ZINTER, Justice.
[¶ 1.] American Family Insurance initiated this declaratory action to determine whether its homeowner's policy covered damages awarded against its insured in an underlying tort action for negligent misrepresentation. The circuit court in the underlying action found that the damages were caused by negligent acts. Notwithstanding those findings, the circuit court in the declaratory action concluded there was no coverage because the misrepresentations were intentional and because there were no causally related damages for which there was coverage under the policy. We affirm the judgment because there was no dispute of fact that allegedly negligent acts caused expected damages; the expected damage issue was not and could not have been tried in the underlying tort action; and, under Robnik's own line of authorities, negligent misrepresentation resulting in expected damages is not an accident/occurrence for which there is coverage under the policy.
[¶ 2.] Shirley Hunter owned a home in Rapid City. In connection with her sale of the home, Hunter completed a property disclosure statement as required by SDCL ch. 43-4. In the disclosure statement, Hunter answered "No" to the following question: "Are you aware of any problems with the sewer blockage or backup, past or present?" Hunter also indicated that the "plumbing and fixtures" were "working," and that the "sewer system/drains" were
[¶ 3.] Approximately two years prior to the sale, Hunter had hired a plumbing contractor to repair a sewer blockage in the home. The contractor discovered defects in the sewer line. Rather than fixing the problem, Hunter had the shower drain in the basement capped. She also had the toilet drain capped. This information was not disclosed to Robnik, and it conflicted with the representations in the disclosure statement.
[¶ 4.] After purchasing the home, Robnik uncapped the shower and toilet drains and began using those facilities. Less than a year after closing, Robnik experienced sewage back up, including standing water. In a second incident, Robnik experienced a basement sink full of sewage and feces.
[¶ 5.] Robnik subsequently initiated the underlying action against Hunter for personal injury and property damage. Robnik's action was initially premised on alternative theories of negligence and deceit. Hunter did not appear, and American Family intervened to provide a defense. At the conclusion of a trial to the court, Robnik dismissed her claim for deceit and all allegations of intentional misconduct. Circuit Judge Trimble entered findings of fact that: Hunter negligently completed the disclosure statement; her negligence proximately caused Robnik property damage and emotional distress accompanied by bodily injury; and, Hunter committed the tort of negligent misrepresentation.
[¶ 6.] Hunter's homeowner's insurance policy provided liability coverage for bodily injury and property damage caused by an "occurrence." An occurrence was defined as: "an accident, including exposure to conditions, which, results during the policy period, in: a. bodily injury; or b. property damage." The term "accident" was not defined in the policy. The policy also contained an intentional acts exclusion, which provided:
[¶ 7.] After entry of the judgment in the underlying action, American Family and Robnik filed cross motions for summary judgment in the already pending declaratory action. Judge Delaney denied Robnik's motion for summary judgment and granted American Family's motion. Notwithstanding Judge Trimble's findings that Hunter's misrepresentations were negligent, Judge Delaney found that the acts were intentional and there was no coverage under the intentional acts exclusion.
[¶ 8.] On appeal, Robnik contends that in light of American Family's participation in the underlying action, res judicata prevented the declaratory court from recasting Hunter's acts as intentional rather
[¶ 9.] To be a covered "occurrence," Hunter's misrepresentations had to have been an "accident" within the meaning of the policy. This issue has been considered by numerous courts, resulting in a split of authority. One author has summarized the issue and the two most often stated views:
H. Brent Brennenstuhl, Annotation, Negligent Misrepresentation as "Accident" or "Occurrence" Warranting Insurance Coverage, 58 A.L.R.5th 483, 483 (1998). We have not had occasion to consider the issue.
[¶ 10.] Robnik relies on Sheets v. Brethren Mut. Ins. Co., 342 Md. 634, 657, 679 A.2d 540, 551 (1996). Sheets concluded that notwithstanding the intent to induce reliance element, negligent misrepresentation is an accident/occurrence if "the resulting damage is an event that takes place without one's foresight or expectation."
