#25142, #25154-a-DG 

2010 SD 15 

IN THE SUPREME COURT 

OF THE 

STATE OF SOUTH DAKOTA 

* * * * 

DE SMET FARM MUTUAL INSURANCE 

COMPANY OF SOUTH DAKOTA, Plaintiff and Appellant, 

 v. 

GULBRANSON DEVELOPMENT 

COMPANY, INC., Defendant, Third-Party 

Plaintiff and Appellee, 

v. 

GARY CROON d/b/a GARY CROON 

INSURANCE, Third-Party Defendant. 

* * * * 

APPEAL FROM THE CIRCUIT COURT OF 

THE THIRD JUDICIAL CIRCUIT 

BROOKINGS COUNTY, SOUTH DAKOTA 

* * * * 

HONORABLE DAVID R. GIENAPP 

Judge 

* * * * 

TED L. McBRIDE of 

Beardsley, Jensen and 

 Von Wald, Prof. LLC 

Rapid City, South Dakota Attorneys for plaintiff 

and appellant. 

RICHARD J. HELSPER of 

Glover & Helsper, PC 

Brookings, South Dakota Attorneys for defendant, 

third-party plaintiff and 

appellee. 

* * * * 

CONSIDERED ON BRIEFS 

ON OCTOBER 5, 2009 

 OPINION FILED 02/17/10 
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#25142, #25154 

GILBERTSON, Chief Justice 

[¶1.] Insurer, De Smet Farm Mutual (De Smet) brought a declaratory action 

against its insured claiming the language of the policy excluded coverage and a duty 

to defend the insured in an underlying action. De Smet filed a motion for summary 

judgment; its insured, Gulbranson Development Company, contended coverage 

existed under a theory of estoppel. The trial court granted the insured’s motion in 

part. It determined that evidence developed in the declaratory action, not just the 

pleadings and record evidence in the underlying action, could be used to establish 

the duty to defend under the theory of estoppel. We affirm. 

FACTS 

[¶2.] Sometime before October 2003, Gulbranson Development Company, 

Inc., (Development Company) purchased ninety acres of undeveloped land 

southwest of Brookings, South Dakota. Dean Gulbranson (Gulbranson) purchased 

the land in his capacity as an officer of Development Company to develop and 

subdivide the land into residential lots. In October 2003, Gulbranson asked Gary 

Croon, doing business as an independent insurance agent under the name of Gary 

Croon Insurance, to conduct a review of the property and recommend an insurance 

policy to cover it. Although the parties dispute for what purpose the coverage was 

requested, both parties agree the policy covered the ninety acres of land owned by 

Development Company. 

[¶3.] Croon testified at deposition that Gulbranson contacted him by 

telephone and requested a site visit to write a policy on Gulbranson’s home. Croon 

further testified he visited Gulbranson’s home along with Mel Gross, the 
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underwriting and marketing supervisor for De Smet. That site visit occurred 

sometime in October 2003. Gulbranson, Croon, and Gross discussed insuring 

Gulbranson’s home, the ninety acres of land, another farm property in Arlington, 

South Dakota, and two duplexes Gulbranson had built near his home. Croon and 

Gross testified that although Croon was not asked to write a policy to cover the 400-

acre Arlington farm at that time, Gulbranson discussed the farm and both Gross 

and Croon understood that it was an active farming operation, while the ninety 

acres southwest of Brookings was not. 

[¶4.] Croon testified he observed two homes located east of and in the same 

development as Gulbranson’s home. He also testified he saw two or three duplexes 

north of Gulbranson’s home and that Gulbranson told Croon he planned on building 

another duplex. Croon further testified he observed paved roads in the area. Croon 

testified he assumed that Development Company sold off lots one at a time and 

then removed the land from its policy once the sale of the lot was completed. Croon 

based this assumption on a similar experience he had with another customer in 

Sioux Falls who sold undeveloped land for development by others. 

[¶5.] Gross testified he knew the legal description for the land but was 

unaware of the location of the land in relation to Gulbranson’s home, and did not 

realize at the time of the site visit that Gulbranson’s home was adjacent to the 

ninety acres. Gross further testified that based on the information shared with him 

during the site visit, he recommended Gulbranson purchase a farm liability policy 

to cover the ninety acres. Gross also assumed that once a parcel sold, Gulbranson 

removed it from the policy. 
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[¶6.] On or about October 20, 2003, Croon returned to Gulbranson’s home to 

have Gulbranson fill out the application for liability insurance on the ninety acres. 

