FARM BUREAU INS. OF NEBRASKA v. Martinsen, S-02-563.

• Decision Date: 18 April 2003
• Docket Number: No. S-02-563.,S-02-563.
• Citation: 265 Neb. 770,659 N.W.2d 823
• Court: Nebraska Supreme Court
• Parties: FARM BUREAU INSURANCE COMPANY OF NEBRASKA, Appellant, v. Justin MARTINSEN et al., Appellees.

659 N.W.2d 823

265 Neb. 770

FARM BUREAU INSURANCE COMPANY OF NEBRASKA, Appellant, v. Justin MARTINSEN et al., Appellees.

No. S-02-563.

Supreme Court of Nebraska.

April 18, 2003.

Gary J. Nedved, of Keating, O'Gara, Davis & Nedved, P.C., L.L.O., Lincoln, for appellant.

Dale A. Romatzke and Vikki S. Stamm, of Ross, Schroeder & Romatzke, Kearney, for appellees Diane Brundage and Paul Budzinski.

WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

MILLER-LERMAN, J.

NATURE OF CASE

The appellant, Farm Bureau Insurance Company of Nebraska (Farm Bureau), brought this declaratory judgment action in the district court for Hall County to determine the rights and liabilities of the parties under an automobile policy issued by Farm Bureau. The following individuals were named as defendants: Justin J. Martinsen; Andrew Martinsen; Laura Martinsen; Diane Brundage, individually and as personal representative of the estate of Jeffrey D. Budzinski; and Paul Budzinski (collectively the Appellees). At issue is whether Farm Bureau is liable for certain claims of Paul Budzinski and Diane Brundage (collectively the Budzinskis) for negligent infliction of emotional distress suffered in connection with an automobile accident in which their son, Jeffrey Budzinski (Jeffrey), was killed. The district court concluded that Farm Bureau was liable up to the $500,000 per-occurrence limits of the policy. Farm Bureau appeals. We reverse.

STATEMENT OF FACTS

On September 28, 1997, Justin Martinsen was driving an automobile insured by Farm Bureau when he struck Jeffrey, who was walking along the shoulder of U.S. Highway 281 in Howard County, Nebraska. Jeffrey was injured and later died from his injuries. Jeffrey's parents, the Budzinskis, filed a wrongful death action in the district court for Howard County against Justin Martinsen and against his father, Andrew Martinsen, as the owner of the automobile. The automobile was insured under the Farm Bureau policy at issue. The policy generally provided for bodily injury liability limits of $300,000 per person and $500,000 per occurrence. The Budzinskis' petition included a claim for recovery of medical expenses incurred by Jeffrey as a result of his injuries as well as claims for negligent infliction of emotional distress suffered by each of the Budzinskis.

A settlement was reached providing for $300,000 for the medical expenses incurred by Jeffrey and for $100,000 to each of the Budzinskis in connection with their claims for emotional distress. Justin Martinsen and Andrew Martinsen confessed judgment for the $200,000 total amount for the Budzinskis' claims of emotional distress. The settlement agreement indicates that the Budzinskis agreed that their sole recourse in collecting the $200,000 would be against Farm Bureau and that they would forbear collecting the $200,000 from Justin Martinsen and Andrew Martinsen.

On January 22, 1999, Farm Bureau filed the instant declaratory judgment action to determine the extent of its liability under the terms of its automobile insurance policy issued to Andrew and Laura Martinsen. The issue in this case is whether Farm Bureau, having paid the $300,000 per-person bodily injury limit, is further liable up to the $500,000 per-occurrence limit.

The policy contained the following language:

The amount shown in the Declarations for Coverage A, Bodily Injury, "per person" is the maximum amount we will pay for all damages for bodily injury sustained by any one person in any one automobile accident. Subject to this "per person" limit, the amount shown in the Declarations for Coverage A, Bodily Injury "per occurrence" is the maximum amount we will pay for all damages for bodily injury resulting from any one automobile accident.

The policy also provided, "Bodily Injury means injury to a person's body and includes sickness, disease or death which results from it."

Farm Bureau argued that there was only one bodily injury due to this "one automobile accident" and that the Budzinskis' claims of emotional distress were entirely dependent upon and derivative of the bodily injury to Jeffrey. Farm Bureau asserted that the extent of its liability in connection with the Budzinskis' case was the $300,000 per-person limit and that such liability had been satisfied because it had paid the $300,000 settlement for Jeffrey's medical expenses. Farm Bureau asserted that because the Budzinskis' claims were entirely dependent upon the bodily injury to Jeffrey, their claims were subject to the single $300,000 per-person limit which had been exhausted.

