South Dakota Supreme Court Holds That Liquidator Can Make Claims for Coverage Up to Six Months After Expiration of Claims-Made Policy

The Supreme Court of South Dakota has held that a state insurance liquidator’s notice of a claim first made and reported four months after the insolvent insurer’s claims-made policy period had ended was within the policy’s coverage. Dieter v. XL Specialty Ins. Co., 980 N.W.2d 229 (S.D. 2022). On a certified question from the United States District Court for the District of South Dakota, the court held that a South Dakota statute that gives the liquidator 180 additional days from the order of liquidation to give notice of a claim enlarges the coverage period under a claims-made insurance policy past the end of the policy period.

On June 12, 2018, the state director of insurance filed an order of liquidation of the insured, an insolvent insurer, which was entered on June 27, 2018. The insured had a claims-made D&O policy that provided coverage for claims made during the July 1, 2017to July 1, 2018 policy period. On November 1, 2018, the liquidator of the insured sought coverage under the insured’s claims-made D&O policy for a claim against the insured relating to a $21 million loan that the insured allegedly made without a discernible means of repayment. The insurer denied coverage for the claim because it was not first made during the policy period. The liquidator filed coverage litigation against the insurer. The district court certified to the supreme court the question of whether South Dakota Codified Laws § 58-29B-56, which gives the liquidator 180 additional days from the order of liquidation to give notice of a claim, thereby enlarges the coverage period under a claims-made insurance policy past the end of the policy period.

The statute provides that: “[i]f, by any agreement, a period of limitation is fixed for . . . . filing any claim, . . . . and where in any such case the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the insurer, within a period of [180] days subsequent to the entry of an order for liquidation . . . .” The liquidator argued that, under a plain reading of the statute, the claim was within the policy period because it was made within 180 days of the order for liquidation. The insurer disagreed, asserting that the statute does not apply because the policy does not place a “period of limitation” on the insureds or liquidator to make a claim. Instead, the insurer argued that the insuring agreement only imposes an obligation on the insurer to provide coverage for claims made during the policy period. Further, the insurer contended that the liquidator’s arguments failed to consider that the statute was enacted before claims-made policies were widely used and that more contemporary guidance recommends purchasing tail coverage to extend the time in which to file a claim.

The state supreme court disagreed with the insurer and answered the certified question in the affirmative. The court held that the plain language of the statute extends the coverage period for the policy, and that there is no “claims-made policy” exception in the statute. Moreover, the court held, the statute applies because the policy has a “period of limitation,” namely, the policy period. And that period of limitation had “not expired at the date of the filing of the petition”—the petition and liquidation order were both entered in June, before the end of the policy period. Additionally, the court pointed to the statute’s use of the term “any claim” as further indication that the statute was intended to extend coverage to “any” claims brought within the 180-day time period. The court reasoned that whether the claim is made or noticed during the policy period is of no consequence because the statute does not make that distinction.

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