Kaiser v. Allstate Indemnity Co. ( 2020 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
12/04/2020 08:09 AM CST
- 562 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
Jeremy Kaiser, appellant, v. Allstate
Indemnity Company, appellee.
___ N.W.2d ___
Filed October 23, 2020. No. S-19-858.
1. Insurance: Contracts. Interpretation of an insurance policy is a ques-
tion of law.
2. Judgments: Appeal and Error. In reviewing questions of law, an
appellate court must reach its own conclusions independent of the lower
court’s conclusions.
3. Summary Judgment: Appeal and Error. An appellate court reviews a
district court’s grant of summary judgment de novo, viewing the record
in the light most favorable to the nonmoving party and drawing all rea-
sonable inferences in that party’s favor.
4. Insurance: Contracts: Presumptions: Proof. In assessing which party
in an insurance dispute bears the burden of proving or disproving cover-
age, a court must first determine whether the insurance policy presump-
tively extends coverage to all, or only to specific, perils.
5. Insurance: Contracts. A specific perils policy covers limited risks and,
by implication, excludes all other risks.
6. ____: ____. An all perils policy impliedly covers all risks except those
expressly addressed in the policy’s exclusion paragraphs.
7. Insurance: Contracts: Presumptions: Proof. Under a specific perils
policy, the insured carries the initial burden of proving that a provi-
sion in the insurance policy requires the insurer to provide coverage
for a specific type of loss. But that initial burden is presumed met in an
all perils policy, provided the insured can show that covered property
was damaged.
8. Insurance: Contracts: Proof. Once the insured’s initial burden of prov-
ing coverage is met, the insurer bears the burden of proving the applica-
bility of an exclusion under the policy as an affirmative defense.
9. Insurance: Contracts: Appeal and Error. An insurance policy is a
contract, and an appellate court construes it like any other contract,
according to the meaning of the terms that the parties have used.
- 563 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
10. ____: ____: ____. An appellate court gives terms in an insurance policy
that are clear their plain and ordinary meaning as a reasonable person in
the insured’s position would understand them.
11. Insurance: Contracts. Terms in an insurance policy that are reasonably
susceptible to multiple conflicting meanings are ambiguous and con-
strued in favor of the insured.
12. Words and Phrases. Contamination is the act of contaminating, the
condition of being contaminated, defilement, pollution, or infection.
13. Insurance: Contracts. Simply because multiple provisions in an insur-
ance policy individually exclude coverage for a single peril does not
mean that those terms are necessarily ambiguous.
14. ____: ____. Whether terms in an insurance policy are individually
ambiguous will depend on the susceptibility of their language to multiple
reasonable meanings, not on whether they overlap with each other.
15. Insurance: Contracts: Proof. If the insurer meets its burden of prov-
ing the applicability of any exclusions under the policy as affirmative
defenses, then the burden returns to the insured to prove the applicabil-
ity of an exception to any exclusions.
16. Words and Phrases. Because the phrase “sudden and accidental” is
expressed in the conjunctive, it requires both sudden and accidental to
be shown.
17. Insurance: Courts. When an insured’s claim to his or her insurer is for
one whole property loss, courts must frame the property loss accord-
ingly, and not by its component parts.
18. Time: Words and Phrases. An event occurring over a period of time is
not sudden.
19. Summary Judgment. Summary judgment is proper when the plead-
ings and the evidence admitted at the hearing disclose that there is no
genuine issue as to any material fact 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.
20. Summary Judgment: Appeal and Error. An appellate court will affirm
a lower court’s grant of summary judgment if the pleadings and admit-
ted 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.
Appeal from the District Court for Douglas County: Leigh
Ann Retelsdorf, Judge. Affirmed.
Matthew P. Saathoff and Donald E. Loudner III, of Saathoff
Law Group, P.C., L.L.O., for appellant.
- 564 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
Leslie S. Stryker Viehman and Brian D. Nolan, of Nolan,
Olson & Stryker, P.C., L.L.O., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Heavican, C.J.
I. INTRODUCTION
Jeremy Kaiser filed an insurance claim alleging that his
tenants damaged his rental house by producing or using meth-
amphetamine indoors. Allstate Indemnity Company (Allstate)
denied the claim. The district court granted summary judgment
for Allstate, holding that the loss was excluded from coverage
under Allstate’s insurance policy with Kaiser. Kaiser appeals.
