Swenson v. Auto-Owners Insurance Co.

Summary

The South Dakota Supreme Court reviewed summary judgment in favor of Auto-Owners Insurance Company in a dispute concerning its duty to defend and indemnify a contractor under a commercial general liability policy. The court held that several policy exclusions applied to the claimed construction-related property damage, eliminating coverage and the insurer's duty to defend or indemnify. Because the insurer had a reasonable basis for denying coverage, the court also rejected the insureds' bad-faith claim and affirmed.

Holdings

1. Exclusion j(5) applied because the framing lumber and other building materials were personal property in DJ Construction's care, custody, and control when they were damaged. South Dakota law does not require exclusive care, custody, or control for the exclusion to apply.
2. Exclusion j(6) applied to claims concerning damage to the home that arose from DJ Construction's and its subcontractors' construction operations.
3. Exclusion j(7) was unambiguous and excluded coverage for property damage to property that had to be restored, repaired, or replaced because DJ Construction's work was incorrectly performed on it.
4. Auto-Owners had no duty to defend or indemnify DJ Construction because exclusions j(5), j(6), and j(7) excluded coverage for the claims.
5. Auto-Owners did not act in bad faith because it had a reasonable basis for denying coverage: multiple policy exclusions applied.

Questions Presented

1. Whether policy exclusion j(5) excluded coverage for damage to building materials that were in DJ Construction's care, custody, or control.
2. Whether policy exclusion j(6) excluded coverage for damage to the home arising out of construction operations.
3. Whether policy exclusion j(7) excluded coverage for property damage resulting from incorrectly performed work when the work was not completed and therefore was not within the products-completed operations hazard.
4. Whether Auto-Owners had a duty to defend or indemnify DJ Construction under the policy.
5. Whether Auto-Owners acted in bad faith by denying defense and indemnity.
6. Whether the circuit court properly granted summary judgment to Auto-Owners.

Disposition

affirmed