Hanson Farm Mutual Insurance Co. of South Dakota v. Degen

#26435-a-LSW
2013 S.D. 29

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

****
HANSON FARM MUTUAL
INSURANCE COMPANY OF
SOUTH DAKOTA, Plaintiff and Appellee,

v.

MARCUS DEGEN, Defendant and Appellant,

and

TINA SELLERS, AS PERSONAL
REPRESENTATIVE OF THE ESTATE
OF ADRIANNA SUMMER SELLERS, Defendant and Appellant.

****
APPEAL FROM THE CIRCUIT COURT OF
THE FIRST JUDICIAL CIRCUIT
HANSON COUNTY, SOUTH DAKOTA
****
THE HONORABLE SEAN M. O’BRIEN
Retired Judge
****

CRAIG A. KENNEDY of
Kennedy, Pier & Knoff, LLP
Yankton, South Dakota Attorneys for plaintiff
and appellee.

DOUGLAS M. DAILEY of
Morgan Theeler, LLP
Mitchell, South Dakota Attorneys for defendant
and appellant Marcus Degen.
ROLLYN H. SAMP
Sioux Falls, South Dakota Attorney for defendant
and appellant Tina Sellers.

****
CONSIDERED ON BRIEFS
ON FEBRUARY 12, 2013
OPINION FILED 04/03/13
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WILBUR, Justice

[¶1.] Tina Sellers, as the personal representative of her daughter’s estate,

and Marcus Degen appeal the trial court’s determination that Hanson Farm Mutual

Insurance Company of South Dakota (HFMIC) had no obligation to indemnify or to

defend Marcus in an underlying wrongful death action. We affirm.

FACTS AND PROCEDURAL HISTORY

[¶2.] Marcus and Tina met in the spring of 2006 at work. Their work

relationship quickly developed into a romantic one. At that same time, Marcus was

living with his parents. Tina and her daughters, Adrianna and Zeraya, were living

between an apartment and with her parents while Tina was in the process of

divorcing the girls’ father.

[¶3.] As their relationship progressed, Tina and Marcus began to look for a

home in Alexandria, South Dakota, Marcus’s hometown. After finding a house they

liked, Marcus purchased the home in February 2007. As a part of qualifying for a

home loan, Marcus also purchased a homeowner’s insurance policy with HFMIC.

Marcus was the named insured on the policy. The policy defined certain specific

terms that it used. “Insured” was defined in part as:

a. “you”;
b. “your” relatives if residents of “your” household;
c. persons under the age of 21 residing in “your” household
and in “your” care or in the care of “your” resident relatives;
...

The policy also contained a household exclusion, which read: “Coverage L [personal

liability coverage] does not apply to: . . . ‘bodily injury’ to ‘you’, and if residents of

‘your’ household, ‘your’ relatives and persons under the age of 21 in ‘your’ care or in

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the care of ‘your’ resident relatives.” “[I]n ‘your’ care” was not defined in the policy

nor did the policy place a specific time frame as to when “care” had to be rendered in

order to fit the definition. “Bodily injury” was defined to “include[ ] sickness,

disease, or death.”

[¶4.] Marcus, Tina, and both of Tina’s daughters moved into the home.

Marcus and Tina then began to fix up the house, purchasing furniture, appliances,

and other necessities within their financial means.

[¶5.] Following Marcus and Tina’s move to Alexandria, Marcus and Tina

enrolled Adrianna in school. In addition to Tina and the family doctor, Marcus was

listed as one of the girls’ emergency contacts.

[¶6.] A few months after moving into the house in Alexandria, Tina took a

position with a different company with hours that allowed her to start work later in

the morning and leave work earlier in the afternoon. This schedule enabled Tina to

get the girls ready in the morning and pick them up in the afternoon. Marcus got

the girls ready for the day and picked them up in the afternoon when Tina was

unable to do so.