Croon testified Gulbranson noted on the application form for the farm liability 

policy that the land was being developed for residential lots. He further testified he 

understood Gulbranson wanted property liability coverage for personal injuries 

such as those that might result to someone walking on Development Company’s 

land. Despite testifying that the land in question was not being farmed at the time 

of the site visit, no farm machinery was stored on the property, and no farm 

buildings existed on the property, Croon wrote a note in Gulbranson’s file: “Do we 

want the 90 acres liability on the farm/ranch or on the farm liability?” He explained 

at his deposition that the note meant he needed to ask the De Smet underwriting 

department whether it would be better to add the ninety acres to the farm/ranch 

policy covering the Arlington farm, or instead write a new farm liability policy. 

Croon eventually selected a farm liability policy as the appropriate type of coverage. 

He also testified that to his knowledge, De Smet did not sell liability coverage for 

development activities. Croon claimed he told Gulbranson that the policy would not 

cover business pursuits, but did not tell Gulbranson that he needed to look 

elsewhere for coverage for the development activities. He further testified he did 

not specifically understand that Gulbranson wanted coverage for the development 

activities. 

[¶7.] Gulbranson testified in his deposition he had previously insured the 

development land and the development activities through Harleysville Insurance 

Company under a commercial liability policy issued by Valley Insurance in effect 
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from August 25, 2000, through August 25, 2004. Gulbranson further testified he 

had told Valley Insurance he was developing the land for residential lots and 

understood the policy covered development activities. The annual premium for that 

policy was $1,094.00. 

[¶8.] Gulbranson also testified he provided Croon with a copy of the Valley 

policy for his review at the time they met. He testified he “showed [Croon] what we 

currently had and this was what his recommendation was to purchase.” He also 

testified that he relied “on my insurance agent to tell me what I needed to purchase 

because that’s his expertise.” Gulbranson further testified he could not recall if 

Croon specifically stated one way or the other whether the De Smet policy would 

cover the property development activities. However, he also explained the activities 

and construction that had already taken place made it more than apparent that the 

land was being developed as a business activity. Gulbranson further stated the 

application indicated it was a farm liability policy and contained the following 

question: “Are business pursuits being conducted at the premises?” He answered 

on the form “Land is being developed for buildings lots.” Finally, Gulbranson 

admitted he did not read the policy in its entirety upon receipt and was unaware of 

the business exclusion it contained. 

[¶9.] The policy issued with the following exclusion: “activities related to 

the business of the insured, except as provided for by an incidental Business 

Coverage.” The policy defined “Business” as follows: 

Business means a trade, a profession or an occupation, all 

whether full or part time. This includes the rental of property to 

others. It does not include the occasional rental for residential 
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purposes of the part of the insured premises normally occupied 

solely by your household. 

Business includes services regularly provided by an insured for 

the care of others and for which an insured is compensated. A 

mutual exchange of like services is not considered compensation. 

 

Business does not include farming. 

(Bolding in original). The policy further stated: “We will defend a suit seeking 

damages if the suit resulted from bodily injury or property damages not excluded 

under this coverage.” (Bolding in original). The policy remained in effect until 

sometime in 2007 with an annual premium of approximately $200. 

[¶10.] In 2003, while the policy was in effect, Development Company sold 

several lots and made improvements to the land for the housing development. In 

2003, the City of Brookings rebuilt the street between the development and 

property owned by Randy Cragoe and Koryn Steen Cragoe (Cragoes). By 

September 2005, approximately sixty homes had been constructed in the 

subdivision along with the infrastructure necessary to support the subdivision. 

Heavy rainfall and storm runoff in September and October of 2005 allegedly caused 

damage to the Cragoes’ home. 

[¶11.] In April 2007, Cragoes filed suit against the City of Brookings and 

Development Company seeking monetary damages for negligence and nuisance for 

altering the natural and/or existing drainage and thereby forcing storm and surface 

waters onto Cragoes’ property. Development Company tendered defense to De 

Smet. DeSmet declined to defend based on the business exclusion in the farm 

liability policy. 
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[¶12.] On May 16, 2007, De Smet filed a declaratory action in which it sought 

a judicial determination of whether it had a duty to defend or indemnify 

Development Company in the underlying negligence and nuisance action brought 

by Cragoes. De Smet alleged that the business exclusion in the farm liability policy 

excluded both duties. Development Company answered De Smet’s complaint and 

brought a counterclaim for attorney fees incurred in the Cragoes’ action against it. 

