American Family Insurance Group v. Robnik

Summary

The South Dakota Supreme Court affirmed summary judgment for American Family Insurance Group in a declaratory action concerning homeowner’s insurance coverage for damages arising from negligent misrepresentation in a real estate sale. The court held that the insured’s prior knowledge of sewer problems meant the resulting damages were not an unexpected accident or occurrence under the policy. It also held that res judicata did not preclude the insurer from litigating the coverage issue in the declaratory action.

Holdings

1. The negligent misrepresentation did not constitute a covered accident or occurrence because Hunter had previously experienced the sewer problem, knew of the defective sewer line, and failed to repair it; therefore, subsequent sewage backups were expected as a matter of law under both the Sheets and Carter Lake approaches.
2. Neither issue preclusion nor claim preclusion barred American Family from litigating whether the damages were expected in the declaratory action.

Questions Presented

1. Whether Hunter's negligent misrepresentation constituted an accident or occurrence covered by the homeowner's liability policy.
2. Whether collateral estoppel or claim preclusion barred American Family from litigating the expected-damages aspect of its accident-or-occurrence coverage defense after participating in the underlying tort action.
3. Whether summary judgment for American Family was proper when the material coverage facts were undisputed.

Disposition

affirmed