#26357-a-JKK
2013 S.D. 16
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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STEVE MILINKOVICH and
DIANNE MILINKOVICH, Plaintiffs and Appellants,
v.
PROGRESSIVE CASUALTY
INSURANCE CO., Defendant and Appellee.
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APPEAL FROM THE CIRCUIT COURT OF
THE FOURTH JUDICIAL CIRCUIT
LAWRENCE COUNTY, SOUTH DAKOTA
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THE HONORABLE RANDALL L. MACY
Judge
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GEORGE J. NELSON of
Abourezk & Zephier, PC
Rapid City, South Dakota Attorneys for plaintiffs
and appellants.
LON J. KOURI
ERIC D. DENURE of
May & Johnson, PC
Sioux Falls, South Dakota Attorneys for defendant
and appellee.
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CONSIDERED ON BRIEFS
ON JANUARY 8, 2013
OPINION FILED 02/06/13
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KONENKAMP, Justice
[¶1.] An Arizona couple was injured on their motorcycle by another biker.
Because the other motorcyclist left the scene, the couple sought uninsured motorist
benefits from their insurer. The insurer tendered the policy’s full uninsured
motorist benefits of $15,000 per person. But the couple sought $25,000 per person,
which is what they would have recovered in South Dakota had they been able to
obtain the other biker’s liability insurance. On cross motions for summary
judgment, the circuit court declared that the terms of the Arizona insurance policy,
rather than South Dakota law, governed the applicable coverage. The couple
appeals.
Background
[¶2.] Steve and Dianne Milinkovich are residents of Arizona. While riding
their motorcycle on Highway 85 near Deadwood, South Dakota, on August 3, 2008,
an unidentified motorcyclist forced them off the road. Both Steve and Dianne were
injured. The driver of the other motorcycle did not stop, and the Milinkoviches were
unable to get a license plate number.
[¶3.] The Milinkoviches insured their motorcycle through Progressive
Insurance Company. Their insurance contract was executed in Arizona and
contained uninsured motorist coverage limits of $15,000 per person and $30,000 per
accident, as required by Arizona law. After the Milinkoviches made a claim,
Progressive tendered $15,000 to Steve and $15,000 to Dianne under the policy.
They accepted payment of the benefits, but refused to release Progressive from any
and all claims.
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[¶4.] In July 2010, the Milinkoviches brought suit in South Dakota against
Progressive seeking, among other relief, a declaration that the company must pay
uninsured motorist benefits in compliance with South Dakota’s statutory minimum
limits — $25,000 per person and $50,000 per accident. They alleged that
Progressive acted in bad faith when it refused to tender $50,000. As support, the
Milinkoviches relied on public policy and South Dakota’s financial responsibility
law, which mandates liability coverage of $25,000 per person and $50,000 per
accident for persons operating vehicles within South Dakota.
[¶5.] Progressive moved for summary judgment and the Milinkoviches
moved for partial summary judgment on the issue of uninsured motorist benefits.
After a hearing, the circuit court issued a memorandum decision granting summary
judgment for Progressive. It reasoned that while South Dakota’s financial
responsibility law, SDCL 32-35-70, dictates that all vehicles operating in this state
must provide liability coverage for bodily injury of $25,000/$50,000, the statute does
not specifically include a requirement that drivers must maintain uninsured
motorist coverage at the same levels. The court also relied on the language in
SDCL 58-11-9 addressing uninsured motorist coverage for insurance policies issued
in South Dakota for “any motor vehicle registered or principally garaged in this
state[.]” Because the Milinkoviches’ policy was issued in Arizona and their
motorcycle was registered and principally garaged in Arizona, the court held that
the parties’ insurance contract and Arizona law governed the dispute. Their policy
provides, and Arizona law requires, $15,000 per person and $30,000 per accident in
uninsured motorist coverage, which Progressive tendered.
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Analysis and Decision
[¶6.] On appeal, the Milinkoviches ask this Court to hold that drivers
operating motor vehicles within our borders must be protected by South Dakota’s
minimum uninsured motorist coverage limits, regardless of the level of uninsured
motorist coverage contracted for between non-resident drivers and their insurance
companies. In urging their position, the Milinkoviches emphasize that in both
South Dakota and Arizona uninsured motorist coverage is “inextricably linked as
equal sums.” Indeed, both states have held that the purpose of uninsured motorist
coverage is to protect victims to the same extent as if they had been injured by an
insured driver. See Transp. Ins. Co. v. Martinez, 899 P.2d 194, 196 (Ariz. Ct. App.
