[¶ 1.] Paul Wentzlaff, an insurance agent, stole thousands of dollars from Harvey Severson, an elderly man who asked Wentzlaff to help manage his financial affairs. Donald Hass, as personal representative for Severson's estate, sued Wentzlaff and two insurance companies who appointed Wentzlaff as an agent, North American Company for Life and Health Insurance (North American) and Allianz Life Insurance of North America (Allianz). Hass and North American each moved for summary judgment and Allianz joined North American's motion. After a hearing, the circuit court denied Hass's motion and granted the insurance companies' motion. Hass appeals, arguing that the insurance companies are vicariously liable for Wentzlaff's acts. We affirm.
FACTS AND PROCEDURAL BACKGROUND
[¶ 2.] Wentzlaff began working as an insurance agent in 1988. From 1988 through 1995, Wentzlaff was an agent for Aid Association for Lutherans, working in Colorado and Minnesota. Aid Association for Lutherans terminated Wentzlaff in late 1995 because of his sales practices, in part for not properly explaining a whole life policy. Wentzlaff then moved to South Dakota and worked as an agent for Kansas City Life and, in the late 1990s, for Lutheran Brotherhood. In 1997, Wentzlaff entered into a consent order with the South Dakota Division of Insurance under which he paid a $250 fine. Wentzlaff was penalized for promoting and advertising a seminar on then-recent federal legislation in a way that sought to influence the purchase of insurance through "fright and scare tactics."
[¶ 3.] In April 2001, Wentzlaff applied with North American. The application required that Wentzlaff disclose whether a complaint had ever been filed against him by a state insurance department, National Association for Securities Dealers (NASD), or another regulatory agency. Wentzlaff included a letter with his application, notifying North American of the 1997 consent order and attaching a copy of the order itself. In May 2001, North American received a supplement to the disclosure, explaining that the 1997 consent order involved an "advertising violation" and revealing that Wentzlaff was appointed as an agent by several other insurance companies. In August 2001, Lutheran Brotherhood reported that Wentzlaff failed to disclose or obtain approval for outside business and submitted non-genuine signatures on forms. Because of this report, the NASD suspended Wentzlaff from working with any NASD dealer for two years. Wentzlaff was also required to pay a $5,000 fine if he sought future employment as a securities broker for an NASD dealer. The report and subsequent consent order were based on Wentzlaff engaging in outside business activities without notifying Lutheran Brotherhood and for failing to disclose that he was both the existing agent and insuring agent on several insurance replacement forms.
[¶ 4.] Wentzlaff eventually started an independent insurance business. As an independent agent, Wentzlaff could write for any insurance company that appointed him as an agent. Wentzlaff applied to multiple insurance companies. Wentzlaff was ultimately appointed by at least ten insurance companies, including North American and Allianz. Wentzlaff never considered one insurance company to be his primary company. In 2004, he formed
[¶ 5.] Joyce Farr met Wentzlaff sometime in 1999 when he spoke at her Lutheran church while he was working for Lutheran Brotherhood. Farr later became a client of Wentzlaff's, and Farr was pleased with his work. Around 2000, Farr introduced Wentzlaff to Harvey Severson, her brother and a retired farmer who had recently moved into an assisted living facility. Approximately six months after meeting Severson, Wentzlaff began assisting Severson with paying monthly bills and other financial affairs. Wentzlaff provided similar bookkeeping services to Farr. Wentzlaff would write checks and Severson would sign them. Wentzlaff charged Severson $200 per month, and later, $250 per month, for his bookkeeping services. Wentzlaff did not inform North American or Allianz that he was performing these services. Wentzlaff considered himself to be acting on behalf of RDI when providing the bookkeeping services.
[¶ 6.] When Severson and Wentzlaff first met, Severson had investments in mutual funds and annuities. Severson eventually authorized Wentzlaff to convert almost all of these investments into annuities with North American and Allianz. During this time, Wentzlaff indicated that he was with the Fellowship of Christian Estate Planners, Inc. Beginning in 2005, Wentzlaff began submitting requests to North American and Allianz to withdraw funds from Severson's annuities. The requests were signed by Severson. Wentzlaff told Severson that the money was needed to pay bills or that Wentzlaff would reinvest the funds. Wentzlaff asked that North American and Allianz directly deposit the funds into Severson's bank account, and the companies complied. Allianz and North American deposited funds into Severson's account; Wentzlaff then wrote checks from Severson's account payable to RDI, had Severson sign them, and deposited the money into RDI's bank account. With each withdrawal, Allianz and North American mailed a letter to Severson advising him of the withdrawal, any surrender charges, and potential tax consequences.
