#30728-aff in pt & rev in pt-PJD 2026 S.D. 5
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
****
KAISER TRUCKING, INC. and DAVID SIMONS, Plaintiffs and Appellants,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant and Appellee.
APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA
THE HONORABLE JOSHUA HENDRICKSON Judge
JARED D. NOONEY of Nooney & Solay, LLP Rapid City, South Dakota Attorneys for plaintiffs and appellants.
JACK H. HIEB ZACHARY W. PETERSON of Richardson, Wyly, Wise Sauck & Hieb, LLP Aberdeen, South Dakota Attorneys for defendant and appellee.
ARGUED APRIL 30, 2025 OPINION FILED 02/04/26 #30728
DEVANEY, Justice
[¶1.] This is the second appeal in the legal dispute between the plaintiffs,
Kaiser Trucking, Inc. and David Simons, and the defendant, Liberty Mutual Fire
Insurance Company. Simons is a truck driver who worked as an agent of the
trucking company. In 2015, he was involved in a collision with a vehicle driven by
Bianca Spotted Thunder and owned by her father, Charles Spotted Thunder. 1 The
Spotted Thunders are insureds under an automobile policy issued by Liberty
Mutual. After Kaiser Trucking obtained a default judgment against Bianca that
remained unsatisfied, it sued Liberty Mutual seeking recovery under the insureds’
policy. In the first appeal, Kaiser Trucking challenged the circuit court’s dismissal
of the complaint for failure to state a claim, and this Court reversed.
[¶2.] On remand, Liberty Mutual moved for summary judgment, contending
it was not responsible for coverage because of the failure to comply with conditions
in the policy requiring cooperation with the investigation of the liability claim and
notification of the lawsuit against Bianca. The circuit court granted the motion for
summary judgment. Kaiser Trucking appeals, claiming there was no obligation to
comply with conditions precedent contained in the insurance policy. Kaiser
Trucking alternatively claims that there are disputed facts that should have
precluded summary judgment as to whether the conditions precedent had been met.
We affirm in part and reverse in part.
1. For convenience, the plaintiffs herein are jointly referred to using the singular term “Kaiser Trucking,” unless the context requires otherwise. The Spotted Thunders are identified by their first names to avoid confusion.
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Factual and Procedural Background
[¶3.] On September 8, 2015, Bianca Spotted Thunder was involved in a
vehicle accident on a highway in Oglala Lakota County, South Dakota. According
to the law enforcement report, Bianca crossed the center line of the highway and
collided head-on with David Simons, who was driving a semi-truck and trailer.
Bianca made statements at the scene suggesting the accident may have been an
attempted suicide on her part.
[¶4.] The vehicle Bianca was driving, with permission, was owned and
insured by her father, Charles, under a policy issued by Liberty Mutual. Charles
notified Liberty Mutual of the accident the same day it occurred. Liberty Mutual
paid Charles and his lienholder under the collision coverage of the policy for the
damage to his vehicle. Liberty Mutual attempted to investigate the circumstances
surrounding the accident to assess the availability of liability coverage under the
policy and to determine whether the accident was the result of an intentional act by
Bianca. It sought the cooperation of Charles and Bianca, including a statement
from Bianca about the accident, but these attempts were unsuccessful. At some
point, Bianca and Charles moved to California, where Liberty Mutual’s investigator
eventually spoke to Charles and delivered a reservation of rights letter. Charles
responded that he did not wish to be bothered. Liberty Mutual received no response
from Bianca after sending her a certified letter requesting cooperation.
[¶5.] Simons owned the semi-truck he was driving and was an agent of
Kaiser Trucking, the owner of the trailer. Kaiser Trucking’s insurer, Great Western
Casualty Company (GWCC), reached out to Liberty Mutual seeking recovery for the
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amounts GWCC had paid on behalf of or directly to Simons and Kaiser Trucking for
their damages and for Simons’ medical expenses. In a letter dated April 8, 2016,
Liberty Mutual told GWCC that it was denying coverage based on the lack of
cooperation on the part of its insureds, Charles and Bianca. The letter explained
that Liberty Mutual had made numerous unsuccessful attempts to reach both of
them in order to determine if the accident was a result of an intentional act.2 After
further communications, Liberty Mutual again notified GWCC via a letter dated
May 17, 2016, that it was denying coverage based on provisions in its insurance
policy requiring notice of the accident and cooperation in the investigation,
settlement or defense of any claim or suit. After GWCC reached out again to
Liberty Mutual in December 2016, the two insurers exchanged emails in January
2017 in which GWCC sought settlement in lieu of commencing litigation. Liberty
Mutual advised GWCC that it stood by its decision to deny coverage due to an
exclusion in the policy for intentional acts. In an email dated January 26, 2017,
Liberty Mutual’s claims specialist told GWCC that “[i]f it is decided that suit will be
filed, please contact me.”
[¶6.] Later in 2017, Kaiser Trucking commenced a negligence lawsuit
(Lawsuit) against Bianca by service of a summons and complaint upon the South
Dakota Secretary of State on September 25, 2017. See SDCL 15-7-6 and 15-7-7
2. The summary judgment record includes internal claim notes entered by Liberty Mutual’s claims specialists. These notes refer to the law enforcement accident report containing Bianca’s statements that suggest she may have intentionally caused the accident to hurt herself. The notes also include references to Liberty Mutual’s intent to obtain a statement from Simons as to his rendition of how the accident occurred.
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(permitting substituted service of process).3 On December 6, 2019, Kaiser Trucking
obtained a default judgment against Bianca. The court awarded judgment in the
amount of $36,977.06 to Kaiser Trucking, $146,619.80 to Simons, as well as pre-
and post-judgment interest. These judgments remain unsatisfied.
