887 N.W.2d 887
S.D.2016Background
- Dakota Mill contracted Gateway to build three large grain bins plus integrated fill and reclaim conveyor systems; site prep and fill gravel were not Gateway’s contractual responsibility. Construction substantially completed July 2009.
- After the bins were filled, they began tipping and became unstable; Dakota Mill emptied the bins and alleged structural and performance failures (foundations, footings, conveyors, and integration with an existing leg/support tower).
- Dakota Mill sued Gateway for negligence, breach of implied warranty, and breach of contract; Western National (Gateway’s insurer) defended under a reservation of rights and then filed this declaratory-judgment action seeking a ruling that policy exclusions bar coverage.
- The circuit court granted summary judgment for Western National, relying heavily on an expert report Western National submitted via counsel’s affidavit; the court found multiple policy exclusions defeated coverage.
- The South Dakota Supreme Court reversed and remanded, holding the circuit court resolved genuine disputes of material fact and improperly relied on the late-filed expert report attached to an attorney affidavit; summary judgment was premature on the disputed exclusions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the "Damage to Your Work" (your work) exclusion bars coverage | Western Nat.: Dakota Mill’s claimed damage is to Gateway’s work, so exclusion applies | Gateway: Subcontractors (B & B, BMS) may have caused the damage; exception for work performed by subcontractor applies | Reversed — genuine disputes of material fact (causation and subcontractor involvement) preclude summary judgment on this exclusion |
| Whether the "Professional Services" exclusion bars coverage | Western Nat.: Lack of engineering is the ultimate cause, so professional-services exclusion applies | Gateway: Causation is disputed; engineering may not be the sole or proximate cause | Reversed — causation is disputed; summary judgment premature |
| Whether the "Impaired Property" exclusion bars coverage for pre-existing leg/support tower | Western Nat.: Pre-existing tower was incorporated into Gateway’s defective work, so exclusion applies | Gateway: Unclear what damage/loss-of-use claimed and whether injury was "sudden and accidental"; factual disputes exist on timing/nature of injury | Reversed — insufficient record and factual disputes on suddenness, causation, and damages |
| Admissibility of expert report submitted via attorney affidavit | Western Nat.: Expert report is probative and properly before the court | Gateway: The report was improperly introduced without proper foundational affidavit; attorney’s affidavit insufficient | Court questioned admissibility; noted attorney affidavits cannot substitute for proper foundation and may not create facts for summary judgment; reliance on that report was improper |
Key Cases Cited
- Swenson v. Auto Owners Ins. Co., 831 N.W.2d 402 (S.D. 2013) (standard of review for summary judgment and insurance-policy interpretation)
- De Smet Ins. Co. of S.D. v. Pourier, 802 N.W.2d 447 (S.D. 2011) (contract interpretation and review scope when facts undisputed)
- Biegler v. Am. Family Mut. Ins. Co., 621 N.W.2d 592 (S.D. 2001) (plain-meaning construction of insurance policies)
- Robinson v. Ewalt, 808 N.W.2d 123 (S.D. 2012) (definition of a "material" disputed fact defeating summary judgment)
- Gul v. Ctr. for Family Med., 762 N.W.2d 629 (S.D. 2009) (same standard on materiality of disputes)
- Andrushchenko v. Silchuk, 744 N.W.2d 850 (S.D. 2008) (limits on use of attorney affidavits and requirement of admissible foundation)
- Maryland Cas. Co. v. Delzer, 283 N.W.2d 244 (S.D. 1979) (attorney affidavits and admissibility concerns)
- Haberer v. First Bank of S.D., 429 N.W.2d 62 (S.D. 1988) (affirming limits on documents introduced via counsel’s affidavit)