[¶ 7.] Wentzlaff provided similar services to Orlin Berge. When Berge's attorney became suspicious of Wentzlaff's practices, Wentzlaff prepared and Severson signed a letter requesting the surrender value of the entire Allianz policy. Again, Allianz notified Severson of the request by letter and thereafter wired the funds into Severson's account. Severson then signed checks payable to RDI, and Wentzlaff used the Allianz policy funds to pay back money stolen in a similar manner from Berge.
[¶ 8.] Although some of the money was used to pay Severson's bills, Wentzlaff stole most of it, using the money for personal and business expenses and to cover his thefts from Berge's investments. In April 2007, a Minnehaha County grand jury indicted Wentzlaff on two counts of insurance fraud and eight counts of grand theft by embezzlement. Two days later, the South Dakota Department of Insurance issued an emergency order suspending Wentzlaff's license and mailed a copy to the insurance companies. Wentzlaff pleaded guilty to one count of grand theft of property received in trust and one count of committing a fraudulent insurance act. He was sentenced to twenty years in the state penitentiary and ordered to pay $472,000 in restitution.
[¶ 9.] Severson died in February 2008. North American paid Severson's estate $334,834.29 in death benefits in March 2008. Donald Hass, as personal representative of Severson's estate, sued Wentzlaff, North American, and Allianz. The complaint against the insurers alleged securities
[¶ 10.] Hass moved for partial summary judgment on liability. North American moved for summary judgment and Allianz joined North American's motion and all submissions in support of the motion. After a hearing, the circuit court granted the insurance companies' summary judgment motion. Hass appeals.
STANDARD OF REVIEW
[¶ 11.] This Court reviews entry of summary judgment de novo. Adrian v. Vonk, 2011 S.D. 84, ¶ 8, 807 N.W.2d 119, 122.
Saathoff v. Kuhlman, 2009 S.D. 17, ¶ 11, 763 N.W.2d 800, 804. We have also noted that,
W. Consol. Coop. v. Pew, 2011 S.D. 9, ¶ 21, 795 N.W.2d 390, 396.
[¶ 12.] "Statutory interpretation is a question of law, reviewed de novo." State ex rel. Dep't of Transp. v. Clark, 2011 S.D. 20, ¶ 5, 798 N.W.2d 160, 162. "The purpose of statutory construction is to discover the true intention of the law, which is to be ascertained primarily from the language expressed in the statute." Id. Legislative intent is also "determined from the statute as a whole, as well as enactments relating to the same subject." Id. ¶ 10.
ANALYSIS AND DECISION
1. Did Hass preserve the argument that there are genuine issues of material fact?
[¶ 14.] Summary judgment "shall be rendered ... if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law." SDCL 15-6-56(c). A party moving for summary judgment must submit a statement of material facts. SDCL 15-6-56(c)(1). A party opposing a summary judgment motion must include a "separate, short, and concise statement of the material facts as to which the opposing party contends a genuine issue exists to be tried." SDCL 15-6-56(c)(2); Discover Bank v. Stanley, 2008 S.D. 111, ¶ 23, 757 N.W.2d 756, 763. "The opposing party must respond to each numbered paragraph
[¶ 15.] After a party files a summary judgment motion, "an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in § 15-6-56, must set forth specific facts showing that there is a genuine issue for trial." SDCL 15-6-56(e). "If he does not so respond, summary judgment, if appropriate, shall be entered against him." Id. See also Dakota Indus., Inc. v. Cabela's.Com, Inc., 2009 S.D. 39, ¶ 14, 766 N.W.2d 510, 514 (finding that under SDCL 15-6-56(e), once the moving party meets its initial burden of proof, the burden shifts to the non-moving party to identify facts disputing the moving party's allegations).
[¶ 16.] In this case, Hass moved for partial summary judgment on liability and filed a statement of undisputed material facts. Allianz responded to Hass's statement of undisputed material facts.
[¶ 17.] Hass did not respond to the insurance companies' statement of undisputed material facts. At the summary judgment hearing, Hass's counsel said, "I think the Court correctly noted that there have been statements of undisputed material facts, which certainly as to North American are not disputed, nor we towards North American's statement of material facts." The circuit court, in its letter decision, stated that Hass "conceded at the hearing that there are no genuine issues of material fact."
