SDCL § 9-12-7: Liability insurance and agreements for protection of municipality, officers and employees.

Any municipality may obtain and pay for all forms of liability insurance, or in lieu thereof, make other arrangements, including entering into agreements with others, which agreements may create separate legal or administrative entities pursuant to chapter 1-24, to protect and assist the municipality in meeting obligations arising from such acts or omissions for which the municipality may be legally liable. The liability insurance coverage obtained or other arrangement shall protect the municipal officers and employees in the performance of official duties and against acts committed by them that could be reasonably considered to be within the scope of their official duties.