[¶7.] On December 1, 2020, Kaiser Trucking brought the present action
against Liberty Mutual. It requested a declaration that Liberty Mutual is liable for
the judgments that Kaiser Trucking obtained against Bianca and sought a
monetary judgment against Liberty Mutual for the same.4
Motion to dismiss
[¶8.] Liberty Mutual filed a motion to dismiss for failure to state a claim.
Liberty Mutual contended that injured third parties may bring an action against a
tortfeasor’s insurer for an unsatisfied default judgment only in accordance with the
terms of the insurance policy, as provided in SDCL 58-23-1:
All liability insurance policies issued in this state shall provide in substance that if an execution upon any final judgment in an action brought by the injured or by another person claiming, by, through, or under the injured, is returned unsatisfied, then an action may be maintained by the injured, or by such other person against the insurer under the terms of the policy for the
3. The record does not indicate that Bianca was ever aware of the lawsuit against her. In an affidavit in support of the default judgment, counsel for Kaiser Trucking noted Bianca’s last known addresses in South Dakota and California but acknowledged that correspondence sent to the California address had been “returned to sender.”
4. Although this action is captioned in the names of Kaiser Trucking and Simons as plaintiffs, Kaiser Trucking did not dispute Liberty Mutual’s statement in its statement of undisputed material facts that it is Kaiser Trucking’s insurer, GWCC, that seeks recovery, in the current lawsuit against Liberty Mutual, for the amounts it paid to Kaiser Trucking and Simons.
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amount of any judgment recovered in such action, not exceeding the amount of the policy, and every such policy shall be construed to so provide, anything in such policy to the contrary notwithstanding.
(Emphasis added.)
[¶9.] Charles’ liability policy issued by Liberty Mutual contains, in part, the
following provisions in Part E entitled “Duties After an Accident or Loss”:
We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:
....
B. A person seeking any coverage must:
1. Cooperate with us in the investigation, settlement or defense of any claim or suit. . . .
2. Promptly send us copies of any notices or legal papers received in connection with the accident or loss.
[¶10.] In its motion to dismiss, Liberty Mutual asserted that, prior to the
present lawsuit, it had never been notified of the Lawsuit against Bianca. It further
asserted that Kaiser Trucking’s complaint failed to allege facts establishing that
Liberty Mutual had notice of the Lawsuit and that Bianca cooperated in the
investigation, settlement, or defense of the Lawsuit. Liberty Mutual argued the
notice and cooperation terms of Charles’ policy were conditions precedent to its
obligation to defend and indemnify and, as such, must have been pled in order for
Kaiser Trucking to have stated a plausible claim.
[¶11.] In response, Kaiser Trucking contended that, as a plaintiff in the
Lawsuit against Bianca, it had no obligation to notify Liberty Mutual of the
Lawsuit. It further argued that the requirements in Part E of the policy cited by
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Liberty Mutual were policy exclusions which Liberty Mutual has the burden of
proving. After a hearing, the circuit court granted Liberty Mutual’s motion to
dismiss. The court ruled that “notice of suit against an insured is a prerequisite to
a liability insurer’s duty to indemnify[.]” The court further determined that,
because the amended complaint failed to allege that Liberty Mutual was ever
provided notice of the Lawsuit, plaintiffs failed to state a plausible claim for relief.
Kaiser I
[¶12.] Kaiser Trucking appealed the dismissal. See Kaiser Trucking, Inc. v.
Liberty Mut. Fire Ins. Co., 2022 S.D. 64, 981 N.W.2d 645 (Kaiser I). This Court
framed the issue in Kaiser I as “whether the circuit court erred in finding that
notice to Liberty Mutual of a claim against its insured was a condition precedent
under Liberty Mutual’s insurance policy that must have been alleged in the
complaint in order to state a claim upon which relief could be granted.” Id. ¶ 12,
981 N.W.2d at 650. We began by discussing the meaning of a condition precedent,
or “an act or event that must exist or occur before there is a right to performance
under a contract.” Id. ¶ 15, 981 N.W.2d at 651 (citations omitted). We noted that,
generally, an insured must substantially comply with conditions precedent under
an insurance policy, “[o]therwise, the insurer does not have to indemnify the
insured for damages awarded against him [or her].” Id. (second alteration in
original) (citing Terra Indus., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 383
F.3d 754, 759 (8th Cir. 2004)). We contrasted conditions precedent “from
exclusions, which carve out some particular events from a coverage that is
otherwise general,” and observed that “an insured has the burden to prove that
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conditions precedent are met, while the insurer has the burden to prove that an
exclusion applies.” Id. (citation modified).
[¶13.] We then analyzed whether conditions precedent must be pled for a
third-party claimant bringing a direct action to survive a motion to dismiss for
failure to state a claim. We acknowledged contrasting schools of thought and
ultimately applied a “middle ground approach” that looks to the substantive law
providing the basis for the complaint. Id. ¶¶ 24, 26−27, 981 N.W.2d at 654−55
(citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure
§ 1303 (4th ed.)). Adopting this approach, we concluded “that a condition precedent
need only be pled in a complaint when the performance or occurrence of conditions
precedent is an element of the claim.” Id. ¶ 27, 981 N.W.2d at 655.
[¶14.] With respect to the Liberty Mutual policy at issue, we observed that,
“as between Liberty Mutual and Spotted Thunder (insured), [Part E5] may be a
condition precedent to coverage because it sets forth a requirement for coverage
under the Policy, rather than carving out an event from the Policy’s general
coverage as an exclusion.” Id. ¶ 28 (citation omitted). However, the Court noted
that “Kaiser Trucking is not a party” to Liberty Mutual’s insurance contract in this
case, but instead, derives its ability to seek recovery under SDCL 58-23-1.
Analyzing this statute, we explained that although an injured party may maintain
a direct action against the insurer if the injured party “can show the existence of an
5. The Kaiser I opinion refers to “Section E(A)” of the policy, but that is the provision pertaining to notice of the accident. Liberty Mutual’s motion to dismiss was based on the lack of notice of the underlying lawsuit Kaiser Trucking brought against Bianca, which is a requirement in Part E(B).
