Was fire a “wrongful entry”?
Was fire a “wrongful entry”?
On September 19, 2012, Charles Korzan and his brother, Michael Korzan, were moving hay bales from Charles’s property in Jones County to his property in Brule County. The weather and crop conditions were dangerously dry. To transport the hay bales, Michael drove a 1998 International 9400 series semi-truck, hauling a 48-foot trailer. Charles drove a similar semi-truck and trailer. Charles owned both semi-trucks and trailers. Charles drove a load of hay out of the field toward Interstate 90, a distance of about nine miles, and Michael followed in the other semi-truck, which was loaded with approximately 30 round hay bales secured by straps.
Before leaving the field, neither Charles nor Michael noticed any problems with the hay, including flames or smoke. After Michael started driving, however, he began to feel heat on his arm through the open window and suspected a hay bale was on fire. Charles observed the fire, called Michael on his cell phone, and advised Michael that there was a fire and he should drive to Exit 177. Charles called 911 to report the fire and asked that the fire department meet them at Exit 177. The semi-truck became inoperable because of the fire approximately three miles from the spot Charles and Michael first observed the fire and one mile from Interstate 90. Michael was unaware that the semi-truck was spreading firebrands and sparks along either side of the road as he drove. Upon exiting the semi-truck, Michael observed fire rolling across the prairie. Neither Charles nor Michael knew what started the fire.
Upon responding to the scene, the fire chief observed a semi-truck with a flatbed trailer on fire and three separate fires on land along the route Michael had just driven. The fires were located near Okaton, South Dakota. It was unknown what ignited the hay; officials confirmed, however, that the source of the Okaton fires was “determined to have originated with the burning semi hauling hay.” Officials eliminated all other possible causes of the fire. The fire burned fencing, hay, power poles, outbuildings, and 2,465 acres of wheat stubble and grass.
Henry Roghair, Raymond Stotts, and Bork & Sons, Inc., filed a lawsuit against Charles asserting claims of nuisance, negligence, trespass, and punitive damages for the Okaton fires. Roghair and Stotts later amended their complaint to include Michael as a defendant and add additional plaintiffs. The amendment also included a claim for wrongful entry.
On February 6, 2014, Charles’s insurance carrier, North Star Mutual Insurance Company, filed a separate action for declaratory judgment. North Star sought a determination as to whether it had a duty to defend and indemnify the Korzans for the Okaton fires. The Korzans counterclaimed for declaratory judgment, asserting that North Star had a duty to defend. North Star and the Korzans filed cross-motions for summary judgment.
The competing motions centered on interpretation of a farmowners policy issued by North Star to Charles with a policy period of February 11, 2012, through February 11, 2013. The policy contained Coverage L–Personal Liability, which provided:
“We” pay, up to “our” “limit,” all sums for which an “insured” is liable by law because of “bodily injury” or “property damage” caused by an “occurrence” to which this coverage applies. “We” will defend a suit seeking damages if the suit resulted from “bodily injury” or “property damage” not excluded under this coverage.
The policy also contained exclusions to Coverage L, including an exclusion for motorized vehicles that provided:
This policy does not apply to: … “bodily injury” or “property damage” which results from the ownership, operation, maintenance, use, occupancy, renting, loaning, entrusting, supervision, or “loading or unloading” of “motorized vehicles,” trailers, or watercraft owned, operated, or used by or rented or loaned to an “insured.”
North Star contended that this exclusion prohibited coverage under the policy as the incident involved the use and operation of a motor vehicle. The Korzans countered, arguing that the exclusion did not apply because the incident involved independent acts of negligence that were “wholly separate” from the operation of the motor vehicle. The Korzans also argued that there were genuine issues of material fact regarding the cause of the fire and the acts of the Korzans that precluded summary judgment.
In addition to the exclusions, the policy contained an extension to Coverage L to pay for damages for which an insured is liable by law because of personal injury. This extension, referred to as the “Personal Injury Endorsement,” defined personal injury as “false arrest, false imprisonment, wrongful eviction, wrongful entry, wrongful detention, malicious prosecution, misrepresentation, libel, slander, defamation of character or invasion of privacy.”
Under this endorsement, North Star alleged that coverage did not extend to wrongful entry or trespass, as the incident involved a fire, which did not constitute a personal injury as defined in the policy or by law. North Star argued in the alternative that even if the fire was construed to be a wrongful entry covered by the personal injury endorsement, coverage would be precluded under the motorized vehicle exclusion. The Korzans argued that the motorized vehicle exclusion did not apply to the personal injury endorsement, as it was not expressly reincorporated into the endorsement section of the policy.
On October 23, 2014, the court denied the Korzans’ motion for summary judgment and granted North Star’s motion, finding no coverage under the policy. The Korzans appealed.
On appeal, the Korzans first argued that the court erred by finding that North Star had no duty to defend in light of the motorized vehicle exclusion to Coverage L. The Korzans contended that the fact that they were operating motor vehicles was not, in and of itself, determinative of the scope of coverage. The Korzans pointed to a number of alleged independent acts of negligence, as set forth in the underlying complaint, that they contended were non-vehicle-related and for which North Star must indemnify and defend them.
North Star responded that the Korzans had not established an independent act of negligence necessary to overcome the motorized vehicle exclusion.
The court held that to defeat the motorized vehicle exclusion, the Korzans must establish that they committed at least one act of negligence that could have caused the Okaton fires without the use of the motor vehicle. The court noted that none of the acts cited by the Korzans was distinct from the use of a motor vehicle; rather, each act was inextricably intertwined with its use.
The Korzans also contended that the circuit court erred in granting summary judgment because what caused the hay to ignite on the semi-trailer was unknown, which they submitted created a genuine issue of material fact.
The appellate court stated that other than speculation, the Korzans had not presented any factual cause for the fire and its spread other than the semi-truck being driven down the road with a flaming load of hay dropping sparks and firebrands as it traveled. The court stated that the trial court had correctly determined that the motorized vehicle exclusion applied to Coverage L.
With respect to the personal injury endorsement, the Korzans claimed that the endorsement covered wrongful entry and that the Okaton fires constituted wrongful entry. The court declined to address this issue because coverage already was excluded by the motor vehicle exclusion.
The court affirmed the trial court’s grant of North Star’s motion for summary judgment.
North Star Mutual Insurance Company vs. Korzan-Supreme Court of South Dakota-December 16, 2015-No. 27264