Braesch v. Union Ins. Co.

• Decision Date: 18 January 1991
• Docket Number: No. 88-772,88-772
• Parties: Duane E. BRAESCH, Appellant, v. UNION INSURANCE COMPANY, an Insurance Corporation, Appellee. Helen E. BRAESCH, Appellant, v. UNION INSURANCE COMPANY, an Insurance Corporation, Appellee.
• Court: Nebraska Supreme Court

Page 769

464 N.W.2d 769

237 Neb. 44

Duane E. BRAESCH, Appellant, v. UNION INSURANCE COMPANY, an Insurance Corporation, Appellee.

Helen E. BRAESCH, Appellant, v. UNION INSURANCE COMPANY, an Insurance Corporation, Appellee.

No. 88-772.

Supreme Court of Nebraska.

Jan. 18, 1991.

Syllabus by the Court

1. Demurrer: Pleadings: Appeal and Error. In reviewing an order sustaining a demurrer, this court accepts the truth of facts well pled and the factual and legal inferences which reasonably may be deduced from such facts, but does not accept conclusions of the pleader.

2. Demurrer: Pleadings. In ruling on a demurrer, the petition is to be liberally construed; if as so construed the petition states a cause of action, the demurrer is to be overruled.

3. Demurrer: Pleadings. A court may not assume the existence of any facts not alleged, find facts in aid of the pleading, or consider evidence which may be introduced at trial.

4. Actions: Insurance: Claims: Parties. This state recognizes a cause of action for an insurer's bad faith in refusing to settle a claim with a third party.

5. Insurance. The business of apportioning and distributing losses arising from specified causes among all those who apply and are accepted to receive the benefits of such service is public in character and requires that all those having to do with it shall at all times be actuated by good faith in everything pertaining thereto.

6. Demurrer: Pleadings. In ruling on a demurrer, documents attached to and made part of the petition may be considered.

7. Actions: Insurance: Parties. A first-party bad faith cause of action is based upon allegations that the insurer, in bad faith, refused to settle with its own policyholder insured, who thereby suffered some type of direct loss.

8. Actions: Torts: Insurance: Claims. An injured policyholder who is also a "covered person" or a policyholder who is also a beneficiary may bring a cause of action in tort against the policyholder's insurer for bad faith failure to settle the policyholder's insurance claim.

9. Torts: Insurance: Claims: Proof: Intent. To show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the insurance policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. The tort of bad faith is an intentional one.

10. Actions: Mental Distress: Intent. To state a cause of action for intentional infliction of emotional distress, a plaintiff must allege that (1) there has been intentional or reckless conduct, (2) the conduct was so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency and is to be regarded as atrocious and utterly intolerable in a civilized community, and (3) the conduct caused emotional distress so severe that no reasonable person should be expected to endure it. An extremely disabling emotional response is required.

Thomas J. Guilfoyle, Frost, Meyers, Guilfoyle & Govier, and J. Patrick Green, Omaha, for appellants.

Edward F. Noethe, Sodoro, Daly & Sodoro, Omaha, for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

FAHRNBRUCH, Justice.

These appeals each involve two issues: (1) whether an insurer may be held liable in tort if the insurer acts in bad faith in refusing to settle a claim with its policyholders who are also entitled to receive benefits under the policy, and (2) whether each appellant's amended petition states a proper theory of recovery for intentional infliction of emotional distress.

The trial court sustained demurrers to each of the petitions and dismissed the appellants' lawsuits. In each appeal, we reverse the trial court on the first issue and affirm the trial court on the second issue.

In reviewing an order sustaining a demurrer, this court accepts the truth of facts well pled and the factual and legal inferences which reasonably may be deduced from such facts, but does not accept conclusions of the pleader. St. Paul Fire & Marine Ins. Co. v. Touche Ross & Co., 234 Neb. 789, 452 N.W.2d 746 (1990). In ruling on a demurrer, the petition is to be liberally construed; if as so construed the petition states a cause of action, the demurrer is to be overruled. Weimer v. Amen, 235 Neb. 287, 455 N.W.2d 145 (1990). A court may not assume the existence of any facts not alleged, find facts in aid of the pleading, or consider evidence which may be introduced at trial. St. Paul Fire & Marine, supra.

