If a South Dakota conservation district leases equipment to farmers, or sends its own employees to operate that equipment on private land, should it buy liability insurance? Does the district itself have sovereign immunity? What about its employees personally?
Plain-English summary
The Hughes County Conservation District, like other conservation districts in South Dakota, owned heavy equipment used for conservation projects (terraces, dams, waterways). Sometimes the district leased the equipment to farmers who operated it themselves. Sometimes district employees operated the equipment on the farmer's land. District manager Maxwell Finke wrote AG Mark Meierhenry asking whether the district should carry liability insurance.
The AG's answer was yes, and the reasoning required walking through South Dakota's confusing sovereign immunity doctrine. The constitutional starting point was Article III, § 27, giving the legislature authority to decide when and how the state could be sued. The state itself was largely immune. Below the state, the AG identified two categories of subordinate units:
Municipal corporations (cities) had liability when their acts were "proprietary" (like operating a utility) as opposed to "governmental" (like enforcing ordinances). They wielded broad authority over limited geographic areas.
Quasi-municipal corporations (counties, townships, school districts) were "mere instrumentalities of the state" and were not liable for torts unless a statute expressly created liability. They wielded narrow authority over broad geographic areas.
The AG placed conservation districts in the quasi-municipal category. They had a narrow function (soil and water conservation), they operated over a wide geographic area (county-sized or larger), and they were structurally similar to school districts or townships. So conservation districts themselves were probably immune from tort liability.
But that wasn't the end of the analysis. The Supreme Court's 1982 National Bank of South Dakota v. Leir decision had dramatically narrowed employee immunity. Under Leir, an employee of a governmental unit could be personally liable even when the unit itself was immune. The court applied a ministerial-vs-discretionary test: discretionary actions (high-level policymaking) might retain immunity, but ministerial actions (everything else) did not. Leir had treated the very difficult judgment call of whether to remove children from an abusive home as a "ministerial" action, which the AG read as a signal that the court would treat almost any operational decision as ministerial.
The practical implication for a conservation district was sharp. The district itself was probably immune. But the employee operating a tractor, maintaining leased equipment, or supervising a project could be personally liable for negligence, even though the district itself could not be sued. Without insurance, employees were exposing personal assets every time they did their job.
The AG also flagged residual risk to the district. The classification of conservation districts as quasi-municipal had not actually been litigated. A future court might disagree with the AG's analysis and classify them as municipal corporations, exposing the district itself to liability for proprietary functions like equipment leasing. Insurance protected against that contingency.
The AG's bottom-line recommendation: buy insurance covering both the employees' personal liability (which was definitely exposed under Leir) and the district itself (which was probably immune but at risk of judicial reclassification). It was good business.
Currency note
This opinion was issued in 1984. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. South Dakota's sovereign immunity doctrine has evolved substantially since 1984. The legislature has enacted statutory waivers and immunities through various amendments to SDCL chapter 21-32 and related statutes. The South Dakota Supreme Court has continued to develop the ministerial-vs-discretionary doctrine. Conservation district status, employee immunity, and the proprietary-vs-governmental distinction should be checked against current law.
What the opinion meant at the time
For conservation districts across South Dakota, the opinion was a budget-affecting recommendation. Districts that had been operating without liability insurance, assuming sovereign immunity protected them, learned they were leaving their employees personally exposed. Insurance premiums became a recognized line item.
For conservation district employees personally, the opinion was alarming. Daily work like driving heavy equipment, supervising erosion control projects, or maintaining leased machinery created potential personal liability. Leir's narrowing of employee immunity meant the older comfortable assumption ("I'm a public employee, I'm covered") was no longer reliable.
For district directors making policy decisions about insurance coverage levels and types, the opinion provided a framework. Cover the employees first (the certain exposure). Cover the district itself (the residual but real exposure). Consider proprietary-style activities like equipment leasing as higher-risk because they were the activities most likely to be classified as municipal-corporation-style proprietary functions if the district's quasi-municipal status was ever judicially reconsidered.
