Quest Aviation, Inc. v. Nationair Insurance Agencies, Inc.
OPINION AND ORDER granting in part and denying in part 47 Motion for Summary Judgment. Signed by U.S. District Judge Roberto A. Lange on 1/27/2017. (JLS)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
JAN 2 7 201?
OPINION AND ORDER GRANTING IN
PART AND DENYING IN PART MOTION
FOR SUMMARY JUDGMENT
NATIONAIR INSURANCE AGENCIES,INC.,
On December 9, 2011, a Cessna 42IC operated by Plaintiff Quest Aviation, Ine.(Quest)
crashed near Sioux Falls, killing the pilot and three passengers. Quest filed a complaint against
its insurance agent NationAir Insuranee Agencies, Inc. (NationAir) in South Dakota state court
seeking a declaratory judgment that NationAir was responsible for damages beyond a $3 million
liability limit in an Aviation Poliey. Doe. 1-1 at 13-19. After NationAir removed the ease to
federal district court based on diversity jurisdiction, NationAir filed a motion to dismiss for
failure to state a claim, asserting that there were no damages and no ripe elaims until Quest had
to pay more than the poliey limit. Doc. 7. This Court denied the motion to dismiss, coneluding
that Quest had stated a justieiable elaim upon which relief may be granted. Doe. 17.
Quest settled the wrongful death elaims arising out of the Cessna erash. Quest then filed
a Second Amended Complaint containing two claims; Count I alleged a negligenee cause of
action, and Count II alleged breach of fiduciary duty. Doc. 27. As alleged by Quest,
NationAir's conduct constituting negligence and breach of fiduciary duty is the same: "a. failing
to advise Quest that the CGL Policy would not provide coverage for an incident involving an
aircraft operated by Quest; and/or b. failing to recommend procurement of an insurance policy
that provided adequate coverage for an incident involving an aircraft operated by Quest." Doc.
27 at m 44, 48. NationAir filed a motion for partial summary judgment seeking summary
judgment on the fiduciary duty claim in its entirety and seeking summary judgment on aspects of
the negligence claim. Doc. 47. For the reasons explained below, this Court grants NationAir
summary judgment on the breach of fiduciary duty claim, but denies summary judgment on the
Facts in the light most favorable to non-moving party Quest
In deciding a motion for summary judgment, this Court must view the evidence in the
light most favorable to the non-moving party and give that party the benefit of all reasonable
inferences. Anderson v. Libertv Lobbv. Inc.. 477 U.S. 242, 250(1986); Celotex Corp. v. Catrett,
477 U.S. 317, 324 (1986). This Court, in setting forth the facts in the light most favorable to
non-movant Quest, is making no factual findings whatsoever.
Quest is a fixed-based operator (FBO) based in Aberdeen, South Dakota, providing
aeronautical services. During the relevant period, those services included hangaring, flight
instruction, aircraft rental, charter services, and maintenance and fueling of aircraft. Quest
owned and operated a few smaller airplanes, typically with one to three passenger seats, for use
for instruction, rental, and charter services. In 2009, Quest entered into an agreement to use a
larger plane, a Cessna 42IC with six available seats—one for the pilot and five for passengers—
as part of Quest's charter services. The dispute m this case anses out of a tragic accident in
December of2011,in which a pilot and three passengers died in a crash of that Cessna.
Quest is indirectly owned by Ronald Rivett. At the relevant time, Quest was primarily
run by Kevin Braun, the executive vice president of Quest. Braun began working for Quest in
1985 as an aircraft mechanic, became director of maintenance in 1987, and was named executive
vice president m 2005. In that capacity, Braun is primarily responsible for managing day-to-day
activities and employment matters for Quest. Quest at the relevant time employed 12 to 13
employees m Aberdeen, and another 12 or so employees, mainly part-time, in a second location
m Tea, South Dakota. Those employees were mechanics or pilots.