In its counterclaim, Development Company alleged De Smet and Croon were both 

aware of its purpose and its business of developing the land for residential lots, and 

that Croon had visited the site as early as 2003 and observed the activities of 

Development Company. Development Company filed a third-party complaint 

against Croon d/b/a as Gary Croon Insurance alleging he failed to procure the 

requested coverage and that he had authority to bind De Smet as its agent. 

[¶13.] De Smet filed a motion for summary judgment on the declaratory 

action arguing it had no duty to defend because the business activities of 

Development Company were excluded under the unambiguous language of the 

policy. Croon filed a motion for summary judgment arguing he had no duty to 

procure a policy for Development Company’s development activities. Finally, 

Development Company filed a motion for summary judgment on a theory of 

coverage by estoppel. Gulbranson stated in Development Company’s supporting 

affidavit that he and Croon toured the property in 2003. During that tour, Croon 

saw the development activities, Gulbranson’s home in the subdivision, and the 

infrastructure for the development including water, sewer, street lights, curbs, 

gutters, and asphalt roads. Gulbranson further attested he had relied on Croon to 
#25142, #25154 

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procure the type of insurance necessary to defend and protect any claims against 

Development Company, yet Croon failed to procure the coverage for the business 

activities of Development Company as requested. The affidavit also alleged that 

Croon was De Smet’s agent and Croon’s negligence in failing to procure the proper 

liability coverage was imputed to De Smet. De Smet denied the agency 

relationship. 

[¶14.] On August 20, 2008, after a hearing on the matter, the trial court 

entered an order in the declaratory action in which it denied the three motions for 

summary judgment. However, the trial court granted partial summary judgment 

on De Smet’s motion concluding the duty to pay any judgment against Development 

Company was excluded under the language of the policy. It also granted partial 

summary judgment on Development Company’s motion that De Smet had a duty to 

defend in the underlying action filed by Cragoes. 

[¶15.] In its memorandum decision, the trial court determined genuine issues 

of material fact existed regarding Development Company’s coverage by estoppel 

claim,* but granted partial summary judgment on the duty to defend. It based its 

 (continued . . .) 

* In its memorandum opinion dated July 11, 2008, the trial court determined 

there were genuine issues of material fact regarding all three motions. It 

noted that Croon denied some of Gulbranson’s testimony regarding what 

Croon knew or saw when he visited the land. In also noted that Gulbranson 

testified that he could not recall whether Croon had represented the farm 

liability policy would cover the development activities. The trial court 

determined there was a genuine issue of material fact as to whether the 

conduct that gave rise to the estoppel claim occurred before or at the 

inception of the policy as required by Rumpza v. Larsen, 1996 SD 87, ¶26, 

551 NW2d 810, 815. Finally, the trial court identified a factual dispute 

regarding the exact nature of Croon’s relationship with De Smet and whether 
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________________________ 

(. . . continued) 

decision on the severability of the duty to defend from the duty to indemnify. The 

trial court framed the issue as “whether or not there is a duty to defend if there is 

not coverage within the complaint but the insurance carrier has independent 

knowledge of facts that may establish coverage.” Noting that this Court had yet to 

consider this issue, it quoted with approval the holding from St. Paul Mercury Ins. 

Co. v. Dahlberg, Inc, 596 NW2d 674 (Minn 1999), and expressed that it felt this 

Court would adopt the Minnesota rule from that case. The trial court noted that St. 

Paul Mercury states that “if a complaint fails to establish coverage, an insurer still 

must accept tender of defense if it has independent knowledge of facts that may 

establish coverage[.]” Because De Smet had independent knowledge of facts 

relating to estoppel and agency that could establish coverage, the trial court 

determined that it had a duty to defend. This Court denied De Smet’s subsequent 

petition for interlocutory appeal. 

[¶16.] In late 2008, Development Company was dismissed from the Cragoes’ 

underlying action. It filed a motion with the trial court to compel De Smet to pay 

the $21,492.50 in attorney fees it incurred in that action. The trial court entered a 

final order in which it noted that because of Development Company’s dismissal from 

the underlying action, the duty to defend had expired. It further stated all that 

remained was for De Smet to pay the attorney fees incurred by Development 

he was its agent since Croon had the right to sell other insurers’ policies but 

only sold De Smet policies. 
#25142, #25154 

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Company in the underlying action. It then entered an order to that effect. De Smet 

appeals from that order raising one issue: 

Whether the trial court erred when it considered facts and 

allegations outside the pleadings in the underlying action to 

determine whether De Smet was equitably estopped from 

denying a duty to defend a claim excluded by the language of the 

policy. 

