#27798-r-JMK 

2017 S.D. 72 

IN THE SUPREME COURT 

OF THE 

STATE OF SOUTH DAKOTA 

* * * * 

WESTERN NATIONAL MUTUAL 

INSURANCE COMPANY, Plaintiff and Appellant, 

 

v. 

TSP, INC., Defendant and Appellee. 

 

* * * * 

APPEAL FROM THE CIRCUIT COURT OF 

THE SECOND JUDICIAL CIRCUIT 

 LINCOLN COUNTY, SOUTH DAKOTA 

* * * * 

THE HONORABLE BRADLEY G. ZELL 

Judge 

* * * * 

DOUGLAS M. DEIBERT of 

Cadwell, Sanford, Deibert 

 & Garry, LLP 

Sioux Falls, South Dakota 

JAMES T. MARTIN of 

Gislason, Martin, Varpness 

 & Janes, PA 

Minneapolis, Minnesota Attorneys for plaintiff 

 and appellant. 

MICHAEL L. LUCE 

DANA VAN BEEK PALMER of 

Lynn, Jackson, Shultz & Lebrun, PC 

Sioux Falls, South Dakota Attorneys for defendant and 

 appellee. 

* * * * 

CONSIDERED ON BRIEFS 

ON NOVEMBER 7, 2016 

 OPINION FILED 11/08/17
#27798 

-1- 

KERN, Justice 

[¶1.] Western National Mutual Insurance Co. (Western National) insured 

BHI Inc. under a commercial general liability (CGL) policy. In 2005, Regency 

Plymouth Ventures Ltd. (Regency) hired BHI to serve as a general contractor to 

build four condominiums near Alexandria, Minnesota. TSP Inc. was the project 

architect. BHI hired LandTeam Surveying Co. (LandTeam) to do the project’s land 

surveying. LandTeam made a surveying error, and two of the condos were located 

too close to the property line and did not comply with county setback requirements. 

In order to compensate for the error, BHI and TSP agreed to provide the funds for 

Regency to purchase a buffer strip of land to complete the project. Although TSP 

and BHI agreed to share the expense, TSP paid Regency the entire amount. 

Accordingly, TSP sued BHI for damages arising from LandTeam’s error. BHI 

forwarded the suit to Western National for defense, which it refused to provide. 

After several years, BHI and TSP settled the case, agreeing that TSP could pursue 

any potential remedy against Western National that BHI might have under the 

CGL policy. Western National brought a declaratory judgment action against TSP, 

seeking a judgment that its CGL policy did not provide coverage for TSP’s claims. 

The parties filed cross-motions for summary judgment. The circuit court granted 

summary judgment for TSP. Additionally, the court awarded TSP attorneys’ fees 

and costs pursuant to SDCL 58-12-13 and SDCL 58-33-46.1. Western National 

appeals. We reverse and remand for entry of summary judgment in favor of 

Western National and for further hearing on the award of attorneys’ fees. 
#27798 

-2- 

Facts and Procedural History 

[¶2.] Regency hired BHI to serve as general contractor for a construction 

project at Regency’s Arrowwood Resort near Alexandria, Minnesota. The project 

involved building four separate condos, each containing four units. TSP was the 

project architect. The construction contract required BHI to hire a “legally 

qualified” land surveyor experienced in providing land-surveying services and using 

accepted surveying practices. BHI hired LandTeam to do the surveying work. 

[¶3.] The project proceeded in stages. BHI completed the first two condos 

before LandTeam began survey work for the last two. After the last two condos 

were finished in the spring of 2006, the parties learned that they were built too 

close to the adjoining property because LandTeam committed a surveying error. A 

county zoning ordinance required a fifty-foot side-yard setback (setback provision) 

with which the two condos did not comply. Accordingly, the county refused to issue 

occupancy permits for the condos. 