Beginning in approximately 2006, Braun became responsible for obtaining insurance for
Quest. Rivett, as the indirect owner of Quest, asked Braun to consult about certain business
operations of Quest with individuals at The Rivett Group (TRG), which is another entity owned
indirectly by Rivett. TRG provided back office assistance, such as accounting, for companies
owned by Rivett or his family. Sarah Hogg is a financial and tax analyst who works for TRG.
Braun asked Hogg to attend meetings with NationAir to discuss insurance issues for Quest, not
only because of the financial implications, but also because NationAir acted as an insurance
broker for a corporate aircraft owned separately by TRG.
NationAir is an insurance broker specializing in the procurement of aviation insurance on
behalf of its clients. Quest had purchased insurance through NationAir for some 15 years when
Braun became responsible for obtaining insurance for Quest in 2006. John Worthing was the
pnmary contact for Quest at NationAir from 2006 until Quest switched brokers in 2015.
Worthing has worked for NationAir since 1997, specializing in working with clients m the
aviation industry. Worthing has experience as a licensed pilot, plane owner, and former
technician at an FBO m Nebraska. Worthing had more experience with aviation insurance than
either Braun or Hogg, whose experienees with aviation insurance were limited to their work with
Quest and TRG respectively.
NationAir, through Worthing, brokered two yearly aviation insurance policies for
Quest—an Aviation Policy and a Commercial General Liability (CGL) Policy. NationAir,
through Worthing, also brokered a separate Aviation Policy for the corporate plane owned by
TRG, which was done in conjunction with securing the policies for Quest. These insurance
policies took effect on February 1 of each year.
Typically, more than a month before the policies were to be renewed, an account
executive at NationAir would send to Quest a renewal application, with much of the information,
including policy limits^ filled in. NationAir meanwhile would be soliciting quotes for Quest's
Aviation Policy and CGL Policy from various insurers, based on the previous year's coverage
and limits. Braun on behalf of Quest supplied any additional or updated information and
returned the application to NationAir. NationAir would update that information to the potential
insurers once it received the fully completed application from Braun.
In January before the expiration of the policy. Worthing would speak with Quest, either
by phone or in person in Aberdeen, about Quest's insurance options and quotes for renewal
policies. For the renewal conversation for both the 2009-10 and 2011-12 policy years.
Worthing on behalf of NationAir travelled to Aberdeen and met with Braun and Hogg.
Worthing toured Quest's facilities and viewed the aircraft and operation while in Aberdeen.
In 2007, Quest acquired a second FBO at Tea and began operating charter and FBO
services from that location. NationAir was aware of Quest's acquisition and operation of an
FBO in Tea. In late 2008, a company called S&S Aviation LLC (S&S) became interested in
purchasing a Cessna 42IC for its use and sought to defray the costs of the Cessna by leasing the
Cessna for Quest to use as well. Braun worked with Worthing to obtain quotes to include the
Cessna on Quest's insurance. In 2009, Quest and S&S entered into an Aircraft Marketing
Agreement that allowed Quest to use the aircraft and, among other things, obliged Quest to
maintain liability insurance of$2 million on the Cessna.
On January 15, 2009, Worthing on behalf of NationAir met with Braun and Hogg in
Aberdeen to discuss the 2009 insurance renewal. The parties have somewhat different versions
of what occurred during this meeting. By January of2009, Quest contemplated using the Cessna
m its business, although it had not finalized the arrangement with S&S. At the time of the 2009
renewal meeting. Quest had a $2 million Aviation Policy limit of liability and a $20 million CGL
Policy limit of liability with National Union Fire Insurance Company of Pittsburgh (National
Union), which is an affiliate of AIG Insurance. Either at the renewal meeting or sometime
afterwards. Worthing presented quotes for a $2 million liability limit on aircraft and a separate
$5 million liability limit on the Cessna. The quote for a $2 million liability limit for the Cessna
was from an AIG entity, and the quote for the $5 million liability limit was from W. Brown &
Associates, although there is some dispute over whether that was a "hard quote" or something
else. Based upon the extra training required, higher premiums, and the fact that Quest was
currently insured by an AIG company and wanted to keep its policies together. Quest declined
the $5 million Aviation Policy quote and opted for the $2 million Aviation Policy coverage for
the Cessna and other aircraft, together with the CGL Policy with a $20 million liability limit, as
it had for previous years.
