Johnson v. US Fid. and Guar. Co., S-03-748.

• Decision Date: 06 May 2005
• Docket Number: No. S-03-748.,S-03-748.
• Citation: 696 N.W.2d 431,269 Neb. 731
• Parties: Gregory F. JOHNSON, appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation now known as St. Paul Fire and Marine Insurance Company, and Employers Mutual Casualty Company, a corporation, appellees.
• Court: Nebraska Supreme Court

696 N.W.2d 431

269 Neb. 731

Gregory F. JOHNSON, appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation now known as St. Paul Fire and Marine Insurance Company, and Employers Mutual Casualty Company, a corporation, appellees.

No. S-03-748.

Supreme Court of Nebraska.

May 6, 2005.

Daniel H. Friedman and Herbert J. Friedman, of Friedman Law Offices, Lincoln, for appellant.

Cathy S. Trent and Stephen L. Ahl, of Wolfe, Snowden, Hurd, Luers & Ahl, L.L.P., Lincoln, for appellee United States Fidelity and Guaranty Company.

Randall L. Goyette and Molly M. Egley Brummond, of Baylor, Evnen, Curtiss, Grimit & Witt, L.L.P., Lincoln, for appellee Employers Mutual Casualty Company.

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

HENDRY, C.J.

NATURE OF CASE

This is an action arising out of a motor vehicle accident that occurred in Colorado in which appellant Gregory F. Johnson was injured. After recovering from the tort-feasor's insurers, Johnson sought additional benefits from his own insurer and the insurer of the car he was driving when injured. The district court for Lancaster County granted the insurers' motions for summary judgment, determining that in accordance with Colorado law, Johnson was not entitled to any additional benefits.

BACKGROUND

At the time of the accident, Johnson was a partner in a Kearney, Nebraska, automobile dealership known as Action Auto Exchange. Action Auto Exchange was insured by Employers Mutual Casualty Company (EMC). EMC's policy provided, inter alia, underinsured motorist (UIM) coverage in the amount of $100,000 and medical payments coverage.

In December 1993, another Kearney automobile dealer, Leon Brown, asked Johnson to ride with him to Denver in order to drive back any vehicle Brown might purchase at an automobile auction. Brown paid Action Auto Exchange for Johnson's services. Brown's dealership was insured under a policy issued by United States Fidelity and Guaranty Company (USF&G), which also provided, inter alia, UIM coverage in the amount of $100,000 and medical payments coverage.

On December 15, 1993, while driving a pickup Brown purchased in Colorado, Johnson was struck from behind by an automobile driven by Melissa Schultz. The impact caused the pickup to roll over. Johnson was seriously injured and sued Schultz and her insurers, Shelter Insurance Company and Allstate Insurance Company. These policies provided, respectively, $50,000 and $100,000 of automobile liability coverage. Both of Schultz' insurers tendered their policy limits to settle Johnson's claims, which offers Johnson accepted in November 2000.

Johnson then made demand against USF&G and EMC for unpaid medical expenses and UIM benefits. Both of these policies contained out-of-state coverage extensions, requiring the insurers to "[p]rovide the minimum amounts and types of other coverages, such as no-fault, required of out-of-state vehicles by the jurisdiction where the covered `auto' is being used." Both policies also contained setoff provisions, purporting to reduce the insurer's UIM liability by any moneys recovered from a legally responsible party. In conformance with Colorado law and the out-of-state coverage provisions, USF&G paid Johnson the maximum required personal injury protection (PIP) benefits of $100,000. EMC denied coverage for the balance of Johnson's claimed medical expenses. Both USF&G and EMC denied Johnson's claim to UIM benefits.

On November 13, 2000, Johnson brought suit against USF&G and EMC in the district court for Lancaster County, alleging he was totally and permanently disabled, had incurred medical expenses in excess of $151,000 to date, and would require future surgery and medical treatment. Johnson set out three causes of action. In his first cause of action, Johnson alleged that USF&G and EMC each owed him $100,000, their respective policy limits for UIM coverage. In his second cause of action, Johnson asserted that EMC owed him $51,000, which he claimed was the balance of his medical expenses not covered by the $100,000 PIP benefit previously paid by USF&G. In his third cause of action, Johnson alleged that USF&G and EMC's denials of benefits were made in bad faith.