[¶4.] Regency demanded the mistake be corrected as it was losing revenue 

because it could not rent the condo units without the occupancy permits. BHI had 

three options: it could seek a variance with local zoning authorities, which it did 

only to have its request denied; tear down the condos and start construction in a 

new location; or purchase a strip of adjoining property from the neighboring 

landowner to satisfy the setback provision. Regency’s and BHI’s agreed-upon 

remedy was the third: Regency would purchase a strip of land from Blue Lakes 

Land Co. for the sum of $302,208.50. BHI and TSP decided to fund Regency’s 

purchase with BHI agreeing to pay as its share $96,774.19. However, only TSP or 
#27798 

-3- 

its insurer provided the funds for the purchase. Regency bought the necessary 

buffer strip in September 2006. BHI never reimbursed TSP for its agreed-upon 

portion of the loss. 

[¶5.] Western National insured BHI for several years under a CGL policy 

renewable each year beginning on March 31, 2004. In July 2006, BHI filed a Notice 

of Occurrence/Claim with Western National as a result of the surveying mistake 

and resulting property purchase to resolve the error. BHI identified the date of the 

occurrence as September 15, 2005. The parties agree that the CGL policy that 

commenced on March 31, 2005, is the relevant insurance contract in this dispute. 

Western National failed to respond to BHI’s notice for almost two years. 

[¶6.] On May 1, 2008, TSP sued BHI for contribution, common law 

indemnity, contractual indemnity, and breach of a settlement agreement and 

sought to recover the sum paid to Regency. BHI forwarded the complaint to 

Western National. Within a week, Claims Adjuster Gary Zylstra informed BHI that 

TSP’s claims were outside the scope of coverage. Zylstra explained his decision in a 

detailed letter, citing the lack of property damage from an occurrence and several 

policy exclusions. As Western National believed there was no coverage under the 

policy, it refused to provide BHI with a defense to TSP’s suit. On January 14, 2009, 

BHI’s attorney sent a letter to Western National, refuting its denial of coverage and 

citing two cases as support. Nearly six months later, BHI’s attorney still had not 

heard back from Western National and sent a reminder letter on July 9, 2009. 

Western National still refused to provide coverage or a defense. 
#27798 

-4- 

[¶7.] No pleadings were filed in the suit for several years, and BHI did not 

answer TSP’s complaint. In April 2011, the parties resolved their dispute by 

entering into a Miller–Shugart settlement agreement.1 Under the terms of the 

agreement, BHI accepted full responsibility for LandTeam’s surveying error and 

agreed to entry of judgment against it in the amount of $279,208.50. BHI agreed to 

assign its rights against Western National to TSP. On April 12, 2011, Western 

National received notice of this agreement. On September 28, 2011, Western 

National sued TSP, seeking a declaratory judgment as to whether its policy 

provided coverage for TSP’s claims against BHI and whether BHI’s confession of 

judgment is valid and binding on Western National. TSP answered and filed a 

motion for summary judgment asserting BHI’s right to coverage under the policy. 

[¶8.] On March 3, 2015, the circuit court held a hearing on cross-motions for 

summary judgment regarding the coverage dispute. On May 27, 2015, the circuit 

court issued a memorandum decision granting TSP’s motion for summary 

judgment. The court ruled that the costs arising from the surveying error were 

covered by the policy, that none of the exclusions barred coverage, and that the 

Miller–Shugart settlement agreement was valid. On October 19, 2015, the circuit 

court held a second hearing on the issue of attorneys’ fees and awarded TSP 

 

1. A Miller–Shugart settlement permits an insured to settle a claim against it 

by admitting to a judgment and then assigning its rights under its insurance 

policy to its judgment creditor. The settlement, however, is not binding on 

the insurer unless the claim was actually covered and the amount of the 

settlement is reasonable and not the product of fraud or collusion. See Miller 

v. Shugart, 316 N.W.2d 729, 734-35 (Minn. 1982); Jerome Abrams, Failure to 

Allocate? Nobody Pays: Using Miller Shugart Settlements in Cases of 

Questionable Insurance Coverage, 4 Wm. Mitchell J.L. & Prac. 2, 5-6 (2010). 
#27798 

-5- 

$19,800.18 in attorneys’ fees and costs pursuant to SDCL 58-12-3 and SDCL 

58-33-46.1. The court found that the delays caused by Western National in 

handling BHI’s claim violated the Unfair Claims Practices Act and were without 

reasonable cause. On February 12, 2016, the court issued findings of fact and 

conclusions of law and a final combined judgment against Western National in the 

sum of $299,008.68. 

