De Smet Farm Mutual Insurance Company of South Dakota v. Busskohl

In 1983, David Busskohl (defendant) was living in his parents’ home when a fire destroyed it. His parents used the insurance proceeds to build Busskohl a house, which burned in 1990. An investigation suggested arson involving Busskohl. Busskohl and his wife built a second house at the same location and visited an American Family Insurance Company agent to insure it after the 1990 fire. But the agent said the underwriter would not insure the house because of the Busskohls’ loss history. In 2004, the Busskohls filled out an application with De Smet Farm Mutual Insurance Company of South Dakota (plaintiff). In response to “Has any insurer cancelled, refused, restricted, or declined to renew similar insurance?” Busskohl checked no. Had he answered yes, the application required an explanation. De Smet insured the house, and a third fire destroyed it nearly a year later. De Smet paid out nearly half a million dollars, but Busskohl sued, claiming the coverage limits were inadequate. During litigation, De Smet discovered American Family had refused to insure the Busskohls and sued to rescind the policy and recover the proceeds. The underwriting supervisor submitted an affidavit stating he would not have insured the Busskohls if he knew about the denial, because he would have obtained a copy of the 1990 fire-investigation report, which also disclosed the 1983 fire and Busskohl’s possible involvement. Busskohl denied misrepresenting that he was refused similar coverage because he never submitted a written application to American Family or received a written rejection and claimed he withdrew the American Family application because he decided to seek coverage elsewhere. But Busskohl’s wife testified they had gone to the agent seeking insurance and were told American Family would not insure them. The trial court granted summary judgment for De Smet, and Busskohl appealed.