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Biegler v. American Family Mutual Insurance Company1/24/2001
As amended January 29, 2001.
Appeal from the Circuit Court of The Fifth Judicial Circuit Brown County, South Dakota Hon. Jack R. Von Wald, Judge
Argued September 20, 2000
[ .] American Family Insurance Company (American Family) appeals from a money judgment awarding Rick Biegler (Biegler) damages for breach of an insurance contract, compensatory and punitive damages for deceit/bad faith breach of the insurance contract, and attorney fees per SDCL 58-12-3.á We affirm but remand with instructions.
FACTS AND PROCEDURAL HISTORY
[ .] In February 1996, S & R Food Mart (S & R), a convenience store, casino, and off-sale liquor store, located in Aberdeen, South Dakota, was owned by Sue and Rick Biegler and insured by American Family.á On February 3, 1996, Mike Schwan (Schwan), a disabled individual, entered S & R where he was harassed by employees of the store.á Among other things, Schwan was served coffee and soft drinks spiked with alcohol, had a flammable liquid squirted on the back of his pants, and then had his pants set on fire.á
[ .] After Schwan left S & R he lost control of his vehicle and drove into a snowbank.á The police were called and Schwan was arrested and incarcerated for driving under the influence .á This charge was later dropped when it was discovered that Schwan became involuntarily intoxicated.á Two of S & R's employees later plead guilty to various charges in connection with Schwan's harassment.
[ .] After the incident at S & R there was an outpouring of negative publicity surrounding Biegler and his store.á On February 7, one of American Family's agents saw an article discussing the incident in an Aberdeen newspaper.á The article was mailed to American Family's claims office and two days later American Family's adjuster, Mike Jares (Jares) met with Biegler.á Jares interviewed Biegler for a brief period and then presented him with a non-waiver agreement. áThe agreement put forth the policy provisions that American Family felt would negate coverage for Biegler.á Both parties signed the agreement.á
[ .] Biegler felt that he needed the assistance of a lawyer and contacted H. I. King (King) of Aberdeen for advice.á King then contacted one of Schwan's lawyers and made a settlement offer of $5,000.áá This offer was rejected and on February 23 King wrote to American Family and asked them to defend Biegler under the policy.á American Family did not respond to King's letter; although it appears that Jares and King communicated by telephone or in person until early June.á
[ .] On April 10, Schwan's attorney, Rick Sommers (Sommers) wrote King detailing his representation of Schwan and the fact that there may be a claim for negligent supervision and management.á King forwarded a copy of the letter to American Family.á On April 26, American Family's legal department was asked to review the letter.á The legal department determined that there was no coverage for Biegler and a letter stating American Family's position was sent to King.á The letter dated May 10, stated: "it continues to be American Family's position that coverage is excluded.á We will be unable to provide any assistance for Mr. Biegler on this claim."á
[ .] On May 31 King wrote to American Family asking it to "clearly state reasons for refusal to assume the contractual obligations under the insurance policy.á .á . ."á On June 3 King wrote American Family, correcting an error in his May 31 letter, and asking American Family "to be more clear and state specifically on what paragraphs of the insurance contract American Family Insurance relies upon to avoid their contractual obligations."á King
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