Breci v. St. Paul Mercury Ins. Co. ( 2014 )

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626 288 NEBRASKA REPORTS
Fred Breci et al., appellants and cross-appellees, v.
St. Paul Mercury Insurance Company, appellee and
cross-appellant, and Union Pacific Streamliner
Federal Credit Union, intervenor-appellant
and cross-appellee.
___ N.W.2d ___
Filed July 25, 2014. No. S-12-983.
1. Jurisdiction: Appeal and Error. Before reaching the legal issues presented for
review, it is the duty of an appellate court to determine whether it has jurisdiction
over the matter before it.
2. Summary Judgment: Final Orders: Appeal and Error. A denial of a motion
for summary judgment is an interlocutory order, not a final order, and therefore
not appealable.
3. Pleadings: Judgments: Appeal and Error. A motion to alter or amend a judg-
ment is addressed to the discretion of the trial court, whose decision will be
upheld in the absence of an abuse of that discretion.
4. Judges: Words and Phrases. A judicial abuse of discretion exists when the
reasons or rulings of a trial judge are clearly untenable, unfairly depriving
a litigant of a substantial right and denying just results in matters submitted
for disposition.
5. Declaratory Judgments. In Nebraska, a party may not simply move the court for
a declaratory judgment.
6. Declaratory Judgments: Trial. Issues of fact in a declaratory judgment action
may be tried and determined in the same manner as issues of fact are tried
and determined in other civil actions in the court in which the proceeding
is pending.
7. Summary Judgment: Proof. The party moving for summary judgment has the
burden to show that no genuine issue of material fact exists and must produce
sufficient evidence to demonstrate that the moving party is entitled to judgment
as a matter of law.
8. Pleadings: Appeal and Error. Permission to amend pleadings is addressed to the
discretion of the trial court; absent an abuse of discretion, the trial court’s deci-
sion will be affirmed.
9. Pleadings. Generally, leave to amend a party’s pleading shall be freely given
when justice so requires.
10. Equity: Estoppel. The doctrine of equitable estoppel applies where, as a result
of conduct of a party upon which another person has in good faith relied to his
detriment, the acting party is absolutely precluded, both at law and in equity,
from asserting rights which might have otherwise existed.
11. Insurance: Estoppel. The doctrine of mending one’s hold generally has no appli-
cation to matters relating to insurance coverage.
12. ____: ____. Estoppel cannot be invoked to expand the scope of coverage of an
insurance contract absent a showing of detrimental good faith reliance upon state-
ments or conduct of the party against whom estoppel is invoked which reasonably
led an insured to believe coverage was present.
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13. ____: ____. There is a widely recognized exception to the general rule that estop-
pel cannot be used to expand the scope of insurance coverage. Under the excep-
tion, when an insurance company assumes the defense of an action against its
insured, without reservation of rights, and with knowledge, actual or presumed,
of facts which would have permitted it to deny coverage, it may be estopped from
subsequently raising the defense of noncoverage.
14. Insurance: Estoppel: Proof. The exception to the general estoppel rule applies
when an insured is able to show (1) that the insurer had sufficient knowledge
of facts or circumstances indicating noncoverage, (2) that the insurer assumed
or continued defense of the insured without obtaining an effective reserva-
tion of rights agreement, and (3) that the insured suffered some type of harm
or prejudice.
15. Pretrial Procedure: Appeal and Error. Decisions regarding discovery are
directed to the discretion of the trial court, and will be upheld in the absence of
an abuse of discretion.
16. Pretrial Procedure: Proof: Appeal and Error. The party asserting error in
a discovery ruling bears the burden of showing that the ruling was an abuse
of discretion.
17. Motions for Continuance: Appeal and Error. A motion for continuance is
addressed to the discretion of the trial court, whose ruling will not be disturbed
on appeal in the absence of an abuse of discretion.
18. Insurance: Contracts. An insurance policy is a contract, and when the facts
are undisputed, whether or not a claimed coverage exclusion applies is a matter
of law.
19. Appeal and Error. An appellate court is not obligated to engage in an analysis
that is not necessary to adjudicate the case and controversy before it.
Appeal from the District Court for Douglas County: W.
Russell Bowie III, Judge. Affirmed.
Thomas M. White, C. Thomas White, and Amy S. Jorgensen,
of White & Jorgensen, for appellants and intervenor-appellant.
Thomas A. Grennan and Abbie M. Schurman, of Gross
& Welch, P.C., L.L.O., and J. Price Collins and Thomas M.
Spitaletto, of Wilson, Elser, Moskowitz, Edelman & Dicker,
L.L.P., for appellee.
Heavican, C.J., Wright, Connolly, McCormack, Miller-
Lerman, and Cassel, JJ.