[¶ 18.] General arguments at the summary judgment hearing do not satisfy the requirement that Hass specifically respond to the insurance companies' statement of material facts. By failing to respond, all facts asserted by the insurance companies are deemed admitted. Furthermore, because Hass conceded that there are no genuine issues of material fact, SDCL 15-6-56(e) mandated that summary judgment be entered against Hass due to his failure to specifically respond to North American's motion and statement of facts, so long as the insurance companies were entitled to judgment as a matter of law. Therefore, Hass did not preserve his argument that genuine issues of fact precluded summary judgment in this case. Thus, we analyze whether North American and Allianz were entitled to judgment as a matter of law under the undisputed facts set forth in the parties' respective statements.
2. Was Wentzlaff acting within his scope of employment with Allianz and North American when he stole money from Severson?
[¶ 20.] The doctrine of respondeat superior "hold[s] an employer or principal liable for the employee's or agent's
[¶ 21.] We apply a two-part test when analyzing vicarious liability claims. See id. ¶¶ 24-25.
A. Was Wentzlaff wholly motivated by his personal interests or did the thefts have a dual purpose?
[¶ 23.] We must first determine whether Wentzlaff's acts had a dual purpose. A principal may be liable for an agent's acts where the agent's "purpose, however misguided, is wholly or in part to further the [principal's] business[.]" Id. ¶ 22 (quoting Prosser and Keeton on the Law of Torts, § 70, 505-06 (5th ed.1984)). "But if [the agent] acts from purely personal motives ... he is considered in the ordinary case to have departed from his employment and the master is not liable." Id.
Id. (quoting Deuchar, 410 N.W.2d at 181).
[¶ 24.] In this case, Hass seeks to hold the insurance companies liable for Wentzlaff's acts of theft. Wentzlaff stole Severson's money by writing checks from Severson's account to RDI. Wentzlaff had access to Severson's personal assets and accounts due to his bookkeeping position. These undisputed facts may establish that Wentzlaff was not serving North American or Allianz when he committed the thefts. If this is the case, then our inquiry into vicarious liability would end as Wentzlaff's actions would be outside the scope of his agency relationship with the insurance companies and the companies would not be liable for Wentzlaff's acts.
[¶ 25.] However, the undisputed material facts also demonstrate that although Wentzlaff initially only withdrew the maximum amounts allowed before a penalty or surrender charge applied, Wentzlaff eventually began withdrawing amounts that resulted in surrender charges and interest adjustments. In fact, North American received over $36,000 in penalty fees or surrender charges due to the withdrawals on Severson's annuities which could be considered a benefit for the company. Therefore, if one measures the "act of theft" from the time Wentzlaff called the insurance company to start the withdrawal process so he could eventually steal the money, then it becomes more likely that Wentzlaff's purpose, at least in part, was to further the insurance companies' business.
B. Was there a sufficient nexus of foreseeability between Wentzlaff's agency relationship and the thefts?
[¶ 27.] We must next determine whether Wentzlaff's acts were foreseeable to decide whether North American and Allianz were entitled to summary judgment as a matter of law under the undisputed facts set forth in the parties' respective statements.
Leafgreen, 393 N.W.2d at 280-81. "`Foreseeability' as used in the respondeat superior context [differs] from `foreseeability' as used for proximate causation analysis in tort law." Kirlin, 2008 S.D. 107, ¶ 14, 758 N.W.2d at 444. "In respondeat superior, foreseeability includes a range of conduct which is `fairly regarded as typical of or broadly incidental to the enterprise undertaken by the employer.'" Id.
[¶ 28.] Although this Court considered certain factors in Leafgreen v. American Family Mutual Insurance Co., Restatement (Second) of Agency § 229(2) contains more helpful criteria in analyzing foreseeability as it relates to vicarious liability. Restatement (Second) of Agency § 229(2) lists ten factors relevant to the scope of employment inquiry:
[¶ 29.] Applying those factors to this case, Wentzlaff's acts were "seriously criminal." In addition, neither North American nor Allianz had "reason to expect" that Wentzlaff would steal money from Severson because the undisputed material facts establish that Wentzlaff did not tell the insurance companies that he was providing bookkeeping services to Severson. Also, the insurance companies notified Severson by letter before effectuating the withdrawals and thereafter followed Wentzlaff's instructions to deposit the funds directly into Severson's bank account. The undisputed facts also establish that Wentzlaff's bookkeeping services were completely separate from his work as an insurance agent and that Wentzlaff considered himself to be working on behalf of RDI when providing the bookkeeping services to Severson.
