State Farm Fire and Casualty Company v. Loseth et al

Filing 42

ORDER granting 25 Motion for Summary Judgment and Declaratory Judgment. Signed by U.S. District Judge Camela C. Theeler on 3/6/2025. (CR)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
STATE FARM FIRE AND CASUALTY
COMPANY,

5:23-CV-05059-CCT

Plaintiff,
vs.
CHAD LOSETH, VALKYRIE
CONSTRUCTION, LLC, DAVE
SWANSON, and COLLEEN SWANSON,

ORDER GRANTING PLAINTIFF’S
MOTION FOR SUMMARY
JUDGMENT AND DECLARATORY
JUDGMENT

Defendants.

Plaintiff, State Farm Fire and Casualty Company (State Farm), moves for
summary judgment, seeking a declaration that it has no duty to defend or
indemnify Valkyrie Construction, LLC (the LLC) or anyone else in and from the
lawsuit entitled Swanson v. Valkyrie Construction, LLC (the Underlying Action),
filed in state court at Custer County Circuit Court File No. 16CIV23-000011.
Docket 25. The defendants oppose the motion. Dockets 29, 32.
BACKGROUND
Many facts are undisputed; however, where there are disputes, the Court
states the facts and reasonable inferences therefrom in a light most favorable
to the defendants, the nonmoving parties. See Use and Benefit of J & N
Seeding, LLC v. Morris, Inc., 3:22-CV-03009-RAL, 2024 WL 4043649, *3 (D.S.D.
Sept. 4, 2024) (providing that “[c]ourts ruling on a summary judgment motion

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view the facts and inferences fairly drawn from the facts in the nonmoving
party’s favor” (citation omitted)). Chad and Anita Loseth had an ongoing
business relationship, spanning approximately 17 years, with State Farm for
personal and business insurance. Docket 31-2 at 8. 1 Relevant to this case, the
Loseths contacted State Farm in approximately September 2017 to obtain
insurance coverage for Chad because he was working as a subcontractor for a
general contractor. Docket 31-1 at 28. State Farm issued Chad a policy (the
Policy) on or about September 11, 2017. Docket 1 ¶ 13. The Policy’s declaration
page listed Chad Loseth as the named insured. Id. ¶ 13, 17.
While Chad was working as a subcontractor, he also registered the
assumed business name under which he was operating—Valkyrie
Construction. Docket 31-1 at 17. The registration document was signed and
recorded on September 14, 2017. Id. at 19. According to the Loseths, State
Farm was informed at the time they procured the Policy that Chad intended to
work under an assumed business name. Id. at 37.
Chad worked as a subcontractor after being issued the Policy by State
Farm, but at some point thereafter, he decided he wanted to work as a general
contractor. Id. at 24. According to Chad, the State required him to form a
limited liability company to work as a general contractor. Id. Therefore, on
September 14, 2018, the Loseths formed Valkyrie Construction, LLC. Docket
28-2 (the LLC’s articles of incorporation); Docket 31-1 at 16. Chad also testified

1 Citations to depositions in the record are to the deposition page, not the docket

document page.