For other special-purpose districts (water districts, drainage districts, watershed districts), the analysis was likely similar. The AG's reasoning about geographic and functional scope would generally place them in the quasi-municipal category, but with the same employee-exposure problem under Leir.
For the South Dakota legislature, the opinion was an implicit suggestion to clean up sovereign immunity law statutorily. The AG noted that Chief Justice Fosheim had been concerned about the court's willingness to defer to legislative judgments under Article III, § 27. Clearer statutory immunity for special-purpose districts and their employees would have provided certainty.
Common questions
Q: What was the proprietary-vs-governmental distinction for cities?
A: An old doctrine treating city functions as either "governmental" (core sovereign functions like policing or ordinance enforcement, immune) or "proprietary" (commercial-like activities like operating a utility, not immune). The distinction was always fuzzy in practice but remained part of South Dakota law in 1984.
Q: Why did the AG think a court might reclassify conservation districts?
A: Because the classification had never been litigated, and conservation districts had some features (owning and leasing equipment, charging fees, operating across functional areas) that resembled municipal corporation activities. A future court could weigh those features differently and reach a different conclusion.
Q: What was the National Bank of South Dakota v. Leir holding?
A: A Department of Social Services employee was personally sued for allegedly negligent handling of a child welfare case. The Supreme Court held that the state's immunity from suit did not extend to the employee personally when the employee's actions were "ministerial." The court treated the child welfare judgment as ministerial, which signaled that almost any operational decision would be ministerial.
Q: Could the conservation district indemnify its employees?
A: That was a separate question from sovereign immunity. South Dakota law in 1984 generally permitted public entities to indemnify employees for actions in the scope of employment, but the indemnity had to come from somewhere (insurance, district budget, etc.) and could not be enforced against a district that lacked the funds. Insurance was the practical solution.
Q: What about the equipment lease arrangement specifically?
A: The AG addressed this directly. If a private operator borrowed equipment and caused harm to himself or others, the district itself probably wasn't liable. But if a district employee had negligently maintained the equipment, the employee could be personally liable. And if the employee got too involved in the private operator's work, the employee might be liable for the private operator's actions.
Q: Did the AG suggest the legislature should act?
A: Implicitly yes. The reference to Chief Justice Fosheim's concerns about the legislature's role under Article III, § 27 was a signal that the AG saw the immunity doctrine as needing legislative clarification. The legislature has, in fact, amended sovereign immunity statutes many times since 1984.
Background and statutory framework
Conservation districts in South Dakota are organized under SDCL chapter 38-8 to address soil and water conservation. They have directors elected from within the district, taxing or fee authority, and responsibility for designing and supporting conservation projects on private agricultural land. The model spread across the United States during the Dust Bowl era and was widely adopted.
The sovereign immunity doctrine in South Dakota in 1984 was unsettled. The constitutional starting point was clear (Article III, § 27 putting the legislature in charge), but the case law had developed a three-tiered structure (state, municipal corporation, quasi-municipal corporation) that the legislature had not enacted. The court was also signaling, through Leir and Chief Justice Fosheim's concurrences and dissents, that the doctrine was in flux.
The AG opinion was conservative legal advice in an unsettled landscape. Rather than relying on probabilities of judicial outcomes, the AG recommended insurance as a hedge against multiple risks: the certain exposure of employees under Leir, the residual risk to the district itself from possible reclassification, and the broader risk of doctrinal change.
The earlier 1979 AG opinion (AGR 79-8) referenced by Meierhenry had apparently raised similar concerns about consistency in sovereign immunity law. The 1984 opinion built on that earlier framework and provided more specific guidance to conservation districts.