[¶ 30.] We agree with the circuit court's conclusion that the facts in this case are analogous to the facts in Leafgreen, 393 N.W.2d 275 on the foreseeability issue. In Leafgreen, an independent insurance agent became aware of a clients' lockbox containing jewelry and other valuables when visiting the home. Id. at 276. The agent and clients were also personal friends. Id. The agent learned through this friendship that the clients would be out of town and conspired with two felons to burglarize the clients' home. Id. The clients sued the insurance company, seeking to hold it liable for the criminal acts of the agent. Id. at 276-77. The insurance company moved for summary judgment, arguing that the agent was not acting within the scope of his employment when he conspired to burglarize the clients' home. Id. at 277. The circuit court granted the insurance company's motion, finding that the agent's acts were not reasonably foreseeable by the insurance company and thus, it would be unfair to impute the agent's acts to the company. Id. This Court agreed that the agent's criminal acts were unforeseeable and affirmed. Id. at 281.
[¶ 31.] Like the insurance agent in Leafgreen, who was a friend of the clients, Wentzlaff was not merely an insurance
[¶ 32.] An illustration following Restatement (Third) of Agency § 7.08
This illustration parallels the facts of this case, but there is one notable difference — in the illustration, the insurance company surrendered the client's money directly to the insurance agent and the agent misappropriated the money. Here, the undisputed material facts reveal that North American and Allianz not only contacted Severson before completing the withdrawal requests submitted by Wentzlaff, but the companies also directly deposited the funds into Severson's personal account. Severson then gave Wentzlaff access to the funds by signing checks written to RDI. Thus, it was Severson, not the insurance companies, who gave Wentzlaff direct access to the money.
[¶ 33.] This illustration supports the conclusion that North American and Allianz are not liable to Severson for Wentzlaff's acts. Neither North American nor Allianz made a manifestation to Severson that Severson could reasonably believe to mean that the companies authorized Wentzlaff to reinvest Severson's money or convert the money after it was transferred to Severson's personal account.
[¶ 34.] Hass has not demonstrated that there is a sufficient nexus of foreseeability between the agency relationship and Wentzlaff's theft of Severson's money and thus, the insurance companies are entitled
3. Did Wentzlaff's agency relationship with Allianz and North American enable Wentzlaff to carry out his theft, invoking liability under Restatement (Second) of Agency § 219(2)(d)?
[¶ 36.] Restatement (Second) of Agency § 219(2) provides four exceptions to the general rule that a principal is liable for the torts of an agent only if the agent was acting within the scope of his or her employment. One exception provides that a principal may be liable for the torts of an agent acting outside of the scope of his or her employment if "the [agent] ... was aided in accomplishing the tort by the existence of the agency relation." Restatement (Second) of Agency § 219(2)(d) (1958). "In those cases, liability attaches because the tortfeasor's employment enabled or endowed him with a unique advantage to perpetrate the tortious acts." Iverson v. NPC Int'l, Inc., 2011 S.D. 40, ¶ 9, 801 N.W.2d at 279. The comment to Section 219(2)(d) explains that "the [agent] may be able to cause harm because of his position as agent, as where a telegraph operator sends false messages purporting to come from third persons[.]" (citing Restatement (Second) of Agency, § 261 (1958)).
[¶ 37.] In this case, Hass argues that Wentzlaff's agency relationship with North American and Allianz enabled him to steal Severson's money, thus invoking liability under § 219(2)(d). The insurance companies respond with three arguments: (1) that Hass failed to argue § 219(2)(d) to the circuit court; (2) that this Court has not yet adopted the Restatement (Second) of Agency § 219(2)(d) "aided by agency" theory of liability;
[¶ 38.] At the summary judgment hearing, Hass's counsel specifically referred to Restatement (Second) of Agency § 261 but not § 219. The circuit court did not cite or rely upon § 219 but did cite and discuss § 261. On appeal, Hass addresses both § 219 and § 261 under the same issue. However, there are significant differences between the sections. While § 261 addresses whether an agent is "enabled" by the agency relationship, § 261 applies only if the agent was acting with apparent authority and thus, within the scope of employment. In contrast, § 219(2)(d) embodies the theory that, if the agent is acting outside the scope of employment, the principal may nevertheless be liable if the agency relationship enabled the agent.
