Kaiser Trucking, Inc. v. Liberty Mutual

#30728-aff in pt & rev in pt-PJD
2026 S.D. 5

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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KAISER TRUCKING, INC. and
DAVID SIMONS, Plaintiffs and Appellants,

v.

LIBERTY MUTUAL FIRE
INSURANCE COMPANY, Defendant and Appellee.

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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
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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 . . .)
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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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