In this case, Duane E. and Helen E. Braesch, husband and wife, each brought identical actions against Union Insurance Company (Union), an insurance corporation.

In virtually identical amended petitions and attachments, the Braesches alleged in substance that Union issued to them as policyholders an insurance policy for valuable consideration; that under the policy's terms, Union agreed to pay all sums, up to the maximum of $100,000, which the insured or covered person was legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury; that on or about October 12, 1984, the plaintiffs' daughter, Lori J. Braesch, was the driver of an automobile which was covered by the policy; that she was involved in a collision with an uninsured motorist, David R. Brockhaus; that as a result of the collision, Lori Braesch died; and that Brockhaus' negligence was the sole and proximate cause of Lori Braesch's death. Each of the Braesches further alleged that Duane E. Braesch, as special administrator of his daughter's estate, commenced an action against Union under the uninsured motorist provisions of the policy on behalf of the appellants; that on March 5, 1987, following a trial, judgment in the amount of $185,000 was entered in favor of the plaintiff Duane Braesch, as special administrator; and that on March 18, 1987, Union paid to the plaintiff as special administrator its policy coverage of $100,000.

In each of their first theories of recovery, the Braesches claim that Union's refusal to settle under the uninsured motorist provisions of Union's policy constituted the tort of bad faith. The Braesches alleged that each was a policyholder and that as a beneficiary of Union's insurance policy, each of them was owed a duty of good faith. It was further claimed that despite repeated efforts by the Braesches and their counsel to settle the suit on the uninsured motorist coverage, Union, in bad faith, refused to settle such litigation and never entered into serious negotiations, and engaged in only a perfunctory investigation and developed no defense. Each amended petition alleges that Union's refusal to settle was part of an effort to put psychological pressure on each of the Braesches to settle the wrongful death claim for sums considerably less than its value. The Braesches allege that because of Union's bad faith actions, each of them was forced to endure a trial in which each relived the death of their daughter, causing each of the appellants to suffer profound emotional distress.

Relying on the same facts alleged in their first theory of recovery, the Braesches alleged in their respective second theories of recovery that Union's actions under the circumstances constituted the tort of outrage. The Braesches alleged that Union knew or had reason to know that its bad faith refusal to settle the litigation brought by Lori Braesch's special administrator would cause each of the appellants severe emotional distress. The appellants contend that as a direct and proximate result of Union's conduct, each of them has been forced to suffer profound mental pain and suffering as a result of reliving the death of their daughter in an unnecessary trial of the action.

Each of the Braesches asked for general damages.

Since the two amended petitions are substantially identical, our analysis will be equally applicable to both amended petitions. Attached to and made part of both amended petitions was a copy of Union's auto policy issued to both of the appellants, together with a copy of the special administrator's petition from the former action against Union.

Union demurred to both amended petitions on the ground that they did not state facts sufficient to constitute a cause of action. The trial court sustained Union's demurrer to each amended petition and dismissed them.

The plaintiffs' three assignments of error merge to allege that the trial court erred in failing to (1) recognize that a cause of action exists in Nebraska for a bad faith failure on the part of a first-party insurer to promptly pay a claim made by its policyholder, where litigation of the claim is not warranted, and (2) find that the claims for intentional infliction of mental distress were well pleaded.

I. BAD FAITH SETTLEMENT

This state recognizes a cause of action for an insurer's bad faith in refusing to settle a claim with a third party. In Olson v. Union Fire Ins. Co., 174 Neb. 375, 118 N.W.2d 318 (1962), the insured collided with a bridge, and one of his passengers sustained injuries resulting in total and permanent disability. In the passenger's suit against the insured, the insurer refused to settle the claim with the passenger despite an offer to settle the claim for $10,000. The jury returned a verdict in the sum of $50,000 against the insured. Thereafter, the plaintiff, individually and as assignee of the insured, commenced suit against the insurer, asserting negligence and bad faith by the insurer in refusing to settle the passenger's claim for $10,000. This court held: "The liability of an insurer to pay in excess of the face of the policy accrues when the insurer, having exclusive control of settlement, in bad faith refuses to compromise a claim for an amount within the policy limit." Id. at 379, 118 N.W.2d at 320-21. The rationale for the rule is that "[i]n the event the insurer elects to resist a claim of liability, or to effect a settlement thereof on...