Citations and references
Constitutional:
- S.D. Const. Art. III, § 27
Statutes:
- SDCL ch. 9-24 (suits against municipalities)
- SDCL ch. 38-8 (conservation districts)
- SDCL 21-32-15 to 21-32-17 (state immunity waiver)
Cases:
- Budahl v. Gordon and David Associates, 287 N.W.2d 489 (S.D. 1981)
- National Bank of South Dakota v. Leir, 325 N.W.2d 845 (S.D. 1982)
- Jensen v. Jeul, 278 N.W. 6 (S.D. 1938)
- Plumbing Supply Co. v. Board of Education, 142 N.W. 1131 (S.D. 1913)
- Merrill v. Birhanzel, 310 N.W.2d 522 (S.D. 1981)
- High Grade Oil v. Sumner, 295 N.W.2d 736 (S.D. 1980)
- Conway v. Humbert, 145 N.W.2d 524 (S.D. 1966)
- State v. Board of Commissioners, 222 N.W. 583 (S.D. 1928)
- Norgeot v. State of South Dakota, 334 N.W.2d 501 (S.D. 1983)
- Bailey v. Lawrence County, 59 N.W. 219 (S.D. 1894)
- Shaub v. Moerke, 338 N.W.2d 109 (S.D. 1983)
- Kringen v. Shea, 333 N.W.2d 445 (S.D. 1983)
- Krueger v. Wilson, 325 N.W.2d 851 (S.D. 1982)
- Sioux Falls Construction Company v. City of Sioux Falls, 297 N.W.2d 454 (S.D. 1980)
Earlier AG opinion referenced:
- AGR 79-8
Source
Original opinion text
February 23, 1984
Mr. Maxwell M. Finke
Hughes County Conservation District
225 South Pierre Street, Rm. 303
Pierre, South Dakota 57501
OFFICIAL OPINION NO. 84-12
Necessity of conservation district to purchase liability insurance
Dear Mr. Finke:
You have requested an official opinion based upon the following factual situation:
FACTS:
Several conservation districts own and lease equipment to operators on a rental basis. In other instances district employees will operate the equipment and the pertinent district will receive a rental fee.
Based on this information, you have asked the following question:
QUESTION:
Should a conservation district organized under SDCL 38-8 carry a liability insurance policy to protect itself and its employees?
To answer this question it is first necessary to ascertain the extent of potential liability of a conservation district and its employees. The pertinent constitutional provision is South Dakota Constitution, Article III, § 27 which states: 'The Legislature shall direct by law in what manner and in what courts suits may be brought against the state.'
Our Supreme Court has implied that this provision sets up a general rule of immunity for all units of government, including state, political divisions and local units of government. See Budahl v. Gordon and David Associates, 287 N.W.2d 489, 493 (S.D. 1981). See generally, Shaub v. Moerke, 338 N.W.2d 109 (S.D. 1983); Kringen v. Shea, 333 N.W.2d 445 (S.D. 1983); Krueger v. Wilson, 325 N.W.2d 851 (S.D. 1982); Sioux Falls Construction Company v. City of Sioux Falls, 297 N.W.2d 454 (S.D. 1980). However, the court has also developed rules which are essentially exceptions from the general rule of immunity. These rules are apparently based upon a trichotomy of governmental units; the finding that a governmental unit is of a particular character carries with it a determination of the extent to which that unit of government will be subjected to suit.
The first unit of government is the state itself. The state is the generic body politic and thus partakes totally of the constitutional immunity from tort. See generally, Conway v. Humbert, 145 N.W.2d 524, 526 (S.D. 1966); State v. Board of Commissioners, 222 N.W. 583, 587-593 (S.D. 1928). The state, incidentally, has provided for a limited waiver of its immunity and that of its employees from suit in SDCL 21-32-15 to 17. See Norgeot v. State of South Dakota, 334 N.W.2d 501 (S.D. 1983). (I am not here addressing any questions relating to this legislation and the South Dakota Constitution, Article III, § 1.)
The second and third units of government are created by the state. They are the municipal corporation and the quasi-municipal corporation.
The familiar municipal corporation is the city. The municipal corporation may be liable, that is, it does not have immunity, when its acts are of a 'proprietary' as opposed to a 'governmental' nature. See Jensen v. Jeul, 278 N.W. 6, 8 (S.D. 1938). See also, Conway v. Humbert, 145 N.W. at 526. Thus, there is a broad area in which a city might be found to be liable. SDCL 9-24 sets up procedures which direct a manner in which suit might be brought against the city.