[¶7.] Even though they maintained separate checkbooks, Marcus and Tina

pooled their financial resources to pay their monthly expenses with each helping the

other out in the event that there was a shortfall in finances. Marcus paid the

mortgage on the home, insurance, real estate taxes, and all of the utilities. Tina

bought groceries for Marcus, the girls, and herself. She also purchased the girls’

clothing and school supplies. Tina’s purchases were supplemented by monthly child

support payments from Tina’s ex-husband. Marcus and Tina each paid for their

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own fuel for their vehicles. Additionally, the couple divided the household duties

evenly.

[¶8.] During this time, the couple also discussed and participated in various

facets of the girls’ lives, including appropriate discipline, education, religion, and

recreation activities. Marcus and Tina discussed and developed a plan to discipline

the girls and Marcus or Tina disciplined the girls when they misbehaved.

Additionally, Marcus helped Adrianna with learning her alphabet and numbers,

and read books to the girls at night. Marcus, Tina, and the girls all attended a local

church because Marcus and Tina agreed that it would be best for the girls.

Together, they would often watch movies, play outside, and camp in the local park.

Both Marcus and Tina tucked the girls in bed at night and told the girls that they

loved them. The girls returned this affection to both Marcus and Tina. The girls

often called Marcus “Dad” and he considered them his daughters. Marcus also

purchased birthday and Christmas presents for the girls. Lastly, Marcus named

Adrianna as the primary beneficiary in his retirement plan and Zeraya as the

secondary beneficiary.

[¶9.] Despite this relationship, Marcus never adopted the girls. Their

biological father maintained his parental rights and paid child support monthly.

Additionally, even though both Marcus and Tina hoped the relationship would last

forever, Marcus and Tina never discussed marriage or an engagement.

[¶10.] On the evening of October 27, 2007, Marcus was leveling dirt on the

property with a skid loader. Later, Tina and Adrianna joined Marcus outside.

Tragically, while operating the skid loader, Marcus, hit and killed Adrianna.

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Following the accident, Marcus, Tina, and Zeraya continued to live together for

more than a year until the difficulty in dealing with the accident caused the couple

to split. Tina then pursued a wrongful death action against Marcus.

[¶11.] Based on the household exclusion, HFMIC filed a declaratory

judgment action and asked the trial court to determine whether HFMIC had an

obligation to indemnify or to defend Marcus in the underlying wrongful death

action. Additionally, HFMIC filed a motion for summary judgment and a hearing

on that motion was held. In a memorandum decision, the trial court concluded that

the phrase in the insurance contract “in ‘your’ care” was unambiguous, and yet

denied HFMIC’s motion on the basis that issues of material fact existed as to

whether Adrianna was in Marcus’s care.

[¶12.] A court trial on the declaratory judgment was held on June 19, 2012.

Marcus and Tina both testified. The trial court ruled in favor of HFMIC and

determined that Adrianna was in Marcus’s care and therefore excluded from

coverage under the household exclusion contained in the policy. Both Tina, as

personal representative of her daughter’s estate, and Marcus appeal.

[¶13.] The issues on appeal are:

1. Whether the phrase “in ‘your’ care” is ambiguous as it relates to
coverage under a homeowner’s insurance policy.

2. Whether the trial court erred in concluding that Adrianna was
in Marcus’s care and therefore excluded from coverage under the
household exclusion contained in the policy.

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STANDARD OF REVIEW

[¶14.] “We review declaratory judgments as we would any other order,

judgment, or decree.” Mid-Century Ins. Co. v. Lyon, 1997 S.D. 50, ¶ 4, 562 N.W.2d

888, 890 (citing SDCL 21-24-13) (additional citation omitted). “A trial court’s

findings of fact are examined under a clearly erroneous standard and its conclusions

of law under a de novo standard.” Id. Additionally, “[i]nsurance contract

interpretation is a question of law, reviewable de novo.” Ass Kickin Ranch, LLC v.

N. Star Mut. Ins. Co., 2012 S.D. 73, ¶ 7, 822 N.W.2d 724, 726 (quoting De Smet Ins.

Co. of S.D. v. Gibson, 1996 S.D. 102, ¶ 5, 552 N.W.2d 98, 99). “This includes

determining whether an insurance contract is ambiguous.” Id. (quoting Roden v.

