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AMCO Ins. Co. v. Employers Mutual Casualty Co.

Supreme Court of South Dakota

April 16, 2014

AMCO INSURANCE CO., Plaintiff and Appellant,
v.
EMPLOYERS MUTUAL CASUALTY COMPANY d/b/a EMC INSURANCE COMPANIES, Defendant and Appellee

Considered on Briefs February 18, 2014.

APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT BRULE COUNTY, SOUTH DAKOTA. THE HONORABLE BRUCE V. ANDERSON Judge.

JAMES E. MOORE, CHERI S. RAYMOND of Woods, Fuller, Shultz & Smith, PC, Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.

TIMOTHY M. GEBHART, JUSTIN T. CLARKE of Davenport, Evans, Hurwitz & Smith, LLP, Sioux Falls, South Dakota, Attorneys for defendant and appellee.

KONENKAMP, Justice. GILBERTSON, Chief Justice, and ZINTER and SEVERSON, Justices, and TIMM, Circuit Court Judge, concur. TIMM, Circuit Court Judge, sitting for WILBUR, Justice, disqualified.

OPINION

Page 919

KONENKAMP, Justice.

[¶1] In this dispute between successive commercial general liability insurers, we are asked to declare void as against public policy an exclusion barring coverage for an unknown progressive or continuous injury or damage that occurred before the inception date of the successor insurance policy.

Background

[¶2] Steven Thomas & Sons, LLC was a South Dakota limited liability company.[1] In 2002, Swift Contractors, Inc. hired Thomas & Sons to do excavation and soil compaction work for an addition to a school building in the Kimball School District. The project was completed in 2004. At some point in 2005, the building's floor

Page 920

started to shift and, in 2006, cracks began to appear on certain interior masonry walls. Swift, the School District, and architect Glenn Mannes were aware of the problems. Mannes recommended that these conditions be monitored.

[¶3] In 2008, the problems persisted, and the School District hired a geotechnical investigation company and an engineering firm to investigate the issues with the building. In 2010, the School District received a final report indicating that the settling issue was caused primarily by the use of low-moisture clay, that the bowing of the north and west exterior walls was due to improper compaction of the backfill soils, and that the moisture in the clay soils would continue to expand and cause additional distress. The problems were attributed to negligently performed excavation and compaction work by Thomas & Sons.

[¶4] In March 2010, Thomas & Sons's commercial general liability insurer, Employers Mutual Casualty Company (EMC), received notice from the School District of the potential claims against Thomas & Sons. Three weeks later, EMC issued Thomas & Sons a letter indicating that it intended to investigate the alleged loss and injury because it believed certain exclusions in the policy might preclude coverage. In August 2010, the School District brought suit against Thomas & Sons and several other defendants. EMC officially withdrew from participating in, or contributing to, Thomas & Sons's defense. EMC asserted that it had no duty to defend because, among other reasons, Thomas & Sons's policy excluded coverage for continuous or progressive property damage that occurred before the effective date of the policy. According to ...


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