ACCIDENTS OR OCCURRENCES
An accident is an event that occurs without foresight or expectation. Riley v. National Auto Ins. Co., 77 N.W.2d 241, 246 (Neb. 1956). In the insurance context, "accident" is understood as having a broader meaning than mere negligence and extends to any "unexpected happening without expectation." Kimball v. St. Paul Fire & Marine Ins. Co., 206 N.W.2d 632 (Neb. 1973).1 See also Columbia Nat. Ins. Co. v. Pacesetter Homes, Inc., 248 Neb. 1, 532 N.W.2d 1 (1995)(misrepresentations concerning sale of property not an "occurrence").
An “accident” is understood in the liability insurance context as ““an unexpected happening without intention.”” Sullivan v. Great Plains Ins. Co., 210 Neb. 846, 851, 317 N.W.2d 375, 379 (1982). In its ordinary sense, ““accident”” means ““a happening that is not expected, foreseen, or intended.”” Webster’’s New World College Dictionary 8 (3d ed. 1996). The term, in its ordinary sense, has no reference to anyone’’s perspective. Instead, it refers to an unexpected, unintended, or unforeseen happening, regardless of the perspective from which it is viewed. As such, intentional acts by definition cannot be accidents. Austin v. State Farm Mut. Automobile Ins. Co., 261 Neb. 697 (Neb. May 4, 2001)(holding that “road rage” incident in which uninsured motorist drove into insured was not an “accident” even though the incident was unintended by the insured).
Under Nebraska law, an insured will be deemed to have "expected" some injury if it "knew or should have known that there was a substantial probability that certain consequences will result from his actions." City of Carter Lake v. Aetna Cas. & Surety Co., 604 F.2d 1052 (8th Cir. 1979). Interpreting Nebraska law, the Eighth Circuit held that merely because an insured might foresee the possibility of injury did not mean that it "expected" that harm to occur. However, coverage will not be required where there is a "substantial probability" that harm will result from the insured's deliberate acts.
Thus, in Bisgard v. Johnson, 525 N.W.2d 225 (Neb. App. 1994), the Court of Appeals ruled that an insured must have intended to cause injury to the plaintiff when he shot at him from a distance of seven feet, holding that any reasonable person in such circumstances would have known that there was a high probability that such acts would cause injury.
In most cases, "intended" requires proof that the insured subjectively intended to cause harm. However, the intent need not be specific; a general intent to cause harm is sufficient. State Farm Fire & Cas. Co. v. Victor, 232 Neb. 942, 442 N.W.2d 880 (1989). Intent will be inferred as a matter of law where the insured's conduct is inherently injurious. Victor, supra and State Farm v. van Gorder, 907 F.2d 900, 902 (9th Cir. 1990)(sexual molestation).
Court of Nebraska has ruled that there can be no such thing as a "negligent
sexual assault." State Farm Fire & Casualty Co. v. Van Gorder,
455 N.W.2d 543, 545 (Neb. 1990) and Torrison v. Oberman, 549 N.W.2d 124
are heard directly by the Nebraska Supreme Court.
Unfair or deceptive consumer practices are proscribed by Neb. Rev. Stat. § 59-1601 (1988). Unfair claims handling by insurers is regulated under Neb. Rev. Stat. § 44-1525(9) (1943).
An insured seeking damages for bad faith must show that (1) there was no good faith basis for the insurer's denial of coverage and (2) that the insurer knew of, or recklessly disregarded, the lack of a reasonable basis for denying the claim. Ruwe v. Farmers Mut. United Ins. Co., 238 Neb. 67, 469 N.W.2d 129 (1991). A claimant may not recover if it fails to fails to show the absence of any reasonable basis for the insurer's denial. Braesch v. Union Ins. Co., 464 N.W.2d 769, 777 (Neb. 1991).
A diligent investigation by an insurer requires an evenhanded investigation of the facts using objective standards. Hadenfeldt v. State Farm Mutual Auto Ins. Co., 239 N.W.2d 499 (Neb. 1976). However, the Nebraska Supreme Court has ruled that an insurer did not act in bad faith by failing to conduct an investigation of the facts giving rise to the claims against its insured where the investigation would not have disclosed any potential covered set of facts to support a claim for coverage. John Markel Ford, Inc. v. Auto-Owners Ins. Co., No. S-94-137 (Neb. February 9, 1996).
