Aurora County on hook for damages in lawsuit

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After three and a half hours of deliberation Friday afternoon, a Davison County jury decided Aurora County is liable to pay damages in an earlier decision won against the county by Thompson Farms.

The decision could put the county and its taxpayers on the hook for millions of dollars in a controversy that is now 14 years old.

A judge has already determined Thompson Farms is owed money because county zoning laws passed during the late 1990s forced the family to lose its dairy business.

The determination of an amount of damages has been on hold since 2009 while the county’s insurer, the South Dakota Public Assurance Alliance, sued the county to avoid covering the damages.

The insurance lawsuit hinged on whether the county provided timely notice of the Thompson Farms matter. The Alliance successfully claimed it did not receive timely notice and therefore does not have to cover future damages assessed against the county in the Thompson Farms lawsuit.

Attorneys for the county exited the third-floor Davison County courtroom in Mitchell quickly after the proceedings. Attorneys for the Alliance celebrated, visiting with people on cell phones.

“Yeah, we won,” a smiling attorney Roy Wise said while speaking on a phone.

The Alliance had to prove numerous points, and one of its attorneys, Wise, of Aberdeen, started his closing argument by thanking the jury for its patience with and attention to the complex case.

He asked the jury for a “no” answer to both of the first questions on the verdict sheet, which asked whether Aurora County promptly reported any incident that could result in a claim being made by or against the county, and whether the county gave timely notice of any situation or injury that may have resulted in a claim.

The jury answered “no” to both questions.

The jury also found in favor of the Alliance on five other questions in the seven-point verdict:

• The Alliance was prejudiced by the county’s untimely notice.

• Aurora County made a misrepresentation, an omission of fact, concealed facts, or made incorrect statements to the Alliance about the zoning dispute with Thompson Farms.

• The Alliance’s knowledge as to the truth of the misrepresented, omitted, concealed or incorrect statements was material to the coverage of the dispute, and the Alliance would either not have issued coverage or would have altered the coverage had it known of the Thompson Farms lawsuit.

• Aurora County did not prove that the Alliance misrepresented the availability of coverage for zoning actions and claims of inverse condemnation, or that the county reasonably relied on those representations to its ultimate detriment.

• The county did not prove by clear and convincing evidence that a waiver has occurred.

Wise said during his closing argument Friday that Aurora County created “an elaborate scenario of two dairy farmers” and asked the Alliance whether that type of scenario would be covered, but never specifically mentioned Thompson Farms.

“We told them we would cover them under that scenario,” Wise said. “Did anything in that correspondence or file memos, or anyone else from the county mention ‘Thompson Farms’ or a $5 million claim?”

Wise also reminded the jury of a letter to the Alliance from Susan Urban, the county’s auditor, that stated, “We are not aware of any incidents that may result in a loss under this area of coverage prior to 3/1/01.”

Yet Thompson Farms’ attorney, former state attorney general Mark Meierhenry, sent a letter to Aurora County State’s Attorney John Steele on Jan. 22, 2001, threatening a lawsuit. Wise said the letter proves the county knew of the dispute prior to entering into a contract with the Alliance later in 2001 and could have easily notified the Alliance.

In a Feb. 13, 2001, letter Steele sent to the county’s previous insurance carrier, he referenced the Thompson Farms dispute by name. However, he did not send that notice to the Alliance.

“The Alliance does have coverage for a Thompson Farms-type claim, we’ve never disputed that,” Wise said, adding that the Alliance did not know of the Thompson Farms claim specifically.

One of Aurora County’s attorneys, Roger Tellinghuisen, of Spearfish, also a former state attorney general, told the jury there was no dispute the county finally gave notice of the Thompson Farms issue in 2009.

However, he said Steele “genuinely thought the coverage for the Thompson lawsuit would come from the prior insurance carrier.”

Tellinghuisen told the jury that although Steele thought he noticed all the county’s insurance carriers of the dispute, he had “a mental block” in thinking he had also noticed the Alliance.

Tellinghuisen acknowledged Steele filed the insurance claim in 2009, which was years after Thompson Farms filed a lawsuit against the county. But he said the county signed a contract for 10 years of retroactive coverage through the Alliance, which should have covered the Thompson Farms dispute.

“Remember the memos. You have to look at the memos,” Tellinghuisen said to the jury. “Those are the smoking guns. They don’t lie.”

Tellinghuisen referenced a file note and other memos from Joann Gries, a former secretary at Hagan Benefits Inc., an underwriter for the Alliance. The memos between Gries and Claims Associates, the reinsurer for the Alliance, mentioned a dairy farm zoning dispute and said it would be covered under the retroactive policy.

“Is this another case of an insurance company not wanting to pay a claim?” Tellinghuisen said. “It’s your duty to follow the law and to determine the facts.”

Wise emphasized the memos never mentioned Thompson Farms specifically.

He said it didn’t make any sense that Steele didn’t give the Alliance a copy of Meierhenry’s letter threatening a lawsuit.

“It’s not a question of fairness. It’s a question of being bound to your word, and that was to give proper notice,” Wise said. “You can’t withhold material facts. If you do, we don’t have to pay.”

This was the second jury to return a verdict in favor of the Alliance against Aurora County.

After a jury found for the Alliance during the first trial in 2010, the county appealed to the state Supreme Court. The Supreme Court ordered a new trial, because certain documents had been improperly excluded from evidence during the first trial.

The county could appeal this new decision, or the focus could return to the underlying Thompson Farms suit. Thompson Farms successfully sued the county in 2002, eventually getting a judge to declare that a county cap on dairy cattle imposed in 1998 put the Thompsons out of business. The next step in that underlying case is to determine a damage amount, which could be in the millions, judging from the $5.6 million the Thompsons sought upon filing their lawsuit.

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