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that he formed the LLC in part because he wanted to protect his personal
assets. Docket 36-9 at 55.
After forming the LLC, Chad and Anita discussed the need to update
their insurance with State Farm and “make sure [they] were still good for [their]
coverage.” Docket 31-1 at 27–28. Anita, with Chad present, called Steve
Engelbrecht, their State Farm agent, and set up a meeting. Docket 31-1 at 27.
Neither Chad nor Anita could recall the date of the meeting; however, Chad
testified that the meeting took place within a couple days after the Loseths
formed the LLC and only Anita attended. Docket 36-9 at 26. Anita could not
remember with certainty whether she provided Engelbrecht with the LLC’s
incorporation documents during this meeting. Docket 31-2 at 8. She did
remember, however, that she told Engelbrecht they had formed the LLC and
needed insurance for it. Id. at 9, 12, 14–15. She testified that when she left the
meeting, she trusted Engelbrecht “to make sure that things were legally the
way that they were supposed to be.” Id. at 11.
While Chad did not attend the meeting, he testified that Anita told him
“that she notified [Engelbrecht] at that time that we had formed the LLC. That’s
basically - - that’s basically the conversation as I remember it.” Docket 31-1 at
27. He also testified that she told him “she had taken care of it and discussed it
with [Engelbrecht] and notified him of the change.” Id. at 28. Chad, like Anita,
“trusted [Engelbrecht] to adjust the policy as needed” and “to take care of the
situation for [him] as he did with all [their] other insurance policies.” Id. at 31–
32.
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It is undisputed that the LLC performed work as a general contractor in
South Dakota and Arizona. Docket 30 ¶ 14. Relevant here, the LLC contracted
with Dave and Colleen Swanson to be the general contractor and provide
various materials and services for construction projects at the Swansons’
property. Docket 28-16 at 10. Dave testified that he asked the Loseths whether
the LLC was licensed and insured. Id. at 17. The Loseths provided the
Swansons with a copy of the declarations page for the Policy, which listed Chad
as the named insured. Id. Dave testified that the Loseths told him “they were
insured and Valkyrie Construction was one in the same under their insurance
policy with them.” Id. at 17–18. Chad does not dispute that he represented to
the Swansons that the LLC was covered under the Policy. Docket 36-9 at 64–
66.
The LLC began construction on the Swansons’ property in March 2022.
Docket 28-3 at 36; Docket 28-15 at 63. However, around mid-July 2022, the
parties’ relationship began to deteriorate, and ultimately, the relationship
between the LLC and Swansons terminated. Docket 30 ¶¶ 25, 26. While the
Loseths and Swansons “interpret the circumstances surrounding the
termination differently[,]” on or near August 23, 2022, the LLC removed its
tools and materials from the Swansons’ property. Id. ¶¶ 26–27. For purposes of
State Farm’s motion for summary judgment, the LLC and Chad do not dispute
that on the date the LLC removed its tools, the work the LLC “agreed to perform
was either incomplete or had not been started yet[,]” and “various work

