The Supreme Court of South Dakota, affirming a trial court's decision, has ruled that an insurer did not have to defend claims against its insured arising after he sold a portion of his farm property to a purchaser that constructed a hog confinement facility there.
The Case
On April 16, 2013, Delray Geidel sold a portion of his real property to Cedar Creek Feeders, LLC, for the construction of a hog confinement facility. As part of the sale, Mr. Geidel retained a right of first refusal to repurchase the property. He also retained the right to acquire manure from the property.
Mr. Geidel allegedly was aware that Cedar Creek would construct the hog facility within one-quarter of a mile of property owned by Herman and Jeanette Fink and other property owned by Karl and Alene Fink (collectively, the “Finks”). The Finks claimed they had informed Mr. Geidel of their objection to the location of the facility prior to construction.
Cedar Creek finished constructing the hog facility in July 2013 and began operations.
On April 30, 2014, the Finks sued Cedar Creek and Mr. Geidel, alleging claims for nuisance, trespass, and negligence based on the construction and operation of the hog confinement facility. They sought injunctive relief and compensatory and punitive damages.
In May 2014, Mr. Geidel submitted a claim to De Smet Farm Mutual Insurance Company under his farm liability insurance policy requesting that De Smet defend him against the Finks' lawsuit.
De Smet declined to defend, explaining that the Finks' complaint did not allege bodily injury, property damage, or an occurrence within the provisions of the insurance policy and that, even if coverage existed, two policy exclusions applied.
After receiving De Smet's letter, Mr. Geidel retained his own counsel and defended the Finks' lawsuit. The jury returned a verdict in favor of Cedar Creek and Mr. Geidel on all claims.
Thereafter, Mr. Geidel brought suit against De Smet, alleging breach of contract in failing to defend him against the Finks' lawsuit. The trial court granted summary judgment in favor of De Smet, and Mr. Geidel appealed.
The Supreme Court of South Dakota's Decision
The court affirmed.
In its decision, the court first found that, to invoke De Smet's duty to defend, the Finks' complaint had to allege an arguably qualifying occurrence.
The court pointed out that although Mr. Geidel may not have expected to get sued by the Finks because of Cedar Creek's operation of the hog confinement facility, the allegations and record established that Mr. Geidel “knew his neighbors would see, hear, and smell the facility on the property sold by [Mr.] Geidel.” Moreover, the court continued, the Finks' complaint set forth that, prior to construction, they informed Mr. Geidel and Cedar Creek of their concerns. Therefore, the court ruled, the Finks' claims did not allege an “occurrence” as defined by the policy.
The court also ruled that the Finks' negligence claim likewise did not allege an “occurrence” under the policy given that the Finks' complaint asserted that Mr. Geidel owed the Finks a duty to construct the facility in a location that would not disrupt or cause harm to the Finks but Mr. Geidel did not construct the facility.
The court concluded that Mr. Geidel's sale of real property to Cedar Creek was not an “occurrence” because under no set of facts alleged in the complaint would the mere selling of property to an objectionable purchaser invoke coverage even if he had alternative locations on which to locate the hog confinement building.
The case is Geidel v. De Smet Farm Mutual Ins. Co., No. 28627 (S.D. April 10, 2019). Attorneys involved include: ERIC R. KERKVLIET, DANA VAN BEEK PALMER, ROSS M. WRIGHT of Lynn, Jackson, Shultz, & Lebrun, P.C., Sioux Falls, South Dakota, Attorneys for plaintiff and appellant. JESSICA L. LARSON of Beardsley, Jensen & Lee, Prof. LLC, Rapid City, South Dakota, Attorneys for defendant and appellee.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].