Cassel, J.
I. INTRODUCTION
Former members of a credit union’s board of directors, after
having been sued by the credit union, sought a declaratory
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judgment that an insurance policy covered the credit union’s
claims. The district court first held in favor of the former direc-
tors, but reconsidered and later granted summary judgment to
the insurer. While reconsideration was pending, the former
directors settled with the credit union. On appeal, we resolve
two broad issues. First, because the former directors did not
establish that they were entitled to summary or declaratory
judgment, the court did not abuse its discretion in vacating its
initial judgment. Second, because the settlement potentially
gave rise to new policy-based defenses that were not barred
by equitable estoppel, the court did not abuse its discretion in
permitting an amended answer. We affirm the court’s summary
judgment for the insurer.
II. BACKGROUND
1. Factual Background
(a) Credit Union
On February 16, 2006, the National Credit Union
Administration (NCUA) placed Union Pacific Streamliner
Federal Credit Union (credit union), a federally chartered credit
union, under conservatorship. The conservatorship revoked the
authority of the credit union’s board of directors, which then
included Fred Breci, William Gallo, Henry Kammerer, Michael
Kros, Carl Launer, Steven Slater, and S. Anthony Siahpush
(collectively former directors).
NCUA had previously recommended conservatorship for a
number of reasons, including “[i]nsider abuse and preferential
treatment towards certain members of the . . . board of direc-
tors.” According to the recommendation, specific instances of
preferential treatment included leasing office space in a build-
ing owned by a director and obtaining engineering and con-
struction assistance from the director’s firm.
(b) Insurance Policy
On September 12, 2006, the credit union signed an appli-
cation for an insurance policy. St. Paul Mercury Insurance
Company (St. Paul) later issued a policy effective from
November 18, 2006, through November 18, 2009 (Policy). The
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management liability insuring agreement had a limit of liability
of $2 million and provided directors and officers individual
coverage. The Policy covered only claims first made during the
policy period.
The Policy specifically defined several terms, which we set
forth using the style of the Policy:
•  Insured” was defined to include both “the Insured Persons”
“
and “the Company, except the Company shall not be an
Insured with respect to the Directors and Officers Individual
Coverage.”
•  Insured Persons” was defined to include “Directors or
“
Officers.”
•  Company” was defined as “any entity named in the
“
Declarations and its Subsidiaries.” The credit union was the
entity named in the declarations.
•  Claim” included “a civil proceeding against any Insured
“
commenced by the service of a complaint or similar plead-
ing” which was “on account of a Wrongful Act.”
•  Wrongful Act” included a “Management Practices Act.”
“
•  Management Practices Act” included any “breach of duty
“
actually or allegedly committed or attempted by any Insured
Person in their capacity as such.”
(c) Credit Union’s Lawsuit
Against Directors
On June 15, 2007, the credit union sued the former direc-
tors and two businesses affiliated with one of the former
directors. Its amended complaint alleged that the former
directors failed to exercise the ordinary care and prudent
judgment required of directors, thereby causing injury and
financial loss. The complaint set forth the following acts by
the former directors:
•  ommissioning, without competitive bidding, an engineer-
c
ing study by a company owned and controlled by one of the
former directors;
•  ccepting, without seeking competitive bids, a proposal to
a
name the company of one of the former directors as general
contractor of an expansion project; and
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•  easing space, without exploring options elsewhere, in a
l
building owned by a company in which one of the former
directors was a majority owner.
The credit union sought general and special damages resulting
from the breaches of the former directors’ fiduciary duty.
(d) Claim on Policy
In July 2007, the former directors submitted the credit
union’s lawsuit to St. Paul, seeking coverage under the Policy.
In a January 21, 2008, letter to the former directors, St. Paul
acknowledged receipt of the lawsuit and described coverage
under the Policy. The letter discussed the following:
•  here was a retention per claim that must be exhausted
T
before St. Paul advanced defense costs or contributed toward
any loss.
•  ertain definitions were contained in the Policy, pursuant to
C
which the credit union was the “Company,” the former direc-
tors were “Insured Persons,” the complaint was a “Claim,”
and the allegations of breach of fiduciary duty may meet the
definition of “Management Practices Act.”
•  he Policy remained controlling in regard to any determina-
T
tion of coverage, and any coverage analysis in the letter was
subject to change as the claim developed and further informa-
tion was obtained.
•  t. Paul reserved all rights under the Policy to rely upon and
S
enforce additional terms of the Policy and to disclaim cover-
age on alternative bases.