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unsatisfied final judgment[,]” the statute “does not require the injured party to
plead any other element or condition precedent to maintain the action. Satisfaction
of conditions precedent in the applicable insurance contract is not, therefore, a
requirement under SDCL 58-23-1.” Id. ¶ 28, 981 N.W.2d at 656.
[¶15.] Turning to the complaint, we determined that, consistent with notice
pleading requirements, the complaint’s averments were “sufficient to allege a claim
against Liberty Mutual pursuant to SDCL 58-23-1.” Id. ¶¶ 29−30, 981 N.W.2d at
656. We held that “Kaiser Trucking was not required to plead satisfaction of
conditions precedent in the Policy to sufficiently state a claim . . . and avoid a Rule
12(b)(5) dismissal of its complaint.” Id. ¶ 31. We reversed and remanded for
further proceedings. Id. ¶ 1, 981 N.W.2d at 648.
Proceedings on remand
[¶16.] On remand, Kaiser Trucking filed an amended complaint and Liberty
Mutual filed its answer. Among other defenses, Liberty Mutual alleged an
affirmative defense “that a condition precedent under the [p]olicy was not met,”
citing Part E of the policy. Liberty Mutual specifically alleged that it was not
provided notice of the Lawsuit “by plaintiffs, Bianca Spotted Thunder, or any other
person, at any point prior to this lawsuit.” The parties thereafter engaged in
discovery.
[¶17.] Liberty Mutual filed a motion for summary judgment, brief, and
statement of undisputed material facts (SUMF). Kaiser Trucking opposed the
motion, filing responses to the SUMF and a brief. Kaiser Trucking also sought
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leave to conduct additional discovery, which the circuit court granted. The court
then held the motion for summary judgment in abeyance.
[¶18.] Following additional discovery, Liberty Mutual filed a renewed motion
for summary judgment and brief, to which Kaiser Trucking responded. Liberty
Mutual asserted that its motion for summary judgment was based on a narrow,
single issue involving the failure of Kaiser Trucking to present any material facts
showing that a genuine issue existed regarding whether the requirements of Part
E(B) of the policy were met. Specifically, Liberty Mutual alleged there were no facts
showing that Bianca, or anyone on her behalf, fully complied with the duty to
cooperate with Liberty Mutual in the investigation, settlement or defense of any
claim or suit, or with the duty to notify Liberty Mutual of any notices or legal
papers received in connection with the accident or loss. Liberty Mutual also alleged
that it is undisputed that neither the plaintiffs, nor their insurer, GWCC, notified
Liberty Mutual when they brought the Lawsuit against Bianca. Liberty Mutual
made it clear that its motion principally relied on the fact that it was not notified of
the Lawsuit against Bianca and did not become aware of it until the present case
was filed.
[¶19.] Kaiser Trucking, relying on its interpretation of Kaiser I, argued that
satisfaction of conditions precedent in the policy is not a requirement under SDCL
58-23-1. See Kaiser I, 2022 S.D. 64, ¶ 28, 981 N.W.2d at 656. Treating the issue as
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a question of law, Kaiser Trucking did not argue that, as a matter of fact, the
conditions precedent in Part E(B) of the policy had been met in this case.6
[¶20.] The circuit court held a hearing on the renewed motion. In its oral
ruling at the conclusion of the hearing, the court determined there were no disputed
material facts regarding noncompliance with the provisions of Part E(B)(1) and (2).
The court therefore ruled that because Kaiser Trucking had not presented material
facts to show there was compliance with these conditions precedent, Kaiser
Trucking could not recover under the terms of the policy. The court granted Liberty
Mutual’s motion on that basis and entered a written order and a judgment granting
summary judgment in favor of Liberty Mutual.
[¶21.] Kaiser Trucking appeals, asserting that the circuit court erred when it
granted Liberty Mutual’s motion for summary judgment. We re-state the issues
Kaiser Trucking raises on appeal as follows:
1. Whether conditions precedent to coverage apply in the context of a direct action by an injured third party against a tortfeasor’s insurer.
2. Whether there are disputed material facts precluding a grant of summary judgment.
6. While Kaiser Trucking argued that it was undisputed that Liberty Mutual had notice of the accident, which is an additional condition precedent in Part E(A) of the policy, Liberty Mutual admitted that such notice occurred. Liberty Mutual made it clear that its summary judgment motion was not based on lack of compliance with that sub-part. Instead, the motion was based on the lack of compliance with Part E(B) of the policy.
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Analysis and Decision
1. Whether conditions precedent to coverage apply in the context of a direct action by an injured third party against a tortfeasor’s insurer.
[¶22.] The threshold issue presented in this appeal is whether compliance
with the provisions of Part E(B) in Liberty Mutual’s insurance policy was necessary
to trigger coverage. Kaiser Trucking’s argument in this regard rests primarily on
this Court’s statement in Kaiser I that “[s]atisfaction of conditions precedent in the
applicable insurance contract is not . . . a requirement under SDCL 58-23-1.” Kaiser
I, 2022 S.D. 64, ¶ 28, 981 N.W.2d at 656.7 However, this sentence must be read in
the proper context of the rest of our opinion.
[¶23.] The issue in Kaiser I was whether the complaint was sufficient to
survive dismissal under Rule 12(b)(5). The Court’s analysis thus centered on what
is—and is not—required to be pled in a direct action under SDCL 58-23-1. In
analyzing that narrow issue, we adopted the view that “when the substantive law
does not require satisfaction of conditions precedent as an element . . . , conditions
precedent need not be pled.” Id. ¶ 25, 981 N.W.2d at 655. We then noted Kaiser
Trucking’s action was commenced pursuant to SDCL 58-23-1, which “does not
require the injured party to plead any other element or condition precedent to
maintain the action.” Id. ¶ 28, 981 N.W.2d at 656. The sentence that immediately
follows, which Kaiser Trucking improperly reads in isolation, related to this Court’s
7. Kaiser Trucking made this same argument to the circuit court, but the circuit court did not expressly rule on this issue. We presume that the court rejected Kaiser Trucking’s argument, given its ruling that no genuine issue of material fact regarding compliance with the conditions precedent exists.
