8th Circs hold that cattleman who lost livestock from feedlot could not claim the loss under his business theft insurance policy because court finds the cattle were "converted" or "embezzled" Associated Press 11/01/05 O'Daniel v. NAU Country Ins. No. 04-3894 District of South Dakota. Perle O'Daniel commenced a declaratory action in district court seeking an order declaring that his loss of cattle was covered by an insurance policy issued by NAU Country Insurance Company. Following discovery, both parties moved for summary judgment. The district court granted O'Daniel's motion, and the insurance company appealed. After careful review of the briefs and the record, we conclude that the district court erroneously granted summary judgment to O’Daniel. Insurer must prove exclusionUnder South Dakota law, the Insurer has the burden of proving an exclusion applies, and any ambiguity favor the insured. Opperman v. Heritage Mut. Ins. Co., 566 N.W.2d 487, 489 (S.D.1997). But where there is no ambiguity, we must resolve the insurance contract as it is written. O’Neill v. Blue Cross of W. Iowa & South Dakota, 366 N.W.2d 816, 818 (S.D. 1985) Unlawful conversion of property may be theft except when terms are specified The conversion exclusion is not ambiguous. The policy covered theft, but specifically excluded coverage when the loss has occurred by wrongful conversion or embezzlement. “While the term ‘theft’ may, under some circumstances, include conversion, the term must be construed in the light of the specific exclusions contained in the insurance policy.” Roth v. Farmers Mut. Ins. Co. of Neb., 371 N.W.2d 289, 291 (Neb. 1985). Thus, where an entity has lawful control of the property and then converts or embezzles that property, coverage is not provided. Id. The decision by a three-judge panel of the 8th U.S. Circuit Court of Appeals said the insurance policy bought by Fall River County rancher Perle O'Daniel covered theft, but it specifically excluded coverage for loss due to embezzlement or wrongful conversion, which is the illegal taking of someone else's property. O'Daniel's loss occurred because the feedlot wrongfully converted his property, the cattle, the appeals panel said. "Accordingly the loss is not covered by the policy," the judges said. O'Daniel bought an insurance policy to cover real estate and personal property, including cows and calves, from NAU Country Insurance Co., based in Minnesota, according to court records. Due to drought conditions, he transferred cattle to Midwest Feeders, a commercial feedlot owned by David Chavez. The feedlot was to feed, water and care for the animals. O'Daniel discovered some of his cattle were missing from the Onida feedlot in September 2002, and state officials began an investigation that ended when Chavez committed suicide later that month. After O'Daniel determined that he was missing 334 cows, 369 calves and 15 bulls, he filed a claim with the insurance company. The company conceded a theft had occurred but denied coverage under the policy's exclusion for wrongful conversion or embezzlement. O'Daniel went to court, and U.S. District Judge Andrew Bogue ruled the insurance policy covered the cattle loss. Bogue said the insurance contract should be interpreted based on what a reasonable person would understand the words to mean, and he said a reasonable person would have been confused by the policy's use of the terms "theft" and "wrongful conversion." But the appeals court said the policy's exclusion of coverage for wrongful conversion is not ambiguous, and the commercial feedlot wrongfully converted O'Daniel's cattle.