Beardsley, Jensen and Von Wald
An insurance company's denial of coverage for two unassembled wind turbines destroyed in a fire on Ass Kickin Ranch's property was upheld in a unanimous decision of the South Dakota Supreme Court in Ass Kickin Ranch, LLC v. North Star Mutual Insurance Company, 2012 S.D. 73.
The issue was whether the unassembled wind turbines fit within the insurance policy's exclusion of coverage for "fences, windmills, windchargers, and their towers."
In its analysis, the Court set out the following principles used to determine insurance coverage disputes:
1. The scope of coverage in an insurance policy is determined from the contractual intent and objectives of the parties as expressed in the insurance contract.
2. The insurer has the burden of proving that an exclusion applies.
3. 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."
4. When the terms of an insurance contract/policy are unambiguous, those terms "cannot be enlarged or diminished by judicial construction."
5. Insurance policies must be subject to a reasonable interpretation and "not one that amounts to an absurdity."
In this case, the insurance company argued that the exclusion language encompasses "all windmills and windchargers" whether assembled or not. The ranch argued to the contrary, that a "pile of parts" that has never been assembled does not constitute a windmill or windcharger for purposes of the exclusion.
The Court explained that the trial court properly relied on definitions in an on-line dictionary to determine the "plain and ordinary meaning of the terms." The unassembled parts fit within the exclusion because:
1. The ranch acknowledged it purchased the parts to use them to generate electricity for the ranch; thus, the ranch's intended purpose of the unassembled wind turbines fit within the plain and ordinary meanings of "windmill" and "windcharger."
2. The unassembled component parts are encompassed within the plain and ordinary meaning of "windmill" and "windcharger" because they are designed to function as such upon assembly.
3. The only additional elements needed for the unassembled wind turbines to operate were cement footings and a power source; the ranch had everything else in place.
4. When paying for the unassembled parts, the ranch indicated that its check was for "2 windmills."
5. The ranch's interpretation "strains the meaning of the policy exclusion and diminishes the significance of its terms."
6. Implementing the ranch's interpretation could lead to "absurd results."
7. Because there was no legal precedence directly on point in South Dakota, the Court found a case from Connecticut it believed was persuasive.
This Ass Kickin Ranch, LLC decision is instructive on how our Court analyzes disputes about exclusions in insurance policies.
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