[¶9.] Western National appeals, alleging there is no coverage under the 

policy for the surveying error because there was no property damage caused by an 

occurrence. In Western National’s view, this is because “[d]efective work which 

causes damage only to the insured’s work product itself is not an ‘occurrence.’” 

Additionally, Western National contends there was no damage to property as a 

result of the surveying error because the finished structures never impinged upon a 

third party’s property. Even if the policy covers the error, Western National 

submits that coverage is precluded by the “work-in-progress,” “faulty 

workmanship,” and “professional services” exclusions. Western National further 

disputes the validity of the Miller–Shugart agreement and the award of attorneys’ 

fees to TSP. Because we find the “professional services” exclusion applies to defeat 

coverage, we need not address the threshold question of whether the surveying 

error resulted in property damage caused by an occurrence or the remaining issues 

raised by the parties with the exception of the issue of attorneys’ fees. See Swenson 

v. Auto Owners Ins. Co., 2013 S.D. 38, ¶ 32, 831 N.W.2d 402, 412.

 
#27798 

-6- 

Standard of Review 

[¶10.] “We review a court’s denial of a motion for summary judgment under 

the de novo standard of review.” N. Star Mut. Ins. v. Korzan, 2015 S.D. 97, ¶ 12, 

873 N.W.2d 57, 61. “Summary judgment is appropriate ‘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 a judgment as a matter of law.’” Id. (quoting 

SDCL 15-6-56(c)). 

[¶11.] “The interpretation of an insurance policy is a question of law, 

reviewed de novo.” Swenson, 2013 S.D. 38, ¶ 13, 831 N.W.2d at 407. “The 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 the plain 

meaning of its terms.” Id. “When an insurer seeks to invoke a policy exclusion as a 

means of avoiding coverage, the insurer has the burden of proving that the 

exclusion applies.” Ass Kickin Ranch, LLC v. N. Star Mut. Ins. Co., 2012 S.D. 73, ¶ 

9, 822 N.W.2d 724, 727. 

Analysis 

 1. Whether the Designated Professional Services endorsement 

excludes coverage for property damage caused by 

LandTeam’s land-surveying error. 

[¶12.] Western National argues the circuit court erred by holding the 

Designated Professional Services endorsement to the CGL policy did not exclude 

coverage for the alleged property damage caused by LandTeam’s land-surveying 

error. The circuit court stated in its May 28, 2015 decision that the endorsement 

did not bar coverage because “[t]he professional services were performed by a non-
#27798 

-7- 

employee subcontractor. The policy does not exclude coverage for work performed 

on behalf of the insured by a professional subcontractor.” 

[¶13.] The one-page endorsement is captioned “Exclusion—Designated 

Professional Services” and states: 

This insurance does not apply to “bodily injury”, “property 

damage” or “personal advertising injury” due to the rendering of 

or failure to render any professional service. 

The endorsement also provides a schedule to list specific professional services. It 

also notes that if left blank, the information required to complete the endorsement 

will be shown in the declarations. No entry appears on the schedule, but the 

declarations page lists “all services” under the exclusion. Western National 

contends that land surveying is a professional service and the use of any includes 

professional services rendered by LandTeam. In response, TSP claims that Western 

National’s interpretation of the endorsement is so broad that it “would seem to 

cover virtually everyone working for BHI.” Further, TSP asserts that the 

endorsement is inapplicable to work done by subcontractors, relying on State Farm 

& Casualty Company v. Lorrick Pacific, LLC, an opinion from the United States 

District Court for the District of Oregon. No. 03:110-CV-834-HZ, 2012 WL 1432603 

at *5-6 (D. Or. Apr. 24, 2012). 

[¶14.] This issue requires us to interpret the meanings of professional service

and any in the endorsement. The CGL policy does not define professional service, 

but we have previously defined the term in CGL policies to mean those acts or 

services “entailing the performance of a vocation, calling, or occupation requiring 

learning and intellectual skill.” St. Paul Fire & Marine Ins. Co. v. Engelmann, 
#27798 

-8- 

2002 S.D. 8, ¶ 8, 639 N.W.2d 192, 197. Further, “[w]e may use statutes and 

dictionary definitions to determine the plain and ordinary meaning of undefined 

words” in a contract. Jackson v. Canyon Place Homeowner’s Ass’n, Inc., 2007 S.D. 