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observation that satisfaction of conditions precedent is not something that must be
pled to maintain an action under SDCL 58-23-1, the substantive law permitting
direct actions. Contrary to Kaiser Trucking’s argument, we did not determine, as a
matter of law, that conditions precedent in Part E of the policy are inapplicable in a
direct action between an injured third party and a tortfeasor’s insured.
[¶24.] In fact, we expressly stated in Kaiser I that “during litigation, Liberty
Mutual is not limited or prejudiced in its ability to present any alleged conditions
precedent to coverage or other defenses that may exist under the Policy.” Id. ¶ 30.
We also observed that “Kaiser Trucking ha[d] not specifically argued that [Part E]
is not a condition precedent to coverage between Liberty Mutual and Kaiser
Trucking,” and concluded that “it is unnecessary to resolve this question in
addressing the motion to dismiss before us on appeal.” Id. ¶ 28 n.9, 981 N.W.2d at
655 n.9 (emphasis added) (citing a secondary source, 7A Couch on Insurance
§ 106:27 (3d ed., Westlaw database updated Dec. 2025), addressing the applicability
of conditions precedent in compulsory liability insurance policies in direct actions
brought by an injured party against an insurer).
[¶25.] That issue, now squarely presented in the current appeal, must be
decided as part of this Court’s de novo review of the circuit court’s entry of summary
judgment. See James v. State Farm Mut. Auto. Ins. Co., 2019 S.D. 31, ¶ 6, 929
N.W.2d 541, 543 (applying de novo review when determining whether circuit court
correctly applied the law); Thunderstik Lodge, Inc. v. Reuer, 2000 S.D. 84, ¶ 5, 613
N.W.2d 44, 46 (noting that contract and statutory interpretation are “questions of
law reviewable de novo”).
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[¶26.] “As a general rule there is no privity between an injured person and
the tortfeasor’s liability insurer, and the injured person has no right of action at law
against the insurer[.]” Trouten v. Heritage Mut. Ins. Co., 2001 S.D. 106, ¶ 11, 632
N.W.2d 856, 858 (alteration in original) (citation omitted). An exception exists
where there is statutory authorization for such an action. Id. As discussed above,
SDCL 58-23-1 provides such authority when the injured party “obtains a [final]
judgment against an insured and the judgment remains unsatisfied.” Kaiser I, 2022
S.D. 64, ¶ 28, 981 N.W.2d at 656.
[¶27.] Generally, in a direct action brought by an injured third party, an
insurer may raise any policy defense that the insurer would have had against the
insured. 7A Couch on Insurance § 106.5 (3d ed., Westlaw database updated Dec.
2025). This is due to the nature of a direct action, which has been described as a
“substitution of sorts,” where the injured party essentially “stands in the shoes of
the insured.” 7A Couch on Insurance § 106.1 (3d ed., Westlaw database updated
Dec. 2025). Consistent with this concept, we have recognized that, pursuant to the
language in SDCL 58-23-1, an injured third party may bring a direct action against
an insurer only “under the terms of the policy.” See Klatt v. Cont’l Ins. Co., 409
N.W.2d 366, 373 (S.D. 1987); Railsback v. Mid-Century Ins. Co., 2004 S.D. 64, ¶ 18,
680 N.W.2d 652, 657. We must therefore consider the language in the policy at
issue when determining whether a particular affirmative defense may be raised, as
“[t]he existence of the rights and obligations of parties to an insurance contract are
determined by the language of the contract, which must be construed according to
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the plain meaning of its terms.” South Dakota Petrol. Release Comp. Fund v. BP
plc, 2020 S.D. 47, ¶ 22, 948 N.W.2d 45, 53.
[¶28.] In secondary sources addressing insurance policy clauses requiring the
giving of notice of an accident or claim and the forwarding of suit papers to an
insurer, it has been noted that “a distinction has been made between policies which
expressly make compliance with [such clauses] a condition precedent to the liability
of the insurer under the policy, and those which omit such an express statement.”
C.T. Drechsler, Annotation, Liability Insurance: Clause With Respect to Notice of
Accident or Claim, Etc., or With Respect to Forwarding Suit Papers, 18 A.L.R.2d
443, § 2(2). If a policy expressly makes a failure to give notice “a condition
precedent to the insurer’s liability, no recovery can be had where timely notice has
not been given.” Id. But without such express provision, it is not clear from the
cases and authorities on this topic whether noncompliance with provisions requiring
notice and forwarding of lawsuit papers will preclude coverage. Id.
[¶29.] Here, Part E of Liberty Mutual’s policy expressly states that it has “no
duty to provide coverage under this policy unless there has been full compliance”
with the duties enumerated thereunder. In Kaiser I, we noted that, “[g]enerally,
when an insured party confronts a condition precedent, the insured must
demonstrate that he or she ‘substantially complied with this condition or that
noncompliance was excused, waived, or did not prejudice the insurer.’” 2022 S.D.
64, ¶ 15, 981 N.W.2d at 651 (citing Terra Indus., Inc., 383 F.3d at 759). While we
have not previously applied this general rule to a direct action brought under SDCL
58-23-1, we have applied it in a context analogous to the direct action brought here.