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performed by [the] LLC was incorrect, defective, and/or not compliant with
code requirement.” Id. ¶¶ 28, 31.
On February 14, 2023, the Swansons filed the Underlying Action against
the LLC, alleging breach of contract and construction defects/negligence. Id.
¶ 36; Docket 1-1. The Swansons claimed more than $278,000 in damages.
Docket 30 ¶ 38. They have never claimed damages at less than $95,000. Id.
On March 28, 2023, the Loseths submitted a claim to State Farm under
the Policy related to the Underlying Action, and on August 21, 2023, State
Farm agreed to defend the LLC subject to a reservation of rights. Docket 28-14
at 1. In a letter, State Farm explained the reasons for its reservation of rights.
Id. State Farm also advised the Loseths that it would be filing a declaratory
judgment action to determine the applicable coverage issues. Id. at 8.
On September 5, 2023, while the Underlying Action was pending, State
Farm filed this declaratory judgment action against the Chad Loseth, the LLC,
and the Swansons pursuant to Federal Rule of Civil Procedure 57 and
28 U.S.C. § 2201, requesting “a determination and declaration from this Court
that [State Farm] has no continuing duty to defend and no duty to indemnify
[the LLC] against the claims and allegations in the Underlying Action.”
Docket 1 ¶¶ 21, 42. Approximately a year later, State Farm filed the current
motion for summary judgment requesting the same relief. Docket 25. Chad and
the LLC oppose State Farm’s motion, Docket 29, and the Swansons join in that
opposition, Docket 32. For ease of reading the defendants will collectively be
referred to as “the LLC.”
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SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). “The moving party bears the burden of
showing both the absence of a genuine issue of material fact and its
entitlement to judgment as a matter of law.” NDN Collective v. Retsel Corp.,
5:22-CV-5027, 2024 WL 3903975, *2 (D.S.D. Aug. 22, 2024) (citations
omitted). “The moving party can meet this burden by presenting evidence that
there is no dispute of material fact or by showing that the nonmoving party has
not presented evidence sufficient to support an element of its case on which it
bears the ultimate burden of proof.” Id. (citation omitted). “Once the movant
has met its burden, the nonmoving party may not simply rest on the
allegations in the pleadings, but must present facts, by affidavit or other
evidence, showing that a genuine issue of material fact exists.” S. Black Hills
Water Sys., Inc. v. Town of Hermosa, 5:21-CV-05070-VLD, 2023 WL 4824956,
at *4 (D.S.D. July 27, 2023) (citing Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 256 (1986); Fed. R. Civ. P. 56(e)). The Court will “review the evidence and
the inferences which reasonably may be drawn from the evidence in the light
most favorable to the nonmoving party.” Musolf v. J.C. Penney Co. Inc., 773
F.3d 916, 918 (8th Cir. 2014) (citation omitted).
DISCUSSION
State Farm contends that “[t]here are several independent and sufficient
reasons why [it] owes no continuing duty to defend and no duty to indemnify
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[the] LLC and is entitled to summary judgment in its favor.” Docket 26 at 9.
Those reasons include: (1) the LLC is not a named insured under the Policy
and does not otherwise qualify as an insured; (2) the damages alleged by the
Swansons in the Underlying Action do not arise out of an “occurrence,” are not
“property damage,” and do not arise out of any of the enumerated offense for
“personal and advertising injury” as these quoted terms are defined in the
Policy; and (3) even if the alleged damages implicate certain coverage
provisions, multiple Policy exclusions nonetheless apply to bar coverage. Id. at
9–10. Although this Court has examined each reason advanced by State Farm
and the LLC’s responses thereto, the Court will address only the question
whether the LLC qualifies as an insured under the Policy, as that issue is
dispositive.
Jurisdiction in this case is based on diversity of citizenship under 28
U.S.C. § 1332(a)(1) because State Farm is a corporation with its principal place
of business in Illinois, Docket 1 ¶ 2, and the LLC’s principal place of business
is in Custer County, South Dakota, Id. ¶3; Docket 12 ¶ 5. “State law controls
the construction of insurance policies when a district court is exercising
diversity jurisdiction, and therefore, South Dakota law governs this insurance
coverage dispute.” Union Ins. Co. v. Klingenberg, CIV 20-4028, 2021 WL
1102189, *2 (D.S.D. March 23, 2021) (citation omitted).
Under South Dakota law, it is well settled “that the duty to defend is
independent and far broader than the duty to indemnify judgments or
settlements.” Nationwide Agribusiness Ins. Co. v. Fitch, 976 N.W.2d 783, 786
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(S.D. 2022) (citation omitted). “An insurance company has a duty to defend ‘if it
is clear or arguably appears from the face of the pleadings in the action against
the insured that the alleged claim, if true, falls within policy coverage.’” Id.
(quoting Hawkeye-Security Ins. Co. v. Clifford, 366 N.W.2d 489, 491 (S.D.
1985)). “The burden rests with the insurer ‘to show the claim clearly falls
outside of the policy coverages’ and that ‘there is no duty to defend.’” N. Star
Mut. Ins. v. Korzan, 873 N.W.2d 57, 61 (S.D. 2015) (quoting De Smet Farm Mut.
Ins. Co. of S.D. v. Gulbranson Dev. Co, 779 N.W.2d 148, 155 (S.D. 2010)).
Applying the above law here, State Farm directs this Court to the
language in the Policy defining who is an insured. That provision provides in
relevant part:
SECTION II – LIABILITY
SECTION II – WHO IS AN INSURED
1. Except for liability arising out of the use of “non-used autos”:
a. If you are designated in the Declarations as:
(1) An individual, you and your spouse are insureds, but only
with respect to the conduct of a business, other than
described in (2) through (5) below, of which you are the
sole owner.
(2) A partnership of joint venture, you are an insured. Your
members, your partners and their spouses are also
insureds, but only with respect to the conduct of your
business.
(3) A limited liability company, you are an insured. Your
“members” are also insureds, but only with respect to the
conduct of your business. Your “managers” are insureds,
but only with respect to their duties as your “managers”.