The Appellees asserted that Farm Bureau was liable up to the $500,000 per-occurrence limit. The Appellees argued that the Budzinskis' claims of emotional distress were direct and separate claims resulting from injuries they personally suffered and that damages for their claims should not be considered derivative of Jeffrey's bodily injury, but should be limited only by the $500,000 per-occurrence policy limit. The case was tried on a stipulated set of facts. Paragraph 10 of the "Stipulation of Fact" reads as follows:

The plaintiff alleges that the maximum amount payable under its policy of insurance is the bodily injury limit of $300,000.00 per person which it paid to the Estate of Jeffrey D. Budzinski in exchange for a full and complete release for wrongful death and medical expenses. Paul Budzinski and Diane Brundage claim that the plaintiff is obligated to pay the entire policy limits of $500,000.00 and satisfy the judgment for the emotional distress damages as set forth in the second cause of action in the petition filed in the District Court of Howard County and which provides as follows: "As a direct and proximate result of the negligence of the defendant, Justin J. Martinsen, plaintiffs' minor son was seriously injured; plaintiffs had an intimate familial relationship with their minor son and as a result of the serious injuries to their minor son, plaintiffs have suffered severe emotional distress such that no person could be expected to endure it."

On May 3, 2002, the district court entered an order declaring that Farm Bureau was liable up to the "`per occurrence'" policy limit of $500,000. The district court determined that the Budzinskis had suffered "bodily injury" as that term was defined in the policy and that the Budzinskis' injuries were not derivative of Jeffrey's bodily injury. The court relied on James v. Lieb, 221 Neb. 47, 375 N.W.2d 109 (1985). The court reasoned that compensation was available because James recognized a tort claim for "`bystanders'" who suffered negligent infliction of emotional distress upon a showing of marital or intimate familial relationship with a victim who has been killed or seriously injured as a result of the negligence of another, even though such claimant had neither witnessed the incident nor exhibited a physical manifestation associated with emotional distress. The district court concluded that James recognized a distinct tort cause of action for separate and actual emotional injury to a claimant and that, therefore, such emotional injury was a "`sickness'" within the meaning of "bodily injury" under the policy and not derivative of injuries to the victim. Farm Bureau appeals.

ASSIGNMENTS OF ERROR

Farm Bureau asserts generally that the district court erred in determining that Farm Bureau was liable for the Budzinskis' emotional distress damages up to the policy's $500,000 per-occurrence limit and asserts specifically that the district court erred in concluding (1) that the emotional injury suffered by the Budzinskis was "bodily injury" within the meaning of the policy and (2) that the Budzinskis' emotional distress claims were not derivative of Jeffrey's injuries.

STANDARD OF REVIEW

The interpretation of an insurance policy is a question of law, in connection with which an appellate court has an obligation to reach its own conclusions independently of the determination made by the lower court. American Fam. Mut. Ins. Co. v. Hadley, 264 Neb. 435, 648 N.W.2d 769 (2002).

ANALYSIS

At issue in this case is whether under the stipulated facts and the policy of insurance issued by Farm Bureau, the amount payable under the policy is the bodily injury per-person limit of $300,000 or the entire per-occurrence policy limit of $500,000. The district court declared that Farm Bureau was liable up to the $500,000 peroccurrence limit of the policy. Farm Bureau claims that the district court erred. We agree with Farm Bureau.

An insurance policy is a contract. American Fam. Mut. Ins. Co., supra; Callahan v. Washington Nat. Ins. Co., 259 Neb. 145, 608 N.W.2d 592 (2000). An insurance contract is to be construed as any other contract to give effect to the parties' intentions at the time the contract was made. American Fam. Mut. Ins. Co., supra; Farmers Union Co-op. Ins. Co. v. Allied Prop. & Cos., 253 Neb. 177, 569 N.W.2d 436 (1997)

. When the terms of a contract are clear, a court may not resort to rules of construction, and the terms are to be accorded their plain and ordinary meaning as the ordinary or reasonable person would understand them. American Fam. Mut. Ins. Co., supra; Cincinnati Ins. Co. v. Becker Warehouse, Inc., 262 Neb. 746, 635 N.W.2d 112 (2001). While an ambiguous insurance policy will be construed in favor of the insured, ambiguity will not be read into policy language which is plain and unambiguous in order to construe against...