United States District Court, D. South Dakota, Southern Division
OPINION AND ORDER GRANTING IN PART MOTION FOR
JUDGMENT ON THE PLEADINGS
ROBERTO A. LANGE UNITED STATES DISTRICT JUDGE
Excel Underground, Inc. (Excel) obtained a $1, 569, 691.81
jury verdict against Defendant Brant Lake Sanitary District
(Brant Lake) in state court. Brant Lake's insurer,
Plaintiff Employers Mutual Casualty Company (EMCC), filed
this case seeking a declaratory judgment that it has no duty
to pay for Brant Lake's appeal of the verdict or to
indemnify Brant Lake for any damages Brant Lake may owe
Excel. Doc. 1. Excel and Brant Lake both counterclaimed
against EMCC, Docs. 9, 35, and EMCC has now moved for
judgment on the pleadings, Doc. 15. For the reasons explained
below, this Court grants in part and denies in part
EMCC's motion for judgment on the pleadings.
Facts Established in the Pleadings
Lake contracted with Excel to build a wastewater treatment
system for Brant Lake's residents. A disagreement arose
over construction of the system, so Excel and Brant Lake sued
each other in South Dakota state court. Doc. 1 at
¶¶ 11-12; Doc. 9 at ¶ 1; Doc. 35 at ¶ 4.
Excel's complaint asserted two claims against Brant Lake,
one seeking a declaratory judgment and one for breach of
contract. Doc. 1-1 at 7-8. EMCC paid for Brant Lake's
defense under a reservation of rights. Doc. 1 at¶ 18;
Doc. 35 at¶ 10.
Lake and Excel tried the case before a jury over nine days in
January 2018. Doc. 1 at ¶ 13; Doc. 9 at ¶ 1; Doc.
35 at ¶ 6; Doc. 1-4 at 4. The trial judge instructed the
jury on breach of contract but not on any other theories.
Doc. 1-2. As relevant here, Instructions 16 and 17 explained
the implied covenant of good faith and fair dealing contained
in all contracts under South Dakota law. Doc. 1-2 at 17-18.
Instruction 19 set forth the parties' positions, stating
that "Excel claims that Brant Lake breached the contract
and that Excel sustained damages as a result." Doc. 1-2
at 20. Next, Instruction 20 explained that if the jury found
for Excel, it would need to calculate damages for
"Excel's retainage;" for "other payments
for work Excel did under the contract, and for work which
Excel was prevented from doing as a result of Brant Lake
Sanitary District's breach(es);" and for
"Excel's lost profits." Doc. 1-2 at 21.
Instruction 25 then addressed Excel's request for lost
Loss of profits may be recovered if the evidence shows with
reasonable certainty both their occurrence and the extent
thereof. The burden is on Excel to prove it is reasonably
certain that the profits it claims would have been realized
except for Brant Lake's conduct, and that the profits can
be ascertained and measured, from evidence introduced, with
Doc. 1-2 at 26.
jury found in Excel's favor and against Brant Lake. Doc.
1-3. Using a special verdict form, the jury awarded Excel
$285, 921.81 for "retainage," $483, 770 for
"other payments under the contract," and $800, 000
for "its lost profits." Doc. 1-3 at 2. The trial
court entered judgment in Excel's favor on February 20,
2018. Doc. 1-3. Brant Lake filed an appeal, which is
currently pending before the Supreme Court of South Dakota.
Doc. 35 at ¶ 8.
Lake sought coverage under the Linebacker Public Officials
and Employment Practices Liability Policy (Policy) it has
with EMCC, demanding that EMCC provide a, supersedeas bond
and legal counsel for its appeal and that EMCC indemnify it
for all damages it may owe Excel. Doc. 1 at ¶¶
19-21; Doc. 35 at ¶¶ 11-13. Several sections of the
Policy are relevant to Brant Lake's demands and
EMCC's motion for judgment on the pleadings. In brief,
the Policy covers a public official's "wrongful
act" but excludes coverage for "contractual
liability." Section 1.1. of the Policy describes the
a. Public Officials Liability We will pay for "defense
expense(s)" and/or those sums that the insured becomes
legally obligated to pay as "damages" because of a
"public official's wrongful act" rendered in
discharging duties on behalf of the insured named in the
Doc. 1-5 at l. The Policy's definition of a
"public official's wrongful act" reads:
b. "Public official's wrongful act" shall mean
any of the following:
(1) Actual or alleged errors;
(2) Misstatement or misleading statement;
(3) Act, omission, neglect, or breach of duty by an insured
in the discharge of "organizational" duties.
"Public Officials Wrongful Act(s)" does not include
an "employment wrongful act."
Doc. 1-5 at 8.
1.5. of the Policy contains the exclusion for
"contractual liability" (Contractual Liability
5. Exclusions - Coverage A and Coverage B
Each of the following exclusions is an absolute exclusion
with no duty to defend or pay "damages" unless
otherwise indicated. If both an absolute exclusion and an
exclusion with a duty to defend apply, coverage for
"defense expenses" is excluded and we have no duty
to defend. This insurance does not apply to:
d. Contractual Liability
(1) Amounts actually or allegedly due under the terms of a
(2) Failure, refusal, or inability of the insured to enter
into, renew or perform any contract or agreement. Exclusion