The addition of the Cessna in Tea changed Quest's charter business by allowing Quest to
fly more passengers in a single charter, and m more inclement weather. Quest had a noticeable
increase in business in 2010 as a result.
Prior to the 2011 insurance renewal meeting, Braun had informed Worthing that Quest
was allowing another insurance broker, Avsurance Corporation, to obtain quotes for Quest.
Quest had invited Avsurance to hid on Quest's business in an effort to ensure that it was getting a
good price for insurance coverage. Avsurance quoted the same limits NationAir had on the
Aviation Policy, which included a $2 million liability limit for aircraft including the Cessna.
Avsurance did this because Quest supplied Avsurance the same application that was partially
completed by NationAir, including the same policy limits from the previous year.
On January 18, 2011, Worthing on behalf of NationAir travelled to Aberdeen for the
annual insurance renewal meeting with Braun and Hogg. The parties differ somewhat over what
was said at the 2011 renewal meeting. Worthing recalled that Quest wanted NationAir to "match
the quote" of Avsurance, and that the 2011 renewal meeting was hnef. Braun and Hogg
remember the meeting being longer and Quest's request being different. Hogg recalled asking
Worthing if the $2 million Aviation Policy coverage was adequate based on the increased
number of passengers. According to Quest witnesses. Worthing talked about the $20 million
CGL Policy covering maintenance issues and protecting Quest if there was a plane crash caused
by faulty maintenance. In actuality, the CGL Policy excluded coverage for claims for bodily
injury ansing from aircraft owned or operated by Quest. This provision—known as the "owned
or operated exclusion"—^meant that there was no circumstance in which the CGL Policy would
cover damages caused by a Cessna crash while Quest was using it for charter purposes.
According to Braun and Hogg, Worthing left Quest with the belief that Quest not only had a $2
million liability limit under the Aviation Policy if the Cessna were to crash, but also had an
additional $20 million limit under the CGL Policy if any such crash was due to a maintenance
issue. Quest now contends that if it knew that its maximum coverage in the event of a crash of
the Cessna used for eharter services was $2 million under the Aviation Policy, it would have
made different decisions either about its insurance coverage or its use ofthe Cessna in the charter
NationAir managed to match Avsuranee's quote, thereby lowering Quest's premium
payment below the original quote it had received. The renewal on February 1, 2011, was for an
Aviation Policy with a $2 million limit and a CGL Policy with a $20 million limit, both with
National Union, an AIG affiliated company.
In May of 2011, the hull value of the Cessna increased as a result of a new paint job. At
the request of Quest, through NationAir, National Union increased the hull value for property
damage coverage from $400,000 to $500,000. For reasons not clear in the record. National
Union also increased the liability limits on the Cessna to $3 million under the Aviation Policy.
Quest believes that Worthing improperly took credit for the increased liability limit, although
Worthing now disclaims having taken such credit.
On December 9, 2011, the Cessna crashed soon after takeoff in Sioux Falls, killing three
passengers and the pilot. The estates of the passengers sued Quest for wrongful death. Quest
now has settled all claims, but the amount paid exceeds the $3 million liability limit for the
Cessna. National Union honored the $3 million liability limit when it paid its part of the
settlements for the lawsuits resulting from the December 9, 2011 accident. National Union, the
AIG entity with both the $3 million Aviation Policy and the $20 million CGL Policy, denied
additional coverage based on the "owned and operated exclusion" provision in the CGL Policy.
The National Transportation Safety Board (NTSB) investigated the cause of the plane
crash and issued a report in 2013. The report determined the "probable cause(s) of [the]
accident" related to actions by the pilot. Quest does not concede that "pilot error" alone is the
cause of the plane erash. Quest notes that preparation and maintenance of the Cessna, as well as
the pilot's response to an in-flight emergeney, were issues in the wrongful death lawsuits, and
that there was an allegation that the pilot failed to seeure the oil eap on the left engine of the
plane after ehecking and filling the oil, whieh led to a fire in the left engine. Quest views the
possible failure to seeure the oil eap as a maintenanee issue.