37, ¶ 11, 731 N.W.2d 210, 213. SDCL chapter 36-18A includes land surveying 

amongst its listing of technical professions, and SDCL 36-18A-4 defines the practice 

of land surveying as the: 

practice or offering to practice professional services such as 

consultation, investigation, testimony evaluation, land-use 

studies, planning, mapping, assembling, interpreting reliable 

scientific measurements and information relative to the location, 

size, shape, or physical features of the earth, improvements on 

the earth, the space above the earth, or any part of the earth, 

and utilization and development of these facts and interpretation 

into an orderly survey map, plan, report, description, or project. 

The practice of land surveying includes any of the following: 

(1) Locates, relocates, establishes, reestablishes, lays out, or 

retraces any property line or boundary of any tract of land or any 

road, right-of-way, easement, alignment, or elevation of any of 

the fixed works embraced within the practice of land 

surveying[.] 

(Emphasis added). The Legislature has clearly identified land surveying as a 

professional service. Further, the nature of land surveying as a vocation requiring 

specialized knowledge and the application of intellectual skill support the inclusion 

of land surveying as a professional service under the endorsement. See also Minn. 

Stat. § 326.02 (imposing licensing requirements on persons engaged in a variety of 

professions including land surveying). 

[¶15.] TSP’s argument that including land surveying as a professional service

gives an overbroad meaning to the endorsement is unpersuasive. It may be true 

that the professional services endorsement “should not apply to construction work 
#27798 

-9- 

performed by contractors[.]” Scott C. Turner, Insurance Coverage of Construction 

Disputes § 39:3 (2d ed.), Westlaw (database updated June 2017). However, “[t]his 

distinction for contractors is part of the larger distinction between professional 

services which require specialized knowledge or training and involve the exercise of 

judgment and those services involved in the execution of a decision based on nonprofessional judgment.” Id. Land surveying requires intellectual assessments and 

the use of professional judgment in comparison to a general construction task like 

putting up a wall, which involves manually implementing an existing plan. 

Including land surveying as a professional service will not give this endorsement 

improper breadth. See Maine Mut. Fire Ins. Co. v. Tinker, 872 A.2d 360, 362 (Vt. 

2005) (holding the phrase “rendering or failing to render any professional service” 

unambiguously includes land surveying in a CGL policy exclusion). 

[¶16.] We next address the scope of the word any in the endorsement. “In 

construing the provisions of an insurance contract, we do not seek strained 

interpretations.” W. Nat’l Mut. Ins. Co. v. Decker, 2010 S.D. 93, ¶ 11, 791 N.W.2d 

799, 802. The endorsement provides that “[t]his insurance does not apply to . . . 

‘property damage’ . . . due to the rendering of or failure to render any professional 

service.” (Emphasis added). Importantly, the endorsement does not limit its scope 

to the professional services of the insured. The property damage at issue was 

caused by LandTeam’s rendering of a professional service. The fact that LandTeam 

was a subcontractor is immaterial to the endorsement. Further, the case TSP cites 

in support of its argument—holding that the endorsement does not apply to services 

provided by subcontractors—is inapposite. See Lorrick Pac., 2012 WL 1432603, at 
#27798 

-10- 

*5-6. In Lorrick Pacific, the court held that the term professional services was 

ambiguous and “construe[d] the term as not including managing, coordinating, and 

overseeing the work of subcontractors.” Id. at *6. The Lorrick Pacific court did not 

find the word any to be ambiguous. Nor do we. The endorsement is broadly 

written, and we will give effect to its plain meaning. Swenson, 2013 S.D. 38, ¶ 13, 

831 N.W.2d at 407. 

[¶17.] Because any alleged property damage in this case was caused by a 

professional service, the Designated Professional Services endorsement excludes 

coverage. Western National has met its burden to show TSP’s claims arising from 

LandTeam’s land-surveying error are excluded by the endorsement. 

 2. Whether the circuit court erred in awarding attorneys’ fees 

to TSP. 

