Pogge v. American Family Mut. Ins. Co.

• Decision Date: 09 November 2004
• Docket Number: No. A-03-470.,A-03-470.
• Citation: 13 Neb. App. 63,688 N.W.2d 634
• Parties: Rosemary POGGE and Philip H. Pogge, appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a member of the American Family Insurance Group, appellee.
• Court: Nebraska Court of Appeals

688 N.W.2d 634

13 Neb. App. 63

Rosemary POGGE and Philip H. Pogge, appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a member of the American Family Insurance Group, appellee.

No. A-03-470.

Court of Appeals of Nebraska.

November 9, 2004.

Joseph C. Byam, of Byam & Hoarty, Omaha, for appellants.

Eugene L. Hillman and Patricia McCormack, of Hillman, Forman, Nelsen, Childers & McCormack, for appellee.

Maren Lynn Chaloupka, of Chaloupka, Holyoke, Hofmeister, Snyder & Chaloupka, Scottsbluff, for amicus curiae Nebraska Association of Trial Attorneys.

INBODY, Chief Judge, and SIEVERS and CARLSON, Judges.

SIEVERS, Judge.

INTRODUCTION

American Family Mutual Insurance Company (American Family) filed a motion to dismiss the declaratory judgment action brought by Rosemary Pogge and Philip H. Pogge. The Pogges filed the action, after their settlement with the insurers for the other two parties involved in a motor vehicle accident, in order to determine the extent of underinsured motorist coverage available to them under their "Family Car Policy" issued by American Family. The trial court sustained the motion to dismiss, and the Pogges appeal. We also deal with issues raised by the Nebraska Rules of Pleading in Civil Actions.

FACTUAL BACKGROUND

As there were no evidentiary proceedings, our statement of facts comes from the pleadings. On January 15, 1999, Lois Sisson's vehicle entered the intersection of 114th and Jackson Streets in Omaha, Nebraska, and collided with Nathan Mandell's vehicle. At the time of that collision, the vehicle Rosemary was driving was stopped at a stop sign at the intersection of 114th Street and Meadow Drive. The impact of the collision of Sisson's and Mandell's vehicles caused Mandell's vehicle to spin in a northwesterly direction and strike Rosemary's vehicle. Rosemary sustained significant bodily injuries.

At the time of the collision, Sisson's vehicle was covered by a $100,000 liability insurance policy issued by Safeco Insurance. Safeco Insurance tendered its $100,000 policy limits to the Pogges. Mandell's automobile insurance carrier, State Farm Insurance Company (State Farm), ultimately offered to settle with the Pogges for $75,000 of Mandell's policy limit of $100,000. The Pogges notified American Family of their intent to settle the claim for $175,000 ($100,000 from Sisson's insurer and $75,000 from Mandell's insurer). American Family did not object to such settlement, but it informed the Pogges that their underinsured motorist coverage of $100,000 "would not be available to the Pogges for this claim in that they are agreeing to settle their claim for less than the full policy limits of all underlying liability policies available for this accident." The Pogges made demand on American Family for the underinsured motorist benefits under the policy because their damages allegedly exceeded the $175,000 settlement. American Family refused such demand, and the instant litigation followed.

PROCEDURAL BACKGROUND

The Pogges filed a petition on January 14, 2003, asking the district court to determine the coverage available to the Pogges under their Family Car Policy issued by American Family and alleging that American Family breached its duty of good faith and fair dealing in failing to pay the underinsured motorist benefits. On February 18, American Family filed a motion to dismiss pursuant to Neb. Ct. R. of Pldg. in Civ. Actions 12(b)(6) (rev.2003). Following a hearing on the motion, the district court entered an order on April 1 sustaining the motion to dismiss. The Pogges appeal, but only with respect to the dismissal of their underinsured benefits claim. The breach of good faith claim is not at issue in this appeal.

ASSIGNMENTS OF ERROR

The Pogges assert that the district court erred in (1) failing to overrule American Family's motion to dismiss and find the language of the exhaustion clause to be ambiguous, (2) failing to overrule American Family's motion to dismiss and find the exhaustion clause void as against public policy, (3) not finding the exhaustion clause contrary to Nebraska's Uninsured and Underinsured Motorist Insurance Coverage Act, (4) not finding the exhaustion clause void and unenforceable because it was not a permissible exclusion or exception under the act, and (5) failing to overrule American Family's motion to dismiss and allow the Pogges to pursue their underinsured motorist claim for the difference between the $75,000 settlement and the $100,000 limit of Mandell's policy.