Quasi-municipal corporations, on the other hand, include, according to Jensen v. Jeul, 278 N.W. at 8, 'counties, civil townships and school district.' These are said to be 'mere instrumentalities of the state for carrying into affect the functions of government and are not liable for damages caused by neglectful performance of such duties, unless cause of action is expressly given by statute.' Id. See also Bailey v. Lawrence County, 59 N.W. 219, 222, (S.D. 1894).
The Supreme Court in 1913 described the immunity of one type of quasi-municipal corporation, the school district, in these words:
School districts are state agencies exercising and wielding a distributive portion of the sovereign power of the state, and the officers of the school districts are the living agencies through whom the sovereign state act is carried into effect. A school district officer in the performance of his duties acts in a political capacity, as much so as the Governor of a state, and is not liable for negligent acts of omission occurring in the performance of such political or public duties, unless the sovereign power of the state has authorized and consented to a suit for such negligence.
Plumbing Supply Co. v. Board of Education, 142 N.W. 1311, 1132 (S.D. 1913). This language was recently repeated in Merrill v. Birhanzel, 310 N.W.2d 522 (S.D. 1981).
The question which must be addressed, then, is obviously whether a conservation district fits into the category of a municipal corporation (such as a city) or into the category of a quasi-municipal corporation (such as a school district, county or township). In my view, a conservation district is more nearly akin to a school district or township and should be classified as a quasi-municipal corporation.
The major reason for this conclusion is that a municipal corporation, such as a city, commonly exercises a comprehensive range of governmental authority; it has substantial power to enact ordinances for the governance of its citizens with regard to many of their activities. A quasi-municipal corporation, such as a school district, on the other hand, exercises its functions only within a very limited range.
Second, but less significantly, the municipal corporation commonly wields its authority over a limited geographic area; the quasi-municipal corporation, in contrast, typically exercises its authority over a wide geographic area.
The distinction between municipal and quasi-municipal corporation thus seems to be that the municipal corporation will commonly exercise broad authority over a limited geographic area, while a quasi-municipal corporation will commonly exercise narrow authority over a broad geographic area.
The conservation district, as one which can exercise but a limited authority over a wide geographic area, thus falls within the definition of the quasi-municipal corporation.
The law of immunity relating to the quasi-municipal corporation, including, in my view, the conservation district, is that such a unit of government will not be liable for its torts. Further, the employees and officers of such a unit of government, including a conservation district, will likewise not be liable for their torts insofar as the action at issue was within the scope of employment of the officer or employee.
There is, however, a very significant limitation to this statement with regard to officers and employees and their personal liability. The Supreme Court has essentially recognized that an officer or employee acting within the scope of his employment may be liable if two obstacles are overcome. The leading case is National Bank of South Dakota v. Leir, 325 N.W.2d 845 (S.D. 1982). In Leir the Supreme Court of South Dakota considered the case of the individual liability of an employee of the South Dakota Department of Social Services. The court stated that the immunity of the state would not protect an employee of the state when a finding of negligence would not subject the state itself to liability. 325 N.W.2d at 847. This rather surprising conclusion, see 325 N.W.2d at 850 (Fosheim, C.J., dissenting); Kringen v. Shea, 333 N.W.2d 445, 447 (S.D. 1983) (Fosheim, C.J., concurring and dissenting) means essentially that the state may be immune from an employee's action, while the employee might himself be liable. Cf. Shaub v. Moerke, 338 N.W.2d 109 (S.D. 1983). Further, it means that the courts will look to the actions of the particular employee to determine whether or not that action itself exposes the state to liability. The court has not set out definitive rules to determine when the state might find itself liable if the employee was found liable. However, it can be said that the immunity for state employees has been very substantially weakened by the Leir decision. Indeed, except for the very narrow class of cases involving highway engineers, see High Grade Oil v. Sumner, 295 N.W.2d 736 (S.D. 1980), I have substantial doubts that the Supreme Court will hereafter find that an employee has any immunity for his actions when he is sued in his individual capacity.