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(4) An organization other than a partnership, joint venture or
limited liability company, you are an insured. Your
“executive officers” and directors are insureds, but only
with respect to their duties as your officers or directors.
Your stockholders are also insureds, but only with
respect to their liability as stockholders.
(5) A trust, you are an insured. Any executor, administrator,
trustee, beneficiary or custodian of your estate or living
trust are also insureds, but only while acting within the
scope of their duties as such.
Docket 26 at 11–12 (emphasis added) (quoting Docket 1-2 at 64).
The Policy defines “you” and “your” as “the Named Insured shown in the
Declarations and any other person or organization qualifying as a Named
Insured under this Policy.” Id. at 10 (quoting Docket 1-2 at 36). The declaration
page issued to the Loseths identified “Chad Loseth” as the named insured and
as an “Individual.” Docket 1-2 at 2.
State Farm argues that because only Chad Loseth is identified as the
named insured, the definition in subsection (1) is implicated, and thus, “the
Policy does not provide coverage for the claims or damages alleged against
Valkyrie Construction LLC.” Docket 26 at 11–12. State Farm further asserts
that because the declaration page identifies the named insured as an
“Individual” and not a limited liability company, the LLC does not otherwise
qualify as an insured under subsection (3). Id. at 12. Finally, according to State
Farm, the fact Chad performed work on behalf of the LLC does not implicate
any definition of an insured because the Policy provides that “[n]o person or
organization is an Insured with respect to the conduct of any current or past

