Merrick v. Fischer, Rounds & Assocs. , 305 Neb. 230 ( 2020 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
05/08/2020 12:15 AM CDT
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Jerald Merrick, as assignee of Western Hay
Services, Inc., appellant, v. Fischer, Rounds &
Associates, Inc., doing business as Quality
Truck Insurance, and Great West
Casualty Company, appellees.
___ N.W.2d ___
Filed March 13, 2020. No. S-18-1173.
1. Summary Judgment: Appeal and Error. An appellate court will
affirm 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
those facts and that the moving party is entitled to judgment as a matter
of law.
2. ____: ____. In reviewing a summary judgment, the court views the
evidence in the light most favorable to the party against whom the
judgment was granted and gives such party the benefit of all reasonable
inferences deducible from the evidence.
3. Insurance: Contracts: Appeal and Error. The interpretation of an
insurance policy presents a question of law that an appellate court
decides independently of the trial court.
4. Insurance: Agents: Brokers: Negligence: Proximate Cause: Liability:
Damages. An insurance agent or broker who agrees to obtain insurance
for another but negligently fails to do so is liable for the damage proxi-
mately caused by such negligence.
5. Insurance: Agents. When an insured asks an insurance agent to pro-
cure insurance, the insured has a duty to advise the insurance agent as
to the desired insurance.
6. ____: ____. An insurance agent has no duty to anticipate what coverage
an insured should have.
7. ____: ____. It is the duty of an insured to advise the agent as to the
insurance he wants, including the limits of the policy to be issued.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
8. Insurance: Brokers: Negligence: Proximate Cause: Liability:
Damages. A broker who agrees to obtain insurance coverage for another
but fails to do so is liable for damage proximately caused by such negli-
gence, including the amount that would have been due under such policy
if it had been obtained.
9. Insurance: Agents: Brokers. If an insurance agent or broker undertakes
to advise an insured, the agent or broker must use reasonable care to
provide accurate information.
10. Insurance: Agents: Brokers: Contracts: Breach of Contract:
Negligence. Absent evidence that an insurance agent or broker has
agreed to provide advice or the insured was reasonably led by the agent
to believe he would receive advice, the failure to volunteer information
does not constitute either negligence or breach of contract for which an
insurance agent or broker must answer in damages.
11. Insurance: Contracts. A court construes insurance contracts like other
contracts, according to the meaning of the terms that the parties have
used. When the terms of an insurance contract are clear, a court gives
them their plain and ordinary meaning as a reasonable person in the
insured’s position would understand them.
12. Insurance: Contracts: Liability. Whether an insurer has a duty to
indemnify and defend an insured depends upon whether the insured’s
claimed occurrence falls within the terms of the insurer’s coverage as
expressed in the policy.
13. Insurance: Contracts: Liability: Damages. The insurer has a duty to
indemnify an insured who becomes legally liable to pay damages for a
covered occurrence.
14. Insurance: Liability. An insurer’s duty to defend is broader than the
duty to indemnify.
15. ____: ____. An insurer has a duty to defend if (1) the allegations of the
complaint, if true, would obligate the insurer to indemnify, or (2) a rea-
sonable investigation of the facts by the insurer would or does disclose
facts that would obligate the insurer to indemnify.
16. ____: ____. An insurer has a duty to defend its insured whenever it
ascertains facts that give rise to potential liability under the policy.
Conversely, an insurer is not bound to defend a suit if the pleadings
and facts ascertained by the insurer show the insurer has no poten-
tial liability.
Appeal from the District Court for Scotts Bluff County:
Andrea D. Miller, Judge. Affirmed.
Michael W. Meister for appellant.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Sean A. Minahan and Patrick G. Vipond, of Lamson, Dugan
& Murray, L.L.P., for appellee Fischer, Rounds & Associates,
Inc.
Robert S. Keith and Alexis M. Wright, of Engles, Ketcham,
Olson & Keith, P.C., for appellee Great West Casualty Company.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Funke, J.
Jerald Merrick was injured in a truck accident in the
course and scope of his employment. Merrick reached a settle-
ment with his employer and received an assignment of rights
against his employer’s insurance broker and insurer. Merrick
filed this action claiming that the broker had a duty to advise
Merrick’s employer to obtain workers’ compensation insur-
ance and that the insurer had a duty to defend the employer
in the underlying action. The district court for Scotts Bluff
County granted summary judgment in favor of the broker and
insurer. We affirm.
BACKGROUND
Western Hay Services, Inc. (Western Hay), is a company
located in Morrill, Nebraska, that buys and sells hay and alfalfa
and delivers the hay and alfalfa to feedlots and dairies in
Colorado and Texas. During Western Hay’s first 4 years, owner
Johnny Hill drove one truck and did not have employees. Hill
subsequently added a second truck and, in 2009, hired Merrick
as a truckdriver.
Since its inception, Western Hay has purchased insurance
through an insurance broker, Fischer, Rounds & Associates,
Inc., doing business as Quality Truck Insurance (Fischer).
Great West Casualty Company (Great West) issued Western
Hay a commercial lines insurance policy, effective from
September 1, 2008, to September 1, 2009, which provided
three different forms of coverage: commercial auto coverage,
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
commercial inland marine coverage, and commercial general
liability coverage. Western Hay did not have workers’ compen-
sation insurance.
The commercial auto policy states that Great West will “pay
all sums an ‘insured’ legally must pay as damages because of
‘bodily injury’ or ‘property damage’ . . . caused by an ‘acci-
dent’ and resulting from the ownership, maintenance or use of
a covered ‘auto.’” The policy contains an exclusion entitled
“Workers Compensation and Similar Laws,” which states that
“[t]his insurance does not apply to . . . [a]ny obligation for
which any ‘insured’ or any ‘insured’s’ insurer may be held
liable under any workers compensation . . . law or any similar
law.” The policy also contains an exclusion entitled “Employee
Indemnification and Employer’s Liability” which states that
the insurance does not apply to “‘[b]odily injury’” to an
“‘employee’ of any ‘insured’ arising out of and in the course of
. . . [e]mployment by any ‘insured.’”
The commercial inland marine policy states that Great West
will pay sums “because of ‘loss’ to ‘covered property’ while
in your custody or control in the ordinary course of transit for
which you are legally liable as a ‘trucker.’”
Under the commercial general liability coverage provisions,
“Coverage A” regarding “Bodily Injury and Property Damage
Liability” states that Great West will “pay those sums that
the insured becomes legally obligated to pay as damages
because of ‘bodily injury’ or ‘property damage’ to which the
insurance applies.” Coverage A contains exclusions equivalent
to the workers’ compensation and employer’s liability exclu-
sions in the commercial auto coverage provisions discussed
above. In addition, Coverage A contains an exclusion for
“‘[b]odily injury’” arising out of ownership, maintenance,
use, or entrustment to others of any “‘auto.’” “Coverage C”
regarding “Medical Expenses” states that Great West will pay
medical expenses for “‘bodily injury’” caused by an accident
“[b]ecause of your operations.” Coverage C contains all exclu-
sions provided within Coverage A.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Hill’s daughter, Tracie Margheim, was responsible for
handling Western Hay’s insurance needs. Margheim spoke
with an insurance agent with Fischer on a yearly basis prior
to renewal of Western Hay’s insurance and on occasion to
increase the insurance for special cargo trips. In August 2008,
a Fischer insurance agent called Margheim to discuss the
annual renewal. Upon speaking with Margheim, the insurance
agent completed a renewal checklist which included question
10: “Is work comp needed?” The agent answered question
10 as “does not have,” because Western Hay had elected not
to purchase workers’ compensation insurance. Thereafter, a
Fischer insurance agent spoke with Margheim, confirmed the
information on the renewal checklist, and submitted the infor-
mation for a quote.
In February 2009, Margheim contacted Fischer and requested
that workers’ compensation coverage be added to Western
Hay’s insurance. Fischer’s agent asked Margheim to provide
Western Hay’s payroll records in order to obtain a quote for
the new workers’ compensation coverage. Margheim provided
Fischer with Western Hay’s payroll information on April 1.
The day prior, March 31, 2009, Merrick was injured in a
truck accident while in the course and scope of his employ-
ment with Western Hay. Margheim notified Great West of the
claim on that date. On April 1 and again on April 6, Great
West spoke with Margheim and advised that Western Hay did
not have workers’ compensation, personal injury, or auto medi-
cal insurance under the commercial lines policy. In a May 13
letter, Great West advised Western Hay that all liability claims
had been paid for a total loss amount of $600 and that the
file was closed. Great West later advised Western Hay that it
would continue its investigation of the claim and assessment
of coverage under a full reservation of rights. Great West
indicated that it would consider all additional information
Western Hay may provide and, if warranted, reconsider its
coverage position.
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305 Nebraska Reports
MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
In 2012, Merrick filed a negligence action against Western
Hay in the district court for Scotts Bluff County alleging he
was injured in the truck accident and had incurred $309,154.10
in medical expenses as a result of his injuries. Merrick claimed
that Western Hay was negligent for requiring him to drive
during a high-wind warning and failing to carry workers’ com-
pensation insurance. Merrick alleged that Western Hay was
required to carry workers’ compensation insurance pursuant to
Neb. Rev. Stat. § 48-106 (Reissue 2010) and that such insur-
ance would have provided coverage for his injuries. Fischer
was not notified of the lawsuit or asked to indemnify or defend
Western Hay. Western Hay requested a defense and indemnity
from Great West. After reviewing the allegations in the com-
plaint, Great West sent a letter to Western Hay denying the
request, indicating that the claim was not covered because the
policy did not provide workers’ compensation coverage, cover-
age for an injury to an employee of the insured, or coverage
for potential liability for failing to provide workers’ compensa-
tion benefits.
In February 2016, the district court entered a stipulated
judgment in favor of Merrick and against Western Hay in the
amount of $800,000. As part of the settlement, Western Hay
assigned its claims against Fischer and Great West to Merrick.
Fischer and Great West were not notified in advance of the
stipulated settlement. Thereafter, Merrick, as the assignee of
Western Hay, filed the present action against Fischer and
Great West. Merrick alleged in this action that Fischer was
negligent in failing to procure workers’ compensation insur-
ance for Western Hay when Western Hay had specifically
requested such insurance for its trucking business, failing
to notify Western Hay of Nebraska’s statutory requirement
for employers to carry workers’ compensation insurance, and
failing to warn Western Hay that its insurance did not cover
injuries to employees while in the scope of their employment.
Merrick separately alleged that Great West denied Western
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Hay’s request for a defense in bad faith. Merrick alleged that
Fischer and Great West are responsible for payment of the
judgment entered against Western Hay.
Fischer filed an answer which admitted that it is an insur-
ance broker and alleged that it met any and all applicable duties
and responsibilities. Great West filed an answer which alleged
that Merrick’s claim is not covered under the relevant policy,
because of the policy’s workers’ compensation and employer’s
liability exclusions. Each defendant moved for summary judg-
ment. Following a hearing, the district court issued an order
sustaining both motions and dismissing Merrick’s complaint
with prejudice.
In considering Merrick’s claim against Fischer, the court
found the undisputed evidence showed that on February 2,
2009, Western Hay called Fischer to request workers’ com-
pensation insurance, but did not provide the payroll informa-
tion necessary for Fischer to complete the quote until April
1, the day after Merrick’s accident. The court concluded that
Fischer had no duty to secure workers’ compensation insur-
ance for Western Hay until after the payroll records were pro-
vided on April 1. The court further concluded that there was
no evidence showing that Fischer breached a duty to obtain
workers’ compensation insurance for Western Hay, failed to
advise Western Hay regarding workers’ compensation insur-
ance prior to its request for a quote, or failed to warn Western
Hay that its insurance policy did not cover injuries to employ-
ees in the course and scope of their employment. The court
concluded that Fischer was entitled to judgment as a matter
of law.
As to Merrick’s claim against Great West, the court deter-
mined that the policy at issue contains exclusions for claims
based on workers’ compensation liability. The court determined
that due to such exclusions, Great West was not required to
defend Western Hay in the underlying lawsuit. The court con-
cluded that Great West was entitled to judgment as a matter
of law.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Merrick appealed. We moved the appeal to our docket pur-
suant to our statutory authority to regulate the caseloads of the
appellate courts of this State.1
ASSIGNMENTS OF ERROR
Merrick assigns, restated, that the district court erred in (1)
applying case law applicable to insurance agents rather than
insurance brokers, (2) finding that Fischer fulfilled its duties
as an insurance broker to Western Hay, and (3) finding that
Great West did not owe a duty to defend Western Hay.
STANDARD OF REVIEW
[1,2] An appellate court will affirm 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 those
facts and that the moving party is entitled to judgment as a
matter of law.2 In reviewing a summary judgment, the court
views the evidence in the light most favorable to the party
against whom the judgment was granted and gives such
party the benefit of all reasonable inferences deducible from
the evidence.3
[3] The interpretation of an insurance policy presents a ques-
tion of law that an appellate court decides independently of the
trial court.4
ANALYSIS
Fischer Not Negligent
Merrick argues that, as an insurance broker, Fischer had a duty
to advise Western Hay of its obligation as an employer under
the Nebraska Workers’ Compensation Act to carry workers’
1
See Neb. Rev. Stat. § 24-1106 (Cum. Supp. 2018).
2
Ray Anderson, Inc. v. Buck’s, Inc., 300 Neb. 434, 915 N.W.2d 36 (2018).
3
Id.
4
Gage County v. Employers Mut. Cas. Co., 304 Neb. 926, 937 N.W.2d 863
(2020).
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
compensation insurance.5 Merrick contends that had Fischer
“simply told Western Hay that [it] had to carry coverage” then
Fischer “would have met its duty of providing sound advice
to Western Hay.”6 Merrick thus argues that the court erred in
dismissing his negligence claim against Fischer.
[4-7] To prevail in any negligence action, a plaintiff must
show a legal duty owed by the defendant to the plaintiff, a
breach of such duty, causation, and resulting damages.7 An
insurance agent or broker who agrees to obtain insurance for
another but negligently fails to do so is liable for the damage
proximately caused by such negligence.8 When an insured asks
an insurance agent to procure insurance, the insured has a duty
to advise the insurance agent as to the desired insurance.9 An
insurance agent has no duty to anticipate what coverage an
insured should have.10 It is the duty of an insured to advise the
agent as to the insurance he wants, including the limits of the
policy to be issued.11
In Polski v. Powers,12 this court noted that although it may
be good business for an insurance agent to make insurance
coverage suggestions, absent evidence that an insurance agent
has agreed to provide advice or the insured was reasonably led
by the agent to believe he would receive advice, the failure to
volunteer information does not constitute either negligence or
breach of contract for which an insurance agent must answer in
damages. We went on to hold that it would be an unreasonable
5
See, Neb. Rev. Stat. § 48-103 (Reissue 2010); § 48-106.
6
Brief for appellant at 10.
7
Lewison v. Renner, 298 Neb. 654, 905 N.W.2d 540 (2018).
8
Hobbs v. Midwest Ins., Inc., 253 Neb. 278, 570 N.W.2d 525 (1997);
Flamme v. Wolf Ins. Agency, 239 Neb. 465, 476 N.W.2d 802 (1991).
9
Dahlke v. John F. Zimmer Ins. Agency, 245 Neb. 800, 515 N.W.2d 767
(1994).
10
Id.
11
Manzer v. Pentico, 209 Neb. 364, 307 N.W.2d 812 (1981).
12
Polski v. Powers, 221 Neb. 361, 377 N.W.2d 106 (1985).
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
burden to impose upon insurance agents a duty to anticipate
what coverage an individual should have, absent the insured’s
requesting coverage in at least a general way.13
Relying on this line of authority, the district court found that
Fischer had no duty to advise Western Hay regarding workers’
compensation insurance until Western Hay requested a quote
for workers’ compensation insurance in February 2009. Fischer
responded to that request by asking for Western Hay’s payroll
information in order to obtain a quote for the necessary cover-
age. Fischer did not receive the requested information until
after Merrick’s accident. On April 8, Fischer informed Western
Hay that it had obtained a quote, but the quote was too expen-
sive. The district court reasoned that under these facts, Fischer
had no duty to obtain workers’ compensation insurance for
Western Hay and advise Western Hay regarding such insur-
ance until Western Hay’s request in February 2009. The court
found that it was the actions of Western Hay which delayed
the insurance quote and that Fischer had not provided Western
Hay with any false information regarding the commercial line
policy’s coverage or the need for workers’ compensation cov-
erage. Thus, the court found that Fischer had not breached its
duty to Western Hay and that Fischer was entitled to judgment
as a matter of law.
Merrick suggests that the district court did not sufficiently
recognize that Fischer is an insurance broker and not an
insurance agent. We have previously addressed the distinction
between an insurance broker and an insurance agent.
“A representative of the insured is known as an ‘insurance
broker.’ A broker represents the insured by acting as a
middleman between the insured and the insurer, soliciting
insurance from the public under no employment from any
special company, and, upon securing an order, places it
with a company selected by the insured, or if the insured
has no preference, with a company selected by the broker.
13
Id.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
In contrast, an ‘insurance agent’ represents an insurer
under an exclusive employment agreement by the insur-
ance company.”14
Merrick’s primary argument on appeal is that “the duty
owed by an insurance broker differs from that of an insur-
ance agent as to a broker’s duty to advise clients concerning
certain matters.”15 Merrick argues that based on cases like
the Eighth Circuit’s decision in Bell v. O’Leary,16 a broker
owes an insured a duty to act with reasonable care, skill, and
diligence. Merrick then goes on to argue, without supporting
legal authority or standard of care testimony, that Fischer had
an affirmative duty to advise Western Hay for insurance risks
known to the trucking business and that in order for Fischer
to fulfill its duty to act with reasonable care, Fischer was
required to advise Western Hay to carry workers’ compensa-
tion insurance.
We find that under the facts of this case, and upon consid-
eration of Merrick’s theory regarding the duty an insurance
broker owes to an insured, Merrick’s reliance on the distinc-
tion between an insurance broker and an insurance agent is
misplaced.
Merrick’s argument is not supported by the rationale articu-
lated in our decision in Broad v. Randy Bauer Ins. Agency.17
In that case, we acknowledged that courts often use the term
“insurance agent” loosely,18 but recognized the need to con-
sider how agency principles affect an insurance intermediary’s
contract liability. Upon review of agency principles recognized
14
Broad v. Randy Bauer Ins. Agency, 275 Neb. 788, 794, 749 N.W.2d 478,
483 (2008). See, also, Moore v. Hartford Fire Ins. Co., 240 Neb. 195, 481
N.W.2d 196 (1992); 3 Steven Plitt et al., Couch on Insurance 3d § 45:1
(2011).
15
Brief for appellant at 7.
16
Bell v. O’Leary, 744 F.2d 1370 (8th Cir. 1984).
17
Broad, supra note 14.
18
See, e.g., id.; Bell, supra note 16; 3 Plitt et al., supra note 14.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
in the insurance context, we concluded that an insurance agent
is not personally liable to the insured for contracts the agent
makes on behalf on the insurer.19 However, we recognized
the existence of a valid cause of action against a broker for
breach of contract to procure insurance, because the broker
is the insured’s agent.20 Thus, Broad recognized that agency
principles may dictate the causes of action available against a
broker or agent. The distinction between an agent and a bro-
ker is important because acts of an agent are imputable to the
insurer and acts of a broker are imputable to the insured.21 Our
decision in Broad did not suggest, as Merrick assumes, that
agency principles affect the scope of the general duty that an
insurance intermediary owes to an insured to act with reason-
able care.
[8,9] Here, Merrick has asserted a claim against Fischer
for negligence. We have previously recognized that a broker
who agrees to obtain insurance coverage for another but fails
to do so is liable for damage proximately caused by such
negligence, including the amount that would have been due
under such policy if it had been obtained.22 If an insurance
agent or broker undertakes to advise an insured, the agent or
broker must use reasonable care to provide accurate infor-
mation.23 Thus, Nebraska law requires an insurance broker
to secure the insurance requested by the insured and if the
insurance broker is advising the insured, the broker must do
19
Broad, supra note 14, citing Gieseke v. Hardware Dealers Mut. Fire Ins.
Co., 46 Ill. App. 2d 131, 195 N.E.2d 32 (1963).
20
See Broad, supra note 14.
21
See, United Fire & Cas. Ins. Co. v. Garvey, 419 F.3d 743 (8th Cir. 2005);
Mark Andy, Inc. v. Hartford Fire Ins. Co., 229 F.3d 710 (8th Cir. 2000); 3
Plitt et al., supra note 14.
22
Countryside Co-op v. Harry A. Koch Co., 280 Neb. 795, 790 N.W.2d 873
(2010), disapproved on other grounds, Weyh v. Gottsch, 303 Neb. 280, 929
N.W.2d 40 (2019).
23
Flamme, supra note 8.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
so with reasonable care. Merrick posits that Fischer’s duty in
this case is broader than previously recognized by this court
and encompasses a duty to evaluate risks within the insured’s
business and advise the insured regarding those risks or, more
specifically, to advise an insured employer to obtain workers’
compensation insurance even in the absence of a request for
such insurance.
We are persuaded that Merrick’s claim against Fischer is
resolved by application of the Nebraska Court of Appeals’
decision in Hansmeier v. Hansmeier.24 There, the owners of
a farming operation obtained insurance through an insurance
agent. The farm had one full-time employee but did not pro-
vide insurance for the employee. The employee then injured
his thumb in an auger, and the injury was not covered under
the farm’s liability policy. The farm had not complied with
§ 48-106(7), which provides that if an employer who is engaged
in an agricultural operation, as described under § 48-106(2)(d),
elects to be exempt from the Nebraska Workers’ Compensation
Act, then the employer must provide employees written notice
that the employer does not provide workers’ compensation
coverage and the employee must sign the notice. Section
48-106(7) states that the failure to provide the required notice
subjects the employer to liability under the Nebraska Workers’
Compensation Act for any employee not notified. The farm
owners did not provide the required notice, the employee
brought a workers’ compensation claim against the farm own-
ers, and the parties reached a settlement.
The farm owners in Hansmeier then brought a negligence
claim against their insurance agent based on the failure to
properly advise them regarding the necessity or availability
of workers’ compensation insurance. The Court of Appeals
found that any claim of negligence or negligent representa-
tion failed as a matter of law. The court stated that the par-
ties had discussed workers’ compensation insurance, but the
24
Hansmeier v. Hansmeier, 25 Neb. Ct. App. 742, 912 N.W.2d 268 (2018).
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
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farm owners elected not to purchase such insurance. The
court found that the insurance agent had not provided any
false information to the insureds and that the agent had no
further responsibility to inform the insureds of their obliga-
tions under the notice provisions of the Nebraska Workers’
Compensation Act.25
[10] We agree with the proposition articulated in Hansmeier
that the Nebraska Workers’ Compensation Act governs employ-
ers, not insurance agents.26 Our prior cases have generally
indicated an insurance intermediary owes a duty of reasonable
care, whether the intermediary is an agent or broker.27 Given
that, under Hansmeier, the Nebraska Workers’ Compensation
Act does not affect an insurance agent’s duty to act with
reasonable care, we hold that the same is true for insurance
brokers. Absent evidence that an insurance agent or broker has
agreed to provide advice or the insured was reasonably led by
the agent to believe he would receive advice, the failure to
volunteer information does not constitute either negligence or
breach of contract for which an insurance agent or broker must
answer in damages.28
The Eighth Circuit Court’s decision in Bell is factually
distinguishable.29 In that case, an insurance broker obtained
flood insurance for two different owners of mobile homes.
The mobile home owners experienced flood damage, and their
insurance claims were denied because the policies had been
issued erroneously. The insurer determined that the mobile
homes were not eligible for flood insurance because they
were located in unincorporated areas. The Eighth Circuit held
that under Missouri law, an insurance broker who fails to
determine whether a client is eligible for insurance coverage
25
See id.
26
Id.
27
See, Hobbs, supra note 8; Flamme, supra note 8.
28
See Polski, supra note 12.
29
Bell, supra note 16.
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is negligent.30 The court found that the insured had relied on
the broker to obtain the requested insurance, that the broker
accepted that responsibility, and that by failing to discover the
insureds were ineligible for coverage and by failing to notify
them of that fact, the broker was negligent.31
In the present case, even when the evidence is viewed in the
light most favorable to Merrick, there is no failure to obtain
effective insurance by Fischer that is analogous to the actions
of the broker in Bell. Rather, the failure in this case was on the
part of the insured for failing to request workers’ compensation
insurance and failing to timely provide payroll information.
Merrick acknowledged at oral argument that he was not alleg-
ing any negligence in procuring the requested insurance and
that he did not challenge the district court’s finding that the
actions of Western Hay delayed the insurance quote by failing
to provide the necessary information until 1 day after Merrick’s
accident. Further, we note that the Eighth Circuit was applying
Missouri law in Bell, and the Missouri Supreme Court has spe-
cifically rejected the argument that insurance brokers have the
duty Merrick is arguing for here.32
Just as in Hansmeier, Fischer never provided Western Hay
with false information regarding insurance coverage and there
were no agreements between Western Hay and Fischer which
obligated Fischer to advise Western Hay of its obligation
to maintain workers’ compensation insurance.33 As a result,
Fischer had no duty to advise Western Hay of its obligations
under the Nebraska Workers’ Compensation Act.
Further, as we stated in Broad, a broker represents the
insured by acting as a middleman between the insured and the
30
Id.
31
Id.
32
See, e.g., Emerson Elec. Co. v. Marsh & McLennan Co., 362 S.W.3d 7
(2012) (brokers have no duty to advise insured on its insurance needs
unless they specifically agree to do so).
33
See Hansmeier, supra note 24.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
insurer, soliciting insurance from the public under no employ-
ment from any special company, and, upon securing an order,
places it with a company selected by the insured or, if the
insured has no preference, with a company selected by the bro-
ker.34 The evidence indicates that no order for workers’ com-
pensation insurance was placed by Western Hay until February
2009 and that Western Hay failed to provide the necessary
payroll information to secure such an order. As a result, Fischer
did not breach its duty to Western Hay.
Fischer is entitled to judgment as a matter of law. This
assignment of error is without merit.
Great West Owed No Duty to Defend
Merrick argues that Great West had a duty to defend Western
Hay in the underlying lawsuit and acted in bad faith when it
failed to provide a defense. The district court found that the
commercial lines policy clearly excluded coverage for work-
ers’ compensation liability and that as a result, Great West was
not required to defend Western Hay. Merrick argues that the
workers’ compensation exclusion in the policy is inapplicable
because the case was brought in district court, not workers’
compensation court.
[11] A court construes insurance contracts like other con-
tracts, according to the meaning of the terms that the parties
have used. When the terms of an insurance contract are clear, a
court gives them their plain and ordinary meaning as a reason-
able person in the insured’s position would understand them.35
[12-14] Whether an insurer has a duty to indemnify and
defend an insured depends upon whether the insured’s claimed
occurrence falls within the terms of the insurer’s coverage as
expressed in the policy.36 The insurer has a duty to indemnify
34
See Broad, supra note 14.
35
Federated Serv. Ins. Co. v. Alliance Constr., 282 Neb. 638, 805 N.W.2d
468 (2011).
36
Id.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
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an insured who becomes legally liable to pay damages for a
covered occurrence.37 An insurer’s duty to defend is broader
than the duty to indemnify.38
[15,16] A court must initially measure an insurer’s duty
to defend an action against the insured by the allegations in
the complaint against the insured, but in determining its duty
to defend, an insurer must look beyond the complaint and
investigate and ascertain the relevant facts from all available
­sources.39 An insurer has a duty to defend if (1) the allega-
tions of the complaint, if true, would obligate the insurer to
indemnify, or (2) a reasonable investigation of the facts by the
insurer would or does disclose facts that would obligate the
insurer to indemnify.40 Thus, an insurer has a duty to defend its
insured whenever it ascertains facts that give rise to potential
liability under the policy.41 Conversely, an insurer is not bound
to defend a suit if the pleadings and facts ascertained by the
insurer show the insurer has no potential liability.42 Although
an insurer is obligated to defend all suits against the insured,
even if groundless, false, or fraudulent, the insurer is not
bound to defend a suit based on a claim outside the coverage
of the policy.43 To show a claim for bad faith, a plaintiff must
show the absence of a reasonable basis for denying benefits of
the insurance policy and the defendant’s knowledge or reck-
less disregard of the lack of a reasonable basis for denying
the claim.44
37
Id.
38
Id.
39
Id.
40
Id.
41
Id.
42
Id.
43
Mortgage Express v. Tudor Ins. Co., 278 Neb. 449, 771 N.W.2d 137
(2009).
44
See LeRette v. American Med. Security, 270 Neb. 545, 705 N.W.2d 41
(2005).
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Upon our de novo review of the commercial lines policy,
we are persuaded that Western Hay’s underlying claim is
excluded under the employer’s liability exclusion. As detailed
above, both the commercial auto and commercial general
liability provisions of the commercial lines policy contain a
workers’ compensation exclusion and an employer’s liabil-
ity exclusion. The workers’ compensation exclusion excludes
any obligation for which any “‘insured’” may be held liable
under any workers’ compensation law or similar law. The
employer’s liability exclusion states that the insurance policy
does not apply to “‘[b]odily injury’” to an “‘employee’ of any
‘insured’ arising out of and in the course of . . . [e]mployment
by any ‘insured.’”
We determine that the language of the employer’s liabil-
ity exclusion is clear and unambiguous and that based on an
ordinary understanding of the terms within the exclusion, a
reasonable person in the insured’s position would understand
that the policy does not cover injuries to employees occurring
in the course and scope of their employment. The allegations
in Merrick’s complaint in the underlying action made clear
that he sought to hold Western Hay liable for damages based
on injuries he sustained during the course and scope of his
employment as a truckdriver. These allegations demonstrate
that Great West had no potential liability under the commer-
cial lines policy based on Merrick’s injuries. As a result, Great
West had a reasonable basis for denying benefits of insurance
coverage and did not act in bad faith in refusing to provide a
defense to Western Hay.
And it makes no difference here that Merrick’s claim was
asserted in the district court rather than the Nebraska Workers’
Compensation Court. As we have already explained, the policy
exclusion was clear and unambiguous. The procedure permit-
ting a suit in the district court by an injured worker against
an uninsured employer does not impose an obligation upon
an insurer where the policy at issue clearly excludes any
such coverage.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.
Cite as 305 Neb. 230
Based on the employer’s liability exclusion, Great West
had no contractual obligation to defend or indemnify Western
Hay in the lawsuit brought by Merrick. Great West had a valid
basis for denying coverage, and thus, Great West is entitled to
judgment as a matter of law. This assignment of error is with-
out merit.
CONCLUSION
For the foregoing reasons, we affirm the decision of the dis-
trict court granting summary judgment in favor of Fischer and
Great West.
Affirmed.