Gen. Cas. Co. of Wis., 2003 S.D. 130, ¶ 6, 671 N.W.2d 622, 625).

ANALYSIS AND DECISION

[¶15.] 1. Whether the phrase “in ‘your’ care” is ambiguous as it
relates to coverage under a homeowner’s insurance
policy.

[¶16.] Marcus and Tina contend that the phrase “in ‘your’ care” is ambiguous.

They argue that an ambiguity exists because “care” has several different dictionary

definitions and a number of courts have utilized different definitions for the term

“care.” Marcus and Tina also assert that the phrase is susceptible to two different

interpretations in that one interpretation of the phrase may invoke the exclusion if

the child is “in ‘[the insured’s]’ care” at the moment of the occurrence for which

coverage is sought and another interpretation may invoke the exclusion if the child

has ever been “in ‘[the insured’s]’ care.”

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[¶17.] Initially, we note that whether or not the phrase “in ‘your’ care” is

ambiguous as used in the insurance policy is an issue of first impression for this

Court. We have recently reviewed the law on insurance contract interpretation:

The scope of coverage of an insurance policy is determined from
the contractual intent and the objectives of the parties as
expressed in the contract. When an insurer seeks to invoke a
policy exclusion as a means of avoiding coverage, the insurer has
the burden of proving that the exclusion applies. Where the
provisions of an insurance policy are fairly susceptible to
different interpretations, the interpretation most favorable to
the insured should be adopted. However, this rule of liberal
construction in favor of the insured and strictly against the
insurer applies only where the language of the insurance
contract is ambiguous and susceptible of more than one
interpretation . . . . The fact that the parties differ as to the
contract’s interpretation does not create an ambiguity.

Further, a court may not seek out a strained or unusual
meaning for the benefit of the insured. Instead, an insurance
contract’s language must be construed according to its plain and
ordinary meaning and a court cannot make a forced construction
or a new contract for the parties. Essentially, this means that
when the terms of an insurance policy are unambiguous, these
terms cannot be enlarged or diminished by judicial construction.
Finally, insurance policies must be subject to a reasonable
interpretation and not one that amounts to an absurdity.

Id. ¶¶ 9-10 (internal citations and quotation marks omitted).

[¶18.] In examining the phrase “in ‘your’ care[,]” as stated within the policy,

we construe the language of the contract “according to its plain and ordinary

meaning” with our focus specifically on the word “care.” Id. ¶ 10 (additional citation

and quotation marks omitted). The Merriam-Webster online dictionary defines

“care” in pertinent part as “painstaking or watchful attention”; “charge,

supervision”; and “a person or thing that is an object of attention, anxiety, or

solicitude[.]” Care, Merriam-Webster Online Dictionary, http://www.merriam-

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webster.com/dictionary/care (last visited March 25, 2013). Thus, the plain and

ordinary meaning of “care” is akin to the charge or supervision of another.

Additionally, there is nothing contained within the plain and ordinary meaning of

the word “care” nor in the insurance policy that attaches a specific time frame to

when such “care” is rendered.

[¶19.] Other courts and persuasive authority faced with this same issue have

defined the word “care” “as the function of watching, guarding or overseeing and is

typically associated with the supervision of children and other physically vulnerable

or dependent individuals such as the elderly or infirm.” 9A Couch on Insurance 3d §

128:11 (2012). See Oliva v. Vt. Mut. Ins. Co., 842 A.2d 92, 96 (N.H. 2004)

(concluding that “the phrase ‘in the care of’ connotes a level of support, guidance

and responsibility that is most often present in situations where an insured cares

for a minor child, an elderly person or an incapacitated individual”); Mitsock v. Erie

Ins. Exch., 909 A.2d 828, 832-33 (Pa. Super. Ct. 2006) (quoting Oliva, 842 A.2d at

96) (concluding that “in the care of” “connote[s] a level of support, guidance and

responsibility that is most often present in situations where an insured cares for a

minor child, an elderly person, or an incapacitated individual”); Priest v. Roncone,

851 A.2d 751, 755 (N.J. Super. Ct. App. Div. 2004) (providing the definition of “care”

as “the function of watching, guarding or overseeing” . . . “the supervision of

children and other physically vulnerable or dependent individuals such as the

elderly or infirm”); Am. Family Mut. Ins. Co. v. Wemhoff, 972 S.W.2d 402, 406 (Mo.

