Nehemiah Larimer also was insured under his parents' insurance policies with American Family, including a family car policy that contained an underinsured motorists (“UIM”) endorsement (the “Endorsement”) and a personal liability umbrella policy.

The Larimers made a UIM claim under their car and umbrella policies. American Family denied the claim pursuant to the “owned but not insured” exclusion in the endorsement. Relying on the definition of motor vehicle contained in the Endorsement, American Family determined that, “Nehemiah was riding a moped at the time of the accident, so is considered to have been occupying a motor vehicle that was not insured under this policy. Therefore, the [e]xclusion . . . would apply and there would be no [UIM coverage].”

American Family also denied coverage under the umbrella policy, explaining that the umbrella policy was “no broader than the underlying insurance.”

Kayne Larimer, special administrator of Nehemiah Larimer's estate, brought an action for declaratory judgment seeking UIM benefits under the two American Family insurance policies.

The trial court found that the policy language was ambiguous and it granted summary judgment in favor of Ms. Larimer.

The dispute reached the Supreme Court of South Dakota. Among other things, American Family asserted that the Endorsement's definition of “motor vehicle” unambiguously included Nehemiah Larimer's moped, and, therefore, that the owned but not insured exclusion applied.

The South Dakota Supreme Court's Decision

The South Dakota Supreme Court affirmed.

In its decision, the court explained that the Endorsement defined a motor vehicle as a “land motor vehicle,” meaning that if a moped was a land motor vehicle, it was a motor vehicle for purposes of the Endorsement.

The court pointed out that the Endorsement did not define “land motor vehicle” and that no other language within the Endorsement indicated whether a moped was a land motor vehicle.

“Certainly,” the court continued, a moped was operated on land. The court added that it was “unclear” whether the policy contemplated that a moped was a motor vehicle simply because it had a motor.

The court then found that, “[a]pplying the minimal guidance provided by the definition of motor vehicle in the Endorsement, it would be equally reasonable to conclude that mopeds either may or may not be motor vehicles.”

The court noted that the umbrella policy defined “car” as a “land motor vehicle[] designed for travel on public roads or subject to motor vehicle registration[,]” including a “[m]otorcycle or moped when licensed for road use[.]” The court reasoned that American Family's decision to include only mopeds “licensed for road use” in the umbrella policy definition of a land motor vehicle supported the conclusion that American Family did not intend a land motor vehicle in the Endorsement to be an unlicensed moped. Therefore, the court concluded, American Family had not met its burden of proving that Nehemiah Larimer's moped clearly fell outside of policy coverage, the exclusion precluding UIM benefits for injuries sustained while occupying a motor vehicle that was “not insured under this policy” did not apply, and the trial court had not erred when it granted summary judgment in favor of Ms. Larimer.

The case is Larimer v. American Family Mutual Ins. Co., Nos. 28623, 28632 (S.D. April 10, 2019). Attorneys involved include: JACK H. HIEB, ZACHARY W. PETERSON of Richardson, Wyly, Wise, Sauck & Hieb, LLP, Aberdeen, South Dakota, Attorneys for defendant and appellant. REXFORD A. HAGG of Whiting, Hagg, Hagg, Dorsey & Hagg, LLP, Rapid City, South Dakota, Attorneys for plaintiff and appellee.