[¶ 11.] In applying the unexpected damage rule, Sheets found coverage for negligent misrepresentation in connection with the sale of property only because that seller had never before experienced a problem with the sewer/septic system that the seller had represented was in good working order. The Maryland Court of Appeals observed that when the problem causing damage has not previously been encountered by the seller, the damages may be considered "[un]anticipated" and the misrepresentation may therefore be considered to have been an accident. The court explained:
Id. at 657-58, 679 A.2d 540 (emphasis added). In contrast, Carter Lake held that where an insured has had one prior sewage backup, "floodings subsequent to the first incident are not unexpected and thus [are] not accidents or occurrences as those terms are used in the insurance policy." Carter Lake, 604 F.2d at 1059.
[¶ 12.] The parties in this case agree that there are no disputes of fact regarding any coverage issue under the policy. Under those undisputed facts, Robnik cannot meet the coverage requirements
[¶ 13.] The dissenters would reverse and remand for the circuit court to address and make a "finding" whether the damages would have been anticipated within the meaning of Carter Lake. See dissent, infra ¶ 27. But both parties moved for summary judgment arguing that there was no dispute of fact regarding the coverage issues. And, on appeal, neither party has requested a remand to circuit court. Both parties agree that we should decide this issue as a matter of law on the record before us. That record includes an agreement that Hunter had previously experienced a backup but capped the drains instead of fixing the problem. Under those facts, the dissent's own authority concludes that such incidents are not unexpected because "after the first backup," there is a "substantial probability" of another backup unless the problem is repaired. Carter Lake, 604 F.2d at 1059. Therefore, under Carter Lake, Hunter's knowledge of the previous sewer issue precludes Robnik's damages from being "unexpected." When the entire record is devoid of a genuine issue of material fact, summary judgment is appropriate. Fisher v. Kahler, 2002 SD 30, ¶ 5, 641 N.W.2d 122, 124-25. As noted in another case "to ... reverse and remand a grant of summary judgment where there are no genuine issues of material fact is somewhat illogical." Tipton v. Town of Tabor, 1997 SD 96 n. 29, 567 N.W.2d 351 n. 29 (Sabers, J., dissenting). Indeed, this Court routinely determines insurance coverage issues on summary judgment when there are no disputes of fact. See e.g., Hoglund v. Dakota Fire Ins., 2007 SD 123, ¶ 28, 742 N.W.2d 853, 860; Schulte v. Progressive Northern Ins. Co., 2005 SD 75, ¶¶ 8-9, 699 N.W.2d 437, 440; Am. Family Mut. Ins. Group v. Kostaneski, 2004 SD 114, ¶ 24, 688 N.W.2d 410, 415; State Cement Plant Comm'n v. Wausau Underwriters Ins. Co., 2000 SD 116, ¶ 24, 616 N.W.2d 397, 407; Alverson v. Northwestern Nat'l Cas. Co., 1997 SD 9, ¶ 15, 559 N.W.2d 234, 237; DeSmet v. Gibson, 1996 SD 102, ¶ 10, 552 N.W.2d 98, 101; Econ. Aero Club, Inc., v. Avemco Ins. Co., 540 N.W.2d 644, 646 (S.D.1995); Am. Family Mut. Ins. Co., v. Elliot, 523 N.W.2d 100, 103-04 (S.D.1994); Am. Family Mut. Ins. Co. v. Purdy, 483 N.W.2d 197, 201 (S.D. 1992); Dairyland v. Wyant, 474 N.W.2d 514, 516 (S.D.1991); Klatt v. Cont'l Ins. Co., 409 N.W.2d 366, 370-71 (S.D.1987);
[¶ 14.] Robnik, however, relying upon the doctrine of res judicata, argues that American Family's accident/occurrence defense may not be raised in the declaratory action because coverage issues either were or could have been litigated in the underlying tort action. This Court reviews de novo a circuit court's application of the doctrine of res judicata. White v. Bain, 2008 SD 52, ¶ 17, 752 N.W.2d 203, 208.