Under Nebraska law, an insurer’s bad faith failure to settle can form the basis for a tort claim. Home Insurance Company v. Aetna Insurance Company, No. 00-1710 (8th Cir. January 8, 2001); Lincoln Benefit Life Company v. Edwards, 45 F. Supp.2d 722, 754 (D. Neb. 1999); and Hadenfeldt, 239 N.W.2d at 502.
insurer’s conduct was reasonable must be based on the information known
to it at the time of denial. Radecki v. Mutual of Ohama Insurance
Company, 583 N.W. 2nd 320, 326 (Neb. 1998)
BREACH OF POLICY CONDITIONS
defeats coverage. ACH v. Farmers Mut. Ins. Co., 215 N.W.2d 518 (Neb.
1974). The Nebraska Supreme Court has required proof of prejudice
for a breach of the cooperation clause, however. MFA Mutual Ins.
Co. v. Sailors, 180 Neb. 201, 141 N.W.2d 846 (1966).
"BROAD FORM COVERAGES"
and use of property due to insured developer's misrepresentations was not
covered because it alleged a loss of beneficial use, not a claim for the
right of occupancy. Columbia Nat. Ins. Co. v. Pacesetter Homes, Inc., 248
Neb. 1, 532 N.W.2d 1 (1995).
CHOICE OF LAWS
it appears that Nebraska continues to follow the traditional lex loci approach
to conflicts of laws and would look to the place where policies were issued.
Universal Underwriters Ins. co. v. Wagner, 367 F.2d 866 (8th Cir. 1966).
Although there is little law on insurance contracts, the Nebraska Supreme
Court held in Harper v. Silva, 224 Neb. 645, 399 N.W.2d 826 (1987), that
"in an action for a personal injury, the local law of the state where the
injury occurred determines the rights and liabilities of the parties, unless,
with respect to the particular issue, some other state has a more significant
relationship under the principles stated in Section 6 to the occurrence
and the parties..."
proximate cause of damage to the insured's hog herd from a pseudo-rabies
virus that was spread by a windstorm was the windstorm, a covered peril
under the farmer's policy. Griess & Sons v. Farm Bureau Ins.
Co., 247 Neb. 526 (1995).
Although the Nebraska Supreme Court has not yet considered the meaning of "damages" in the context of an environmental claim, Nebraska law continues to recognize the distinction between "damages" and equitable remedies, including injunctive relief. In Sandy Creek Public Schools v. St. Paul Surplus Lines Ins. Co., 222 Neb. 424, 384 S.W.2d 279 (1986), the Supreme Court of Nebraska held that a policy that excluded coverage for "relief in any form other than money damages" had no obligation to defend a suit that sought only injunctive relief.
More recently, the Eighth Circuit has predicted that the Nebraska Supreme Court would find coverage for Superfund clean up costs. In Lindsay Manufacturing Co. v. Hartford Accident & Indemnity Co., 118 F.3d 1263 (8th Cir. 1997), the court reversed a District Court determination that such costs are in the nature of an equitable remedy and not "damages." Noting the recent decision of the Missouri Supreme Court in Farmland Industries, which had rejected the Eighth Circuit's NEPACCO distinction between legal and equitable remedies, the court refused to find any basis in Nebraska law for suggesting that its courts would apply a special, technical meaning to the term "as damages" and thus held that coverage is required since clean up costs are within a lay person's understanding of the meaning of "damages."
Nebraska trial courts have ruled for insurers on this basis. See
Lindsay Manufacturing Co. v. Hartford Accident and Indemnity Co., 911 F.Supp.
1249 (D. Neb. 1995); Hoskins-Western-Sonderegger, Inc. v. American
& Foreign Ins. Co., Docket No. 402, (Lancaster County Dist. Ct. Feb.
1, 1989)(costs incurred by the insured in remediating contamination resulting
from mining operations on their property were not "damages") and R.H. Rogers
Investment Co. v. Union Ins. Co., Docket No. 437 (Lancaster County Dist.
Ct. June 30, 1989)(state court grants summary judgment to insurer, holding
that cases finding that clean-up costs are not "damages" are "more persuasive
and better reasoned"). But see, Floyd's Sales and Service, Inc. v. Universal
Underwriters Ins. Co., 1995 WL 786637 (D. Neb. November 3, 1995)(finding
coverage for clean up claims).
A request by an insurer to intervene in the tort action against its policyholder for the purpose of posing special questions to the jury to allow an allocation of damages between covered and non-covered claims was denied in High Plains Cooperative Association v. Mel Jarvis Construction Company, 137 F.R.D. 285, 289 (D. Neb. 1991).
v. Gardner, 471 N.W.2d 391 (Neb. 1991), the Nebraska Supreme Court held
that the claimant was not bound by a previous finding of no coverage in
a declaratory action between the insurance company and the policyholder.