Ct. App. 1998) (defining “care” as “charge; protection; custody”).

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[¶20.] Moreover, other jurisdictions have determined that the phrase “in the

care of” is unambiguous. See State Farm Fire & Cas. Co. v. Odom, 799 F.2d 247,

250 (6th Cir. 1986); Oliva, 842 A.2d at 95; Henderson v. State Farm Fire & Cas. Co.,

596 N.W.2d 190, 194 (Mich. 1999); State Farm Fire & Cas. Co. v. Breazell, 478

S.E.2d 831, 833 (S.C. 1996); Mitsock, 909 A.2d at 833; Priest, 851 A.2d at 755;

Cierzan ex rel. Weis v. Kriegel, 655 N.W.2d 217, 221 (Wis. Ct. App. 2002)

(determining the phrase to be unambiguous and stating that “[t]he mere fact that a

word has more than one dictionary meaning does not necessarily make the word

ambiguous if only one meaning applies in the context and comports with the parties’

objectively reasonable expectations”). But see Or. Mut. Ins. Co. v. Clemens, 861 P.2d

372, 375 (Or. Ct. App. 1993) (additional citation omitted) (stating that the phrase

“in your care” was ambiguous because “it ‘could reasonably be given a broader or

narrower meaning, depending upon the intention of the parties in the context in

which such words are used by them’”). Based on the plain and ordinary meaning of

the word “care,” we conclude that the phrase “in ‘your’ care” is unambiguous and

most appropriately interpreted in the context of the policy as “under the insured’s

charge or supervision” without straining to attach a specific moment in time to

when such “care” is rendered.

[¶21.] Even though we have defined “in ‘your’ care” and determined that it is

unambiguous, its legal application is also a question of first impression for this

Court. In aiding our determination of whether an individual is “in ‘[the insured’s]’

care[,]” we adopt the eight-factor test utilized in Oliva and other jurisdictions. See

842 A.2d at 96. See also Henderson, 596 N.W.2d at 195-96 (using the eight-factor

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test); Mitsock, 909 A.2d at 833 (same); Priest; 851 A.2d at 755-56 (same); Cierzan,

655 N.W.2d at 221-22 (same). Accordingly, a fact finder should consider the

following non-exclusive factors in determining whether an individual is “in ‘[the

insured’s]’ care”:

1. [I]s there a legal responsibility to care for the person;
2. [I]s there some form of dependency;
3. [I]s there a supervisory or disciplinary responsibility;
4. [I]s the person providing the care providing substantial
essential financial support;
5. [I]s the living arrangement temporary or permanent,
including how long it has been in existence and is expected to
continue;
6. [W]hat is the age of the person alleged to be “in the care
of” another (generally, the younger the person the more likely
they are to be “in the care of” another);
7. [W]hat is the physical or mental health status of the
person alleged to be “in the care of” another (a person with
health problems is more likely to be “in the care of” another);
and
8. [I]s the person allegedly “in the care of” another gainfully
employed (a person so employed is less likely to be truly
dependent on another)?

Oliva, 842 A.2d at 96. See 9A Couch on Insurance 3d § 128:11 (2012) (also listing

the eight-factor test to be used in determining whether an individual is in the

insured’s care).

[¶22.] 2. Whether the trial court erred in concluding that
Adrianna was in Marcus’s care and therefore excluded
from coverage under the household exclusion contained
in the policy.