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[¶30.] In Bruins v. Anderson, a case involving a garnishment action by a
judgment creditor against a tortfeasor’s insurer, we interpreted a policy which
expressly stated that “[n]o action shall lie against the company unless, as a
condition precedent thereto, the insured shall have fully complied with all the terms
of [the] policy[.]” 47 N.W.2d 493, 494 (S.D. 1951). We determined that the insurer
has the same defenses against the judgment creditor as it would have against the
insured and noted that an insured’s noncompliance with conditions precedent may
defeat recovery by the judgment creditor “in the absence of waiver or estoppel” on
the part of the insurer. Id. at 495; see 7A Couch on Insurance § 106:19 (3d ed.,
Westlaw database updated Dec. 2025) (noting that “where the right of the injured
person to recover against the insurer is dependent upon the terms and limitations of
the policy, a breach of the policy by failing to give notice of the accident, claim, or
suit, or to forward papers, will defeat the rights of the injured person against the
insurer unless the breach is waived or the insurer is estopped [from] assert[ing]
it”).8
[¶31.] Kaiser Trucking has not asserted that there was a waiver or estoppel
by Liberty Mutual here. We therefore conclude, consistent with the language in
8. See also Jamison v. New Amsterdam Cas. Co., 254 S.W.2d 353 (Tenn. Ct. App. 1952) (failure of an insured to give insurer notice of suit to insurer, absent a waiver of such duty, barred recovery by an injured third party); Courtney v. Stapp, 100 So. 2d 606 (Miss. 1958) (same); C.T. Drechsler, Annotation, Liability Insurance: Clause With Respect to Notice of Accident or Claim, Etc., or With Respect to Forwarding Suit Papers, 18 A.L.R.2d 443, § 37 (1951) (noting multiple decisions following the view that “the rights of the injured person can rise no higher than those of the insured” when determining an insurer may raise the defense of failure to give notice of an accident or claim as required by its policy to defeat an injured person’s claim).
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SDCL 58-23-1 allowing an action by an injured third party against an insurer to be
maintained “under the terms of the policy,” that Liberty Mutual may raise
noncompliance with cooperation and notice provisions as an affirmative defense in
this direct action.
[¶32.] However, Liberty Mutual’s ability to raise such a defense in this direct
action is precluded with respect to the liability insurance coverage amounts
required by South Dakota’s compulsory financial responsibility laws. Relevant
here, SDCL 32-35-74 states, in part:
Every motor vehicle liability policy shall be subject to the following provisions which need not be contained therein:
(1) The liability of the insurance carrier with respect to the insurance required by this chapter shall become absolute whenever injury or damage covered by said motor vehicle liability policy occurs; . . . no statement made by the insured or on his behalf and no violation of said policy shall defeat or void said policy[.]
Additionally, under SDCL 32-35-113, “[e]very driver or owner of a motor vehicle
shall at all times maintain in force one of the forms of financial responsibility on the
motor vehicle[.]” One such form is “an owner’s policy of liability insurance as
provided in § 32-35-70[.]” SDCL 32-35-113(1). In turn, SDCL 32-35-70 requires
such policies to insure the named insured and any person using an insured vehicle
with the permission of the named insured
against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle . . . as follows: twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and, subject to the limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and twenty-five thousand dollars because of injury to or destruction of property of others in any one accident.
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[¶33.] We have previously noted that these financial responsibility statutes
“create a strong public policy favoring monetary protection and compensation for
the benefit of those injured through the negligent operation of a vehicle.” Cimarron
Ins. Co. v. Croyle, 479 N.W.2d 881, 883–84 (S.D. 1992) (noting that, prior to the
enactment of SDCL 32-35-113 in 1986, South Dakota law “required proof of
financial responsibility only after a motorist was involved in an accident or
convicted of certain motor vehicle offenses” but now all owners and operators of
motor vehicles must maintain such proof).9 In Cimarron, an insurer brought an
action seeking a declaration as to whether it must provide liability coverage for a
claim filed by an insured’s family member who was injured during a collision when
riding as a passenger in an insured vehicle. The insured’s son was driving the
vehicle, and his sister was the passenger who sustained injuries. She filed a claim
against Cimarron, alleging that her brother was negligent. We concluded that a
household exclusion in Cimarron’s policy precluding coverage for bodily injury to an
insured or any family member was void because it violated public policy, as
established by the financial responsibility laws, but only to the extent of the
minimum coverage amounts required in SDCL 32-35-70.10 Id. at 884−85. However,
9. In 1989, the South Dakota Legislature amended SDCL 32-35-70 to include provisions stating that “if a policy complies with the filing and form requirements of Title 58 and has been approved by the division of insurance, the driver and owner has complied with this chapter[;]” and that “[p]olicies issued after January 1, 1987, and owners who have purchased such policies are in compliance with this chapter.” 1989 S.D. Sess. Laws ch. 279, § 1.
10. After Cimarron was decided, the Legislature amended SDCL 32-35-70 to include a provision allowing an insurance policy “to exclude or limit coverage (continued . . .) -17- #30728
we further determined that, pursuant to SDCL 32-35-75, any “excess coverage is not
subject to the provisions of this state’s statutes on financial responsibility of
motorists[.]”11 Id. at 885 (emphasis added).
[¶34.] Although we have not previously addressed the question whether an
insured’s failure to comply with conditions precedent can be raised by an insurer as
an affirmative defense in a direct action to preclude statutorily required liability
coverage, other courts have. The Iowa Supreme Court considered this issue in a
case involving the same scenario presented here, i.e., a direct action against a motor
vehicle liability insurer by a third party who had obtained a default judgment for
property damage caused by the owner and driver of a vehicle insured by the insurer.