After the Cessna erash. Worthing allegedly mistakenly eonfirmed to Quest that the CGL
Poliey with its $20 million limits would provide eoverage for the aecident if it was found that the
aireraft had experienced maintenanee issues. Quest maintains that NationAir never informed it
that the CGL Poliey contained an exclusion for owned or operated aircraft, and that if it had
known of the exclusion, it would not have ineurred the liability for the gap between the $3
million Aviation Poliey limit on the Cessna and the amount it ultimately paid to settle lawsuits
that arose out ofthe deaths ofthe three passengers.
A. Summary Judgment Standard
Rule 56 of the Federal Rules of Civil Proeedure provides for summary judgment when
"there is no genuine issue as to any material fact and .. . the movant is entitled to judgment as a
matter oflaw." Fed. R. Civ. P. 56. The party moving for summaryjudgment bears the burden of
showing that there is no genuine issue of matenal faet and that the movant is entitled to judgment
as a matter of law. Celotex Com.. 477 U.S. at 322. The non-moving party is entitled to the
benefit of all reasonable inferences to be drawn from the underlying facts in the reeord. Id, at
324. The non-moving party may not, however, merely rest upon allegations or denials in its
pleadings, but must come forward with speeific facts showing that a genuine issue for trial exists.
Forrest v. Kraft Foods. Inc.. 285 F.3d 688,691 (8th Cir. 2002).
B, Count I- Negligence Claim
Quest's Second Amended Complaint alleges m Count I negligence, claiming that
NationAir had a duty to Quest in providing insurance coverage advice and recommendations and
that NationAir breached its duty to Quest by "a. failing to advise Quest that the CGL Policy
would not provide coverage for an incident involving an aircraft operated by Quest; and/or b.
failing to recommend procurement of an insurance policy that provided adequate coverage for an
incident involving an aircraft operated by Quest." Doc. 27 at^43-44. NationAir seeks partial
summary judgment on the negligence claim, "except for the claim based upon the Aviation
Policy Limits Breach." Doc. 47 at 1. To make this argument, NationAir maintains that Quest
must present expert testimony to support a claim for breach of the standard of care by a
professional, citing Luther v. Citv of Winner, 674 N.W.2d 339, 344(S.D. 2004). NationAir then
attacks three of the four opinions of Quest's expert, Bennet Bibel, who opined that NationAir
breached the applicable standard of care in four ways:
(1) NationAir failed to recommend that Quest purchase more than $2 million
in the Aviation Policy("Aviation Policy Limits Breach");
(2) NationAir failed to advise Quest of the existence and effect of the owned
or operated exclusion in the CGL Policy("Owned and Operated Exclusion
(3) Worthing wrongfully took credit for getting the Aviation Policy limit
increase from $2 million to $3 million ("Credit for Increased Limits
(4) Worthing breached the standard of care by submitting an updated quote m
2011 because the implication to the insured was that he provided his best
quote in the initial quote but he was able to provide a better quote m
response to competition by Avinsure [^ic] ("Submitting Updated Quote
Doc. 48 at 15. NationAir concedes that the first opinion called "Aviation Policy Limits Breach"
involves a genuine issue of material fact on the negligence claim. NationAir argues that the
second opinion called "Owned and Operated Exclusion Breach" does not involve a jury issue
because there is no coverage under the CGL Policy and it is speculative as to how Quest could
have structured its business any differently had it been aware of the "owned and operated"
exclusion in the CGL Policy. Doe. 48 at 16. NationAir argues that the third and fourth
opinions—involving "Credit for Increased Limits Breach" and "Submitting Updated Quote
Breach"—are not breaches of the standard of care and involve no damage to Quest. Doc. 48 at
19. Quest resists summary judgment. Doc. 52.
In this diversity jurisdiction ease, South Dakota law governs substantive legal issues.