[¶ 15.] "Res judicata consists of two preclusion concepts: issue preclusion and claim preclusion." Christians v. Christians, 2001 SD 142, ¶ 46, 637 N.W.2d 377, 387 (Konenkamp, J., concurring specially) (citing Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984)). As the Supreme Court explained in Migra:
Migra, 465 U.S. at 77 n. 1, 104 S.Ct. at 894. See also Christians, 2001 SD 142, ¶ 46, 637 N.W.2d at 387.
[¶ 16.] Robnik first invokes collateral estoppel, the issue preclusion effect of res judicata. She argues that Judge Delaney erred in relitigating the question whether Hunter's misrepresentations were negligent or intentional. Robnik points out that Judge Trimble entered specific findings that Hunter's misrepresentations were merely negligent and those findings were not appealed. Even though Judge Delaney failed to give preclusive effect to Judge Trimble's findings,
[¶ 17.] Robnik relies on four findings entered by Judge Trimble in the underlying action. Those findings were that:
As Robnik correctly points out, the first three findings indicate that Hunter's misrepresentations were negligent rather than intentional acts, and the fourth finding indicates that Hunter's negligent acts caused Robnik's damages. Notably, however, there was no finding in the underlying action relating to the fact necessary for this event to be an accident/occurrence under the Sheets/Carter Lake view; i.e. that Robnik's damages would not have been incurred without Hunter's foresight or expectation.
[¶ 18.] That omission is significant because issue preclusion only bars "a point [that] was actually and directly in issue in a former action and was judicially passed upon and determined by a domestic court of competent jurisdiction...." Sodak Distributing Co. v. Wayne, 77 S.D. 496, 502, 93 N.W.2d 791, 794 (1958). In this case, Judge Trimble made no finding that Robnik's damages would have been incurred without Hunter's foresight or expectation. Because that issue was not actually litigated in the underlying action, collateral estoppel, the issue preclusion aspect of res judicata, did not bar American Family's accident/occurrence defense in this declaratory action.
[¶ 19.] So also, the claim preclusion aspect of res judicata did not bar American Family's defense. Concededly, claim preclusion not only "precludes relitigation of issues previously heard and resolved; it also bars prosecution of claims that could have been raised in the earlier proceeding, even though not actually raised." Lee v. Rapid City Area Sch. Dist., No. 51-4, 526 N.W.2d 738, 740 (S.D. 1995). Therefore, if American Family could have raised the issue of whether the damages were expected, it would have been precluded from raising the accident/occurrence defense in the declaratory action. "When a party to litigation fails to develop all of the issues and evidence available in a case, the party is not justified in later trying the omitted issues or facts in a second action based on the same claim." Id.
[¶ 20.] But, to invoke the claim preclusive aspect of res judicata, there must have been "a full and fair opportunity to litigate the issues in the prior proceeding." People ex rel. L.S., 2006 SD 76, ¶ 22, 721 N.W.2d 83, 90. And here, the question whether the damages were anticipated could not have been litigated in this underlying action because that question was not relevant. The question of anticipated damages was irrelevant because the measure of damages in a tort action "is the amount which will compensate [the plaintiff] for all the detriment proximately caused ..., whether it could have been anticipated or not." SDCL 21-3-1 (emphasis added). Because Robnik's own authorities require unanticipated damages, an issue that was irrelevant in the underlying action, the claim preclusion aspect of res judicata did not bar American Family's defense in this action. See generally Murray v. Crystex Composites, LLC, 618 F.Supp.2d 352, 357 (D.N.J.2009) ("The bar of claim preclusion applies not only to all matters litigated and determined by such judgment but also as to all relevant issues which could have been presented[.]" (internal quotations and citations omitted) (emphasis added)); Nebraska Pub. Advocate v. Nebraska Pub. Serv. Com'n, 279 Neb. 543,
[¶ 21.] More importantly, the preclusive effects of res judicata do not apply in this type of situation where the insurer participated under its duty to defend. As we have previously noted, when the insurer participates under its duty to defend, the insurer must "defend the insured without regard to the insurer's interest." St. Paul Fire and Marine Ins. Co. v. Engelmann, 2002 SD 8, ¶ 18, 639 N.W.2d 192, 201 (quoting Restatement [Second] of Judgments § 58 cmt. a). This creates a conflict of interest for the insurer. "Hence the usual rule that an [insurer] is precluded by the determination of issues which he litigates on behalf of an [insured] stated in [Restatement (Second) of Judgments] § 57, should not apply to an [insurer] who defends, under the compulsion of an independent duty to defend, an [insured] with whom he has a conflict of interest." Id. at ¶ 18, 639 N.W.2d 192 at 200. Therefore, claim preclusion did not bar consideration of the expected damage issue in American Family's declaratory action.