USF&G and EMC moved for summary judgment. Following an evidentiary hearing, the district court found there were no genuine issues of material fact and that USF&G and EMC were entitled to judgments against Johnson. In granting summary judgment, the district court concluded that (1) under Crossley v. Pacific Employers Ins. Co., 198 Neb. 26, 251 N.W.2d 383 (1977), Colorado law applied to Johnson's UIM claim, and that as a result, Johnson was not entitled to UIM benefits from either USF&G or EMC; (2) under Colorado law, Johnson was not entitled to PIP benefits from EMC; (3) pursuant to a contractcexclusion, Johnson was not entitled to medical payments benefits from EMC; and (4) USF&G and EMC had not acted in bad faith. Johnson appeals.

ASSIGNMENTS OF ERROR

Johnson assigns, restated and renumbered, that the district court erred in (1) applying Colorado law and (2) granting summary judgment on the issues of (a) UIM benefits, (b) PIP benefits, and (c) medical payments benefits.

STANDARD OF REVIEW

When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court. Cave v. Reiser, 268 Neb. 539, 684 N.W.2d 580 (2004).

Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Auto-Owners Ins. Co. v. Home Pride Cos., 268 Neb. 528, 684 N.W.2d 571 (2004). In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Id.

ANALYSIS

CONFLICT OF LAW REGARDING UIM BENEFITS: APPLICATION OF TORT OR CONTRACT PRINCIPLES

Although recognizing that Johnson's claims against USF&G and EMC "arguably arise out of insurance contracts," the district court determined that under Crossley, supra, "the Nebraska Supreme Court has nevertheless held that Section 146 of the Restatement governs choice of law questions in actions for uninsured or UIM benefits." The Restatement (Second) of Conflict of Laws § 146 at 430 (1971) provides:

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 [general choice-of-law] principles stated in § 6 to the occurrence and the parties, in which event the local law of the other state will be applied.

Applying § 146, the court concluded that Colorado law governed Johnson's claim for UIM benefits.

Johnson argues that Crossley v. Pacific Employers Ins. Co., 198 Neb. 26, 251 N.W.2d 383 (1977), is not controlling under these facts. Johnson contends that because insurance contracts are involved in this action, the conflict sounds in contract and should be resolved by applying the Restatement, supra, § 188(1) at 575 ("rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties"). We agree with Johnson.

When there are no factual disputes regarding state contacts, conflict-of-law issues present questions of law. See, Malena v. Marriott International, 264 Neb. 759, 651 N.W.2d 850 (2002); Mertz v. Pharmacists Mut. Ins. Co., 261 Neb. 704, 625 N.W.2d 197 (2001); Hughes Wood Products, Inc. v. Wagner, 18 S.W.3d 202 (Tex.2000) (stating that while which state's law governs issue is question of law, determining state contacts involves factual inquiry).

The first step in a conflict-of-law analysis is to determine whether there is an actual conflict between the legal rules of different states. See Malena, 264 Neb. at 762-63, 651 N.W.2d at 854 ("`[b]efore entangling itself in messy issues of conflict of laws a court ought to satisfy itself that there actually is a difference between the relevant laws of the different states'"), quoting Barron v. Ford Motor Co. of Canada Ltd., 965 F.2d 195 (7th Cir.1992). An actual conflict exists when a legal issue is resolved differently under the law of two states. See, Nodak Mut. Ins. v. American Family Mut., 604 N.W.2d 91 (Minn.2000); Seizer v. Sessions, 132 Wash.2d 642, 940 P.2d 261 (1997).

The district court properly concluded that under Colorado law at the time of the accident, an insurer was liable for UIM benefits only when there was a "gap" between the moneys recovered from the person or organization legally liable and the limit of the insurer's UIM coverage. See Colo.Rev.Stat. Ann. § 10-4-609(5) (West 1990) (governing insurer's maximum UIM liability). Because it was undisputed that Johnson had recovered $150,000 in liability benefits from Schultz' insurers and that the USF&G and EMC policies provided only $100,000 in UIM coverage, the court determined: "Whereas there is no `gap' in this case ... Johnson is precluded as a matter of Colorado law from recovering UIM benefits from either defendant."

In contrast, under Nebraska law since 1991, an insured is entitled to recover UIM benefits when there was a "gap" between the insured's damages and the moneys recovered from the person or organization legally liable, up to the limits of the UIM coverage provided. See 1990 Neb. Laws, L.B. 1136, § 124 (operative July 1, 1991), codified as Neb.Rev.Stat. § 44-6409 (Reissue 2004) (transferred from Neb.Rev.Stat. § 60-578 (Reissue 1993)). Thus, there is an actual conflict of law regarding the...