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partnership, joint venture or limited liability company that is not shown as a
Named Insured in the Declarations.” Id. at 12 (quoting Docket 1-2 at 65).
In response, the LLC concedes that it is not a named insured under the
Policy and that it does not otherwise qualify as an insured under any Policy
provision. See generally Docket 29. However, the LLC argues that it is
nevertheless entitled to coverage based on coverage by estoppel or that at the
very least there are material issues of fact in dispute concerning whether
coverage by estoppel applies. Id. at 2, 8. In particular, the LLC directs this
Court to Chad’s and Anita’s deposition testimony wherein they related that
State Farm, via Engelbrecht, “was specifically notified in 2018 that the Loseths
had changed from operating under an assumed name (‘DBA Valkyrie
Construction’) to operating as an LLC (Defendant, ‘Valkyrie Construction,
LLC’)[,]” Id. at 4, and that they “trusted that their agent had done everything
necessary to provide the coverage they sought, and for which they continued
paying[,]” Id. at 7. The LLC further claims that during the 2018 meeting with
Engelbrecht, Anita provided him the LLC documents and “specifically
requested that the policy in question be ‘updated’ accordingly.” Id. at 7.
State Farm argues that the LLC waived its estoppel defense because
none of the defendants raised this defense in their respective answers. Docket
34 at 3. State Farm notes that under Federal Rule of Civil Procedure 8(c),
estoppel is an affirmative defense that must be pled “[i]n response to a
pleading[.]” Fed. R. Civ. P. 8(c). State Farm further quotes the general rule that
the “failure to plead an affirmative defense results in waiver of that defense.”
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Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008) (citation
omitted). Because this Court is sitting under diversity jurisdiction, it will apply
federal law to the procedural question whether the estoppel defense is waived.
Miller v. Honkamp Krueger Financial Servs., Inc., 9 F.4th 1011, 1016 (8th Cir.
2021) (“A federal court sitting in diversity applies state substantive and federal
procedural law.” (citation omitted)).
While State Farm is correct that the defendants did not specifically assert
estoppel as an affirmative defense in their answers, see Dockets 12, 13, the
failure to do so is not always fatal. As the Eighth Circuit explained,
“the Rule 8(c) pleading requirement is intended to give the opposing party both
notice of the affirmative defense and an opportunity to rebut it.” First Union
Nat’l Bank v. Pictet Overseas Tr. Corp., 477 F.3d 616, 622 (8th Cir. 2007)
(citation omitted). Therefore, the court “eschewe[s] a literal interpretation of the
Rule that places form over substance[.]” Id. (citation omitted). Instead, “[w]hen
an affirmative defense is raised in the trial court in a manner that does not
result in unfair surprise, . . . technical failure to comply with Rule 8(c) is not
fatal.” Id. (citation omitted). The party claiming waiver must show that
inclusion of the defense resulted in unfair surprise or is prejudicial. Id. at 623
(noting that the plaintiff has not shown unfair surprise or prejudice by
inclusion of defense).
Here, State Farm has neither asserted unfair surprise nor prejudice by
the LLC raising its coverage by estoppel defense for the first time in its
response to State Farm’s motion for summary judgment. Besides, it would be
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incredulous for State Farm to claim that it was unfairly surprised or
prejudiced. First, while none of the defendants used the phrase “coverage by
estoppel” in their respective answers, the LLC’s estoppel defense is based on
specific factual assertions already known by State Farm through discovery. In
particular, Chad and Anita testified in their depositions that even though the
LLC was not identified as a named insured under the Policy, coverage should
exist because they trusted Engelbrecht to update their Policy after Anita met
with him in September 2018 and told him that they had formed the LLC.
Second, all the facts related to this defense—at least as it pertains to the
motion for summary judgment—are already in the record, and State Farm has
had the opportunity to reply to the LLC’s argument in its reply brief. The Court
therefore construes the LLC’s assertion of the coverage by estoppel defense in
response to State Farm’s motion for summary judgment as constructively
amending its answer. See Pictet, 477 F.3d 623 (construing the assertion of the
defense as a constructive amendment to the pleading).
State Farm further argues that even if the LLC did not waive its estoppel
defense, summary judgment is nevertheless appropriate because “coverage by
estoppel is not applicable in this case for numerous reasons.” Docket 34 at 5.
Though State Farm advances multiple arguments for why coverage by estoppel
does not apply under the circumstances, this Court focuses particularly on
State Farm’s claim that the LLC failed to allege an essential element of its
coverage by estoppel defense—namely, that Engelbrecht or State Farm made a

