An insurance company that insured a Miranda couple has no duty to defend that couple for delivering wheat contaminated with fertilizer, the South Dakota Supreme Court has ruled.
State Farm Mutual Automobile Insurance Co. sought a declaratory judgment that it was not responsible to defend Mike and Nancy Grunewaldt. Justices agreed with Circuit Court Judge Tony Portra, who ruled that State Farm had no duty to defend the Grunewaldts, nor to indemnify the couple for any damages related to the contaminated wheat.
The Grunewaldts were sued by Agtegra Cooperative, which alleged the couple delivered contaminated wheat on Oct. 15 and 16, 2019 to its elevator in Redfield. That wheat was placed in a bin containing about 400,000 bushels of wheat. While the company was able to segregate the contaminated wheat, it alleged that it “received considerably less” than what it otherwise would have gotten for uncontaminated wheat.
Agtegra sought damages of more than $325,000 for loss of income, increased labor costs, loss of the use of the bin and other expenses. The company said that Mike Grunewaldt had done business with Agtegra for 20 years and was aware the company couldn’t accept “seed or grain contaminated with pesticides or other foreign substances, including fertilizer.”
The Grunewaldts’ policy with State Farm included liability insurance of up to $100,000. But the company commenced a separate action seeking a decision that it was not responsible for coverage. The company argued that an exclusion in the policy did not cover bodily injury or property damage caused by pollutants.
Insurance policy not limited to environmental pollution, Supreme Court decides
The Grunewaldts argued that the language in the exclusion should be interpreted specifically to environmental pollution, rather than a broad definition that included polluted wheat.
But the Supreme Court disagreed.
Writing in a 5-0 decision, Justice Patricia DeVaney noted that State Farm’s exclusions and definitions did not refer to the term environmental.
“Therefore,” she wrote, “if this Court interpreted the policy to exclude coverage only for damages related to environmental pollution, we would be rewriting the terms of the policy.”
The Grunewaldts were represented by Zachary Peterson of Richardson of Wyly, Wise, Sauck & Hieb in Aberdeen. State Farm was represented by Hilary Williamson and Tierney Scoblic of Fuller, Williamson, Nelson & Preheim in Sioux Falls.