Under South Dakota law, to prevail in a suit based on negligence, "a plaintiff must prove duty,
breach of that duty, proximate and factual causation, and actual injury." Johnson v. Hayman &
Assocs.. Inc.. 867 N.W.2d 698, 702 (S.D. 2015)(quoting Hendrix v. Schulte, 736 N.W.2d 845,
847 (S.D. 2007)). Under South Dakota law, the existence of the duty in the first place is a
question oflaw. Trammell v Prairie States Ins. Co.,473 N.W.2d 460,462(S.D. 1991).
South Dakota ease law has long recognized a duty that an insurance agent owes to a
customer. "An insurance agent has a duty to a potential insured to 'proeur[e] insurance of the
kind and with the provisions specified by the insured.'" Cole v. Wellmark of S.D., Inc.. 776
N.W.2d 240, 251 (S.D. 2009)(alteration in original)(quoting Citv of Colton v. Schwehaeh, 557
N.W.2d 769, 771 (S.D. 1997))fciting Fleming v. Torrev. 273 N.W.2d 169, 170(S.D. 1978)); s^
also O'Daniel v. NAU Country Ins. Co., No. 05-5089-KES, 2007 WL 4568991, at *5 (D.S.D.
Dec. 21, 2007); Rumnza v. Larsen. 551 N.W.2d 810, 813 (S.D. 1996). The duty of an insurance
agent asked to procure a particular type of insurance "is to use reasonable diligence to get the
insurance specified, or to seasonably notify the potential insured ofthe agent's inability to do so."
Cole. 776 N.W.2d at 251 (citing Feldmever v. Engelhart. 222 N.W. 598, 599 (S.D. 1928)). An
agent also has "a duty to obey [a] elient's instruetions in good faith and with reasonable
professional skill." City of Colton, 557 N.W.2d at 771 (quoting Trammell, 473 N.W.2d at 462).
However, an insuranee agent has "no duty to go beyond this standard and ask [a][elient] further
questions if [the] [client] appeared clear" about what insurance was desired. Id (second and
fourth alterations in original) (quoting Trammell. 473 N.W.2d at 462); see also Rumpza, 551
N.W.2d at 813 ("Although the Trammell court recognized the duty to obey the msured's
instructions m good faith and with reasonable professional skill, it found no duty to exceed that
standard and inquire further whether the insured was clear about what he wanted."). The
Supreme Court of South Dakota has approved a jury instruction on an insurance agent's duty as
An agent who holds himself out as being qualified to procure insurance is
required to exercise the particular skill reasonable to be expected of one in that
occupation, and to have adequate knowledge as to the different companies and the
variety ofterms and coverage available with respect to the insuranee involved.
Moore v. Kluthe & Lane Ins. Agency. Inc.. 234 N.W.2d 260, 265 & n.2 (S.D. 1975). As
discussed further below, the Supreme Court of South Dakota has never recognized an insurance
agent to have a greater fiduciary-type duty to an insured. See Cole, 776 N.W.2d at 253.
There is a causation requirement in any negligence case. In the context of a claim against
an insurance agent, "causation may be proven by showing that if the client had been properly
informed, coverage could have been obtained elsewhere or that the client could have avoided or
reduced the risk." Q'Daniel. 2007 WL 4568991, at *5; see also Bell v. O'Learv. 744 F.2d 1370
(8th Cir. 1984)(appljdng similar standard in case involving Missouri law).