STANDARD OF REVIEW

Because this action was filed on January 14, 2003, we must apply the new rules for notice pleading, which apply to all "civil actions filed on or after January 1, 2003." Neb. Ct. R. of Pldg. in Civ. Actions 1 (rev.2003). In determining the standard of review in the instant appeal, we look to the federal courts for guidance, because the Nebraska appellate courts have not yet set forth a standard of review for a motion to dismiss filed pursuant to notice pleading under rule 12(b)(6), failure to state a claim upon which relief can be granted. The federal rule is that an appellate court reviews de novo a lower court's dismissal of a complaint for failure to state a claim. Gordon v. Hansen, 168 F.3d 1109 (8th Cir.1999). A complaint will not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts that would demonstrate an entitlement to relief. Id. When analyzing a lower court's dismissal of a complaint for failure to state a claim, an appellate court accepts the complaint's factual allegations as true and construes them in the light most favorable to the plaintiff. Id. We apply these principles to this case.

ANALYSIS

Where coverage is denied, the burden of proving coverage under an insurance policy is upon the insured. Farm Bureau Ins. Co. v. Martinsen, 265 Neb. 770, 659 N.W.2d 823 (2003). Thus, the Pogges had the burden to show that they were entitled to underinsured motorist benefits despite their settlement for less than the limit of Mandell's policy.

An insurance policy is a contract. Guerrier v. Mid-Century Ins. Co., 266 Neb. 150, 663 N.W.2d 131 (2003). When the terms of the 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. Id.

Under Nebraska law, a court interpreting a contract, such as an insurance policy, must first determine, as a matter of law, whether the contract is ambiguous. Id. A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings. Id. The fact that parties to a document have or suggest opposing interpretations of the document does not necessarily, or by itself, compel the conclusion that the document is ambiguous. Id. The language of an insurance policy should be read to avoid ambiguities, if possible, and the language should not be tortured to create them. Id.

The seminal Nebraska case to begin our analysis is Ploen v. Union Ins. Co., 253 Neb. 867, 573 N.W.2d 436 (1998), where the Nebraska Supreme Court addressed whether an exhaustion clause in a Union Insurance Company (Union) underinsured motorist policy was ambiguous and against public policy. Arlyn Ploen was a passenger in his father's car when it was "rear-ended" by a car driven by Karen Keller, who had a liability policy limit of $100,000. Ploen settled with Keller's insurer for $54,000, although he claimed damages of at least $250,000. Ploen had underinsured motorist coverage in the amount of $25,000 under his father's Union policy, plus Ploen had $100,000 of underinsured motorist coverage from his own policy with Shelter Mutual Insurance Company (Shelter). Before Ploen settled with Keller, he requested that Union and Shelter agree to the settlement, which they declined to do on the ground that Ploen should not settle for less than Keller's policy limit if his damages were indeed $250,000. Ploen settled with Keller anyway and then brought a declaratory judgment action against Union and Shelter. The Supreme Court found that the Shelter policy did not have an exhaustion clause. Therefore, the focus in Ploen was on the exhaustion clause in the Union policy, which provided: "`We will pay under [underinsured motorist] coverage only after the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements.'" 253 Neb. at 875,573 N.W.2d at 442. The Ploen court held that this exhaustion clause was "plain and unambiguous, should be enforced according to its terms, and is not contrary to public policy." Id. at 877, 573 N.W.2d at 443. See, also, Snyder v. EMCASCO Ins. Co., 259 Neb. 621, 611 N.W.2d 409 (2000).

Additionally, the Supreme Court reviewed the underinsured motorist coverage at issue in Ploen, including the exhaustion clause, under the Uninsured and Underinsured Motorist Insurance Coverage Act, Neb.Rev.Stat. § 44-6401 et seq. (Cum. Supp.1996 & Supp.1997), and found that the coverage was "consistent with the requirements of the act" and "not contrary to the law." 253 Neb. at 876, 573 N.W.2d at 443. Although Ploen sought payment only for the difference between the policy limit and his damages, the Supreme Court found no coverage under the Union policy and affirmed the summary judgment granted in favor of Union.

Although the exhaustion clause in Ploen, 253 Neb. at 875, 573 N.W.2d at 442, stated "`any applicable bodily injury liability bonds or policies'" (emphasis supplied) and here the American Family clause merely says "any bodily injury liability bonds or policies," we find that in order for the American Family policy to make sense, "applicable" must be an implied modifier to "any ... bonds or policies." Obviously, the policy or policies to be exhausted must have a relationship to the...