Once this first hurdle is passed by plaintiff, that is, once it is shown that the action of the state employee could not result in liability being imposed upon the state itself, the Supreme Court applies a further distinction to determine whether or not the individual might himself be personally liable. The court has declared that an employee acting within the scope of his employment might be liable when he is acting in a 'ministerial' capacity as opposed to a 'discretionary' capacity. National Bank of South Dakota v. Leir, supra. The precise contours of this distinction are not clear. The Supreme Court quoted from the Restatement (2d) of Torts, § 895B (1979) in its explanation of the nature of this distinction and I will not reiterate that discussion here. It does seem to me, however, that the Supreme Court has declared that any action other than an action weighing policy considerations at the highest levels of the governmental unit in question will be deemed to be a ministerial action. Thus, most actions in government will hereafter be deemed to be ministerial ones.
In National Bank of South Dakota v. Leir, supra, for example, the Supreme Court stated that the very difficult task of making a judgment on whether children should be removed from a home, an action which is almost inevitably based on conflicting evidence and upon the weighing of subtle nuances, and the differences in human character, was a ministerial one. Given the Leir characterization of the 'ministerial' capacity, I can only conclude that the courts will continue to construe the category in a very broad fashion and that, consequently, many if not all of a typical employee's actions could subject that employee to liability.
What, then, is the extent of probable liability of the conservation district and its officers or employees? The conservation district is, as I interpret the law, entirely immune from liability for its torts. On the other hand, the officer or employee of a conservation district is very probably not immune from personal liability from his torts unless his actions involve policymaking decisions at the highest level. Finally, implicit in the foregoing, an officer or employee may not be immune even with regard to policymaking decisions if his actions are found to be not within the scope of his employment or his duties.
Your specific questions may now be answered. You ask whether the conservation district or its employees might be found liable when a district leases equipment to private operators for conservation projects. In accordance with the views expressed above, I believe that the district would not be liable in the event of a tort committed by the private operator. However, an employee of the district might be found liable if he negligently maintained equipment leased to the private operator and it caused injury to the private operator. Further, it is possible that a district employee might so involve himself in the activities of a private operator of conservation district equipment that he finds himself liable for the private operator's actions.
You also ask about the situation in which the district supplies both the equipment and the manpower to perform a conservation task. Again, it is my view that the district itself would not be liable for the torts of its employees. However, the employees themselves may well be liable should they commit a tort in the performance of their duties.
In my view, a conservation district should purchase insurance at the minimum to cover the activities of its employees insofar as possible.
Further, I feel constrained to warn you, as I noted in my opinion to the Division of Conservation in 1979, see AGR 79-8, p. 18, 20, that the courts do not appear to be consistent on the issue of sovereign immunity. As Chief Justice Fosheim has implied, the South Dakota Supreme Court appears to be unwilling to allow the Legislature to perform its duties as set out by Article III, § 27 of the Constitution. See Kringen v. Shea, 333 N.W.2d 445, 447 (S.D. 1983) (Fosheim, C.J., concurring and dissenting). Thus, the law of sovereign immunity is subject to change which could subject the district itself to liability.
In addition, the precise status of the conservation district as a quasi-municipal corporation has never been established in South Dakota case law. It is possible that the court may indeed find the district to be a municipal corporation and not a quasi-municipal corporation although my analysis is to the contrary. In such a case the district itself, and not merely its employees, would be liable for torts committed by it or by its employees when the torts were committed in pursuance of a 'proprietary' as distinguished from a 'governmental' function. While I do not believe that this would be a logical development of present law, it is not impossible that this development could occur.
A conservation district may, therefore, be well advised to purchase liability insurance to cover not only the individual liability of its employees (because such liability is probably a matter of existing law) but also to cover the liability of the district itself (because such liability may be declared as part of the developing law in this area). To provide against such a contingency would be, in my opinion, good business.
Respectfully submitted,
Mark V. Meierhenry
Attorney General