The court reasoned that although the policyholder and the claimant had
similar goals (establishing coverage), this did not make them “privies”
and so the claimant was not bound.
DUTY TO DEFEND
An insurer has a duty to defend if (1) the allegations of the complaint, if true, would obligate the insurer to indemnity, or (2) a reasonable investigation of the actual facts by the insurer would or does disclose facts that would obligate the insurer to indemnify. John Markel Ford v. Auto-Owners Ins. Co., 543 N.W.2d 173, 179 (Neb. 1996). In considering whether it has a duty to defend, an insurer must look not only to what is alleged in the suit against its insured but must also "investigate and ascertain the relevant facts from all available sources." Mapes Industries, Inc. v. USF&G, 560 N.W.2d 874 (Neb. 1997).
An insurer's duty to defend is determined by the language of its policy and the allegations in the complaint giving rise to the suit against its insured. See, e.g., Sandy Creek Public Schools, School District No. 1-C v. St. Paul Surplus Lines Ins. Co., 222 Neb. 424, 384 N.W.2d 279 (1986).
Supreme Court has ruled that a policyholder’s entitlement to a defense
should not depend upon the whims of a plaintiff’s attorney in drafting
the complaint against the insured. In Allstate Insurance Company
v. Novak, 313 N.W. 2d 636, 641 (Neb. 1981), the court ruled that the insurer
was also obligated to “examine all the facts to determine whether there
is the possibility of coverage under the policy.”
ESTOPPEL AND WAIVER
A waiver is a voluntary and intentional relinquishment of a known right, privilege, or claim, and may be demonstrated by or inferred from a person’’s conduct. Fritsch v. Hilton Land & Cattle Co., 245 Neb. 469, 513 N.W.2d 534 (1994) and Lowry v. State Farm Mut. Auto. Ins. Co., 228 Neb. 171, 421 N.W.2d 775 (1988). Ordinarily, to establish a waiver of a legal right, there must be a clear, unequivocal, and decisive act of a party showing such a purpose, or acts amounting to an estoppel on his or her part. Schoemaker v. Metropolitan Utilities Dist., 245 Neb. 967, 515 N.W.2d 675 (1994).
In general, waiver and estoppel may not be used to create coverage. Nor will estoppel apply unless the insured can show detrimental reliance. Bisgard v. Johnson, 525 N.W.2d 225 (Neb. App. 1994). However, an exception applies where an insurer controls the defense of an action without questioning coverage, thereby causing prejudice to the insured. First United Bank of Bellevue v. First American Title Ins. Co., 496 N.W.2d 474 (Neb. 1993).
Under the "mend the hold" doctrine, an insurer may not deny coverage for one reason and then litigate claims based on wholly separate reasons. Design Data Corp. v. Maryland Casualty Co., 503 N.W.2d 552, 558 (Neb. 1993). Generally, however, estoppel may not be used to expand an insurance policy's coverage to include risks that are specifically excluded under the policy. First United Bank of Bellview v. First American Title Ins. Co., 496 N.W.2d 474, 480 (Neb. 1993). This general rule does not apply in cases where the insurer accepts the defense of a suit against its policyholder, with knowledge of the facts giving rise to a coverage issue, if it fails to issue a reservation of rights that results in some prejudice to the policyholder. Estoppel does not exist in a case where the insurer never assumed the control of the underlying defense.
An insurer that defended for a year without issuing a reservation of rights was estopped to dispute coverage later. First United Bank of Bellevue v. First American Title Ins. Co., 496 N.W.2d 474 (Neb. 1993). However, in Lindsay Manufacturing Co. v. Hartford Accident and Indemnity Co., No. CV 90-0-610 (D.Neb. December 13, 1995), the U.S. District Court ruled that an insured was not entitled to a windfall and must repay its insurer for sums paid for a clean up that the court subsequently ruled was not covered under the policy.
Supreme Court ruled in Daniels v. Allstate Ins. Co., 261 Neb. 571 (Neb.
April 20, 2001) that where an insurance agent assures a delinquent policyholder
that his policy will not be canceled if the overdue premium is paid within
a specified time, the insurer is estopped from insisting upon cancellation
where the insured relies on the assurances to his or her detriment.
policy that defines coverage as excess of "the limits of the underlying
insurance, as set forth in the attached Schedule," "the amounts specified"
in the primary policy or the insured's "retained limit," will not be required
to drop down. Central Waste Systems, Inc. v. Granite
State Ins. Co., 231 Neb. 640, 437 N.W.2d 496 (1989)
is entitled to subrogation only after the insured has recouped his loss
and some or all of his litigation expenses.Motor Club Insurance Association
v. Bartunek, 526 N.W.2d 238, 240 (Neb. 1995).
