The circuit court determined that Milbank was liable under the terms of the insurance policy by finding ambiguity in the term "auto accident," in part because it was undefined in the policy. The court then applied the rules of construction for insurance contracts and interpreted the ambiguous term in the insured's favor. The decision was appealed to the Supreme Court

 The Supreme Court of South Dakota agreed with Milbank that the mere absence of a definition did not alone create ambiguity. However, the court did find that the accidental discharge of the rifle in the idling pickup truck's backseat constituted an "auto accident." According to the court, for liability coverage to exist under the policy, there had to be a causal connection between the accident that injured the passenger and use of truck. Here, the truck was more than the mere situs of the accident, and the accidental discharge was causally connected to the truck's use given that the truck was being used in a hunting expedition where guns were being transported. Thus, the court affirmed the circuit court decision, holding that for purposes of the policy, the accidental discharge of the rifle constituted an "auto accident."