On February 16, 2009, St. Paul sent a letter to the for-
mer directors, stating that it would not defend or indemnify
the former directors for the credit union’s lawsuit against
them. The letter stated that because the former directors were
“Insured Persons” and the credit union was an “Insured” under
the Policy, coverage was precluded under a subsection of
the Policy designated “Exclusions Applicable to All Insuring
Agreements and to All Loss,” which stated in part that “[t]he
Insurer shall not be liable for Loss on account of any Claim
made against any Insured . . . brought or maintained by or on
behalf of any Insured or Company in any capacity.”
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2. P rocedural Background
(a) Complaint, Answer,
and Intervention
On April 9, 2009, the former directors sued St. Paul. They
sought a declaratory judgment that they were entitled to cover-
age under the Policy, that St. Paul was obligated to them for
the cost of defending the action brought by the credit union,
and that St. Paul was obligated to provide coverage for any
damages that might be awarded by a court for the complaint
brought by the credit union.
In St. Paul’s answer, it alleged, among other things, that cov-
erage for the credit union’s lawsuit against the former directors
was barred under an exclusion in the Policy, because the for-
mer directors were “Insureds” under the Policy and the lawsuit
was brought by the credit union, which was also an “Insured”
under the Policy.
The credit union later intervened in the former directors’
lawsuit against St. Paul. It requested an order declaring that
there was coverage under the Policy and that St. Paul would be
required to pay the judgment up to the limits of coverage if a
judgment in the credit union’s lawsuit against the former direc-
tors was entered in favor of the credit union.
(b) Orders to Mediate
Shortly after the former directors sued St. Paul, the district
court entered an order both in the credit union’s lawsuit against
the former directors and in the instant case, referring each
case to mediation and stating that “all parties shall attend and
participate in the mediation.” After the initial mediation date,
St. Paul did not participate in further negotiations.
(c) First Motion for Summary
Judgment and Motion for
Declaratory Judgment
St. Paul and the former directors each filed a motion seek-
ing judgment. St. Paul moved for summary judgment, alleg-
ing that the Policy did not provide coverage for the claims
in the credit union’s lawsuit against the former directors and
that St. Paul was not obligated to advance or reimburse the
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defense costs incurred by the former directors in that lawsuit
or to otherwise indemnify them. The former directors filed a
“Motion for Declaratory Judgment” and asked for an order
declaring their rights under the Policy.
On April 20, 2010, the district court entered judgment,
styled as an order, denying St. Paul’s motion for summary
judgment and granting the former directors’ motion for declar-
atory judgment. The court determined that the “Insured v.
Insured” exclusion did not apply, because the credit union
was not an “Insured” under the “Directors and Officers
Individual Coverage” section of the management liability
insuring agreement.
St. Paul timely filed a motion to alter or amend. It asserted
several grounds in support of its motion and requested that
the court alter or amend its order or, in the alternative, limit
the order solely to the applicability of the “Insured v. Insured”
exclusion and leave open for resolution the remaining issues
relating to other defenses.
(d) Settlement and
Amended Answer
After weeks of negotiations through the mediator, the former
directors settled the credit union’s lawsuit against them. The
settlement agreement provided that the former directors would
pay $155,000 to the credit union, that there would be a confes-
sion of judgment by certain former directors, and that there
would be an assignment of interest.
On April 26, 2010—6 days after the filing of the court’s
judgment denying St. Paul’s motion for summary judgment
and granting the former directors’ motion for declaratory judg-
ment—the confession of judgment was filed. It provided that
five of the former directors confessed that judgment of $2 mil-
lion should be entered against them in favor of the credit
union. Under the assignment of claims, the former directors
transferred to the credit union their interests in the instant
litigation against St. Paul. A covenant not to execute stated
that the credit union “will not execute on, or otherwise seek
to enforce, the Judgment entered against the [former directors]
in this matter by confession, except and to the extent of any
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right, title, claim or interest of any type or kind that the [for-
mer directors] have . . . against St. Paul.”
On May 5, 2010—9 days after the confession of judgment
was filed and while St. Paul’s motion to alter or amend the
April judgment was still pending—St. Paul moved for leave to
file an amended answer. St. Paul alleged that the settlement of
the credit union’s lawsuit raised new issues and new defenses
under the Policy that were not known to St. Paul or otherwise
did not exist at the time the court considered the motion for
summary judgment and motion for declaratory judgment. The
court granted the motion.
St. Paul subsequently filed its amended answer. It alleged
that the settlement between some of the former directors and
the credit union constituted a fraudulent and collusive effort
to obtain the Policy’s limits of liability. St. Paul pointed to
various provisions of the Policy and asserted numerous reasons
why the Policy did not provide coverage under the circum-
stances. The additional defenses included the following:
•  he former directors were not legally obligated to pay the
T
confessed judgment.