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representation or assurance regarding coverage for the LLC under the Policy.
See id. at 6–7.
The South Dakota Supreme Court long ago observed that in South
Dakota “estoppel or waiver is available to bring within the coverage of an
insurance policy risks not covered by its terms or expressly excluded
therefrom.” State Auto. Cas. Underwriters v. Ruotsalainen, 136 N.W.2d 884,
887 (S.D. 1965). Under this rule, as later explained by the court, an “insurer is
estopped to deny coverage after a loss on a risk from a peril actually not
covered by the terms of the policy” when the “insurer or its agent
misrepresents, even though innocently, the coverage of an insurance contract,
or the exclusions therefrom, to an insured before or at the inception of the
contract, and the insured reasonably relies thereupon to his ultimate
detriment[.]” Roseth v. St. Paul Prop. & Liab. Ins. Co., 374 N.W.2d 105, 107
(S.D. 1985) (emphasis omitted) (quoting Harr v. Allstate Insurance Co., 255 A.2d
208, 219 (N.J. 1969)). Coverage by estoppel must be established by clear and
convincing evidence. Ruotsalainen, 136 N.W.2d at 887.
While Anita testified that she met with Engelbrecht in September 2018,
before the inception of the renewed the Policy, and informed him that the
Loseths had formed the LLC and “needed insurance for such[,]” Docket 31-2 at
15, the record does not contain any evidence that Engelbrecht represented to
or assured Anita at the meeting (or at any time prior to the policy renewing)
that the LLC would be a named insured or otherwise covered under the Policy.
In fact, Anita did not testify that Engelbrecht made any representations to her.
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Moreover, after the meeting, the Loseths continued to receive a declaration
page that identified only Chad as the named insured and contained no
reference to the LLC. Therefore, there is no conduct on behalf of State Farm
that could give rise to the Loseths’ belief that the LLC was insured under the
Policy.
The South Dakota Supreme Court deemed similar evidence insufficient
to allow a coverage by estoppel defense in American Family Mutual Insurance
Co. v. Elliot, 523 N.W.2d 100 (S.D. 1994). In Elliot, after suit was brought
against the insured for injuries a child sustained while the insured was
babysitting the child in her home, American Family instituted a declaratory
judgment action to determine whether the insured’s activities were excluded
under the policy. Id. at 101. American Family moved for summary judgment,
arguing that the policy excludes coverage for the babysitting services the
insured operated out of her home. Id. at 102. The circuit court denied the
motion, concluding that fact issues existed concerning, among other matters,
whether the insurance agent’s conduct negated the policy exclusion. Id.
On appeal, the supreme court reversed, noting the following evidence:
The Elliots obtained the policy in 1984 from American Family’s
agent, Al Roeder. Although Roeder testified that he usually tries to
keep his customers informed as to whether their policy covers their
activities, Roeder did not discuss coverage for Elliot’s babysitting
endeavors. Roeder admitted that he failed to discuss this matter
with the Elliots despite the fact that the policy was specifically
amended in 1987 to clarify child care services under the definition
of “business” and despite the fact that Roeder did not believe that
Marie’s child care services were covered by the policy. Marie Elliot
never read the policy prior to April 4, 1991.

