Head of SD Stockgrower praises Supreme Court ruling on insurance

The head of the South Dakota Stockmen’s Association said on July 25 he’s glad the state Supreme Court ruled against the insurance company that refused to pay a claim by a ranch family for their loss of 93 cattle in the deadly 2013 snow storm.

“We’re just glad the courts ruled in that way so that ranchers are protected,” Bill Kluck told the Capital Journal on Monday.

DeSmet Farm Mutual had refused to pay on a claim by Richard and Lorayna Papousek of Quinn, South Dakota, who lost 93 yearling heifers in the sudden, deadly blizzard that hit western South Dakota in early October, 2013.

Estimates ranged from 30,000 to more than 50,000 cattle killed by the storm.

The Papouseks had an insurance policy that many ranchers don’t buy: it covered death by drowning, as well as the more common coverage for death by lightning.

Most ranchers lost a cow maybe every year to lightning out on the range, but drowing is unusual, Kluck said.

However, DeSmet Farm Mutual said that heifers didn’t drown because they were not found “immersed,” in water, using a dictionary definition.

A state district judge agreed with the insurance company based in DeSmet, South Dakota. But the state Supreme Court reversed that decision, agreeing with the Papouseks and their veterinarian that the heifers had died by drowning, in part, by inhaling snow and rain in the driving winds.

The policy itself didn’t define drowning, the Supremes said. But most people know it’s the water inside the body that drowns one, not necessarily on the outside, the court ruled.

The loss meant a lot of money to the Papouseks, because the cattle market was near historic highs and the heifers were worth maybe $1,500 to $2,000 apiece.

Kluck, who raises Angus cattle near Mud Butte, about 100 miles north of Rapid City, said he lost 150 head himself in the storm. But he didn’t have the kind of insurance that covered drowning and his died more from hypothermia, he said.

Many ranchers do buy such insurance that covers drowning, however and they had little problem collecting from their insurance agents, Kluck said.

“There were some insurance companies that took a long time in paying, as they examined the situation. But I don’t know of anybody other than DeSmet that totally refused to pay,” Kluck said. “Basically, DeSmet was trying to duck paying on that insurance.”

Officials at DeSmet Farm Mutual didn’t return calls from the Capital Journal.

He’s heard the company is “pulling out” of much of western South Dakota because of having so many losses to pay on, Kluck said.

The federal government stepped in and added emergency livestock losses aid to the 2014 Farm Bill sort of designed to help the South Dakota ranchers hit so hard so quick.

“That was a very unusual storm,” Kluck said. “It was early in the fall and the cows were not ‘haired up,’ yet (with their usual winter coat). When calves have been with cows all summer, especially the younger cows . . . raising that calf pulls them down. They are not fat yet.”

By spring 2014, the federal emergency livestock indemnity program was ready and ranchers started applying. It set a limit of $125,000 per producer of total aid, based on paying out 75 percent of the market value of each animal lost. That was figured at about $1,100 for a cow.

It didn’t cover all his losses, but it helped a lot, Kluck said.

By mid-2015, federal officials announced that nearly 1,900 ranchers in had applied for the federal payments for losses, with about $41 million paid out, mostly for cattle dying in the storm, named Atlas, in October 2013, according to published reports.

But Kluck said many ranchers never reported their losses.

“They’re ranchers,” he said by way of explanation. “‘We just don’t think it’s the government’s business’ is generally the thinking that is pretty prevalent in western South Dakota.”

A federal official has told the Capital Journal that South Dakota has the lowest rate, of any state, of farmers and ranchers reporting their crop and livestock information to federal officials.

That’s especially true for ranchers, Kluck said.

“A lot of people feel the government uses the figures against us,” he said, especially in pegging the numbers of animals expected to hit the market. Any inflation of those numbers tends to depress prices, he said.

While crop farmers have had crop insurance for 50 years or more, it’s only become common in the past 10 to 15 years for ranchers to insure their cattle against natural hazards such as lightning and death by drowning, Kluck said.

“But it’s very expensive to insure cattle.”

Crop insurance is more highly subsidized by the federal government, too, compared with insurance policies on cattle, he said.

Some ranchers lost 80 percent to 90 percent of their herds in the October 2013 blizzard, Kluck said.

One thing that really helped ranchers recover was that the cattle market was just swinging into historically high prices at the time. Through 2014 until June 2015, cattle prices were as high as they have ever been.

“That helped a lot of people get back on their feet after that storm,” Kluck said.

But just as the wag said about the stock market, the cattle market’s main feature is, it fluctuates.

“Since June 15 of last year, our fat cattle market has dropped almost 40 percent,” Kluck said.

The Stockmen’s Association and other ranching interests are pushing Congress to investigate the big drop, he said.

“The retail market for beef has dropped a very small percent at the same time and consumers are paying pretty much the same money they paid a year ago.”

Which is another reason Kluck put out a news release about the South Dakota Supreme Court finding against DeSmet Farm Mutual and for the ranch family.

Maybe more ranchers are thinking about insuring their herds since the 2013 storm, he said. “It’s a form of risk management.”

“If you pay your insurance company for coverage, it shouldn’t be too much to ask them to take care of your claim when you have a loss like this. It’s hard to keep your business going through a disaster if our insurance company doesn’t back you up. I really hope we don’t see this type of case again,” Kluck said.

“I’d really encourage everyone to make sure you review your livestock insurance policies so you know what’s in the fine print and feel confident that you’re working with a company that will take care of business when you need them to.”