where the insured peril

can be isolated and determined to be an independent cause of the loss. 2015 S.D.

97, ¶¶ 16–17, 873 N.W.2d at 62. Where, however, the concurrent acts are not

distinct from each other, but rather are “inextricably intertwined[,]” the concurrent

cause doctrine will not assist a claimant. Id. ¶ 19, 873 N.W.2d at 63.

[¶17.] We further noted in Korzan that a court “may consider theoretical

possibilities to explain how the accident could have occurred without [the excluded

peril] in determining whether to apply the divisible, concurrent-cause doctrine. But

if those possibilities are too remote, the doctrine will not be applied.” Id. (quoting

Midwest Family Mut. Ins. Co. v. Schmitt, 651 N.W.2d 843, 849 (Minn. Ct. App.

2002)). 6

[¶18.] A decision by the Supreme Court of Vermont animates these principles

under factual circumstances similar to those present here. See Mailhiot v.

Nationwide Mut. Fire Ins. Co., 740 A.2d 360 (Vt. 1999). In Mailhiot, a thirteen-

year-old boy was injured in an all-terrain vehicle (ATV) driven by his friend and

6. Some jurisdictions also enforce “anti-concurrent cause provisions” in
insurance policies, which preclude coverage even when the loss is caused in
part by an insured peril. See Dale Joseph Gilsinger, Annotation, Validity,
Construction, and Application of Anticoncurrent Causation (ACC) Clauses in
Insurance Policies, 37 A.L.R. 6th 657 (2008). Here, however, Nationwide has
not identified an anti-concurrent cause provision in the Policy.
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owned by the friend’s parents. Id. at 361. The injured boy’s parents sued the

friend’s parents, who settled by assigning their rights under their homeowner’s

insurance policy to the plaintiffs. Id.

[¶19.] The homeowner’s policy contained a coverage exclusion for “bodily

injury or property damage arising out of the ownership, maintenance, or use of . . . a

motor vehicle owned or operated by, or rented or loaned to an insured.” Id.

However, the plaintiffs claimed their son’s injuries “were the result of two distinct

causes: [the friend’s] negligence in operating the motor vehicle (a risk . . . clearly

excluded under the policy) and his parents’ negligence in failing to adequately

supervise the two children while they played.” Id. After examining rules similar to

those we have set out above, the court held the concurrent cause doctrine was

inapplicable because “there is no way to separate the . . . alleged negligence in

supervising [the boys] from the vehicle-related conduct because the ATV was the

only possible object of their negligence.” Id. at 362. The court concluded that “[i]t is

impossible to separate the excluded conduct from any included conduct; therefore,

the two causes are not independent of one another and cannot be said to be

concurrent.” Id. at 363.

[¶20.] The same is true here, and we conclude that even if we were to adopt

the concurrent cause doctrine, it would not apply because the alleged acts of

independent negligence by the Fitches are part and parcel of Hunter’s use of the

Gator. The two are, in the words of Korzan, “inextricably intertwined[.]” See 2015

S.D. 97, ¶ 19, 873 N.W.2d at 63. Indeed, we cannot conceive of even a theoretical

possibility that Hunter’s injuries could have occurred without his use of the Gator—

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an expressly excluded peril. Cf. State Farm Mut. Auto. Ins. Co. v. Partridge, 514

P.2d 123, 129 (Cal. 1973) (holding that injuries arising from a gunshot inside of an

insured’s vehicle, though excluded by the “automobile use” exclusion of a

homeowner’s policy, were nevertheless covered because the insured’s allegedly

negligent act of altering the firearm was an independent concurrent cause).

[¶21.] Under the circumstances, the circuit court did not err when it granted

Nationwide’s motion for summary judgment based on the language in the

Recreational Vehicle Endorsement. 7 We affirm.

[¶22.] JENSEN, Chief Justice, and KERN, DEVANEY, and MYREN,

Justices, concur.

7. Hunter also alleges the circuit court improperly engaged in fact-finding
relating to the tort element of causation. We disagree. At issue here is the
interpretation of an insurance contract and a common law insurance
doctrine—legal questions which, when applied to the undisputed facts, are
amenable to summary judgment. Unlike causation assessments in tort, “the
doctrine of proximate cause as applied in insurance law bears no relationship
with the determination of ‘culpability’ or the explanation for why the injury
took place. Instead, insurance law employs the concept of proximate cause
for purposes of determining whether the specific type of injury caused by the
specific type of physical act or event was intended to be covered under the
terms of the subject policy.” 7 Couch on Ins. (3d ed.) § 101:40. Here, the
court did not determine the question of tort liability, and our decision
likewise does not impact Hunter’s negligence action against the Fitches.
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