The South Dakota Supreme Court ruled that notification by a state insurance liquidator of a claim first filed and reported four months after the insolvent insurer’s policy deadline for claims fell within the policy’s coverage. dieter v XL Specialty Ins. Co., 980 NW2d 229 (SD 2022). In response to a certified question from the U.S. District Court for the District of South Dakota, the court ruled that a South Dakota statute that allows the bankruptcy trustee an additional 180 days from the liquidation order to report a claim extends the coverage period for claims-purchased insurance policy over the end of the insurance period.
On June 12, 2018, the National Insurance Director issued a winding-up order of the policyholder, an insolvent insurer incorporated on June 27, 2018, for the insurance period July 1, 2017 to July 1, 2018. On November 1, 2018, the insured’s liquidator applied for coverage under the The insured’s Claims Made D&O policy for a claim against the insured relating to a $21 million loan that the insured allegedly originated with no apparent means of repayment. The insurer refused to cover the damage because it was not claimed for the first time during the insurance period. The insolvency administrator filed a claim for cover against the insurer. The district court upheld the Supreme Court’s question as to whether South Dakota Codified Laws § 58-29B-56, which allows the bankruptcy trustee 180 additional days from the liquidation order to report a claim, thereby extends the period of coverage for claims-purchased insurance policy beyond the end beyond the insurance period.
The law provides: “[i]f A limitation period for is determined by an agreement. . . . make claims, . . . . and if in such a case the time limit had not expired at the time the application was made, the liquidator may take such measures in favor of the estate or take such action as may be required or permitted by the insurer, within a period of  Days after receipt of a liquidation order. . . .” The receiver argued that the request for simple interpretation of the law was made within the period of insurance since it was made within 180 days of the winding-up order. The insurer disagreed, claiming that the law did not apply because the policy did not impose a “statute of limitations” on the insured or the receiver for making claims. Instead, the insurer argued that the insurance contract only obliges the insurer to provide coverage for claims made during the policy period. Additionally, the insurer claimed that the bankruptcy trustee’s arguments failed to take into account that the law was enacted before insurance policies were widely available and that more contemporary guidance recommends purchasing tail insurance to extend the deadline for filing a claim.
The regional court contradicted the insurer and affirmed the certified question. The court ruled that the plain language of the statute extends the period of coverage for the policy and that the statute contains no exception to the claims-made policy. Additionally, the court held, the law applies because the policy has a “statute of limitations,” namely the insurance period. And that statute of limitations “had not expired at the time the application was filed” — the application and liquidation order were both filed in June, before the policy deadline. In addition, the court noted the law’s use of the term “any claim” as a further indication that the law should extend coverage to “all” claims made within the 180-day period. The court justified this by saying that it does not matter whether the claim is made or noticed during the insurance period, since the law does not make this distinction.