Shelter Mut. Ins. Co. v. Freudenburg

• Decision Date: 07 February 2020
• Docket Number: No. S-19-265.,S-19-265.
• Citation: 304 Neb. 1015,938 N.W.2d 92
• Parties: SHELTER MUTUAL INSURANCE COMPANY, appellee, v. Larry FREUDENBURG, appellant.
• Court: Nebraska Supreme Court

304 Neb. 1015

938 N.W.2d 92

SHELTER MUTUAL INSURANCE COMPANY, appellee,

v.Larry FREUDENBURG, appellant.

No. S-19-265.

Supreme Court of Nebraska.

Filed February 7, 2020

NATURE OF CASE

The primary issue in this case is whether Neb. Rev. Stat. § 60-310 (Cum. Supp. 2018) allows provisions known as partial household exclusion clauses, which reduce automobile liability coverage from the policy amount to the state minimum when the injured person is an insured, relative, or resident of the insured’s household. The district court found that the statute unambiguously defined an automobile policy as coverage in the amounts set by the state minimums and that the second sentence of the statute prevented complete household exclusions, but did not prohibit partial exclusions. The district court granted summary judgment in favor of Shelter Mutual Insurance Company (Shelter) upholding the partial household exclusion clause, which reduced the insured’s coverage from the policy amount of $100,000 to $25,000.

BACKGROUND

The insured, Larry Freudenburg, appeals from an order granting summary judgment in favor of Shelter in its action for declaratory judgment regarding the application of § 60-310 to the underlying automobile liability policy and against Freudenburg on his counterclaim for breach of contract. Freudenburg did not file a cross-motion for summary judgment. Shelter originally brought the action against both Freudenburg and Bruce R. Ramage, the director of the Nebraska Department of Insurance, in his official capacity. Ramage was later dismissed from the case and is not part of this appeal.

The facts are undisputed. On October 20, 2016, Freudenburg was traveling as a passenger in a car covered by a policy Freudenburg and his wife had purchased from Shelter. Freudenburg made a claim for his injuries under the Shelter policy because the injuries were not covered by any other policies. After the accident, Freudenburg filed a claim for reimbursement of expenses based on his injuries totaling over $100,000. Rather than paying the policy limit for bodily injury in the amount of $100,000, Shelter paid $25,000, which is the minimum level of automobile liability coverage that drivers in Nebraska are required by law to carry.

Shelter refused to pay Freudenburg’s request for an additional $75,000 based on a partial household exclusion clause in Freudenburg’s policy. A section titled "Partial Exclusions From Coverage A and Coverage B" begins with the following:

Coverage A [for bodily injury] and Coverage B [for property damage] do not cover any of the types of damages listed below unless no other policy of liability insurance provides coverage for those damages in the amount required by the applicable financial responsibility law . In that event, the minimum dollar amount of coverage required by the applicable financial responsibility law will be provided by this policy. No additional benefits that are not required by that law will be provided.

Subsection 13 of this provision allows for a reduction in bodily injury coverage for "[d ]amages owed to any insured, relative, or resident of an insured’s household." Shelter asserted that the $100,000 policy for bodily injury was reduced to the Nebraska minimum of $25,000 pursuant to the partial household exclusion clause.

Shelter received a letter from Ramage on behalf of the Nebraska Department of Insurance which asked Shelter why it had not paid the full $100,000 of the policy. Shelter’s response cited the partial household exclusion clause and asserted that such an exclusion was not prohibited by Nebraska law, specifically that it did not fall under the prohibition found in § 60-310. The Nebraska Department of Insurance sent a letter indicating it disagreed with Shelter’s interpretation of § 60-310, which provides:

Automobile liability policy means liability insurance written by an insurance carrier duly authorized to do business in this state protecting other persons from damages for liability on account of accidents occurring subsequent to the effective date of the insurance arising out of the ownership of a motor vehicle (1) in the amount of twenty-five thousand dollars because of bodily injury to or death of one person in any one accident, (2) subject to the limit for one person, in the amount of fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and (3) in the amount of twenty-five thousand dollars because of injury to or destruction of property of other persons in any one accident. An automobile liability policy shall not exclude, limit, reduce, or otherwise alter liability coverage under the policy solely because the injured person making a claim is the named insured in the policy or residing in the household with the named insured.

In June 2017, Shelter brought a declaratory action seeking to declare that partial household exclusions are permissible under Nebraska law. The district court determined that § 60-310 unambiguously forbade only reductions or alterations in coverage that result in the coverage for the insured, relative, or household member’s falling below the mandatory minimums described in the first sentence of the statute. The court declined to consider the legislative history concerning the 2013 change to § 60-310, which added the language "limit, reduce, or otherwise alter" to the prior version of the statute and explicitly discussed the Legislature’s intent to thereby prohibit partial household exclusions. The court concluded that partial household exclusions are not prohibited by § 60-310. The court granted summary judgment to Shelter. Freudenburg appeals.

ASSIGNMENTS OF ERROR

Freudenburg assigns that summary judgment was improper because the trial court erred in (1) interpreting the last sentence of § 60-310 to allow for reductions in coverage down to the state minimum; (2) refusing to consider the legislative history of 2013 Neb. Laws, L.B. 316; and (3) enforcing the partial household exclusion contained in the policy Freudenburg purchased from Shelter.

STANDARD OF REVIEW

An appellate court affirms a lower court’s grant of summary judgment if the pleadings and admitted evidence show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from the facts and that the moving party is entitled to judgment as a matter of law.¹

In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment was granted, and gives that party the benefit of all reasonable inferences deducible from the evidence.²

To the extent an appeal calls for statutory interpretation or presents questions of law, an appellate court must reach an independent conclusion irrespective of the determination made by the court below.³

ANALYSIS

Although Freudenburg has assigned several errors on appeal, the errors are rooted in a single question of how to interpret § 60-310. Shelter believes the only question in this regard is how to understand § 60-310 ’s term "automobile liability policy" in the context of the statute’s prohibition that "[a]n automobile liability policy shall not exclude, limit, reduce, or otherwise alter liability coverage under the policy solely because the injured person making a claim is the named insured in the policy or residing in the household with the named insured" (hereinafter the household exclusion prohibition). We also find the statute’s term "liability coverage" to be essential to our analysis.

An appellate court will not resort to interpretation to ascertain the meaning of statutory words that are plain, direct, and unambiguous.⁴ A collection of statutes pertaining to a single subject matter are in pari materia and should be conjunctively considered and construed to determine the intent of the Legislature, so that different provisions are consistent, harmonious, and sensible.⁵ It is impermissible to follow a literal reading that engenders absurd consequences where there is an alternative interpretation that reasonably effects a statute’s purpose.⁶ A court must attempt to give effect to all parts of a statute, and if it can be avoided, no word, clause, or sentence will be rejected as superfluous or meaningless.⁷

The Motor Vehicle Registration Act⁸ generally provides the rules and regulations for acquiring and maintaining registration of vehicles that are operating on Nebraska roadways. The first sentence of § 60-310 expressly defines "automobile liability policy" to be coverage in certain amounts based on state minimums for each category, stating:

Automobile liability policy means liability insurance written by an insurance carrier duly authorized to do business in this state protecting other persons from damages for liability on account of accidents occurring subsequent to the effective date of the insurance arising out of the ownership of a motor vehicle (1) in the amount of twenty-five thousand dollars because of bodily injury to or death of one person in any one accident, (2) subject to the limit for one person, in the amount of fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and (3) in the amount of twenty-five thousand dollars because of injury to or destruction of property of other persons in any one accident.

The coverage so described is commonly referred to as "25/50/25 coverage." Other statutes of the Motor Vehicle Registration Act then set forth that a driver must show proof of financial responsibility⁹ or a current "automobile liability policy"¹⁰ in order to register a vehicle and must have a current "automobile liability policy"¹¹ anytime the vehicle is operated in Nebraska.

The second, and last, sentence of § 60-310 addresses the legality of policy provisions that seek to exclude or alter coverage based on the injured claimant in the accident’s being the named insured or a member of the named insured’s household. This is in contrast to a...