[¶23.] Marcus and Tina argue that the trial court erroneously found that

Adrianna was in Marcus’s care. HFMIC counters that the trial court properly

utilized the eight-factor test set forth in Oliva and correctly determined that

Adrianna was in Marcus’s care, and therefore excluded from coverage. 842 A.2d at

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96. In support of its argument that the policy exclusion applied, HFMIC presented

the adverse testimony of both Marcus and Tina. See Ass Kickin Ranch, LLC, 2012

S.D. 73, ¶ 9, 822 N.W.2d at 727 (quoting Opperman v. Heritage Mut. Ins. Co., 1997

S.D. 85, ¶ 4, 566 N.W.2d 487, 489) (stating “[w]hen an insurer seeks to invoke a

policy exclusion as a means of avoiding coverage, the insurer has the burden of

proving that the exclusion applies”).

[¶24.] We initially note that, while Marcus and Tina argue that Adrianna

was not “in fact” in Marcus’s care, the facts in this appeal are essentially

undisputed. The parties’ dispute lies in the trial court’s application of the law to the

undisputed facts. Thus, the resolution of this dispute requires us to review the

record de novo.

[¶25.] In applying the eight-factor test to the undisputed facts, the record

demonstrates that, while Marcus had no legal responsibility for the girls, Adrianna

and Zeraya depended on Marcus for various facets of their well-being. The girls

were dependent on Marcus to provide them with shelter. He paid the mortgage,

insurance, real estate taxes, and utilities on the house. Additionally, Marcus and

Tina equally divided the household duties in order to provide a suitable home for

the girls.

[¶26.] In addition to material needs, the record indicates that Marcus also

provided for the girls’ emotional needs. He participated in making decisions

concerning the girls’ educational and religious activities. Further, Marcus and the

girls each showed affection for one another with the girls referring to Marcus as

“Dad” and Marcus considering the girls his daughters. Lastly, Marcus, Tina, and

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the girls participated as a family in recreational activities, such as going camping

and playing outside.

[¶27.] The record further demonstrates that Marcus supervised and

disciplined the girls. Marcus and Tina discussed and developed a plan to discipline

the girls. And Marcus or Tina would discipline the girls when they misbehaved.

Further, there is evidence in the record that Marcus would occasionally care for the

girls by himself. Marcus was also listed as an emergency contact on Adrianna’s

school records, which further bolsters his supervisory authority.

[¶28.] There is evidence that Marcus was providing substantial essential

financial support for the girls. Tina and Marcus pooled their separate finances to

pay for the monthly expenses, with each helping the other out in the event that

there was a shortfall in finances. Marcus paid the mortgage for the home as well as

all of the utilities, real estate taxes, and insurance. Tina provided groceries for

Marcus, the girls, and herself. She also purchased clothing and school supplies for

the girls supplemented by child support payments. Further, Tina testified that she

could not afford a similar living arrangement based on her own income. Lastly, as

additional evidence of his financial support, Marcus listed Adrianna and Zeraya as

beneficiaries of his retirement policy.

[¶29.] The record also demonstrates that, while not married or engaged,

Marcus and Tina had planned to continue the joint living arrangement indefinitely.

Marcus and Tina both testified that it was their plan to stay together for the rest of

their lives. At the time of the accident, the couple and the girls had been living

together for eight months. Following the accident, Tina and Zeraya continued to

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live with Marcus for a year, until the accident took its toll on Tina and Marcus’s

relationship.

[¶30.] Lastly, at the time of the accident, Adrianna was six years old and in

good mental and physical health. Because of her young age, Adrianna was not

employed. Based on application of the eight-factor test to these undisputed facts,

the trial court correctly concluded that Adrianna was in Marcus’s care. Accordingly,

Adrianna was therefore excluded from coverage under the household exclusion

contained in the policy.

CONCLUSION

[¶31.] The trial court correctly concluded that the phrase “in your care” was

unambiguous. Additionally the trial court did not err in concluding that Adrianna

was in Marcus’s care. Because she was in Marcus’s care, Adrianna was therefore

excluded from coverage under the household exclusion contained in the policy.

Therefore, we affirm the trial court’s determination that HFMIC had no obligation

to indemnify or to defend Marcus in the underlying wrongful death action.

[¶32.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and

SEVERSON, Justices, concur.

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