•  he confessed judgment was not on account of a “Claim” for
T
a “Management Practices Act.”
•  he confessed judgment was not on account of “Wrongful
T
Acts.”
•  he former directors violated the “Defense and Settlement”
T
provision of the Policy.
•  ome of the former directors violated the Policy’s “Duty of
S
the Insureds to Defend” provision.
•  isrepresentations or omissions were made in connection
M
with the application for the Policy.
•  he credit union’s lawsuit against the former directors did not
T
constitute a claim first made during the policy period.
(e) September 2011 Order
On September 15, 2011, the court ruled on St. Paul’s motion
to alter or amend. The court stated:
I clearly erred in awarding the [former directors] a declar-
atory judgment, and even if it was to be considered as a
motion for partial summary judgment, the other parties
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did not have an opportunity to present evidence in opposi-
tion, and that portion of the April 20, 2010 order should
be vacated.
The court granted in part St. Paul’s motion to alter or amend
and vacated that portion of the judgment granting declaratory
judgment. The court denied St. Paul’s motion with respect to
the denial of St. Paul’s motion for summary judgment.
(f) Second Motion for Summary
Judgment, Amended Complaint,
and Motion to Postpone
In April 2012, St. Paul filed a second motion for summary
judgment. It alleged that the Policy did not provide coverage
for the credit union’s lawsuit against the former directors for
the following reasons: (1) The credit union’s lawsuit consti-
tuted a claim first made prior to the policy period and was
therefore precluded from coverage; (2) the regulatory claims
exclusion barred coverage; (3) the credit union’s lawsuit arose
out of facts and circumstances known to the credit union and
the former directors prior to issuance of the Policy, and the
application exclusion therefore precluded coverage; and (4) the
former directors were not legally obligated to pay the judg-
ment, but, rather, were absolved from payment such that the
judgment did not satisfy the insuring agreement of the Policy,
nor did it constitute a covered loss.
On May 11, 2012, the credit union filed a second amended
complaint and cross-claim against St. Paul. It alleged that on or
about October 1, 2009, the parties began to mediate the claims
and that St. Paul “attended approximately the first half day of
mediation but refused to make any additional offers from its
initial and minimal offer. St. Paul . . . then refused to partici-
pate in any further mediation.” The credit union alleged that as
assignee of the rights of the former directors, St. Paul violated
its duty of good faith to the former directors and to the credit
union in a number of ways. The credit union sought damages
of $2 million.
Also on May 11, 2012, the credit union filed a “motion
for postponement of summary judgment hearing,” seeking to
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postpone the June 7 hearing date. In support of its motion, the
credit union alleged that the motion for summary judgment was
premature in light of its amended complaint and cross-claim
and that if the court granted any part of a pending motion to
compel, the credit union might want to submit such informa-
tion at the summary judgment hearing. The court denied the
motion to compel and the motion for postponement.
3. District Court’s Decision
On September 28, 2012, the court entered its final judgment.
The court granted St. Paul’s second motion for summary judg-
ment, dismissed the complaint of the former directors, and dis-
missed the credit union’s complaint in intervention. The court
made the following determinations:
•  t. Paul was not estopped from raising additional defenses in
S
its amended answer, because St. Paul’s January 2008 letter
gave the former directors notice that the terms, conditions,
and exclusions of the Policy controlled; the coverage analy-
sis was subject to change pending further information; and
St. Paul reserved its rights under the Policy.
•  he claim arose prior to the policy period, because the alle-
T
gations in the credit union’s lawsuit against the former direc-
tors were identical to those alleged in the NCUA proceeding,
which was prior to the November 18, 2006, effective date of
the Policy.
•  ven if the credit union’s lawsuit against the former directors
E
fell within the policy period, coverage would be barred by
the regulatory claims exclusion in the management liability
insuring agreement, because the claim arose out of or was
attributable to the NCUA proceeding, which was brought by
the NCUA.
The former directors and the credit union (collectively credit
union parties) timely appealed, and St. Paul filed a cross-
appeal. We moved the case to our docket under our statutory
authority to regulate the caseloads of the appellate courts of
this state.1
1
See Neb. Rev. Stat. § 24-1106(3) (Reissue 2008).
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III. ASSIGNMENTS OF ERROR
The credit union parties assign, restated and consolidated,
that the district court erred in (1) vacating its order granting
declaratory judgment to the former directors, (2) allowing
St. Paul to amend its pleadings and assert new defenses, and
(3) overruling the credit union parties’ motion for further dis-
covery and the credit union’s motion for a postponement of the
summary judgment hearing.