[¶ 39.] In this case, Hass's assertion that Wentzlaff was enabled by his agency relationship with the insurance companies went to his scope of employment argument. Hass never once argued below that Wentzlaff was acting outside the scope of employment, thus invoking liability under § 219(2)(d). Therefore, even though the circuit court concluded that "Wentzlaff's agency relationship with
[¶ 40.] The record demonstrates that Hass never argued that Wentzlaff was outside his scope of employment to the circuit court, invoking § 219(2)(d). Therefore, Hass failed to preserve this argument and we decline to address it for the first time on appeal. See Alvine Family Ltd. P'ship v. Hagemann, 2010 S.D. 28, ¶ 21, 780 N.W.2d 507, 514 ("We have consistently held that this Court may not review theories argued for the first time on appeal.").
4. Does SDCL 58-30-176 impose a higher standard of liability on insurance companies?
[¶ 42.] SDCL 58-30-176 provides:
[¶ 43.] Hass argues that SDCL 58-30-176 supplements agency common law and imposes a strict-liability-like standard on insurance companies for the acts of their agents. To support this argument, Hass focuses on the above emphasized language in SDCL 58-30-176 as well as this Court's decision in State v. Wingler, 2007 S.D. 59, 734 N.W.2d 795. In Wingler, an insurance agent convinced clients to cash in annuities and purchase new annuities from the agent, promising the clients better returns on their investments. Id. ¶ 2. The agent had the clients write checks to a fictitious company and then the agent deposited the money into his personal accounts. Id. The clients' funds were not used to purchase new annuities but instead, the agent misappropriated the money for his personal use. Id. The agent was indicted on six counts of committing a fraudulent insurance act and seven counts of grand theft of property received in trust. Id. ¶ 3. The agent pleaded guilty to five counts of grand theft of property received in trust. Id. The circuit court granted restitution to some of the clients and to the insurance company, and the agent appealed to this Court. Id. ¶ 4.
[¶ 44.] This Court affirmed the trial court's award of restitution. Id. ¶ 22. In doing so, this Court stated:
Id. ¶ 20.
[¶ 45.] North American and Allianz assert, and the circuit court concluded, that this Court's decision in North Star Mutual Insurance Co. v. Rasmussen, 2007 S.D. 55, 734 N.W.2d 352
Id. ¶ 39 (emphasis added).
[¶ 46.] This Court's review of SDCL 58-30-176 in both Wingler and North Star is dicta. This Court was less concerned with principles of agency law in Wingler, a criminal restitution case, than it was in North Star and thus, North Star is more applicable in this case. We acknowledge that based upon our decision in Wingler, SDCL 58-30-176 applies in this case, but we affirm our statement in North Star that statutes regulating the insurance agency, including SDCL 58-30-176, do not change or exclude agency common law. Indeed, in Wingler, the statute and general laws of agency together created an obligation for the insurance company. Wingler, 2007 S.D. 59, ¶ 20, 734 N.W.2d at 800. Moreover, Hass asks this Court to parse one sentence from SDCL 58-30-176, but after reading the statute as a whole and in light of other statutes regulating insurance, we find that the Legislature did not
[¶ 47.] Considering SDCL 58-30-176 along with agency common law, we find that the facts in this case are distinguishable from the facts in Wingler. Here, unlike the agent in Wingler, Wentzlaff actually purchased the annuities that he told Severson he would purchase. Also unlike the agent in Wingler, Wentzlaff had direct access to Severson's bank accounts because Wentzlaff served as Severson's bookkeeper and financial advisor. Therefore, we conclude that North American and Allianz are not liable for Wentzlaff's acts under SDCL 58-30-176 and general principles of agency common law, and we affirm the circuit court's grant of summary judgment to North American and Allianz on this issue.
[¶ 48.] Based upon the undisputed material facts, Wentzlaff was not acting within the scope of his employment when he stole money from Severson, and thus, as a matter of law, North American and Allianz are not vicariously liable for Wentzlaff's acts. Furthermore, Hass failed to preserve his argument that the insurance companies are liable under Restatement (Second) Agency § 219(2)(d) because Hass did not present this argument to the circuit court. Finally, SDCL 58-30-176 does not impose strict liability upon insurance companies for the acts of their agents. We affirm the circuit court's grant of summary judgment in favor of North American and Allianz.
[¶ 49.] Affirmed.
[¶ 50.] GILBERTSON, Chief Justice, and KONENKAMP and ZINTER, Justices, and BASTIAN, Circuit Court Judge, concur.
[¶ 51.] BASTIAN, Circuit Court Judge, sitting for SEVERSON, Justice disqualified.