[¶18.] The circuit court held a hearing on attorneys’ fees on October 19, 2015, 

and awarded TSP $19,800.18 as detailed in its findings of fact and conclusions of 

law, pursuant to SDCL 58-12-32 and SDCL 58-33-46.1.3 The court awarded 

 

2. SDCL 58-12-3 provides: 

In all actions or proceedings hereafter commenced against any 

employer who is self-insured, or insurance company, including 

any reciprocal or interinsurance exchange, on any policy or 

certificate of any type or kind of insurance, if it appears from the 

evidence that such company or exchange has refused to pay the 

full amount of such loss, and that such refusal is vexatious or 

without reasonable cause, the Department of Labor and 

Regulation, the trial court and the appellate court, shall, if 

judgment or an award is rendered for plaintiff, allow the 

plaintiff a reasonable sum as an attorney’s fee to be recovered 

and collected as a part of the costs, provided, however, that 

when a tender is made by such insurance company, exchange or 

self-insurer before the commencement of the action or 

proceeding in which judgment or an award is rendered and the 

(. . . continued) 
#27798 

-11- 

attorneys’ fees under SDCL 58-12-3 because it found that “[t]he denial of coverage 

. . . by [Western National] . . . [was] without reasonable cause.” The court also 

awarded attorneys’ fees under SDCL 58-33-46.1, finding that Western National 

violated the Unfair Claims Practices Act, specifically SDCL 58-33-67(1),4 on two 

occasions by not responding to BHI’s communications within thirty days as 

required. The first violation occurred after Western National ignored BHI’s July 13, 

2006 notice of claim for “some 22 months.” 

 

(continued . . .) 

amount recovered is not in excess of such tender, no such costs 

shall be allowed. The allowance of attorney fees hereunder shall 

not be construed to bar any other remedy, whether in tort or 

contract, that an insured may have against the same insurance 

company or self-insurer arising out of its refusal to pay such 

loss. 

 

3. SDCL 58-33-46.1 provides: 

Any person who claims to have been damaged by any act or 

practice declared to be unlawful by this chapter shall be 

permitted to bring a civil action for the recovery of all actual and 

consequential damages suffered as a result of such act or 

practice including reasonable attorneys’ fees to be set by the 

court. 

4. SDCL 58-33-67(1) provides: 

In dealing with the insured or representative of the insured, 

unfair or deceptive acts or practices in the business of insurance 

include, but are not limited to, the following: 

(1) Failing to acknowledge and act within thirty days 

upon communications with respect to claims 

arising under insurance policies and to adopt and 

adhere to reasonable standards for the prompt 

investigation of such claims[.] 
#27798 

-12- 

[¶19.] In its brief to this Court, Western National admits this violation of 

SDCL 58-33-67(1).5 The second violation occurred after Western National failed to 

respond to BHI’s claim for insurance coverage after TSP initiated its suit against 

BHI. BHI’s attorney sent a letter to Western National dated January 14, 2009, 

seeking insurance coverage. Approximately six months later, BHI’s attorney still 

had not heard back from Western National, and BHI sent a reminder on July 9, 

2009. 

[¶20.] Western National, however, argues that the circuit court erred in 

awarding attorneys’ fees under either statute. Initially, Western National claims 

that SDCL 58-12-3 cannot be a basis for an award because the attorneys’ fees were 

granted as part of a ruling on cross-motions for summary judgment and before a 

hearing on whether attorneys’ fees were warranted. Further, Western National 

argues someone other than the insured cannot be awarded fees under the statute. 

TSP disputes Western National’s contentions, claiming that the court held a later 

hearing on attorneys’ fees after it decided the motions for summary judgment. 

Further, TSP argues the circuit court was correct to determine that TSP was a 

proper assignee of BHI’s insurance contract rights against Western National. As 

such, it could collect under any statute authorizing attorneys’ fees. 