NUMBER OF OCCURRENCES
In a dispute
between a primary and excess insurer with respect to the number of primary
limits that Aetna was required to contribute towards the settlement of
a medical malpractice claim, the Eighth Circuit has ruled in Home Ins.
Co. v. Aetna Ins. Co., No. 00-1710 (8th Cir. January 8, 2001) that the
provisions in Aetna’s primary policy insuring comprehensive general liability
(Coverage A) and hospital professional liability (Coverage O) were not
separate independent insuring agreements but rather were part of a single
insuring agreement that limited Aetna’s liability for medical malpractice
claims from whatever source to $250,000 per occurrence.
Reduced value and use of property due to insured developer's misrepresentations concerning its condition not "property damage." Columbia Nat. Ins. Co. v. Pacesetter Homes, Inc., 248 Neb. 1, 532 N.W.2d 1 (1995).
Supreme Court ruled in Mapes Industries, Inc. v. USF&G, No. S-95-469
(Neb. March 28, 1997), that a liability insurer had no obligation to provide
a defense to a product manufacturer whose insulating panels had delaminated,
causing the exterior surface of the plaintiff's building to ripple.
The court held that the damage was limited to the insured's products and
was therefore barred from coverage pursuant to Exclusions (N) and (O) in
the CGL policy. Further, the court refused to find that the claims
alleged a "loss of use" of tangible property that had not been physically
injured, noting that there was no evidence of a "sudden and accidental"
event giving rise to the plaintiff's alleged injuries.
Miller v. Kingsley, 230 N.W.2d 472 (Neb. 1983).
STANDARDS FOR POLICY INTERPRETATION
Under Nebraska law, "an insurance policy is to be construed as any other contract to give effect to the parties' intentions at the time the contact was made. When the terms of the contract are clear, they are to be accorded their plain and ordinary meaning." Thorell v. Union Ins. Co., 492 N.W.2d 879, 882 (Neb. 1992); Waylett v. USAA, 401 N.W.2d 160, 163 (Neb. 1987). Policies to be construed like any other contract to give effect to the parties' intentions at the time the contract was made. If the words of the contract are clear, they will be given their plain and ordinary meaning. While ambiguous words will be construed in favor of coverage, an ambiguity will not be read into the policy merely to create coverage. Design Data Corp. v. Maryland Casualty Co., 503 N.W.2d 552, 558 (Neb. 1993) and Katskee v. Blue Cross/Blue Shield of Nebraska, 515 N.W.2d 645, 649 (Neb. 1994).
Ambiguity exists in an insurance contract if its words are susceptible of two or more reasonable meanings. Knox v. Cook, 446 N.W.2d 1, 4 (Neb. 1989) and Callahan v. Washington National Insurance Company, 608 N.W.2d 592, 598 (Neb. 2000). The applicable intent is not necessarily the insurer’s but what "a reasonable person in the position of the insured would have understood them to mean." Decker v. Combined Ins. Co. of America, 505 N.W.2d 719, 722 (Neb. 1993). The determination of whether a contract is ambiguous will be undertaken “on an objective basis, not by the subject of contentions of the parties” and is therefore not compelled merely because the parties suggest opposing interpretations. Fraternal Order of Police, Lodge 2 v. County of Douglas, 612 N.W.2d 483, 487 (Neb. 2000) and Callahan v. Washington National Insurance Company, 608 N.W.2d 592, 598 (Neb. 2000).
In the event
that policy language is found to be ambiguous, the court may employ rules
of construction and look beyond the language of the policy to ascertain
the intention of the parties. Katskee v. Blue Cross/Blue Shield of
Nebraska, 515 N.W.2d 645, 649 (Neb. 1994). Resort to extrinsic evidence
of intent is not permitted, however, if the policy is not ambiguous.
term "unfair competition", while conveying both a common law and statutory
meaning, could only be understood in its common law sense where the term
was contained in a list of other torts in the policy's "advertising injury"
section. John Markel Ford, Inc. v. Auto-Owners Ins. Co., No. S-94-137
(Neb. February 9, 1996).
THEORIES OF ALTERNATIVE LIABILITY
TRIGGER OF COVERAGE