S.D. SC: Unassembled windmill more than just pile of parts, for insurance purposes

PIERRE, S.D. (Legal Newsline) - The South Dakota Supreme Court has decided that North Star Mutual Insurance Company does not owe Ass Kickin Ranch for two unassembled wind turbines that were destroyed in a fire.

The decision, released Oct. 17, came after North Star claimed policy exclusion allowed them to deny coverage for the $100,000 loss of the wind turbines. The ranch sued North Star for a breach of contract and that denying coverage was done in bad faith.

Both parties filed cross-motions for summary judgment. The motion was granted for North Star as the circuit court found the policy exclusion did apply. The ranch then appealed, arguing the circuit court erred in denying its motion.

The court opinion, written by Chief Justice David Gilbertson, states the ranch purchased a North Star insurance policy in 2009 to include coverage for unscheduled farm personal property.

On March 31, the shop building on ranch property burned down, including the unassembled wind turbine parts - tower, generator, transmission, blades and controls.

North Star denied the $100,000 claim, concluding coverage for the unassembled wind turbines was not protected due to the excluded coverage for "fences, windmills, windchargers or their towers."

"When reviewing a circuit court's grant of summary judgment, this Court only decides 'whether genuine issues of material fact exist and whether the law was correctly applied,'" Gilbertson wrote.

Neither party argued there is a genuine issue of material facts. The main issue was contract interpretation and whether the unassembled wind turbines fit within the policy's exclusion of coverage.

North Star argued the policy language "encompasses all windmills and windcharges, regardless of whether or not they have been assembled, unassembled, functional or nonfunctional," Gilberston wrote.

According to the ranch, a "pile of parts" that has never been assembled on the property or used as a windmill does not constitute a windmill or windcharger for purposes of the policy exclusion.