By notice of review, Development Company raises the following issues: 

Whether an insurance company can be estopped from asserting 

an exclusionary clause if it is not within the terms the insured 

ordered and within the coverage the insured was led to believe 

existed. 

Whether an insurer’s independent knowledge of facts that may 

establish coverage requires the insurer to accept tender of 

defense under a theory of coverage by estoppel. 

We combine the various issues into a single one: 

Did the trial court err in concluding as a matter of law under the 

undisputed material facts of this case that De Smet had a duty 

to defend Development Company in the underlying action. 

STANDARD OF REVIEW 

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. 

Discover Bank v. Stanley, 2008 SD 111, ¶16, 757 NW2d 756, 761-62 (quoting 

Mueller v. Cedar Shores Resort, Inc., 2002 SD 38, ¶10, 643 NW2d 56, 62). “There 

must be no material facts at issue,” as well as “no genuine issue on the inferences to 
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be drawn from those facts.” Id. (quoting A-G-E Corp v. State, 2006 SD 66, ¶17, 719 

NW2d 780, 786). Furthermore, 

[w]hile we often distinguish between the moving and nonmoving party in referring to the parties’ summary judgment 

burdens, the more precise inquiry looks to who will carry the 

burden of proof on the claim or defense at trial. Entry of 

summary judgment is mandated against a party who fails to 

make a showing sufficient to establish the existence of an 

element essential to that party’s case, and on which that party 

will bear the burden of proof at trial. 

Zephier v. Catholic Diocese of Sioux Falls, 2008 SD 56, ¶6, 752 NW2d 658, 662-63 

(citing Celotex Corp. v. Catrett, 477 US 317, 322-23, 106 SCt 2548, 2552, 91 LEd2d 

265, 273 (1986)). 

ANALYSIS AND DECISION 

[¶17.] On appeal, De Smet contends the trial court erred when it adopted the 

Minnesota rule in St. Paul Mercury, 596 NW3d 674, and considered the factual 

allegations offered by Development Company in the declaratory action to support its 

claim of a duty to defend in the underlying action under a theory of estoppel. De 

Smet argues that if this Court accepts the Minnesota rule that permits 

consideration of facts known to the insurer in determining whether a duty to defend 

existed, it should limit the rule to facts within the record of the underlying action 

and not permit consideration by the trial court of extraneous facts supplied by the 

insured. It further argues that no evidentiary basis exists to support the grant of 

summary judgment on the duty to defend under an estoppel theory. 

[¶18.] As this Court has noted before, “[t]he duty to defend is much broader 

than the duty to pay a judgment rendered against an insured.” Hawkeye-Security 

Ins. Co. v. Clifford by Clifford, 366 NW2d 489, 490 (SD 1985). We place the burden 
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on the insurer to show there is no duty to defend. Id. at 492. The insurer has the 

burden to show the claim clearly falls outside of the policy coverages. Id. 

[¶19.] When determining whether coverage extends to a duty to defend in an 

underlying action, we begin with an examination of the language of the policy and 

the pleadings in the underlying action. Id. at 491 (quoting U.S. Fid. & Guar. Co. v. 

Louis A. Roser Co., 585 F2d 932, 936 (8thCir 1978)). “If it is clear or arguably 

appears from the face of the pleadings in the action against the insured that the 

alleged claim, if true, falls within policy coverage, the insurer must defend.” Id. 

The duty to defend will stand based on the face of the pleadings even when 

ambiguities exist in the pleadings that suggest a claim is both covered by the policy 

and not covered by the policy. Id. at 491-92. Even when extraneous facts available 

in depositions and other record evidence outside the pleadings show the claim as 

pleaded in the underlying action is false, groundless, or even fraudulent, the duty to 

defend cannot be defeated if on the face of the pleadings it indicates the claim falls 

within the policy coverage. Id. 