Dave Ostrem Imports, Inc. v. Globe Am. Cas./GRE Ins. Grp., 586 N.W.2d 366 (Iowa
1998). The insurance policy, which was certified as proof of the driver’s financial
________________________ (. . . continued) pursuant to SDCL 58-11-9.3, or for a relative residing in the named insured’s household[,]” and still be compliant with chapter 32-35. See 1992 S.D. Sess. Laws ch. 233, § 1. SDCL 58-11-9.3 allows an insurer to exclude, in the policy agreement, a named individual from coverage, and to reduce the limits of liability coverage via a restrictive endorsement “when a vehicle is operated by a named person or class of persons.” But “if the policy does provide liability coverage to a person or persons named in a restrictive endorsement, the liability coverage may not be less than the minimum prescribed by chapter 32-35.” SDCL 58-11-9.3.
11. SDCL 32-35-75 states, in its entirety:
Any policy which grants the coverage required for a motor vehicle liability policy may also grant any lawful coverage in addition to the coverage specified for a motor vehicle liability policy and such excess or additional coverage shall not be subject to the provisions of this chapter. With respect to a policy which grants such excess or additional coverage the term, motor vehicle liability policy, shall apply only to that part of the coverage which is required by § 32-35-70 or 32-35-71.
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responsibility required by Iowa law, contained a provision requiring the insured to
notify the insurer “of any accident triggering coverage” and further required the
insured to forward “any [lawsuit] papers that the insured might receive.” Id. at
367. Under the terms of the policy, “a failure to do this would be a basis for denying
coverage.” Id. The insurer did not receive notice of the third party’s lawsuit against
the driver and thus had no opportunity to defend against the action. As a result, a
default judgment was entered and it remained unsatisfied. In the direct action, the
insurer asserted, as an affirmative defense, the failure of the insured to give notice
to the insurer of the underlying suit. Id. The district court concluded that under
Iowa’s financial responsibility laws, policy provisions could not defeat coverage, and
granted summary judgment to the third-party plaintiff. Id.
[¶35.] On appeal, the Iowa Supreme Court affirmed, citing Iowa Code
§ 321A.21(6)(a), which mirrors the language in SDCL 32-35-74 and states that
“[t]he liability of the insurance carrier with respect to the insurance required by
[the financial responsibility laws] shall become absolute whenever injury or damage
covered by . . . [the] liability policy occurs[.]” Id. The court noted that the term
“absolute,” when used in the context of financial responsibility laws, “means that
there shall be no defenses to liability of the insurer based upon any statement made
by, or on behalf of, the insured or upon exclusions, conditions, terms, or language
contained in the policy.” Id. (citing 7A Couch on Insurance § 104:45 (3d ed. Westlaw
database updated Dec. 2025)). The court reasoned that the express purpose of such
statutes is “to preclude a lessening of the protection to the motoring public that
financial responsibility laws are intended to provide.” Id. at 368.
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[¶36.] We likewise conclude that the express language in SDCL 32-35-74—
which establishes absolute liability for the injury or damage covered by Liberty
Mutual’s policy with respect to the liability coverage required by SDCL chapter
32-35—precludes the affirmative defense regarding the failure of its insureds to
cooperate in the investigation or to provide notice of the underlying lawsuit.
Therefore, Liberty Mutual’s asserted affirmative defenses are unavailable, as a
matter of law, with respect to the liability coverage provided in its policy for the
amounts mandated by SDCL 32-35-70. However, as we noted in Cimarron after
similarly determining that a policy exclusion is void with respect to the mandatory
minimum liability coverage required by statute, any excess coverage provided in
Liberty Mutual’s motor vehicle liability policy is not subject to the provisions in
SDCL chapter 32-35. See Cimarron, 479 N.W.2d at 885 (citing the express terms of
SDCL 32-35-75). We therefore conclude that Liberty Mutual may properly assert
noncompliance with conditions precedent in the policy as an affirmative defense
precluding liability coverage in excess of the compulsory insurance required by
statute.
2. Whether there are disputed material facts precluding summary judgment in favor of Liberty Mutual.
[¶37.] We must now determine whether the circuit court erred in granting
summary judgment as to the asserted failure to comply with such conditions
precedent. “We review a circuit court’s entry of summary judgment under the de
novo standard of review.” Knecht v. Evridge, 2020 S.D. 9, ¶ 51, 940 N.W.2d 318,
332 (citation omitted). Moreover, well-settled principles guide our review of the
court’s decision:
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Summary judgment is authorized 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 that the moving party is entitled to judgment as a matter of law. We will affirm only when there are no genuine issues of material fact and the legal questions have been correctly decided. All reasonable inferences drawn from the facts must be viewed in favor of the non-moving party. The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law. Summary judgment will be affirmed if there exists any basis which would support the circuit court’s ruling.
Id. ¶ 51, 940 N.W.2d at 333 (quoting Dakota, Minn. & E. R.R. v. Acuity, 2009 S.D.
69, ¶ 14, 771 N.W.2d 623, 628–29).
[¶38.] In support of its summary judgment motion, Liberty Mutual submitted
its statement of undisputed material facts, as required by SDCL 15-6-56(c).
Because Liberty Mutual made it clear below and on appeal that its summary
judgment motion was primarily based on its assertion that it was not notified of the
Lawsuit against Bianca, we likewise focus on that claim when analyzing this issue.
In support of its claim that Kaiser Trucking had not complied with the notice
requirement in Part E(B)(2) of the policy, Liberty Mutual alleged, in SUMF No. 10,
that “[n]either plaintiffs nor GWCC notified Liberty Mutual when plaintiffs sued
[Bianca].” In response to this statement, Kaiser Trucking stated, “No objection,
providing that Liberty Mutual was not a party to that litigation and there was no
obligation to provide them notice of the suit.”