[¶ 22.] For the foregoing reasons, we conclude that neither effect of res judicata barred American Family's accident/occurrence defense in this action. Further, the material facts in the declaratory action are undisputed. Hunter had experienced prior sewer blockage, and she capped the shower and sewer drains rather than repairing the defective sewer line in her home. Because she had previously experienced the problem but declined to have it repaired, both Robnik's and the dissent's authorities do not permit coverage. See Sheets, 342 Md. at 657-58, 679 A.2d at 552 (concluding coverage was available because there were no prior problems); Carter Lake, 604 F.2d at 1059 (concluding that because the insured declined to repair the problem after the first incident, any subsequent sewage backups "were not unexpected and thus were not accidents or occurrences as those terms were used in the insurance policy"). Accordingly, Hunter's negligent misrepresentation cannot be an accident/occurrence, and the declaratory court did not err in granting American Family's motion for summary judgment. Although the declaratory court entered no conclusion of law on the accident/occurrence issue, we affirm summary judgment if the circuit court was correct for any reason. A-G-E Corp. v. State, 2006 SD 66, ¶ 13, 719 N.W.2d 780, 785. That is especially appropriate here where there are no disputes of fact regarding the alleged accident/occurrence.
[¶ 23.] Affirmed.
[¶ 24.] GILBERTSON, Chief Justice, and SEVERSON, Justice, concur.
[¶ 25.] MEIERHENRY, Justice, and SABERS, Retired Justice, dissent.
[¶ 26.] SABERS, Retired Justice, sitting for KONENKAMP, Justice, disqualified.
MEIERHENRY, Justice (dissenting).
[¶ 27.] I respectfully dissent. We all agree that the circuit court erroneously decided this case on the policy's exclusions, i.e. intentional conduct and contract. Because the circuit court did not address or make a finding on whether the events constituted an occurrence or accident that was covered under the terms of the policy, I would reverse and remand with directions on what definition to apply.
[¶ 28.] The majority opinion does not clearly state which definition of "occurrence" or "accident" this Court is adopting for future reference. I submit that we
Id. at 1058.
[¶ 29.] The Eighth Circuit indicated that the question is "whether a result is `expected' as a matter of probability" and rejected the concept "that a result is expected... simply because it was reasonably foreseeable." Id. This does not mean that all negligent acts are covered. Id. at 1058-59. The Eighth Circuit applied the term "expected" to mean "that the actor knew or should have known that there was a substantial probability that certain consequences will result from his actions." Id. That determination is based on the totality of the circumstances in each case. Id. The Eighth Circuit explained:
Id. at 1059.
[¶ 30.] The Eighth Circuit further noted that substantial probability is a matter of the degree of expectability:
Id. n. 4. The significance of Carter Lake is its rationale and analysis of what "expected" means when determining whether there is insurance coverage for "accidents." By adopting the Eighth Circuit's rationale and definition, this Court would provide a workable standard for the courts of our state in future cases where "accident" is undefined in the policy.
[¶ 32.] Because of the split of authority on the definition of "occurrence" or "accident" and lack of precedent from this Court, it seems reasonable to remand this case given the inherently factual determination whether there is a substantial probability that a person's actions will result in harm. Thus, I would remand this case with instructions to apply Carter Lake's definition of "accident."
[¶ 33.] SABERS, Retired Justice, joins this dissent.
Sheets v. Brethren Mut. Ins. Co., 342 Md. 634, 647-648, 679 A.2d 540, 546 (1996) (citations omitted). See also dissent, infra ¶ 28 (citing City of Carter Lake v. Aetna Cas. & Sur. Co., 604 F.2d 1052, 1058 (8th Cir.1979) for the same proposition).