[¶20.] Regarding whether coverage exists under a theory of estoppel, “[a]n 

insurance company which in its policy has written the generally broad coverage 

may be estopped to defend by reason of an exclusionary clause not within the terms 

the insured ordered and coverage which he was led to believe was contained 

therein.” See Farmers Mut. Auto. Ins. Co. v. Bechard, 80 SD 237, 122 NW2d 86, 91 

(1963) (citing Craig v. Nat. Cas. Co., 76 SD 349, 78 NW2d 464, 468 (1956); Flanagan 

v. Sunshine Mut. Ins. Co., 73 SD 256, 260, 41 NW2d 761, 763 (1950)). This Court 

also quoted with approval the New Jersey Supreme Court, which held: 
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where an insurer or its agent misrepresents, even though 

innocently, the coverage of an insurance contract, or the 

exclusions therefrom, to an insured before or at the inception of 

the contract, and the insured reasonably relies thereupon to his 

ultimate detriment, the insurer is estopped to deny coverage 

after a loss on a risk from a peril actually not covered by the 

terms of the policy. 

Roseth v. St. Paul Prop. and Liab. Ins. Co., 374 NW2d 105, 107 (SD 1985) (quoting 

Harr v. Allstate Ins. Co., 54 NJ 287, 306-07, 255 A2d 208, 219 (1969) (emphasis 

added)). “The conduct giving rise to estoppel must occur ‘before or at the inception 

of the policy.’” Am. Fam. Mut. Ins. Co. v. Elliott, 523 NW2d 100, 104 (SD 1994) 

(quoting Roseth, 374 NW2d at 107). The conduct of the insurer or insured must 

create the belief that the policy covered the liability excluded under the language of 

the insurance contract. Id. Our cases have required either a representation by the 

insurer that coverage existed when it did not exist under the policy, or a failure to 

write the policy to include the specific coverage as ordered by the insured. See 

Rumpza v. Larson, 1996 SD 87, ¶31, 551 NW2d 810, 815. 

[¶21.] In the instant case, the pleadings in the underlying action on their face 

allege a complaint against Development Company by Cragoes that clearly falls 

within the business exclusion and outside the terms of the policy as written. 

Regarding the coverage issue, the trial court found that the policy exclusion was 

clear and unambiguous and determined that no coverage existed within the policy 

language for any judgment resulting from Cragoes’ claim against Development 

Company. Thus, the trial court did not consider any extraneous facts to arrive at 

that conclusion. 
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[¶22.] However, when considering whether a duty to defend existed under a 

theory of coverage by estoppel, the trial court considered the following facts and 

evidence from the declaratory action: the deposition testimony of Croon, Gross, and 

Gulbranson, the policy application, the policy, and affidavits. All of this evidence 

was, regarding the underlying action, extraneous in nature. Gulbranson provided 

some of the evidence, while Croon and De Smet through its employees, Gross and 

Merle Walters, its claims adjustor/supervisor, provided other extraneous facts 

considered by the trial court. 

[¶23.] As previously noted, De Smet argues that under this Court’s holding in 

Hawkeye-Security, the trial court improperly considered extraneous information 

from the declaratory action to support the coverage by estoppel theory. De Smet 

argues the holding in Hawkeye-Security limited the trial court to considering only 

the pleadings in the underlying action. De Smet’s reliance on Hawkeye-Security is 

misplaced for two reasons. First, the holding in Hawkeye-Security did not pertain 

to coverage under a theory of estoppel but to a determination of whether the claims 

pleaded fell within the policy language. 366 NW2d at 490. That holding is 

inapplicable to an estoppel claim in that such a claim by its nature requires the trial 

court to consider the conduct of the insurer at the insurance contract formation 

stage. Bechard, 80 SD 237, 122 NW2d at 91. 

[¶24.] Second, in Hawkeye-Security, we specifically reserved for another day 

the question as to whether the insurer must investigate its duty to defend “or 

whether facts, either within or outside the record, can activate a duty to defend 

when the pleadings clearly do not state a covered claim.” 366 NW2d at 492 n3. The 
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plaintiff in the underlying action is usually a stranger to the defendant’s insurance 

policy. As such, it would be unlikely that the facts surrounding the formation of the 

contract for that policy would be found in the pleadings in the underlying action in 

which the plaintiff sued a defendant/insured. 