NationAir does not argue that it had no duty to Quest, and NationAir does not seek
summary judgment on Quest's claim of an "Aviation Policy Limits Breach" by not
recommending the purchase of more than $2 million in the Aviation Policy. The only other basis
alleged in the Seeond Amended Complaint for negligenee is the failure to advise Quest that the
CGL Policy would not provide coverage for an incident involving an aircraft operated by Quest,
which the parties call the "Owned and Operated Exclusion Breach." Doe. 27 at ^ 44. There
exist genuine issues of material fact on what, if any, effect there would have been on Quest if it
had known that the $20 million CGL Policy limits could never apply to a crash of the Cessna
while chartered, even if the crash were caused by a maintenance issue. Quest has presented
some evidence that it might have made different decisions if it had known that the $20 million
CGL Policy would never provide coverage for any such crash involving the Cessna. Quest
maintains that it may have purchased more coverage in the Aviation Policy or made a business
decision to forego chartered flights using the Cessna. Viewing the facts in the light most
favorable to non-movant Quest, as this Court must at this stage, there is enough evidence that
NationAir misinformed Quest on whether the $20 million CGL Policy could apply to a crash of
the Cessna caused by a maintenance issue, and whether that misinformation caused Quest to
forego seeking higher limits in the Aviation Policy or to otherwise avoid the risk. See O'Daniel,
2007 WL 4568991, at *5.
The two remaining opinions expressed by Quest's expert Bibel—"Credit for Increased
Limits Breach" and "Submitting Updated Quote Breach"—do not independently support a claim
of negligence. There is no evidence that any such malfeasance caused any damage to Quest.
Indeed, the increase in the Aviation Policy limit and the reduction m the amount of the insurance
premiums both benefited Quest. Quest does not appear to argue that these additional two bases
support some negligenee claim; the Second Amended Complaint does not allege that Quest was
negligent in either of these two ways. Although it is inappropnate to refer to these matters as
"breaches" of any duty, circumstances surrounding how the limit of insurance was increased to
$3 million and statements made m reference to that, as well as the circumstances surrounding the
quote for insurance in 2011, may be relevant at trial. In bnef. Quest's two claims for negligence
contained in the Second Amended Complaint survive summaryjudgment.
C. Count II - Breach of Fiduciary Duty Claim
Quest's Second Amended Complaint alleges in Count II breach of fiduciary duty,
claiming that NationAir's same conduct that was negligence supports a breach of fiduciary duty.
As stated above, the Supreme Court of South Dakota has never recognized a breach of fiduciary
duty claim against an insurance agent. In the cases discussing the duty owed by an insurance
agent to a customer, there is no hint of the duty being fiduciary in nature.
Cole, 776 N.W.2d
at 251; Citv of Colton. 557 N.W.2d at 771; Rumnza. 551 N.W.2d at 813; Trammell,473 N.W.2d
at 462; Moore. 234 N.W.2d at 265. The Supreme Court of South Dakota mdeed has refused to
impose a fiduciary duty on insurance agents who solicit applications for insurance. Cole, 776
N.W.2d at 253-54.
The question of whether a fiduciary duty exists is an issue oflaw for the court. Cole, 776
N.W.2d at 253; Ward v. Lange. 553 N.W.2d 246, 250 (S.D. 1996); High Plains Genetics
Research. Inc. v. J.K. Mill-Iron Ranch. 535 N.W.2d 839, 842 (S.D. 1995).
relationship is founded on a "peculiar confidence" involving a situation where a fiduciary has a
"duty to act primarily for the benefit" of the other. Ward. 553 N.W.2d at 250 (quoting High
Piflin.s Cenetics, 535 N.W.2d at 842; Garrett v. BankWest. Inc., 459 N.W.2d 833, 839 (S.D.
1990)). "South Dakota law reflects that most commercial or business relationships do not nse to
the level of a fiduciary relationship when the parties are dealing over an arms-length
transaction." Cole, 776 N.W.2d at 254 (citing High Plains Genetics, 535 N.W.2d at 842). "The
law will imply such duties only where one party to a relationship is unable to fiilly protect its
interests and the unprotected party has placed its trust and confidence in the other." Taggart v.
Ford Motor Credit Co.. 462 N.W.2d 493, 500 (S.D. 1990). To establish a fiduciary duty, three
things must exist: 1) the plaintiff must repose "faith, confidence, and trust" in the defendant; 2)
the plaintiff must be in a position of"inequality, dependence, weakness, or lack of knowledge;"
and 3) the defendant must exercise "dominion, control or influence" over the plaintiffs affairs.