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Id. at 102. In the court’s view, the evidence did not show “conduct on behalf of
American Family or the Elliots which could possibly give rise to a belief that the
American Family policy covered Elliot’s babysitting service.” Id. at 104. The
record also lacked “evidence that the American Family agent, Alvin Roeder,
made any representations to the Elliots that the babysitting service was
covered under the policy.” Id. The court noted that “Elliot’s argument, in
simplest terms,” is a claim “that because [Mr. Elliot] purchased a homeowner’s
policy which he barely read, and because he was not specifically told otherwise,
the babysitting service must have been covered by the policy.” Id. Therefore,
the court held that “[u]nder these facts the remedy of estoppel is not available
to expand the terms of the policy.” Id.
Relying on Elliot, the South Dakota Supreme Court also concluded in
Rumpza v. Larsen, that “the remedy of estoppel is not available to expand the
terms of the policy” because the insured did not allege that the insurer made
any representation regarding the coverage the insured now seeks to obtain.
551 N.W.2d 810, 816 (S.D. 1996). The coverage issue in Rumpza concerned a
vacant home and an endorsement in the policy that excluded coverage for a
loss that occurs while the premises has been vacant beyond thirty days. Id. at
811. Rumpza argued that Stockholm Farm Mutal Insurance Company “should
be equitably estopped from enforcing the vacancy provision” because Rumpza
“relied on the assertion of [his agent] Larsen that they had $50,000 coverage on
their property and that Larsen knew the property would be vacant.” Id. at 815.
The supreme court disagreed, determining that “[w]hile Rumpza alleges that
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Larsen [the representative] had information about potential vacancy and was
negligent, Rumpza does not allege that Larsen or Stockholm made any
representation that the home would be covered in the event of vacancy.” Id.
Two additional cases—ones favorable to the insured—buttress the South
Dakota Supreme Court’s view that there must be evidence of a representation
or assurance by the insurer to the insured to allow a coverage by estoppel
defense. See Farmers Mut. Auto. Ins. Co. v. Bechard, 122 N.W.2d 86 (S.D.
1963); Ruotsalainen, 136 N.W.2d 884. In Bechard, the court held that the
insurer was estopped from relying on its exclusionary clause to deny coverage
because the agent represented to the insured that he would be covered under
the policy while driving his gravel truck regardless of what kind of work he was
doing and further indicated in a letter that death and disability benefits apply
regardless of what the insured is driving. 122 N.W.2d at 91–92. Similarly, in
Routsalainen, the court upheld a circuit court’s application of coverage by
estoppel because the insured asked for certain coverage; the agent “specifically
advise[d] and assure[d]” that the trailer “was fully covered” as requested; and
the insured “relied upon such representations so made[.]” 136 N.W.2d at 887–
88.
Here, the LLC, seemingly acknowledging the lack of evidence that
Engelbrecht made a representation regarding coverage, contends that coverage
by estoppel can apply even without a representation when an “insured relied
upon the agent’s expertise and selection of the policy to [the insured’s]
detriment, after having informed the agent of the coverage needed, and so long
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as the insured had a reasonable belief that the policy covered the activities
disclosed to the agent.” Docket 29 at 6. The LLC directs this Court to De Smet,
wherein the court said that “a failure to write the policy to include the specific
coverage as ordered by the insured” can give rise to a claim of coverage by
estoppel. 779 N.W.2d at 156.
In De Smet, the undisputed facts established that the insured,
Gulbranson, showed the insurance agent, Croon, a copy of an insurance policy
containing the type of coverage Gulbranson sought to obtain from Croon. Id. at
157. Croon thereafter selected the farm liability policy to issue to Gulbranson,
which ended up not being of the type Gulbranson requested. Id. Coon selected
the policy by relying “on an erroneous assumption, based entirely on his own
prior experience with another customer[.]” Id. at 158. Neither the insurance
company nor Croon clarified the matter. Id. Ultimately, the court upheld the
circuit court’s coverage by estoppel determination because “Gulbranson relied
upon Croon’s expertise and selection of the farm liability policy to his
detriment” and “because of Croon’s actions, Gulbranson had a reasonable
belief that the De Smet policy covered [the] Company’s business activities.” Id.
In contrast, the LLC did not present any evidence that the Loseths
requested that Engelbrecht procure specific coverage for the LLC. Rather, Anita
testified that she told Englebrecht they “went to the LLC” and needed
insurance. Docket 31-2 at 15. Further, even though Anita testified that she
“trusted [their] insurance agent to make sure that things were legally the way
they were supposed to be” after the September 2018 meeting, Id. at 7, her
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reliance on her agent was not tethered to any action by Engelbrecht or to
information provided to the Loseths by State Farm. Indeed, after the 2018
meeting, the Loseths continued to receive a new declaration page each year
that identified—as it did prior to the 2018 meeting—only Chad Loseth as the
named insured. Docket 31-2 at 14; Docket 36-9 at 30. And while Anita testified
that she did not “did not know that [the Policy] needed to specifically say
Valkyrie Construction[,]” and she and Chad believed the LLC and Chad were
“one in the same[,]” Docket 31-2 at 14, 16, these beliefs, which were based on
her assumptions, cannot give rise to a coverage by estoppel defense.
Because the record does not contain any evidence that Engelbrecht or
State Farm represented to the Loseths that the LLC would be covered under
the Policy or evidence that the Loseths had a reasonable basis to believe that
the Policy covered the LLC’s activities, the LLC has failed to identify a material
issue of fact in dispute on the question whether coverage by estoppel applies.
Further, because it is undisputed that the LLC was not a named insured and
did not otherwise qualify as an insured under the Policy during the coverage
period at issue, the Swansons’ claims against the LLC clearly fall outside the
Policy, and State Farm has no duty to defend or indemnify the LLC or anyone
else in and from the Underlying Action.
Accordingly, it is hereby
ORDERED that State Farm’s motion for summary judgment, Docket 25,
is granted.

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DATED March 6, 2025.
BY THE COURT:

/s/ Camela C. Theeler
CAMELA C. THEELER
UNITED STATES DISTRICT JUDGE

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