[¶25.] Most of the cases in which this Court has considered coverage under a 

theory of estoppel have been direct actions between the insurer and the insured and 

were not tied to an underlying action as in the present case. See Rumpza, 1996 SD 

87 ¶¶2, 7, 551 NW2d at 811-12; Bechard, 80 SD 237, 122 NW2d at 87. A case in 

which a declaratory action was filed while an underlying action was pending is 

Elliott, 523 NW2d 101. In that case, this Court reviewed the same kind of 

extraneous facts as the trial court did in the instant case, including the facts 

surrounding the contract formation. See id. at 104. 

[¶26.] Given our precedent in this area, the trial court did not need to rely 

upon the Minnesota rule from St. Paul Mercury, 596 NW2d 674, to consider facts 

outside the record of the underlying action. The trial court did not need to resort to 

the Minnesota rule given that evidence of the insurer’s and insured’s conduct and 

expectations at the formation stage of the contract form the basis of a claim for 

coverage under a theory of estoppel. Nevertheless, the trial court did not err when 

it considered the evidence from the formation stage of the contract. Such evidence 

is exactly the type of fact, although extraneous to an underlying action, necessary to 

establish a duty to defend by estoppel in a declaratory action. To do as De Smet 

suggests would limit the trial court to a virtually empty evidentiary record. 
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[¶27.] The undisputed facts in the record indicate that Gulbranson attempted 

to purchase a replacement for the Valley Insurance policy from Croon. Gulbranson 

testified he showed Croon a copy of the Valley Insurance commercial general 

liability policy, a fact which neither Croon nor De Smet disputed. Gulbranson 

testified that while he did not specifically ask for a rider or policy provision to cover 

the development activities, the copy of the Valley Insurance policy gave Croon 

notice of the type of coverage Gulbranson wanted to purchase. Furthermore, the 

difference in annual premium for the Valley Insurance policy as compared to the De 

Smet policy also gave Croon notice that the two were not equivalents. Finally, 

Croon, and not Gulbranson, selected the farm liability policy to replace the Valley 

Insurance commercial general liability policy, a strategy also recommended by 

Gross. 

[¶28.] This was not a case where the insured failed to read the policy while 

assuming the new policy covered the business pursuits being conducted on the 

property, see Elliott, 523 NW2d at 104, nor where the insured failed to 

communicate to the agent the exact type of coverage desired, see Rumpza, 1996 SD 

87, ¶31, 551 NW2d at 816. In this case, Gulbranson provided Croon with enough 

information to communicate the type of coverage Gulbranson wanted to purchase. 

In response to the question on the application regarding whether business pursuits 

were being conducted on the premises, Gulbranson clearly responded “land is being 

developed for lots.” Croon claimed he relied on an erroneous assumption, based 

entirely on his prior experience with another customer, about how the development 

activities were conducted. Based on this faulty assumption, he ordered an 
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insurance policy that did not provide the coverage Gulbranson wanted to replace. 

Neither De Smet nor Croon made a follow-up attempt to clarify the matter. 

[¶29.] While it might have been inadvertent, it appears Croon failed to 

inform Gulbranson that the De Smet farm liability policy was not an equivalent 

replacement for the Valley Insurance commercial general liability policy. 

Gulbranson relied upon Croon’s expertise and selection of the farm liability policy to 

his detriment. In addition, Croon’s representation occurred at the formation stage 

of the contract. Gulbranson applied for the farm liability policy selected by Croon, 

disclosed the development activities conducted on the land, and because of Croon’s 

actions, Gulbranson had a reasonable belief that the De Smet policy covered 

Development Company’s business activities. Sufficient undisputed material facts 

are contained in the record to show that Croon and De Smet were aware, or should 

have been, of the type of coverage Gulbranson sought to replace. 

[¶30.] Admittedly, questions of fact exist on the scope of the coverage, which 

is distinct from the duty to defend. However, because no judgment was rendered 

against Development Company in the underlying action, we do not need to consider 

those factual issues on appeal. The trial court did not err when it considered facts 

outside the record of the underlying action in determining whether coverage under 

a theory of estoppel existed. The rule in Bechard, 80 SD 237, 122 NW2d at 93, 

imputes the knowledge of Croon to De Smet for purposes of imposing a duty to 

defend under the theory of estoppel. Based on the foregoing facts and our settled 

case law that holds that the duty to defend is much broader than the duty to pay a 
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judgment rendered against an insured, we conclude that summary judgment in 

favor of Gulbranson was appropriate. 

[¶31.] Affirmed. 

[¶32.] KONENKAMP, ZINTER, MEIERHENRY, and SEVERSON, Justices, 

concur.