 

5. Western National conceded: 

There is no doubt that Western National violated its own claims handling 

procedures and requirements under South Dakota law that an insurer 

respond to a claim within 30 days. SDCL 58-33-67(1). There is no excuse for 

the fact that there was no follow-up after the July 13, 2006 Notice of Claim 

for some 20 months.
#27798 

-13- 

[¶21.] “Attorney fees may only be awarded by contract or when specifically 

authorized by statute.” Biegler v. Am. Family Mut. Ins. Co., 2001 S.D. 13, ¶ 56, 

621 N.W.2d 592, 606. “The party requesting an award of attorneys’ fees has the 

burden to show its basis by a preponderance of the evidence.” Arrowhead Ridge I, 

LLC v. Cold Stone Creamery Inc., 2011 S.D. 38, ¶ 25, 800 N.W.2d 730, 737. 

[¶22.] Regardless of the parties’ various arguments, SDCL 58-12-3 cannot be 

the basis for an award of attorneys’ fees to TSP. SDCL 58-12-3 permits a court to 

award attorneys’ fees in an action against an insurance company for the denial of 

coverage without reasonable cause but only “if judgment or an award is rendered for 

plaintiff.” TSP is not entitled to judgment or an award against Western National 

for the denial of coverage and is therefore not entitled to an award of fees under this 

provision. Because we reverse the grant of summary judgment in favor of TSP, we 

vacate any fees awarded under SDCL 58-12-3. 

[¶23.] Regarding the second statutory ground for attorneys’ fees, Western 

National argues that although it violated SDCL 58-33-67(1), “the South Dakota 

statute, on its face, indicates that its violation does not supply a private cause of 

action to anyone . . . and certainly not TSP.” Western National relies upon 

SDCL 58-33-69, which states that “[n]othing in §§ 58-33-66 to 58-33-69, inclusive, 

grants a private right of action.” But SDCL 58-33-46.1 allows “[a]ny person who 

claims to have been damaged by any act or practice declared to be unlawful by 

[chapter 58-33] . . . to bring a civil action for the recovery of all actual and 

consequential damages suffered as a result of such act or practice including 

reasonable attorneys’ fees to be set by the court.” In other words, while SDCL 58-
#27798 

-14- 

33-67(1) does not by its own terms grant a private right of action according to SDCL 

58-33-69, a violation thereof provides a cause of action under SDCL 58-33-46.1. 

[¶24.] In its answer to the amended complaint, TSP asserted that it “is 

entitled to an award of attorneys’ fees pursuant to SDCL 58-33-46.1” for Western 

National’s violations of SDCL 58-33-67. The circuit court’s factual findings that 

Western National violated SDCL 58-33-67(1) twice by failing to respond to BHI’s 

communications within thirty days are not clearly erroneous. See Brooks v. 

Milbank Ins. Co., 2000 S.D. 16, ¶ 16, 605 N.W.2d 173, 178. Further, under SDCL 

58-33-46.1, TSP was a “person . . . damaged by” Western National’s violation of 

SDCL 58-33-67(1).6 Thus, regardless of whether there was coverage, TSP was 

entitled to bring a claim for reasonable attorneys’ fees. 

[¶25.] Although the circuit court held a hearing on attorneys’ fees and 

awarded TSP $19,800.18, it is unclear what portion of the fees were properly 

assessed because the court did not delineate between fees awarded under 

SDCL 58-33-46.1 and SDCL 58-12-3. Further complicating the matter, the parties 

have not included the transcript of the October 19, 2015 attorneys’ fees hearing in 

the record. Thus, we remand for the court to hold a hearing to determine what 

portion, if any, of the fees awarded to TSP occurred as a result of Western 

National’s violations of SDCL 58-33-67(1) and to award the same. 

Conclusion

[¶26.] The Designated Professional Services endorsement excludes all 

potential coverage for any property damage caused by the land-surveying error. 

 

6. The definition of person under SDCL 2-14-2 includes a corporation. 
#27798 

-15- 

Accordingly, the circuit court erred by granting TSP’s motion for summary 

judgment. We remand for entry of summary judgment in favor of Western 

National. Further, the circuit court erred in awarding attorneys’ fees pursuant to 

SDCL 58-12-3. We vacate the award of attorneys’ fees and remand to the circuit 

court for further hearing on this issue consistent with this opinion. 

[¶27.] GILBERTSON, Chief Justice, and ZINTER and SEVERSON, Justices, 

and WILBUR, Retired Justice, concur. 

[¶28.] JENSEN, Justice, not having been a member of the Court at the time 

this action was submitted to the Court, did not participate.