Sentell v. Farm Mutual Ins.

956 N.W.2d 826, 2021 S.D. 19
South Dakota Supreme Court·Decided March 10, 2021·No. 29130·Published·Cited by 4 cases

Opinion

#29130-a-PJD 2021 S.D. 19

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

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MIKE SENTELL and MARY ODLAND, Plaintiffs and Appellants,

v.

FARM MUTUAL INSURANCE COMPANY OF LINCOLN COUNTY, SOUTH DAKOTA, Defendant and Appellee.

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APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT SPINK COUNTY, SOUTH DAKOTA

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THE HONORABLE TONY L. PORTRA Judge

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SEAMUS W. CULHANE NANCY J. TURBAK BERRY of Turbak Law Office, P.C. Watertown, South Dakota Attorneys for plaintiffs and appellants.

GARY P. THIMSEN JORDAN J. FEIST of Woods, Fuller, Shultz & Smith, P.C. Sioux Falls, South Dakota Attorneys for defendant and appellee.

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CONSIDERED ON BRIEFS

MAY 27, 2020

OPINION FILED 03/10/21

DEVANEY, Justice [¶1.] Insureds brought suit against their insurer for breach of contract and tortious breach of good faith and fair dealing arising out of the insurer’s failure to pay over $200,000 in property damage sustained after a hail and wind storm. The insureds sought compensatory and punitive damages. They also asserted a separate claim for statutory attorney fees, contending that the insurer’s refusal to pay benefits was vexatious and unreasonable and that the insurer violated the Unfair Trade Practices Act. The jury returned a verdict in favor of the insureds on their claims of breach of contract and bad faith and awarded compensatory damages, but the jury denied punitive damages. After the trial, the insureds filed a motion for attorney fees. The insurer objected, claiming that the circuit court could not award attorney fees without a jury determination that the insurer had engaged in an unfair trade practice. The court agreed and denied the insureds’ request. The insureds appeal, and we affirm.

Factual and Procedural Background [¶2.] In June 2013, a hail and wind storm struck Spink County, causing severe damage to Mike Sentell and Mary Odland’s farm and homes. The storm produced baseball-sized hail that totaled automobiles, broke windows, damaged shingles and gutters, and perforated siding. The wind from the storm was so strong that a motorhome on the property flipped onto its side. After the storm, free- standing water remained inside the dwellings on the property, glass littered the floors, and furniture, clothing, and other personal property was damaged.

[¶3.] Sentell and Odland’s farm and homes were insured under a policy issued by Farm Mutual Insurance Company of Lincoln County. After the storm, they filed a claim with Farm Mutual, and Farm Mutual arranged for Jason Good, an adjuster from Dakota Claims Service, Inc., to examine the property damage. Good visited the property, talked to Sentell and Odland, and thereafter, estimated their loss at $69,138.14. He then reduced the estimated loss to $56,346.99 for depreciation because he believed their insurance policy only allowed payment for actual cash value. His calculation also excluded damage to a mobile home and Sentell’s mother’s home based on an exclusion in the policy precluding coverage for damage caused by a leaky roof. [¶4.] While repairing the damage, Sentell and Odland realized that the amount paid by Farm Mutual would not cover the cost of repairs. Sentell also disputed that the roof exclusion applied because the damage to his mother’s home was caused by broken windows and doors, not a leaky roof. Sentell requested that the adjuster reconsider his loss calculation, but the adjuster refused to investigate further. [¶5.] Sentell and Odland hired an independent adjuster, Clint Schlinke, to review Good’s loss assessment. Schlinke did not personally examine the property damage. Rather, he reviewed Good’s report, information obtained by the contractor hired to repair the property, and a report issued by a home inspector hired by Sentell and Odland. Schlinke calculated Sentell and Odland’s loss at $318,632.99 under the applicable insurance policy coverage provisions and its exclusions.

Sentell and Odland added $14,988 to that estimate for the value of their damaged unscheduled property. [¶6.] In February 2015, Sentell and Odland sent the following to Farm Mutual: Schlinke’s calculation of loss, the home inspector’s report, the contractor’s video documentation of damage, and a letter from a mobile home consultant. Based upon these submissions, they requested that Farm Mutual remit payment for $277,274.00, the amount they believed remained due on their claim. In response, Farm Mutual sent a different adjuster from Dakota Claims, Mark Larson, to examine the property. However, Larson did not alter the previous calculation of loss, and Farm Mutual did not issue any additional payments to Sentell and Odland. [¶7.] In July 2015, Sentell and Odland brought suit against Farm Mutual. Their complaint identified multiple causes of action, including breach of contract and tortious breach of duty of good faith and fair dealing. Under their claim for breach of good faith and fair dealing, they alleged that Farm Mutual acted with malice, oppression, or fraud and that its conduct was willful and wanton and in reckless disregard of their rights as policy holders, entitling them to punitive damages. [¶8.] The complaint also set out as a separate count a claim for “Statutory Entitlement to Attorney’s Fees” alleging that Sentell and Odland were entitled to

recover attorney fees under SDCL 58-33-46.1 and SDCL 58-12-3. 1 The complaint also demanded a “trial by jury on all the issues in this action.” [¶9.] After a trial in June 2019, the jury returned its verdict on a special verdict form, answering “yes” to the question whether Farm Mutual breached the insurance contract. The jury determined that the breach occurred on April 16, 2015, and that Sentell and Odland were entitled to $250,000 in additional benefits. The jury also answered “yes” to the question whether Farm Mutual breached its duty of good faith and fair dealing and found that breach to be the legal cause of damage to Sentell and Odland. The jury awarded them $150,000 on the bad faith claim but did not award punitive damages. [¶10.] Following the trial, Sentell and Odland filed a motion for attorney fees and non-taxable expenses. They alleged entitlement to $498,582.58 in attorney fees under SDCL 58-33-46.1 for Farm Mutual’s “unfair trade practices conduct.” Farm Mutual objected, asserting that Sentell and Odland could not use SDCL 58-33-46.1 “as a back door to collect” attorney fees because the Legislature specifically exempted farm mutual insurers from liability for attorney fees otherwise authorized under SDCL 58-12-3 for a vexatious or unreasonable refusal to pay the full amount of loss. See SDCL 58-35-57(9). Farm Mutual further argued that even if SDCL 58- 33-46.1 applied, Sentell and Odland could not recover because they did not submit their unfair trade practice claim to the jury after demanding a jury trial on all issues raised in their complaint.

1. Although Sentell and Odland requested attorney fees under SDCL 58-12-3, they ultimately did not pursue this claim because SDCL 58-35-57(9) provides that SDCL 58-12-3 does not apply to farm mutual insurers.

[¶11.] After a hearing, the circuit court issued an oral ruling denying Sentell and Odland’s motion for attorney fees. The court rejected Farm Mutual’s first argument that the exemption of farm mutual insurers from liability for attorney fees under SDCL 58-12-3 precluded an award of attorney fees under SDCL 58-33- 46.1, noting that the Legislature has specifically subjected farm mutual insurance companies to the Unfair Trade Practices Act (the Act). However, the court concluded that it could not award attorney fees under SDCL 58-33-46.1 because Sentell and Odland did not ask the jury to determine whether Farm Mutual violated the Act. [¶12.] Sentell and Odland appeal, asserting that the circuit court erred in concluding that it could not award them attorney fees under SDCL 58-33-46.1.

Analysis and Decision

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Sentell v. Farm Mutual Ins., 956 N.W.2d 826, 2021 S.D. 19 (S.D. 2021).

956 N.W.2d 826 (Sentell v. Farm Mutual Ins.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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