The credit union parties also assign that the court erred in
granting St. Paul’s second motion for summary judgment, but
their brief does not specifically argue the issue. To be con-
sidered by an appellate court, an alleged error must be both
specifically assigned and specifically argued in the brief of the
party asserting the error.2 The credit union parties state in their
brief, “As it is the [credit union parties’] primary contention
that the District Court should not have permitted [St. Paul] to
assert the new defenses in its Amended Answer after a deter-
minative ruling by the District Court, this brief will not address
the merits of those defenses.”3 Thus, we do not consider this
assignment of error.
On cross-appeal, St. Paul assigns that the district court erred
in denying its first motion for summary judgment and in deny-
ing its motion to alter or amend the April 2010 judgment when
the “Company v. Insured” exclusion barred coverage for the
credit union’s lawsuit against the former directors.
IV. ANALYSIS
1. St. Paul’s Jurisdictional
Argument
[1] St. Paul asserts that the credit union parties’ appeal “suf-
fers from fatal jurisdictional deficiencies.”4 Before reaching the
legal issues presented for review, it is the duty of an appellate
court to determine whether it has jurisdiction over the matter
2
Carlson v. Allianz Versicherungs-AG, 287 Neb. 628, 844 N.W.2d 264
(2014).
3
Brief for appellants at 12.
4
Brief for appellee at 10.
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before it.5 St. Paul points out that the credit union parties do
not challenge the coverage defenses upon which the final judg-
ment was based. And St. Paul argues that the discretionary
orders which the credit union parties challenge do not bear on
the correctness of the district court’s final judgment.
The credit union parties properly waited until entry of
final judgment to appeal. The orders the credit union parties
are challenging—the order vacating declaratory judgment, the
order allowing St. Paul to file an amended answer, the order
denying their motion to compel, and the order denying a con-
tinuance—were nonfinal and not immediately appealable at the
time of entry.6 Contrary to St. Paul’s assertion, these orders all
bear on the correctness of the court’s entry of summary judg-
ment, because a reversal on any of the nonfinal orders would
require us to reverse, vacate, or modify the final judgment.
Accordingly, we now have jurisdiction over the various inter-
locutory orders at issue.
2. Credit Union Parties’
Jurisdictional Argument
[2] The credit union parties claim that we lack jurisdiction
to consider the errors assigned on cross-appeal. The cross-
appeal is directed to the district court’s denial of St. Paul’s
first motion for summary judgment and the denial of St. Paul’s
motion to alter or amend that judgment. A denial of a motion
for summary judgment is an interlocutory order, not a final
order, and therefore not appealable.7 And because the denial of
St. Paul’s first motion for summary judgment was not appeal-
able at the time of entry, St. Paul properly waited until entry
of final judgment to challenge the court’s ruling on the earlier
interlocutory order. Thus, we also have jurisdiction over the
orders challenged on cross-appeal.
5
Deleon v. Reinke Mfg. Co., 287 Neb. 419, 843 N.W.2d 601 (2014).
6
See, e.g., Connelly v. City of Omaha, 278 Neb. 311, 769 N.W.2d 394
(2009) (to be final, order must ordinarily dispose of whole merits of case);
Brozovsky v. Norquest, 231 Neb. 731, 437 N.W.2d 798 (1989) (discovery
order can be reviewed on appeal from final judgment).
7
Cerny v. Todco Barricade Co., 273 Neb. 800, 733 N.W.2d 877 (2007).
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3. Vacating P rior Declaratory
Judgment
(a) Claim
The credit union parties first argue that the district court
abused its discretion by vacating its prior judgment granting
the former directors declaratory judgment. In vacating that
portion of the judgment, the court stated that it “clearly erred”
in awarding a declaratory judgment and that “even if it was to
be considered as a motion for partial summary judgment, the
other parties did not have an opportunity to present evidence
in opposition.”
(b) Standard of Review
[3,4] A motion to alter or amend a judgment is addressed
to the discretion of the trial court, whose decision will be
upheld in the absence of an abuse of that discretion.8 A judicial
abuse of discretion exists when the reasons or rulings 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
(c) Discussion
The credit union parties focus on the second part of the
court’s statement and point out that St. Paul had the oppor-
tunity to—and did—present evidence in opposition to the
motion. But the real problem for the credit union parties lies
with the court’s recognition that it erred in awarding a declara-
tory judgment under these circumstances.
[5] In Nebraska, a party may not simply move the court
for a declaratory judgment. The former directors filed both a
complaint for declaratory judgment and a “motion for declara-
tory judgment.” The order at issue in this assignment of error
vacated the portion of the April 2010 judgment purporting to
grant the motion for declaratory judgment. Although a “motion
8
Russell v. Clarke, 15 Neb. Ct. App. 221, 724 N.W.2d 840 (2006).
9
Fox v. Whitbeck, 286 Neb. 134, 835 N.W.2d 638 (2013).
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for declaratory judgment” has been referenced in a few pub-
lished opinions of this court10 and one such opinion of the
Nebraska Court of Appeals,11 no such summary proceeding is
recognized in Nebraska.
[6] Issues of fact in a declaratory judgment action may be
tried and determined in the same manner as issues of fact are
tried and determined in other civil actions in the court in which
the proceeding is pending.12 When there is no genuine issue of
material fact, a motion for summary judgment may be appro-
priate.13 A party may also move for judgment on the pleadings,
but if matters outside the pleadings are received by the court—
as was the case here—the motion shall be treated as one for
summary judgment.14
[7] To the extent the former directors may have been seek-
ing summary judgment, they failed to prove entitlement to
judgment as a matter of law. The party moving for summary
judgment has the burden to show that no genuine issue of
material fact exists and must produce sufficient evidence to
demonstrate that the moving party is entitled to judgment
as a matter of law.15 The district court’s determination that
the “Insured v. Insured” exclusion was inapplicable did not
resolve other issues presented by the pleadings. The former
directors were not entitled to summary judgment or declara-
tory judgment.
10
Kubicek v. City of Lincoln, 265 Neb. 521, 658 N.W.2d 291 (2003); In re
Interest of J.H., 242 Neb. 906, 497 N.W.2d 346 (1993); State v. Green,
236 Neb. 33, 458 N.W.2d 472 (1990), overruled on other grounds, State
v. Tingle, 239 Neb. 558, 477 N.W.2d 544 (1991); Stremmel v. Kinney, 226
Neb. 555, 412 N.W.2d 834 (1987).
11
Countryside Developers v. Peterson, 9 Neb. Ct. App. 798, 620 N.W.2d 124
(2000).
12
Neb. Rev. Stat. § 25-21,157 (Reissue 2008).
13
See C.E. v. Prairie Fields Family Medicine, 287 Neb. 667, 844 N.W.2d 56
(2014).
14
See Neb. Ct. R. Pldg. § 6-1112(c).
15
Durre v. Wilkinson Development, 285 Neb. 880, 830 N.W.2d 72 (2013).
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(d) Resolution
We conclude that the district court did not abuse its discre-
tion by granting St. Paul’s motion to alter or amend in part to
vacate the entry of declaratory judgment.
4. Allowing Amendment to
Raise New Defenses
(a) Claim
The credit union parties’ chief complaint on appeal con-
cerns the district court’s decision to permit St. Paul to assert
new defenses in its amended answer. They argue that St. Paul
should be estopped from raising new defenses.
(b) Standard of Review
[8,9] Permission to amend pleadings is addressed to the
discretion of the trial court; absent an abuse of discretion, the
trial court’s decision will be affirmed.16 Generally, leave to
amend a party’s pleading shall be freely given when justice
so requires.17
(c) Discussion
[10] The doctrine of equitable estoppel applies where, as
a result of conduct of a party upon which another person
has in good faith relied to his detriment, the acting party
is absolutely precluded, both at law and in equity, from
asserting rights which might have otherwise existed.18 The
credit union parties argue that they detrimentally relied on
St. Paul’s defenses asserted in the initial answer when agree-
ing to a settlement of the credit union’s lawsuit against the
former directors.
[11,12] We first reject the credit union parties’ argument
that the equitable doctrine of mending one’s hold has estopped
St. Paul from asserting additional defenses. We have con-
cluded that the doctrine of mending one’s hold generally “‘has
16
Mutual of Omaha Bank v. Murante, 285 Neb. 747, 829 N.W.2d 676
(2013).
17
See Neb. Ct. R. Pldg. § 6-1115(a).
18
Burns v. Nielsen, 273 Neb. 724, 732 N.W.2d 640 (2007).
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no application to matters relating to coverage.’”19 And we have
stated that “‘estoppel cannot be invoked to expand the scope
of coverage of an insurance contract absent a showing of det-
rimental good faith reliance upon statements or conduct of the
party against whom estoppel is invoked which reasonably led
an insured to believe coverage was present.’”20
We have determined that the doctrines of mending one’s
hold and estoppel do not apply when an insured has notice
that other defenses could be asserted by an insurer. In Sayah
v. Metropolitan Prop. & Cas. Ins. Co.,21 an insurer initially
denied a claim because of inconsistencies in the report of the
loss compared with the physical evidence, but later denied the
claim upon the basis that the insureds did not have an insurable
interest in the vehicle. The insureds argued that the doctrine
of mending one’s hold prevented the insurer from raising the
insurable interest defense, but we determined that the insurer
was not estopped from asserting that defense. We reasoned
that the insureds did not suffer detrimental reliance, because
they had notice that the insurer could assert the defense: (1)
The insurance policy addressed the insurable interest issue
and provided no coverage if an insured did not have an
insurable interest in the covered vehicle, and (2) the insurer
expressly reserved the right to assert additional defenses in its
denial letter.
Like the insureds in Sayah, the former directors did not suf-
fer detrimental reliance, because they had notice that St. Paul
could assert the additional defenses set forth in its amended
answer. First, the additional defenses raised by St. Paul to
support its denial of coverage were based on the terms, condi-
tions, and exclusions of the Policy. Second, St. Paul explicitly
reserved the right to assert additional defenses based on the
Policy in its January 2008 letter to the former directors and in
its original answer. Thus, like the insureds in Sayah, the former
19
Sayah v. Metropolitan Prop. & Cas. Ins. Co., 273 Neb. 744, 749, 733
N.W.2d 192, 197 (2007), quoting Design Data Corp. v. Maryland Cas.
Co., 243 Neb. 945, 503 N.W.2d 552 (1993).
20
Id.
21
Sayah, supra note 19.
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directors did not suffer detrimental reliance when St. Paul
amended its answer to allege other exclusions from coverage
set forth in the Policy.
[13,14] There is a widely recognized exception to the gen-
eral rule that estoppel cannot be used to expand the scope of
insurance coverage. Under the exception, when an insurance
company assumes the defense of an action against its insured,
without reservation of rights, and with knowledge, actual or
presumed, of facts which would have permitted it to deny
coverage, it may be estopped from subsequently raising the
defense of noncoverage.22 The exception to the general estop-
pel rule applies when an insured is able to show (1) that the
insurer had sufficient knowledge of facts or circumstances
indicating noncoverage, (2) that the insurer assumed or contin-
ued defense of the insured without obtaining an effective res-
ervation of rights agreement, and (3) that the insured suffered
some type of harm or prejudice.23
The exception to the general estoppel rule is not applicable.
St. Paul’s January 2008 letter did not explicitly state that there
was coverage. It did, however, explicitly state that St. Paul’s
investigation and evaluation of coverage were continuing. The
letter also stated:
We expressly reserve all rights under the Policy and
pursuant to applicable law to rely upon and enforce addi-
tional terms of the Policy and to disclaim coverage on
alternative bases if facts become known to us which result
in the application of other terms, conditions, exclusions,
endorsements or other provisions of the Policy, including
representations, statements, declarations and/or omissions
in connection with the . . . application.
Further, St. Paul did not have the duty to defend under the
express terms of the Policy, and St. Paul never assumed or
controlled the defense of the credit union’s lawsuit against the
former directors. The January 2008 letter to the former direc-
tors noted that the former directors had the duty to defend any
22
See First United Bank v. First Am. Title Ins. Co., 242 Neb. 640, 496
N.W.2d 474 (1993).
23
Id.
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claim covered under the Policy, that the former directors had
selected an attorney to represent them, and that St. Paul had
the right to be consulted in advance about defense strategies
and settlement negotiations—all of which were consistent
with the terms of the Policy. Thus, the exception to the gen-
eral estoppel rule does not apply under the circumstances of
this case.
The credit union parties next argue that allowing St. Paul “to
amend its pleading subsequent to an adverse ruling on a deter-
minative motion would violate the public policy of Nebraska”
because it “will severely inhibit the ability to [sic] an insured
to achieve finality in litigation.”24 But because St. Paul timely
filed a motion to alter or amend—which stopped the time in
which to file an appeal from running—the April 2010 judgment
never became subject to appeal. To the extent the credit union
parties relied upon a judgment which could still have been
altered by the district court or appealed to a higher court, they
did so at their peril. And it was while St. Paul’s motion to alter
or amend was pending that St. Paul filed its amended answer.
Thus, there was no “finality in litigation” at the time St. Paul
filed its amended answer.
The credit union parties rely on Darrah v. Bryan Memorial
Hosp.25 in support of their argument that St. Paul should not
have been allowed to amend its answer. In that case, after
the district court granted the defendant’s motion for summary
judgment, the plaintiff filed a motion for reconsideration and
new trial or leave to amend in order to allege specific acts of
negligence. The court overruled the motion, and we determined
that it was not an abuse of discretion to deny a motion to
amend pleadings absent some mitigating factor which justified
a party’s raising new issues after a motion for summary judg-
ment had been heard and submitted.26 We stated that unless
evidence or testimony exists in the record indicating either
that a proposed claim or defense was newly discovered or that
24
Brief for appellants at 30.
25
Darrah v. Bryan Memorial Hosp., 253 Neb. 710, 571 N.W.2d 783 (1998).
26
See id.
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counsel was unaware of the claim or defense prior to the pend-
ing action, the proposed amendment is merely a belated effort
to inject issues of material fact into a proceeding where previ-
ously the pleadings revealed none.27
We distinguish Darrah from the situation at hand. Here,
St. Paul promptly sought leave to amend its answer after a
“newly discovered” development—the settlement of the credit
union’s lawsuit against the former directors. The settlement
potentially raised new issues and new defenses under the
Policy. Although not all of the new defenses asserted in the
amended answer related to the settlement, many of them did.
Thus, even though St. Paul did not seek to amend its answer
until after a motion for summary judgment had been heard and
submitted, the new development justified the late stage in the
proceedings in which St. Paul sought to amend its answer.
(d) Resolution
We conclude that the doctrine of mending one’s hold is not
applicable and that the former directors did not suffer detri-
mental reliance, because they had notice that St. Paul could
assert additional defenses based on the Policy. We also con-
clude that the exception to the general rule that estoppel can-
not be used to expand the scope of insurance coverage is not
applicable. Because the district court’s April 2010 judgment
did not become appealable due to St. Paul’s motion to alter or
amend and because the settlement of the credit union’s lawsuit
against the former directors made other exclusions from cover-
age under the Policy potentially applicable, the district court
did not abuse its discretion in allowing St. Paul to amend its
answer to assert new defenses.
5. Motions for Discovery
and Continuance
(a) Claim
In connection with the district court’s decision to allow
St. Paul to file an amended answer, the credit union parties
27
See id.
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assign that the court abused its discretion by denying their
motion to compel discovery and denying the credit union’s
motion to postpone the summary judgment hearing.
(b) Standard of Review
[15,16] Decisions regarding discovery are directed to the
discretion of the trial court, and will be upheld in the absence
of an abuse of discretion.28 The party asserting error in a dis-
covery ruling bears the burden of showing that the ruling was
an abuse of discretion.29
[17] A motion for continuance is addressed to the discretion
of the trial court, whose ruling will not be disturbed on appeal
in the absence of an abuse of discretion.30
(c) Discussion
[18] St. Paul’s second motion for summary judgment was
based on the terms of the Policy and presented a question of
policy interpretation. An insurance policy is a contract, and
when the facts are undisputed, whether or not a claimed cover-
age exclusion applies is a matter of law.31 Because St. Paul’s
second motion for summary judgment could be—and was—
resolved based on the language of the Policy, no additional
discovery was necessary.
(d) Resolution
We conclude that the court did not abuse its discretion in
denying the motion to compel or the motion for postponement
of the hearing.
6. St. Paul’s Cross-Appeal
[19] On cross-appeal, St. Paul argues that the district court
erred in denying St. Paul’s first motion for summary judgment
by finding that the “Company v. Insured” exclusion did not
28
U.S. Bank Nat. Assn. v. Peterson, 284 Neb. 820, 823 N.W.2d 460 (2012).
29
Id.
30
Gilroy v. Ryberg, 266 Neb. 617, 667 N.W.2d 544 (2003).
31
Woodle v. Commonwealth Land Title Ins. Co., 287 Neb. 917, 844 N.W.2d
806 (2014).
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646 288 NEBRASKA REPORTS
apply to the claim raised in the credit union’s lawsuit against
the former directors and in denying its motion to alter or amend
the April 2010 judgment which challenged that finding. Both
of St. Paul’s motions for summary judgment were based on its
belief that the terms of the Policy did not provide coverage for
the claims alleged in the credit union’s lawsuit against the for-
mer directors. Because the credit union parties do not argue on
appeal that the court erred in granting St. Paul’s second motion
for summary judgment, we affirm the judgment. Thus, we need
not further address the cross-appeal. An appellate court is not
obligated to engage in an analysis that is not necessary to adju-
dicate the case and controversy before it.32
V. CONCLUSION
We conclude the district court properly vacated its earlier
judgment granting the former directors’ “motion for declara-
tory judgment,” because the former directors had not demon-
strated entitlement to summary judgment or declaratory judg-
ment. Because the settlement between the credit union parties
potentially gave rise to new defenses under the Policy and
because estoppel and the general exception to estoppel do not
apply, the court did not abuse its discretion in allowing St. Paul
to amend its answer. We further conclude that the court did not
abuse its discretion in denying the motion to compel or the
motion for postponement of the summary judgment hearing,
because St. Paul’s second motion for summary judgment could
be decided based upon the language of the Policy. We therefore
affirm the court’s judgment.
Affirmed.
Stephan, J., not participating.
32
Kerford Limestone Co. v. Nebraska Dept. of Rev., 287 Neb. 653, 844
N.W.2d 276 (2014).