Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co.

Decision Date30 December 2016
Docket NumberNo. S-15-912.,S-15-912.
Citation295 Neb. 419,889 N.W.2d 596
Parties MILLARD GUTTER COMPANY, a corporation, doing business as Millard Roofing and Gutter, appellee, v. FARM BUREAU PROPERTY & CASUALTY INSURANCE COMPANY, appelllant.
CourtNebraska Supreme Court

Michael T. Gibbons, Omaha, and Aimee C. Bataillon, of Woodke & Gibbons, P.C., L.L.O., for appellant.

Theodore R. Boecker, Jr., of Boecker Law, P.C., L.L.O., for appellee.

Heavican, C.J., Wright, Miller–Lerman, Cassel, Stacey, Kelch, and Funke, JJ.

Cassel, J.


A homeowner's insurance policy prohibited an assignment of "[a]ll rights and duties" without the insurer's consent. Nonetheless, after a storm damaged the homeowner's roof, he assigned his claim to the company that repaired it. The company obtained a county court judgment, which the district court affirmed. This appeal followed. Because we conclude that a postloss assignment of a claim under a homeowner's insurance policy is valid despite the nonassignment clause, we affirm the decision of the district court.


Farm Bureau Property & Casualty Insurance Company (Farm Bureau) issued a homeowner's insurance policy to Howard Hunter. The policy contained in part the following nonassignment clause:

Change / Assignment of Interest
A. All rights and duties under this policy may not be assigned without our written consent.
B. No change of interest in this policy is effective unless we consent in writing.

During the policy coverage period, a storm damaged Hunter's home and he made a claim under his insurance policy.

Hunter retained Millard Gutter Company, a corporation doing business as Millard Roofing and Gutter (Millard Gutter), to repair the damage to his roof. Millard Gutter believed that the entire roof required replacement, and its estimate showed the cost of repairs to be $8,854.35. Farm Bureau opined that only two slopes of the roof needed to be replaced, and it computed the cost of those repairs to be $3,022.43. Millard Gutter ultimately replaced Hunter's entire roof.

At some point after the loss, Hunter signed an "Assignment of Claim" presented by Millard Gutter. According to the document, Hunter assigned to Millard Gutter "any and all claims or moneys due or to become due" to Hunter under his insurance policy for damages to Hunter's property. There is no evidence that Hunter obtained Farm Bureau's written consent prior to executing the assignment. Farm Bureau received a copy of Hunter's assignment and issued a check for $3,022.43 directly to Millard Gutter.

Millard Gutter sued Farm Bureau, seeking judgment against Farm Bureau of at least $5,252.66. Millard Gutter alleged that Farm Bureau was obligated under its policy with Hunter to pay the fair and reasonable value of Millard Gutter's services. Farm Bureau set forth a number of affirmative defenses. It alleged that the complaint failed to state a cause of action upon which relief could be granted for three reasons: (1) Farm Bureau did not consent to the alleged assignment, (2) Millard Gutter was not the real party in interest, and (3) Millard Gutter lacked privity of contract with Farm Bureau. Farm Bureau also claimed that the county court lacked subject matter jurisdiction.

Following a bench trial, the county court found in favor of Millard Gutter in the amount of $5,252.66. The county court later awarded Millard Gutter $11,668.34 in attorney fees.

Farm Bureau appealed to the district court, which affirmed the judgment of the county court. Farm Bureau took a further appeal, and we granted Millard Gutter's petition to bypass review by the Nebraska Court of Appeals.


Farm Bureau assigns that the district court erred in affirming the county court's exercise of subject matter jurisdiction, because the purported assignment of rights by Hunter to Millard Gutter was invalid and Millard Gutter lacked privity of contract with Farm Bureau.