Chem-Age Indus.. Inc. v. Glover. 652 N.W.2d 756, 772 (S.D. 2002) (quoting Garrett. 459
N.W.2d at 838). "Fiduciary relationships juxtapose trust and dependence on one side with
dommance and influence on the other." High Plains Genetics. 535 N.W.2d at 842.
Quest argues that NationAir and its agent Worthing had both influence over Quest's
affairs and greater knowledge ofinsurance matters, and that Quest reposed faith, confidence, and
trust in NationAir and its agent Worthing. Doc. 52 at 33-34. In nearly any purchase of
insurance, a customer can assert that the agent has both greater knowledge of insurance matters
and influence over the customer's affairs, and that the customer reposed faith, confidence, and
trust in the agent. The Supreme Court of South Dakota considered these eircumstances decades
ago in setting the duty in negligence that insurance agents have to their customers. S^ Moore,
234 N.W.2d at 265 (noting the superior knowledge of insurance agents and the disadvantage of
customers in understanding, but setting negligence standard). Much more recently, in 2009, the
Supreme Court of South Dakota considered the grant of summary judgment for an insurance
agent on a fiduciary duty claim. Cole. 776 N.W.2d at 253—54. In Cole, the plaintiffs claimed
that an agent assisting in obtaining health insurance had breached a fiduciary duty by, among
other things, accepting a premium check and having them sign an authorization for electronically
deducted premiums, and then telling them they were "all set" and "good to go." Id. at 244. The
insurer rejected the insurance application for the plaintiffs' failure to sign riders. li In
affirming summary judgment on the breach of fiduciary duty claim, the Supreme Court of South
Dakota considered there to be an arms-length transaction for the purchase of the insurance
involved m Cole, in part because the plaintiffs had researched and reviewed other policies,
determined those policies to be too expensive, and demonstrated no "weakness of age, of mental
strength, business intelligence, knowledge of the facts involved, or other conditions." Id at 254
(quoting Garrett. 459 N.W.2d at 838).
Similar to the circumstances in Cole. Quest is a commercial business that has operated an
FBO for more than a decade. Hogg, a CPA, and Braun, an executive with Quest, participated m
annual meetings concerning the Aviation Policy and CGL Policy renewals. Quest sought out an
alternative quote for coverage from another agent, Avsurance. Quest did not demonstrate any
"weakness of age, of mental strength, business intelligence, knowledge of the facts involved, or
other condition" such that NationAir and Worthing had some advantage over it. NationAir did
not exercise "dominion, control, or influence" over the business operations of Quest in the sense
necessary to take on a fiduciary duty. Although Quest may have reposed "faith, confidence, and
trust" in NationAir in helping it make insurance decisions. Quest's placement of trust and
confidence in NationAir does not suffice to create a fiduciary duty. As the Supreme Court of
South Dakota stated:
One party cannot transform a business relationship into one which is fiduciary in
nature merely by placing trust and confidence m the other party. There must be
additional cireumstanees, or a relationship that induces the trusting party to relax
the care and vigilance which he would ordinarily exercise for his own protection.
Amsworth v. First Bank of S.D.. 472 N.W.2d 786, 788 (S.D. 1991). Quest's remedy for being
allegedly misinformed by NationAir as to whether the CGL Policy covered crashes due to
maintenance issues and whether coverage under the Aviation Policy was sufficient lies under
South Dakota law in an action for negligence, not for breach of fiduciary duty. Therefore,
NationAir is entitled to summary judgment on Count II of the Second Amended Complaint.
For the reasons contained above, it is hereby
ORDERED that Defendant's Motion for Partial Summary Judgment, Doc. 47, is denied
as to the two theories of negligence contained in Count I ofthe Second Amended Complaint. It is
ORDERED that Defendant's Motion for Partial Summary Judgment, Doc. 47, is granted
with respect to Count II - Breach of Fiduciary Duty contained in the Second Amended
DATED this 31^^ day of January, 2017.
BY THE COURT:
ROBERTO A. LANGE
UNITED STATES DISTRICT JUDGE
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