1995); Cornelius v. Nat’l Cas. Co., 2012 S.D. 29, ¶ 12, 813 N.W.2d 167, 171 (citations
omitted).
[¶7.] Yet the fact that uninsured coverage and bodily injury liability
coverage have the same purpose does not mean the two types of insurance
protection are equal, one in the same, or interchangeable. Compare SDCL 58-11-9
with SDCL 32-35-70. An insurer provides bodily injury liability coverage to pay
damages to another for bodily injury when an insured becomes legally responsible
because of an accident arising out of the ownership, maintenance, or use of the
insured motor vehicle. See SDCL 32-35-70. On the other hand, an insurer pays an
insured uninsured motorist benefits when the insured would legally be entitled to
recover from the operator of an uninsured motor vehicle. See Am. Family Mut. Ins.
Co. v. Merrill, 454 N.W.2d 555, 559 (S.D. 1990) (citing SDCL 58-11-9).
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[¶8.] Still, the Milinkoviches emphasize that they would have been able to
recover $25,000 per person and $50,000 for the accident had the driver that injured
them been insured. They argue that South Dakota has an interest in protecting all
motorists driving in this state to the same extent that it protects its own residents.
Thus, despite the lower limits of uninsured motorist protection in their policy, they
assert that Progressive must meet the demands of SDCL 58-11-9.
[¶9.] To reach the conclusion the Milinkoviches seek, we would have to
overlook the language of their policy, our financial responsibility law, and the
statute on uninsured motorist coverage solely because this state and Arizona have
declared that the purpose of uninsured motorist coverage is the same as liability
coverage.* This we cannot do. First, our financial responsibility law only applies to
liability coverage: “[a]n owner’s policy of liability insurance . . . shall insure . . .
against loss from the liability imposed by law for damages arising out of the
ownership, maintenance, or use of the vehicle or vehicles within the United States
of America or the Dominion of Canada[.]” SDCL 32-35-70 (emphasis added).
Second, SDCL 58-11-9, governing uninsured motorist coverage, only addresses
* While not specifically addressed by the Milinkoviches, there is an underlying
choice of law issue. See Dunes Hospitality, L.L.C. v. Country Kitchen Int’l,
Inc., 2001 S.D. 36, ¶ 10, 623 N.W.2d 484, 488 (a choice of law provision is
subject to limitation and invalidation by our state’s overriding public policy).
As we stated in Great Western Cas. Co. v. Hovaldt, the nature of the action
determines which state law applies. 1999 S.D. 150, ¶ 8, 603 N.W.2d 198, 201.
Here, the question is one of coverage, which “sounds in contract.” See id. The
contract provides that Arizona law governs a dispute related to coverage, and
there is no policy reason to invalidate this provision. Indeed, the contract
was created in Arizona, for Arizona residents, for a motorcycle principally
garaged and registered in Arizona.
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policies “issued for delivery in this state” for motor vehicles “registered or
principally garaged in this state[.]”
[¶10.] Nothing in SDCL 32-35-70 or SDCL 58-11-9 forces the conclusion that
it is the policy of this state that our mandated uninsured motorist coverage must
apply to policies not issued for delivery in South Dakota for vehicles not registered
or principally garaged in this state. See Wilds v. Mid-Century Ins. Co., 642 P.2d 567
(Kan. 1982) (interpreting similar language on similar facts); Martin v. Lumberman’s
Mut. Cas. Co., 559 A.2d 1028 (R.I. 1989) (interpreting similar language). The
interrelationship between uninsured and bodily injury liability coverage
notwithstanding, our only connection to this dispute is that the accident happened
in South Dakota. The Milinkoviches’ policy was issued in Arizona for a motorcycle
registered and principally garaged in Arizona. Our laws do not support altering the
terms of parties’ contracts in these circumstances. See Vaughan v. Nationwide Mut.
Ins. Co., 702 A.2d 198, 202 (D.C. 1997). There being no dispute that the parties’
insurance contract provides, and Arizona law requires, $15,000 per person, which
amount was tendered to the Milinkoviches, the circuit court did not err when it
granted Progressive’s motion for summary judgment.
[¶11.] Affirmed.
[¶12.] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and
WILBUR, Justices, concur.
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