A jurisdictional question that does not involve a factual dispute is determined by an appellate court as a matter of law, which requires the appellate court to reach a conclusion independent of the lower court's decision.1

The district court and higher appellate courts generally review appeals from the county court for error appearing on the record.2 When reviewing a judgment for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.3 In instances when an appellate court is required to review cases for error appearing on the record, questions of law are nonetheless reviewed de novo on the record.4


Farm Bureau raises a jurisdictional argument that turns upon the assignment to Millard Gutter. Farm Bureau argues that Millard Gutter lacked standing to sue and that thus, the county court lacked subject matter jurisdiction over the action. Millard Gutter brought its breach of contract action against Farm Bureau as the assignee of Hunter's insurance claim, and a statute provides that "[t]he assignee of a thing in action may maintain an action thereon in the assignee's own name and behalf ...."5 Whether Millard Gutter had standing depends on the validity of the assignment.

Farm Bureau's argument is grounded on contract and is quite simple. The policy provided that "[a]ll rights and duties under this policy may not be assigned without our written consent" and that without such consent, "[n]o change of interest in this policy is effective ...." Thus, Farm Bureau asserts that Hunter's assignment to Millard Gutter was invalid because Farm Bureau did not consent to it.

But courts have often upheld assignments despite a nonassignment provision. The three theories typically used for upholding such an assignment are:

(1) The parties did not intend the nonassignment provision to apply to rights to receive payments, but only to the duties under the personal contract; (2) The reason for the prohibition ceased because the insurer's risks and liabilities under the contract became fixed when the insured event occurred; and (3) The public policy supported free alienability of a chose in action.6

At least after a loss has occurred, an indemnity contract of insurance is a chose in action because it confers a right to bring a legal action to recover a sum of money from or out of the contract.7


Over a century ago, we were faced with an assignment of a claim in light of a contractual provision prohibiting an assignment in the context of a fire insurance policy. In Star Union Lumber Co. v. Finney ,8 after a loss caused by fire, the party who obtained insurance assigned the policy to an entity who held a mechanic's lien on the property. Each policy stated that if the policy was assigned without written consent, the policy should be void. In upholding the assignment of the claim, we stated: "It is claimed that a policy could not be assigned without the assent of the company. However this may be as to a policy before a loss occurs, the objection does not apply as to the assignment of a claim for a loss after it occurs."9

More recently, we addressed the issue with reference to a health insurance contract. In OB–GYN v. Blue Cross ,10 an insurer's contract with its subscribers provided that benefits payable to subscribers may not be assigned by the subscribers. One nonparticipating provider, in an effort to collect payment directly from the insurer for services it provided to subscribers, took assignments of the subscribers' benefits and submitted them to the insurer for payment. The insurer, relying on the nonassignment clause, refused to pay the nonparticipating provider directly and instead sent the payment to the subscribers. We upheld the nonassignment provision, determining that it was not void as a matter of public policy.

In OB–GYN , we discussed—but did not overrule—our decision in Star Union Lumber Co . Initially, we appeared to minimize its holding:

The Star Union opinion deals with the nonassignment issue in two sentences ... and gives no reasoning for such a holding. The Star Union case has never been cited in Nebraska on the nonassignment point. How this fleeting reference in 1892 regarding a fire insurance policy sets out the public policy of Nebraska in 1982 with regard to a medical insurance policy is not argued.11

But we also distinguished the insurance contract in Star Union Lumber Co. from that in OB–GYN :

[R]eading Star Union and [an Eighth Circuit case] in light of the public policy and equity questions before those courts, it is important to distinguish the insurance contracts in those cases from that of [the insurer] in another way. Both the insurance contracts in Star Union and [the Eighth Circuit case] required the avoidance of the entire contract on assignment. The [insurer's] contract does not avoid payment on assignment, it simply claims the contracted right to pay the subscriber with whom it contracted. Many contracts commentators have recognized the negative weight of an avoidance penalty in the public policy balance; that weight is not present here.12

In this respect, the contractual provision in the instant case is more akin to that in OB–GYN —it did not void the policy, but would invalidate an insured's purported transfer of payment to an unauthorized assignee.

Our other nonassignment clause cases did not involve insurance policies. In several cases involving the sale of land, we stated that a contractual provision requiring a seller's consent to any assignment was intended to safeguard performance and that the provision was not enforceable when security for the seller was not an issue, such as when performance was rendered or was being tendered.13 But we have also held that an assignment by a lessee of an interest in a lease which prohibits such assignment without the lessor's consent is ineffective without such consent.14 And in a case involving an action...

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