[¶39.] Additionally, Liberty Mutual alleged, in SUMF No. 11, that “Plaintiffs
have no knowledge that [Bianca] or her father sent any notices or legal papers to
Liberty Mutual or otherwise cooperated in conjunction with Liberty Mutual with
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respect to the [Lawsuit].” In support, it referred to Kaiser Trucking’s answers to
interrogatories attached to Liberty Mutual’s counsel’s affidavit. These
interrogatories reveal that, when asked whether they were aware of any efforts by
Bianca or Charles to provide Liberty Mutual notice of the Lawsuit and to cooperate
with Liberty Mutual in the investigation, settlement, or defense of the Lawsuit,
Kaiser Trucking and Simons stated that they did not know of any actions taken by
Bianca or Charles related to the Lawsuit, nor did they have any information as it
concerns communications that Bianca and Charles may have had with Liberty
Mutual. When responding to Liberty Mutual’s SUMF No. 11, Kaiser Trucking
simply stated, “Objection. Neither Kaiser Trucking or Simons have any information
as it concerns communications between [Bianca] and Liberty Mutual.”
[¶40.] On appeal, Kaiser Trucking does not contend that Liberty Mutual was
notified of the Lawsuit. Indeed, it acknowledges that this did not occur. Instead,
Kaiser Trucking focuses solely on the word “received” in sub-section (B)(2). After
first explaining that service of process of the Lawsuit was effected upon Bianca, as
authorized in SDCL 15-7-6, when the legal papers were served upon the Secretary
of State, Kaiser Trucking then notes that the follow-up mailing to Bianca’s last
known address required by SDCL 15-7-7 was “returned to sender.” As such, Kaiser
Trucking claims there is no evidence showing that Bianca (or Charles, who was not
a named party in that suit) ever received any such notices or legal papers and,
therefore, it was not possible for them to provide these documents to Liberty Mutual
as required under the terms of the policy.
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[¶41.] In response to Kaiser Trucking’s argument that an issue of fact
remains regarding the failure to provide notice of the Lawsuit because neither
Bianca nor Charles ever “received” these legal papers, Liberty Mutual asserts that
GWCC was “orchestrating” the underlying lawsuit and was in the best position to
ensure that Liberty Mutual was informed about the Lawsuit, given the prior
communications between the two companies.
[¶42.] Under SDCL 15-6-56(c)(2), “[a] party opposing a motion for summary
judgment shall 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.”
Additionally, a non-moving party “may not rest upon the mere allegations or denials
of his pleading, but his response . . . must set forth specific facts showing that there
is a genuine issue for trial. If he does not so respond, summary judgment, if
appropriate, shall be entered against him.” SDCL 15-6-56(e); see City of Sioux Falls
v. Strizheus, 2022 S.D. 81, ¶ 27, 984 N.W.2d 119, 126–27.
[¶43.] Based on the record below, there is no dispute that Liberty Mutual did
not receive notice of the Lawsuit, and it also appears that neither party disputes the
fact that Liberty Mutual’s insureds (Charles and Bianca) did not receive the legal
papers related to the underlying Lawsuit. Although this Court has not addressed
the question whether a scenario like this precludes an insurer from asserting a lack
of compliance with a notice requirement, other courts have determined that if no
notice of lawsuit or legal process was received by the insured, the language of the
insurance policy does not require the insured to forward something that was never
received. See, e.g., Fisk v. Atl. Nat’l Ins. Co., 236 A.2d 688, 691 (N.H. 1967) (noting
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that the terms of a liability policy requiring notice of any summons or legal process
to be forwarded to the insurer would not be violated if an insured did not receive a
copy of such documents, unless the insured “knowingly by his own actions avoid[ed]
receipt of the process”). Similar to the service of the underlying Lawsuit on the
Secretary of State here, in Fisk, the service of the injured party’s lawsuit upon the
insured was accomplished pursuant to a statute authorizing service on the
Massachusetts Motor Vehicle Commissioner, with a copy sent in a registered letter
to the insured at the insured’s last known address; however, such letter was
returned to the sender as “unclaimed.” Id. at 690. The appellate court in Fisk
determined that a remand was necessary to determine whether the failure of
receipt was due to the insured’s “own unjustifiable action.” Id. at 691; see also
Tennant v. Farm Bureau Mut. Auto. Ins. Co., 141 N.Y.S.2d 449, 452−53 (N.Y. App.
Div. 1955) (considering an appeal in a direct action where a jury had rejected an
insurer’s claim that it was not liable due to noncompliance with a condition
requiring notice of a lawsuit because the insured had no notice or knowledge of the
suit, and reversing the verdict because the evidence did not sustain this factual
determination).
[¶44.] Unlike in Fisk and Tennant, here, neither party disputes the fact that
Bianca did not receive notice of the Lawsuit, nor have any facts been alleged
showing that Bianca intentionally avoided receipt of process. But more
importantly, the insurance policies at issue in both Fisk and Tennant contained
language referring only to the insured being required to forward any notice of claim
or legal process received by the insured. Fisk, 236 A.2d at 690; Tennant, 141
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N.Y.S.2d at 450. Here, the relevant language in Liberty Mutual’s policy is broader.
The action required under Part E(B)(2) is not confined to the insured. Rather this
provision requires “[a] person seeking any coverage” to promptly send Liberty
Mutual “copies of any notices or legal papers received in connection with the
accident or loss.” (Emphasis added.) Admittedly, the term “received” is more fitting
when referring to an insured who has been sued. However, as noted above, in a
direct action filed by an injured third party under SDCL 58-23-1, the injured is, in
essence, stepping into the shoes of the insured and must, therefore, comply with the
terms of the policy that must be met to obtain coverage, at least with respect to
those terms within the control of the injured party.
[¶45.] Based on the record here, there were no impediments precluding
Kaiser Trucking from sending copies of the legal papers of its Lawsuit against
Bianca to Liberty Mutual.12 Kaiser Trucking has admitted that it is GWCC that is
seeking a recovery in the current lawsuit, and GWCC had communicated with
Liberty Mutual numerous times in an attempt to obtain liability coverage from
Liberty Mutual, prior to Kaiser Trucking’s lawsuit against Bianca. And notably, in
the last series of emails exchanged between Liberty Mutual and GWCC, Liberty
Mutual expressly requested that GWCC contact Liberty Mutual if it decided to file
suit. Given these circumstances, Kaiser Trucking should not be allowed to shield
itself from the consequences arising from the fact that Liberty Mutual was not
12. The same law firm represented Kaiser Trucking in both the suit against Bianca and the direct action suit against Liberty Mutual.
