South Dakota may be the first to judicially address a novel and recently emerging exclusion in commercial general liability insurance policies, in a case handled by Davenport Evans.  On April 17, 2014, the South Dakota Supreme Court upheld a policy endorsement excluding coverage for property damage that began or which is alleged to have occurred before the effective date of the policy, regardless of whether the damage is known, unknown, or should have been known by the insured.  The case, AMCO Insurance Co., v. Employers Mutual Casualty Company d/b/a EMC Insurance Companies, is the first reported decision analyzing the particular exclusion.

AMCO insured a South Dakota construction company from 2001 until 2007, when EMC became the insurer.  A project the construction company worked on in 2003 began showing signs of damage in 2005 and 2006 and worsened.  When the construction company was sued in 2010, EMC denied coverage based upon the endorsement in its policy.  AMCO defended the construction company and ultimately paid damages on behalf of the company. AMCO then sued to force EMC to pay a proportionate share of the defense and damages on the grounds the endorsement was void because it was contrary to the public policy of South Dakota.

The trial court ruled in favor of EMC.  AMCO appealed to the Supreme Court.  The Supreme Court unanimously upheld the trial court, saying nothing in South Dakota law violated the state’s legal principles.  Although the Court recognized there was a national trend toward policies addressing continuing damage issues, there were no published court decisions interpreting this particular provision.

For more information about the decision or insurance coverage matters, contact Justin T. Clarke at 605-336-2880.

Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the State’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit