Millard Gutter Co. v. Shelter Mut. Ins. Co. , 312 Neb. 606 ( 2022 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/18/2022 09:05 AM CST
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606Millard Gutter Company, a corporation
doing business as Millard Roofing and
Gutter, appellant, v. Shelter Mutual
Insurance Company, appellee.
___ N.W.2d ___
Filed October 14, 2022. No. S-20-907.
1. Motions to Dismiss: Pleadings: Appeal and Error. A district court’s
grant of a motion to dismiss on the pleadings is reviewed de novo by
an appellate court, accepting the factual allegations in the complaint as
true and drawing all reasonable inferences of law and fact in favor of the
nonmoving party.
2. Actions: Parties: Standing: Judgments: Jurisdiction: Appeal and
Error. Whether a party who commences an action has standing and is
therefore the real party in interest presents a jurisdictional issue. When a
jurisdictional question does not involve a factual dispute, determination
of the issue is a matter of law which requires an appellate court to reach
a conclusion independent from the trial court.
3. Pleadings: Judges: Words and Phrases: Appeal and Error. An order
of the district court requiring a complaint to be made more definite and
certain will be sustained on appeal unless it clearly appears that the
court abused its discretion. A judicial abuse of discretion exists when the
reasons or rulings of a trial judge are clearly untenable, unfairly depri­
ving a litigant of a substantial right and denying just results in matters
submitted for disposition.
4. Actions: Parties: Standing. Whether a party who commences an action
has standing, and is therefore the real party in interest, presents a juris-
dictional issue.
5. Actions: Parties. The purpose of Nebraska’s real party in interest
statute, Neb. Rev. Stat. § 25-301 (Reissue 2016), is to prevent the
prosecution of actions by persons who have no right, title, or interest in
the cause.
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312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 6066. Actions: Parties: Standing. The focus of the real party in interest
inquiry is whether the party has standing to sue due to some real interest
in the cause of action, or a legal or equitable right, title, or interest in the
subject matter of controversy.
7. Standing. The focus of a court’s standing inquiry is not on whether
the claim being advanced has merit; it is on whether the plaintiff is the
proper party to assert the claim.
8. Assignments: Parties. Generally, if there has been a valid and complete
assignment of rights, then the assignee is the real party in interest, but
if the assignment is invalid, then the purported assignor remains the real
party in interest.
9. Assignments: Words and Phrases. An assignment is the transfer of
some identifiable property, claim, or right from the assignor to the
assignee.
10. Assignments. Fundamental to the law of assignments is the concept
that an assignee takes nothing more by an assignment than the assignor
had; an assignor cannot assign any rights greater than that which he or
she held.
11. Assignments: Intent. The intention of the assignor must be to transfer a
present interest in a debt or fund or subject matter.
12. Insurance: Breach of Contract: Assignments: Standing. In the
absence of a statute to the contrary, an insured may validly assign a
postloss breach of contract claim for insurance proceeds due under a
homeowner’s policy, and the assignee of such a claim has standing to
bring the breach of contract claim in its own name.
13. Standing: Pleadings: Evidence: Words and Phrases. When standing
is challenged at the pleadings stage, before an evidentiary hearing and
before any evidence outside of the pleadings is admitted, it is deemed a
facial challenge.
14. Standing: Pleadings: Proof. When considering a facial challenge to
standing, the trial court will typically review only the pleadings to
determine whether the plaintiff has alleged sufficient facts to establish
standing.
15. Torts: Insurance: Contracts. The general theory underlying the tort of
bad faith is that the law implies a covenant of good faith and fair deal-
ing as a result of the contractual relationship between the insurer and
the insured.
16. Torts: Insurance: Claims: Proof. To establish a claim of first-party bad
faith, a policyholder must show both an absence of a reasonable basis
for denying benefits of the insurance policy and the insurer’s knowl-
edge or reckless disregard of the lack of a reasonable basis for denying
the claim.
17. Torts: Intent. An action for first-party bad faith is an intentional tort.
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 60618. Actions: Insurance: Contracts. A cause of action for insurer bad faith
is separate from, and not dependent on, a cause of action for breach of
the insurance policy, although the two may share facts in common.
19. Claims: Torts: Insurance: Damages: Proximate Cause. Because
claims of bad faith are grounded in tort, traditional tort damages, includ-
ing damages for mental distress and for economic loss, are recover-
able when they are proximately caused by the insurer’s tortious bad
faith conduct.
20. Torts: Insurance: Claims. Only (1) an injured policyholder who is also
a covered person or (2) a policyholder who is also a beneficiary may
bring a cause of action in tort against the policyholder’s insurer for fail-
ure to settle the policyholder’s insurance claim.
21. Torts: Claims: Assignments: Death: Abatement, Survival, and
Revival. The common-law rule is that a right of action is not assignable
where the tort causes a strictly personal injury and does not survive the
death of the person injured.
22. Torts: Assignments: Statutes. Where only the proceeds of personal
injury tort litigation, and not control of the litigation, have been assigned,
such assignments are valid and enforceable under Nebraska law unless
there is a statute prohibiting such assignment.
23. Torts: Insurance: Claims: Assignments. A policyholder cannot val-
idly assign the right to prosecute or control a tort action for first-party
bad faith.
24. Torts: Insurance: Assignments. A policyholder’s postloss assignment
of insurance proceeds neither increases nor changes the insurer’s obliga-
tions under the insurance policy.
25. Pleadings. Motions to make more definite and certain are addressed to
the sound discretion of the trial court.
26. Pleadings: Time: Dismissal and Nonsuit. A plaintiff’s failure to file
an amended pleading within the time specified by the court’s order is a
basis for dismissing the action without prejudice under Neb. Rev. Stat.
§ 25-601(5) (Reissue 2016).
27. Courts: Dismissal and Nonsuit. In addition to the statutory authority
under Neb. Rev. Stat. § 25-601 (Reissue 2016), courts have inherent
authority to dismiss an action for violation of a court order. And pur-
suant to their inherent authority, courts can dismiss the action with or
without prejudice.
Appeal from the District Court for Douglas County: Shelly
R. Stratman, Judge. Affirmed.
Theodore R. Boecker, Jr., of Boecker Law, P.C., L.L.O., for
appellant.
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606Michael T. Gibbons, Raymond E. Walden, and Christopher
D. Jerram, of Woodke & Gibbons, P.C., L.L.O., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Stacy, J.
In connection with a 2013 storm, Millard Gutter Company
(Millard Gutter) obtained assignments from various policy­
holders of Shelter Mutual Insurance Company (Shelter).
Millard Gutter then filed suit against Shelter in its own name,
as assignee, seeking to recover damages for breach of the
insurance contracts and for first-party bad faith in failing to
settle the claims. The district court dismissed the action, and
Millard Gutter appeals. The primary question on appeal is
whether Millard Gutter has standing to assert first-party bad
faith claims against Shelter. We affirm the judgment of the
district court.
I. BACKGROUND
1. Complaint
On April 9, 2018, Millard Gutter filed a complaint against
Shelter in the district court for Douglas County. Millard Gutter
brought the action in its own name as “the assignee of vari-
ous insured property owners” who purchased insurance from
Shelter and whose property “sustained loss due to a storm
occurring in 2013.” The assignments were not attached to the
complaint, but were described therein as “valid assignments
of the right to proceeds under an insurance policy issued
by Shelter.”
The complaint alleged that Millard Gutter provided Shelter
with copies of the assignments and made claims for storm dam-
age to the insured properties. The complaint broadly alleged
that all of the Shelter policies were in full force and effect, the
storm damage was covered, and all conditions precedent under
the policies had been met. The complaint did not identify the
addresses or locations of the insured properties, the dates of
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606the alleged storm damage, or the dates the assignments were
made. Millard Gutter alleged that Shelter breached the policies
when it “failed to make direct payment to [Millard Gutter]”
and failed to include Millard Gutter “as a payee on any checks
or other payments for the loss.” The complaint also alleged
that Shelter’s failure to pay Millard Gutter amounted to “bad
faith and constitutes a separate violation of the implied cov-
enant of good faith and fair dealing owed under the insurance
contracts.” The complaint prayed for unspecified general and
special damages in an amount to be determined at trial.
2. Preanswer Motions
Shelter moved to dismiss the bad faith claims pursuant to
Neb. Ct. R. Pldg. § 6-1112(b)(6), arguing the complaint failed
to state a claim because Millard Gutter lacked standing to
assert a first-party bad faith claim. Additionally, Shelter moved
for a more definite statement under § 6-1112(e), arguing that
without more detail identifying the insured properties and the
nature and scope of the alleged assignments, Shelter could
not reasonably form a responsive pleading. More specifically,
Shelter argued that it could not discern, from the allegations of
the complaint, which claims the policyholders had purportedly
assigned, where the insured properties were located, whether
all named insureds had executed the assignments, or whether
the assignments were made preloss or postloss.
In an order entered March 26, 2019, the district court sus-
tained the motion for a more definite statement, finding the
original complaint was “insufficient to identify the homeown-
ers and put [Shelter] on notice of each individual homeowner’s
claim.” Millard Gutter was ordered to file, within 14 days, an
amended complaint which identified the pertinent policy num-
bers and attached the assignments upon which it relied. Millard
Gutter never filed an amended complaint.
In a separate order entered April 8, 2019, the court granted
Shelter’s motion to dismiss the bad faith claims for lack of
standing. The court recited the rule from Braesch v. Union Ins.
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606Co. 1 that only a policyholder who is also a covered person or
beneficiary under the policy has standing to bring a tort action
against an insurer for first-party bad faith. The court then rea-
soned that Millard Gutter, a nonpolicyholder, lacked standing
under Braesch to assert claims for first-party bad faith in its
own name.
The court also considered, and rejected, Millard Gutter’s
argument that it had standing to assert the bad faith claims
by virtue of the alleged assignments. First, the court recited
the general rule that only a present interest may be validly
assigned, 2 and it noted that the complaint contained no fac-
tual allegations suggesting that any Shelter policyholder had
an existing bad faith claim at the time the assignments were
made. Additionally, the court reasoned that even if the assign-
ments purported to include an existing claim for first-party bad
faith, allowing Millard Gutter to bring such claims in its own
name would violate the rule announced in Mutual of Omaha
Bank v. Kassebaum, 3 which held that the proceeds of personal
injury tort litigation may be validly assigned, but control of
the litigation may not. The court therefore concluded that
Millard Gutter’s complaint did not contain sufficient factual
allegations to establish standing to assert claims of first-party
bad faith.
3. Show Cause and Dismissal
With Prejudice
After the court ruled on the preanswer motions, the case
remained pending with no apparent activity for about 17
months. Then, in August 2020, the court sua sponte issued an
1
Braesch v. Union Ins. Co., 237 Neb. 44, 464 N.W.2d 769 (1991), dis­
approved on other grounds, Wortman v. Unger, 254 Neb. 544, 578 N.W.2d
413 (1998).
2
Krohn v. Gardner, 248 Neb. 210, 533 N.W.2d 95 (1995) (holding assign­
ment must transfer present interest in debt, fund, or subject matter).
3
Mutual of Omaha Bank v. Kassebaum, 283 Neb. 952, 814 N.W.2d 731(2012).
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606order for the parties to appear and show cause why the action
should not be dismissed for lack of progression.
Our bill of exceptions does not include the show cause hear-
ing, so it is not clear what, if any, evidence or argument was
offered by Millard Gutter. But other portions of the record
reflect that during the hearing, Millard Gutter advised the court
it would not be filing an amended complaint despite the court’s
prior rulings. In response, Shelter moved to dismiss the entire
action with prejudice.
After a hearing on Shelter’s motion, the court entered an
order dismissing the entire action with prejudice. The court
recited the procedural history of the case, including the basis
for the court’s prior rulings dismissing the bad faith claims
and ordering that Millard Gutter file an amended complaint on
the remaining breach of contract claims. The dismissal order
also stated:
[Millard Gutter] has not at any time filed an Amended
Complaint in this case. Nor has [it] filed anything else
in this case, despite the Court’s Order on August 10,
2020 directing that the parties appear at a hearing on
September 1, 2020 and show cause why the action should
not be dismissed for lack of prosecution. At that hearing,
[Millard Gutter’s] counsel advised that [Millard Gutter] is
standing on its original Complaint.
. . . The court agrees with [Shelter] that it is necessary
under the circumstances to go beyond dismissal for lack
of prosecution and dismiss the action on the basis that
[Millard Gutter] failed to comply with the Court’s specific
Order to file an Amended Complaint by April 24, 2019,
and has instead chosen to stand on the Complaint that the
Court found to be insufficient without a more definite
statement[,] and on the bad faith claims that the Court
also found to be insufficient.
. . . The Court determines that it is appropriate to dis-
miss the breach of contract claims as a sanction for non-
compliance with that Order . . . .
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606. . . The Court also finds that without the assignments
and specific identifying information about the alleged
homeowners executing the assignments, the Court cannot
determine that [Millard Gutter] has standing to assert the
claims of homeowners alleged to be insured by [Shelter]
and therefore finds that the Court lacks subject matter
jurisdiction over this action.
. . . The Court also reaffirms its dismissal of the bad
faith claims, which were not included in the leave to
amend.
Millard Gutter timely moved to alter or amend the order
of dismissal, arguing that under Neb. Rev. Stat. § 25-601(Reissue 2016), the dismissal should have been without preju-
dice. After a hearing, the court entered a slightly modified
order of dismissal, which generally recited the same rationale
for dismissal and, once again, dismissed the entire action with
prejudice.
Millard Gutter filed a timely notice of appeal. We moved the
appeal to our docket on our motion. 4
II. ASSIGNMENTS OF ERROR
Millard Gutter assigns, restated and consolidated, that the
district court erred in (1) granting the motion to dismiss the
bad faith claims for lack of standing, (2) granting the motion
to make more definite as to the breach of contract claims and
ordering Millard Gutter to file an amended complaint identify-
ing the policies and attaching the assignments, and (3) dismiss-
ing the entire action with prejudice once Millard Gutter elected
to stand on its original complaint.
III. STANDARD OF REVIEW
[1] A district court’s grant of a motion to dismiss on the
pleadings is reviewed de novo by an appellate court, accepting
4
See, Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2020); Neb. Ct. R. App.
Prac. § 2-102(C) (rev. 2022).
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606the factual allegations in the complaint as true and drawing all
reasonable inferences of law and fact in favor of the nonmov-
ing party. 5
[2] Whether a party who commences an action has standing
and is therefore the real party in interest presents a jurisdic-
tional issue. 6 When a jurisdictional question does not involve
a factual dispute, determination of the issue is a matter of law
which requires an appellate court to reach a conclusion inde-
pendent from the trial court. 7
[3] An order of the district court requiring a complaint to
be made more definite and certain will be sustained on appeal
unless it clearly appears that the court abused its discretion. 8
A judicial abuse of discretion exists when the reasons or rul-
ings of a trial judge are clearly untenable, unfairly depriving a
litigant of a substantial right and denying just results in matters
submitted for disposition. 9
IV. ANALYSIS
1. Standing to Assert Claim
of First-Party Bad Faith
[4] In Millard Gutter’s first assignment of error, it argues
the district court erroneously concluded that Millard Gutter
did not have standing to assert claims of first-party bad faith
against Shelter. Whether a party who commences an action has
standing, and is therefore the real party in interest, presents a
jurisdictional issue. 10
5
SID No. 67 v. State, 309 Neb. 600, 961 N.W.2d 796 (2021).
6
Valley Boys v. American Family Ins. Co., 306 Neb. 928, 947 N.W.2d 856(2020).
7
Id.8
See Christianson v. Educational Serv. Unit No. 16, 243 Neb. 553, 501
N.W.2d 281 (1993).
9
George Clift Enters. v. Oshkosh Feedyard Corp., 306 Neb. 775, 947
N.W.2d 510 (2020).
10
Valley Boys, supra note 6.
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606[5-7] Nebraska’s real party in interest statute provides in
part that “[e]very action shall be prosecuted in the name of the
real party in interest.” 11 The purpose of that section is to pre-
vent the prosecution of actions by persons who have no right,
title, or interest in the cause. 12 The focus of the real party in
interest inquiry is whether the party has standing to sue due to
some real interest in the cause of action, or a legal or equitable
right, title, or interest in the subject matter of controversy. 13
The focus of our standing inquiry is not on whether the claim
being advanced has merit; it is on whether Millard Gutter is the
proper party to assert the claim. 14
(a) Assignee as Real Party in Interest
[8-11] As a general proposition, we have recognized that if
there has been a valid and complete assignment of rights, then
the assignee is the real party in interest, but if the assignment
is invalid, then the purported assignor remains the real party
in interest. 15 An assignment is the transfer of some identifiable
property, claim, or right from the assignor to the assignee. 16
Fundamental to the law of assignments is the concept that
an assignee takes nothing more by an assignment than the
assignor had; 17 an assignor cannot assign any rights greater
than that which he or she held. 18 The intention of the assignor
must be to transfer a present interest in a debt or fund or sub-
ject matter. 19
11
Neb. Rev. Stat. § 25-301 (Reissue 2016).
12
Valley Boys, supra note 6.
13
Id.14
See Egan v. County of Lancaster, 308 Neb. 48, 952 N.W.2d 664 (2020).
15
See Valley Boys, supra note 6.
16
6A C.J.S. Assignments § 2 (2016).
17
Id., § 91.
18
Id.
19
See, Krohn, supra note 2; Craig v. Farmers Mut. Ins. Co., 239 Neb. 271,
476 N.W.2d 529 (1991).
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Nebraska Supreme Court Advance Sheets
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606[12] In Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins.
Co., 20 we held that in the absence of a statute to the contrary,
an insured may validly assign a postloss breach of contract
claim for insurance proceeds due under a homeowner’s policy.
We also held that the assignee of such a claim has standing to
bring the breach of contract claim in its own name. Notably,
Millard Gutter limited its holding to assignments made after
the occurrence of a loss, reasoning that “‘[a]fter a loss occurs,
the indemnity policy is no longer an executory contract of
insurance [but rather] a vested claim against the insurer and
can be freely assigned or sold like any other chose in action . .
. .’” 21 After concluding that postloss assignments of property
damage claims were valid and enforceable, Millard Gutter sug-
gested that “[i]f postloss assignments of storm damage claims
are having a deleterious effect on insurers, they should present
their concerns to the Legislature.” 22
In 2018, the Legislature responded by amending the Insured
Homeowner’s Protection Act, 23 to add specific provisions gov-
erning the validity of postloss assignments of benefits under
property and casualty insurance policies covering residential
real estate. Postloss assignments that do not comply with all
the provisions of the act are deemed void. 24 However, because
the events which gave rise to this action occurred before the
effective date of such amendments, we leave for another day
a detailed discussion of the act’s provisions governing post-
loss assignments.
(b) Facial Challenge to Standing
[13,14] In this case, Shelter’s challenge to Millard Gutter’s
standing was raised and resolved at the pleadings stage. When
20
Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co., 295 Neb. 419,
889 N.W.2d 596 (2016).
21
Id. at 429, 889 N.W.2d at 603.
22
Id. at 433, 889 N.W.2d. at 605.
23
See Neb. Rev. Stat. §§ 44-8605 to 44-8608 (Cum. Supp. 2020).
24
See § 44-8608.
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606standing is challenged at the pleadings stage, before an evi-
dentiary hearing and before any evidence outside of the plead-
ings is admitted, it is deemed a “‘facial challenge.’” 25 When
considering a facial challenge to standing, the trial court will
typically review only the pleadings to determine whether the
plaintiff has alleged sufficient facts to establish standing. 26
The complaint alleged that Millard Gutter “obtained valid
assignments of rights under the policies issued by Shelter” and
specifically described the nature of the rights assigned as “the
right to proceeds under an insurance policy issued by Shelter.”
On appeal, Millard Gutter argues these allegations were suffi-
cient to establish its standing, as an assignee, to assert not only
breach of contract claims for insurance proceeds, 27 but also to
assert tort claims for first-party bad faith against Shelter.
Regarding the claims of first-party bad faith, we understand
Millard Gutter to advance two separate standing theories. First,
Millard Gutter argues it has standing, as assignee, to assert any
existing bad faith claims that Shelter’s policyholders had when
the assignments were made. Alternatively, Millard Gutter relies
on the assignments to argue it can assert its own claims for
first-party bad faith based on Shelter’s postassignment conduct.
We address each standing argument in turn.
(c) Assignability of First-Party
Bad Faith Claims
Millard Gutter broadly argues that the policyholders’ exist-
ing first-party bad faith claims are assignable because there is
“not a single Nebraska appellate court decision, which states
that an assignee of a post-casualty loss claim cannot state a
claim for bad faith.” 28 Millard Gutter is correct that we have
not previously addressed whether a policyholder can validly
25
SID No. 67, supra note 5, 309 Neb. at 606, 961 N.W.2d at 802.
26
Id.
27
See, Millard Gutter Co., supra note 20; Valley Boys, supra note 6.
28
Brief for appellant at 18.
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606assign an existing tort claim of first-party bad faith. We do so
now, and begin by reviewing the relevant principles from our
first-party bad faith cases.
(i) First-Party Bad Faith
This court judicially recognized the tort of third-party bad
faith in the 1962 case of Olson v. Union Fire Ins. Co. 29 and
recognized the tort of first-party bad faith almost 30 years later
in Braesch. 30 In Braesch, the court described the difference
between the two torts as follows:
[A] first-party bad faith cause of action is based upon alle-
gations that the insurer, in bad faith, refuses to settle with
its own policyholder insured, who thereby suffers some
type of direct loss. . . . In contrast, a traditional third-party
bad faith claim arises when an insurer wrongfully fails to
settle a claim by a third party against an insured. 31
[15] In Braesch, we said the general theory underlying the
tort of bad faith is that the law implies a covenant of good
faith and fair dealing as a result of the contractual relation-
ship between the insurer and the insured. 32 In a later case,
we emphasized that it is the breach of the covenant of good
faith and fair dealing from which the insurer’s tort liability
springs, and we said the tort of first-party bad faith “embraces
any number of bad faith settlement tactics, such as inadequate
investigation, delays in settlement, false accusations, and so
forth.” 33
[16,17] To establish a claim of first-party bad faith, a policy­
holder must show both an absence of a reasonable basis for
denying benefits of the insurance policy and the insurer’s
knowledge or reckless disregard of the lack of a reasonable
29
Olson v. Union Fire Ins. Co., 174 Neb. 375, 118 N.W.2d 318 (1962).
30
Braesch, supra note 1.
31
Id. at 54-55, 464 N.W.2d at 776.
32
See Braesch, supra note 1.
33
Ruwe v. Farmers Mut. United Ins. Co., 238 Neb. 67, 74, 469 N.W.2d 129,
135 (1991).
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MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606basis for denying the claim. 34 Based on these elements, we
have characterized first-party bad faith as an intentional
tort, reasoning that “‘“[b]ad faith” by definition cannot be
unintentional.’” 35
[18,19] We have explained that a cause of action for insurer
bad faith is separate from, and not dependent on, a cause of
action for breach of the insurance policy, although the two
may share facts in common. 36 The damages recoverable for
bad faith differ too; because claims of bad faith are grounded
in tort, 37 traditional tort damages, including damages for men-
tal distress 38 and for economic loss, 39 are recoverable when
they are proximately caused by the insurer’s tortious bad faith
conduct. 40 Indeed, one of the justifications for recognizing
the intentional tort of bad faith was concern that recoverable
damages for breach of the insurance contract are inadequate
to compensate policyholders for personal injuries suffered as a
result of an insurer’s tortious bad faith. 41
[20] In Nebraska, only a policyholder has standing to bring
a first-party bad faith claim against an insurer. 42 More specifi-
cally, “only (1) an injured policyholder who is also a ‘covered
person’ or (2) a policyholder who is also a beneficiary may
bring a cause of action in tort against the policyholder’s insurer
for failure to settle the policyholder’s insurance claim.” 43 In this
case, Millard Gutter does not allege or argue that it is a Shelter
policyholder. Instead, Millard Gutter argues that, by virtue of
34
See Ruwe, supra note 33.
35
Braesch, supra note 1, 237 Neb. at 57, 464 N.W.2d at 777.
36
See Braesch, supra note 1.
37
See id.38
Id.39
See Ruwe, supra note 33.
40
See, Braesch, supra note 1; Ruwe, supra note 33.
41
See, e.g., id.42
Braesch, supra note 1.
43
Id. at 56, 464 N.W.2d at 776.
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Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
MILLARD GUTTER CO. V. SHELTER MUT. INS. CO.
Cite as 312 Neb. 606the postloss assignments from Shelter’s policyholders, it has
standing to bring any existing claims for first-party bad faith
the policyholders had when they executed the assignments.
It is a question of first impression whether a policyholder
can validly assign, to a nonpolicyholder, a cause of action
for the tort of first-party bad faith. At oral argument, Millard
Gutter suggested the question could be answered by applying
the reasoning from Millard Gutter Co. v. Farm Bureau Prop.
& Cas. Ins. Co., 44 but that case answered a different question,
and our analysis was limited to the assignability of postloss
breach of contract claims. To determine whether a policyholder
can validly assign a tort claim for first-party bad faith, we
must examine our jurisprudence governing the assignability of
tort actions.
(ii) Assignability of Tort Actions
Not all tort claims are assignable under Nebraska law. A
wrongful death cause of action cannot be assigned because it
is authorized by statute, and “[t]he plain language of the stat-
ute allows only the personal representative to bring the action
and only the widow, widower, or next of kin to benefit.” 45
Moreover, although the law generally supports the assign-
ability of rights, it does not permit assignments for matters
of personal trust or confidence, or for personal services. 46
Applying this rule, we have held that claims for legal malprac-
tice cannot be validly assigned in Nebraska because of public
policy considerations concerning the personal nature and con-
fidentiality of the attorney-client relationship. 47 And we have
explained that if an assignment “grants both the proceeds of
44
Millard Gutter Co., supra note 20.
45
Spradlin v. Dairyland Ins. Co., 263 Neb. 688, 692, 641 N.W.2d 634, 637
(2002). See Neb. Rev. Stat. § 30-810 (Reissue 2016).
46
See Earth Science Labs. v. Adkins & Wondra, P.C., 246 Neb. 798, 523
N.W.2d 254 (1994).
47
Id. Accord, Community First State Bank v. Olsen, 255 Neb. 617, 587
N.W.2d 364 (1998).
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Cite as 312 Neb. 606[a legal malpractice] action and the right to prosecute it, it is
an assignment of the cause of action” which is void as against
public policy. 48
[21] In Kassebaum, we considered whether an assignment
of the unliquidated proceeds from a personal injury action was
valid and enforceable under Nebraska law. 49 We described this
as an issue of first impression and began our analysis by recit-
ing the common-law rule that a right of action is not assignable
where the tort causes a strictly personal injury and does not
survive the death of the person injured. 50 We said this prohibi-
tion is grounded on two principles: (1) that prior to more recent
statutory amendments, personal claims did not survive the
death of the victim, and (2) that prohibiting the assignment of
tort claims prevents champerty and maintenance. 51
[22] In Kassebaum, we observed there was a split of author-
ity in other jurisdictions regarding whether a party could assign
the proceeds of personal injury litigation without violating this
common-law prohibition. And after discussing the reasons in
favor of and against allowing such assignments, we determined
“the cases holding that an assignment of proceeds is enforce-
able to be the better reasoned position.” 52 We thus adopted the
rule that “[w]here only the proceeds of [tort] litigation, and not
control of the litigation, have been assigned,” such assignments
are valid and enforceable under Nebraska law. 53 In other words,
absent a statute to the contrary, Nebraska law generally allows
a party to assign the proceeds from personal injury actions, but
it does not allow assignment of the right to prosecute or control
such actions.
48
Community First State Bank, supra note 47, 255 Neb. at 622-23, 587
N.W.2d at 368.
49
Kassebaum, supra note 3.
50
Id. See, also, Earth Science Labs., supra note 46.
51
Kassebaum, supra note 3.
52
Id. at 959, 814 N.W.2d at 737.
53
See id.
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Cite as 312 Neb. 606Here, the district court held that tort actions for first-party
bad faith are subject to the assignability rule for personal injury
actions announced in Kassebaum, and we agree. Actions for
first-party bad faith are intentional torts, and plaintiffs in such
actions are entitled to seek and recover traditional personal
injury damages. 54 We conclude it is appropriate to apply the
same assignability rules to actions for first-party bad faith as
are applied to other strictly personal torts. And under that rule,
the proceeds from such an action are assignable absent a statute
to the contrary, but the right to prosecute or control such an
action cannot be validly assigned. 55
[23] As such, even assuming without deciding that the pro-
ceeds from first-party bad faith actions can be validly assigned
under Nebraska law, we hold that a policyholder cannot val-
idly assign the right to prosecute or control such an action.
So, regardless of the validity for other purposes, the postloss
assignments from Shelter’s policyholders could not, as a mat-
ter of law, give Millard Gutter standing to prosecute the poli-
cyholders’ tort actions for first-party bad faith against Shelter.
Millard Gutter’s arguments to the contrary are without merit.
(d) Argument Based on Implied
Covenant of Good Faith
Millard Gutter’s alternative standing theory appears to be
that it is asserting its own claim for first-party bad faith against
Shelter. More specifically, Millard Gutter argues that once it
obtained postloss assignments from Shelter’s policyholders,
it “stood in the shoes of each of the insureds.” 56 And, as the
assignee of the policyholders’ rights to proceeds under the
Shelter policies, Millard Gutter argues that Shelter owed it the
same covenant of good faith and fair dealing that it owed its
policyholders. Thus, according to Millard Gutter, it can assert
a claim for first-party bad faith based on Shelter’s failure “to
54
See, Ruwe, supra note 33; Braesch, supra note 1.
55
See Kassebaum, supra note 3.
56
Brief for appellant at 14.
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Cite as 312 Neb. 606adjust the claim[s] in good faith and make prompt payment to
Millard Gutter.” 57
There is no merit to Millard Gutter’s alternative standing
theory, because there is no legal basis for its contention that
Shelter owed Millard Gutter any obligation of good faith and
fair dealing. The implied covenant of good faith and fair deal-
ing that Nebraska law imposes on insurers “is dependent upon
a contractual relationship between the [policyholder] and the
insurer.” 58 There is no contractual relationship between Shelter
and Millard Gutter, and the postloss assignments did not cre-
ate one.
[24] Moreover, we soundly reject any suggestion that a
policyholder’s postloss assignment of insurance proceeds to
a nonpolicyholder can somehow alter or expand the insurer’s
implied covenant of good faith and fair dealing under the pol-
icy, or create any contractual relationship between the insurer
and the assignee. Our cases allowing postloss assignment
of insurance proceeds plainly hold that “such an assignment
neither increases nor changes the insurer’s obligations under
the policy.” 59
Here, the postloss assignments could not alter Shelter’s
obligations under the insurance policy or change the fact that
Millard Gutter has no contractual relationship with Shelter.
Consequently, there is no doctrinal basis for Millard Gutter
to claim that Shelter owes it a covenant of good faith and fair
dealing. And absent such a duty, there is no legal basis on
which Millard Gutter can assert its own claim of first-party
bad faith against Shelter. As we explained in Braesch, the tort
of first-party bad faith does not extend to nonpolicyholder
beneficiaries—even those who claim to have been harmed by
57
Id.58
Braesch, supra note 1, 237 Neb. at 55, 464 N.W.2d at 776.
59
Valley Boys, supra note 6, 306 Neb. at 939, 947 N.W.2d at 865 (emphasis
supplied). Accord, Kasel v. Union Pacific RR. Co., 291 Neb. 226, 231, 865
N.W.2d 734, 738 (2015) (“[a]n assignment does not affect or change any
of the provisions of the contract”).
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Cite as 312 Neb. 606an insurer’s failure to settle with them—because nonpolicy-
holders lack a contractual relationship with the insurer. 60 As
a nonpolicyholder, Millard Gutter lacks standing to bring an
action for first-party bad faith against Shelter.
In sum, both of Millard Gutter’s standing theories fail as
a matter of law. The district court correctly concluded that
the allegations of Millard Gutter’s complaint, even accepted
as true, failed to establish that Millard Gutter has standing to
assert first-party bad faith claims against Shelter.
For the sake of completeness, we note that under Nebraska’s
real party in interest statute, an action “shall not be dismissed
on the ground that it is not prosecuted in the name of the
real party in interest until a reasonable time has been allowed
after objection for joinder or substitution of the real party in
interest.” 61 But here, Millard Gutter has not assigned or argued
that the district court erred by failing to allow Millard Gutter a
reasonable opportunity to file an amended complaint joining or
substituting the Shelter policyholders as plaintiffs for purposes
of the first-party bad faith claims. And on this record, we can
find no plain error related to § 25-301, particularly where, as
we discuss later, it is apparent that Millard Gutter would have
refused to file an amended complaint if allowed to do so.
2. No Abuse of Discretion in Ordering
More Definite Statement
In its second assignment of error, Millard Gutter argues the
court erred in granting Shelter’s motion to provide a more defi-
nite statement. According to § 6-1112(e) of the pleading rules:
If a pleading to which a responsive pleading is permitted
is so vague or ambiguous that a party cannot reasonably
60
See Braesch, supra note 1.
61
§ 25-301. See, also, North Star Mut. Ins. Co. v. Stewart, 311 Neb. 33,
47, 970 N.W.2d 461, 471 (2022) (holding when plaintiff is not real
party in interest with standing to sue, “better practice” is to allow
plaintiff reasonable period of time to amend complaint by either joining or
substituting real party in interest before dismissing action).
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Cite as 312 Neb. 606be required to frame a responsive pleading, the party
may move for a more definite statement before interpos-
ing a responsive pleading. The motion shall point out
the defects complained of and the details desired. If the
motion is granted and the order of the court is not obeyed
within 10 days or within such time as the court may fix,
the court may strike the pleading or make such order as
it deems just.
[25] Motions to make more definite and certain are addressed
to the sound discretion of the trial court. 62 Rule 6-1112(e)
requires the movant to identify the alleged deficiencies in the
pleading and to specify the details that are reasonably needed
to draft a responsive pleading. Shelter argued it could not tell
from the complaint which claims had been assigned, whether
the assignments were made preloss or postloss, whether all
named insureds had executed the assignments, or whether the
insured properties were located in the county where suit had
been filed. It asserted that without knowing these details, it
was unable to draft a responsive pleading or identify available
policy defenses.
The district court granted the motion, but did not require
all of the additional details requested by Shelter. Instead, the
court ordered Millard Gutter to amend the complaint within
14 days to “include policy numbers and attach the assignment
associated with each homeowner.” This additional detail would
presumably allow Shelter to identify the insured properties, the
named insureds, and the assignors so it could draft a respon-
sive pleading. On this record, we find no abuse of discretion in
granting the motion to make more definite.
3. No Error in Dismissal With Prejudice
In its final assignment of error, Millard Gutter argues it
was error to dismiss the entire action with prejudice. Millard
62
See Vodehnal v. Grand Island Daily Independent, 191 Neb. 836, 218
N.W.2d 220 (1974).
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Cite as 312 Neb. 606Gutter argues that, pursuant to § 25-601, the dismissal should
have been without prejudice. Section 25-601 provides in rel-
evant part:
An action may be dismissed without prejudice to a
future action . . . (3) by the court for want of necessary
parties; . . . (5) by the court for disobedience by the plain-
tiff of an order concerning the proceedings in the action.
In all other cases on the trial of the action the decision
must be upon the merits.
[26,27] We have said the plaintiff’s failure to file an
amended pleading within the time specified by the court’s
order is a basis for dismissing the action without prejudice
under § 25-601(5). 63 But in addition to the statutory author-
ity under § 25-601, we have long recognized that courts have
inherent authority to dismiss an action for violation of a court
order. 64 And pursuant to their inherent authority, courts have
discretion to dismiss the action with or without prejudice. 65
Additionally, § 6-1112(e) of the pleading rules authorizes a
trial court to “strike the pleading or make such order as it
deems just” if an order to make more definite is not obeyed
within the time fixed by the court. Dismissal with prejudice is
63
See Bert Cattle Co. v. Warren, 238 Neb. 638, 471 N.W.2d 764 (1991).
64
Id. at 641-42, 471 N.W.2d at 767 (internal quotation marks omitted)
(explaining “[i]t has almost universally been held or recognized that courts
have the inherent power to dismiss an action for disobedience of a court
order. . . . Without this right, a court could not control its dockets; business
before it would become congested; its functions would be impaired; and
speedy justice to litigants would largely be denied”).
65
See, Scudder v. Haug, 197 Neb. 638, 250 N.W.2d 611 (1977) (finding no
error in dismissing cross-claim with prejudice where defendant was given
repeated opportunities to comply with court’s order to bring pleading
into proper form, yet failed to do so); Ferson v. Armour & Co., 109
Neb. 648, 651, 192 N.W. 125, 127 (1923) (finding no error in dismissing
action with prejudice after four pleadings were stricken for failure to
comply with pleading rules, though such dismissal “should be sparingly
exercised”).
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Cite as 312 Neb. 606generally considered an available sanction under such a provi-
sion and is reviewed for an abuse of discretion. 66
Moreover, the inherent authority of a trial court to dismiss
an action with prejudice for failure to prosecute is also well
established:
The authority of a . . . trial court to dismiss a plaintiff’s
action with prejudice because of [a] failure to prosecute
cannot seriously be doubted. The power to invoke this
sanction is necessary in order to prevent undue delays in
the disposition of pending cases and to avoid congestion
in the calendars of the District Courts. The power is of
ancient origin, having its roots in judgments of nonsuit
and non prosequitur entered at common law, e. g., 3
Blackstone, Commentaries (1768), 295-296, and dismis-
sals for want of prosecution of bills in equity . . . . 67
Our record shows that Millard Gutter’s failure to comply
with the order to make more definite was intentional, not inad-
vertent. Then, when the case showed no activity for a period of
almost 17 months and the court sua sponte issued an order to
show cause why the case should not be dismissed for failure to
prosecute, Millard Gutter offered no explanation, and instead,
it advised the court for the first time that it was going to stand
on its original complaint despite the court’s prior orders. After
the show cause hearing, the district court granted Shelter’s
motion to dismiss the entire action with prejudice, finding that
Millard Gutter’s delay “entirely stalled the case for nearly [a]
year and a half at the initial pleading stage” and that Millard
Gutter had no intention of filing an amended complaint to
remedy the deficiencies the court had identified in the origi-
nal complaint.
66
See, e.g., Nystrom v. Melcher, 262 Mont. 151, 864 P.2d 754 (1993); Clay
v. City of Margate, 546 So. 2d 434 (Fla. App. 1989); Medved v. Baird, 58
Wis. 2d 563, 207 N.W.2d 70 (1973).
67
Link v. Wabash Railroad Co., 370 U.S. 626, 629-30, 82 S. Ct. 1386, 8 L.
Ed. 2d 734 (1962) (emphasis omitted).
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Cite as 312 Neb. 606Although dismissal with prejudice pursuant to a court’s
inherent authority is a severe sanction which should be exer-
cised sparingly, 68 we cannot say on this record that it was
an abuse of discretion. The record in this case supports the
trial court’s determination that Millard Gutter deliberately dis-
obeyed the order to make more definite, stalled progression of
the case by waiting almost 17 months to advise the court of its
decision to stand on the original complaint, and failed to show
good cause for the resulting failure to prosecute. We find no
merit to any of Millard Gutter’s arguments that it was an abuse
of discretion to dismiss the case with prejudice.
V. CONCLUSION
For the foregoing reasons, the judgment of the district court
is affirmed.
Affirmed.
68
See Ferson, supra note 65.