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provided notice of the Lawsuit when it was entirely within Kaiser Trucking’s power
to do so.
[¶46.] Moreover, it is not unreasonable to require Kaiser Trucking, as the
party stepping into the shoes of the insureds seeking “any coverage” under the
terms of the policy, to provide notice of its Lawsuit to Liberty Mutual. Indeed, some
courts have determined that it is entirely proper for an injured third-party claimant
to satisfy such notice requirements under the policy, in order to avoid the
ramifications that noncompliance with the notice requirement may bring. See
Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941) (holding that
injured claimant seeking recovery from insured’s liability insurance company “may
perform the conditions of the policy . . . requiring notice of the accident, notice of
suit, etc., in order to prevent lapse of the policy through failure of the insured to
perform such conditions”); Jameson v. Farmers Mut. Auto. Ins. Co., 309 P.2d 394,
399 (Kan. 1957) (noting that because the injured claimant cannot recover under the
policy unless the insurer is notified of the suit, it is proper for the claimant to satisfy
the notice requirements); Kincaid v. Smith, 167 F. Supp. 195, 203 (N.D. Ohio 1957)
(holding that “Ohio is not alone in holding that an injured person has such a
potential interest and substantial right in the policy as to comply with the terms of
the policy and make them effective in his behalf” and citing several cases from other
states supporting this premise). Because it is undisputed that neither the Spotted
Thunders nor Kaiser Trucking notified Liberty Mutual of the Lawsuit, we conclude
that the circuit court did not err when determining that there is an absence of a
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genuine issue of fact regarding the noncompliance with the condition precedent in
Part E(B)(2) of Liberty Mutual’s policy.
[¶47.] However, we must also address whether Liberty Mutual was required
to show it was prejudiced by the lack of cooperation from the insured or the lack of
notice of the lawsuit. Although neither party has briefed this point, nor was it
raised below, we note that other courts have determined that an injured third party
may recover from a liability insurer notwithstanding noncompliance with
cooperation or timely notice provisions if the insurer was not prejudiced by the
noncompliance. See 7A Couch on Insurance § 106:4 (3d ed., Westlaw database
updated Dec. 2025) (observing that “the insurer, generally, has the burden of proof
on the prejudice issue and is required to raise it as an affirmative defense in a direct
action”) and § 106:24 (noting cases in which the failure of an insured to cooperate or
give notice of an action brought against him by an injured claimant, although
required by the policy, is not a defense if there was no prejudice to the insurer).
[¶48.] Even in insurance coverage cases which are not direct actions brought
by injured third parties, we have determined that a failure to strictly comply with a
notice provision required by an insurance policy did not bar recovery unless an
insurer shows prejudice caused by the noncompliance. See Auto-Owners Ins. Co. v.
Hansen Housing, Inc., 2000 S.D. 13, ¶ 31, 604 N.W.2d 504, 513 (addressing
untimely submission of proof of loss); Union Pac. R.R. v. Certain Underwriters at
Lloyd’s London, 2009 S.D. 70, ¶ 24, 771 N.W.2d 611, 618 (finding that insurer was
prejudiced by untimely notice of loss). We recognized this general rule in Kaiser I.
2022 S.D. 64, ¶ 15, 981 N.W.2d at 651 (noting that an insured need not demonstrate
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compliance with a condition precedent if noncompliance “did not prejudice the
insurer”).
[¶49.] It has been noted in secondary sources that “substantial prejudice by
an insured’s noncompliance is clearly established by the fact that a default
judgment has been entered against an insured.” 7A Couch on Insurance §106:4; see
also Tennant, 141 N.Y.S.2d at 453 (holding that the lack of notice and the entry of a
default judgment “deprived the [insurer] of the vital and essential right to answer
or otherwise move as to the complaint served upon its insured; to elect whether to
defend or to attempt to negotiate a settlement; or in the event of a trial to conduct
the defense and litigate issues relating to liability and damage”). Also, in Union
Pacific Railroad, we noted that although “prejudice generally is a question of fact,
courts have held that ‘the issue of prejudice may become a question of law if all
reasonable persons would conclude the insured did not provide notice in a
reasonable time.’” 2009 S.D. 70, ¶ 25, 771 N.W.2d at 618−19 (further recognizing
that “courts have found ‘summary judgment to be appropriate in several cases
where the insured’s breach of a notice or cooperation clause prevented the insurer
from conducting a meaningful investigation of a claim or presenting a viable
defense to a claim’” (citation omitted)).
[¶50.] The undisputed facts show that such is the case here. We thus
conclude, consistent with the above authorities, that there is no genuine dispute
that Liberty Mutual was prejudiced by the lack of notice of the underlying Lawsuit
prior to a default judgment being entered. Therefore, the circuit court’s grant of
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summary judgment to Liberty Mutual with respect to the noncompliance with Part
E(B)(2) was not erroneous, as it relates to Liberty Mutual’s excess liability coverage.
Conclusion
[¶51.] For the above reasons, we reverse the circuit court’s grant of summary
judgment to Liberty Mutual with respect to the liability coverage required by SDCL
32-35-70. We affirm the grant of summary judgment in favor of Liberty Mutual
with respect to any excess liability coverage provided in its policy.
[¶52.] Affirmed in part, reversed in part, and remanded for the entry of an
amended judgment consistent with this opinion.
[¶53.] JENSEN, Chief Justice, and SALTER and MYREN, Justices, and
KERN, Retired Justice, concur.
[¶54.] GUSINSKY, Justice, not having been a member of the Court at the
time this action was considered by the Court, did not participate.
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