We moved Kaiser’s appeal to our docket to decide whether
property loss from his tenants’ producing or using methamphet-
amine indoors was a covered peril. We conclude that it is not
and affirm the decision of the district court.
II. FACTUAL BACKGROUND
Kaiser owned real property in Omaha, Nebraska, that he
maintained as a rental house. He carried a rental insurance
policy for the property through Allstate. According to the
policy, Allstate agreed to cover most direct physical loss to
the property.
However, as relevant here, paragraphs 12, 13(e) and (f), 18,
and 19(d) excluded from coverage any property loss “consist-
ing of or caused by” the following perils:
12. Any type of vapors, fumes, acids, toxic chemicals,
toxic gasses, toxic liquids, toxic solids, waste materials,
[i]rritants, contaminants, or pollutants, [i]ncluding, but
not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
- 565 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
d) oil, fuel oil, kerosene, liquid propane or gasoline
intended for, or from, a storage tank located at the resi-
dence premises.
13. . . .
....
e) Contamination, including, but not limited to, the
presence of toxic, noxious, or hazardous gasses, chemi-
cals, liquids, solids or other substances at the residence
premises or in the air, land or water serving the resi-
dence premises;
f) Smog, smoke from the manufacturing of any con-
trolled substance, agricultural smudging and industrial
operations[.]
....
18. Vandalism. However, we do cover sudden and acci-
dental direct physical loss caused by fire resulting from
vandalism unless your dwelling has been vacant or unoc-
cupied for more than 90 consecutive days immediately
prior to the vandalism.
19. Any act of a tenant, or guests of a tenant, unless the
act results in sudden and accidental direct physical loss
caused by:
....
d) [S]moke. However, we do not cover loss caused by
smoke from the manufacturing of controlled substances,
agricultural smudging or industrial operations[.]
(Emphasis omitted.) The Allstate insurance policy further pro-
vided that when property loss resulted from multiple causes,
the loss was wholly excluded from coverage if “the predomi-
nant cause(s) of loss is (are) excluded.”
Kaiser did not make regular inspections of his rental house.
Beginning in February 2013, he received reports from persons
living near the property that the house was being used for drug-
related activity.
After his tenants voluntarily surrendered the property on
May 1, 2013, Kaiser inspected the house and found evidence
- 566 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
of methamphetamine. Kaiser retained Absolute Bio Recovery
Service to conduct preliminary tests of the house. Absolute
Bio Recovery Service discovered methamphetamine vapor
and residue throughout the house and recommended that the
house be decontaminated before it could be safely rented to
new tenants.
On May 7, 2013, Kaiser submitted a claim to Allstate for the
cleanup costs. On May 8, Allstate denied the claim.
Despite the denial of coverage, Kaiser worked to remedi-
ate and decontaminate the house throughout May 2013. He
removed flooring, HVAC equipment, and light fixtures from
the house, all of which had absorbed methamphetamine vapor
and residue. He also hired Meth Lab Cleanup LLC, a com-
pany that specialized in restorations of this kind. On May 26,
Meth Lab Cleanup certified that the house was again fit for
human habitation.
On February 11, 2014, Kaiser filed a complaint against
Allstate in the district court for Douglas County. Kaiser asserted
two claims: breach of contract and bad faith. According to
Kaiser, “[a]t sometime [sic] after April 15, 2012, the Tenants
converted the Property into a methamphetamine lab and started
producing methamphetamine.” According to the complaint,
this claim should have been covered by Allstate as “vandalism
and malicious mischief,” but it was wrongfully denied. Kaiser
sought $38,361.80 for remediation costs, lost rent, and com-
pensation from serving as the general contractor overseeing the
house’s restoration. Allstate timely filed an answer disputing
Kaiser’s claims.
After some discovery, the parties filed cross-motions for
summary judgment. Stating that it lacked “competent evidence
of how the damage was actually caused,” the district court
entered an order denying both motions.
Kaiser filed an amended complaint alleging that he lacked
sufficient knowledge as to whether the property loss was
caused by his tenants’ using or manufacturing methamphet-
amine. Allstate filed an amended answer in which it specifically
- 567 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
cited, as affirmative defenses, exclusions in paragraphs 9, 12,
13(e) and (f), 18, and 19(d) of its insurance policy. Kaiser and
Allstate both filed renewed cross-motions for summary judg-
ment. Kaiser also filed a motion to file a second amended
complaint, which the district court denied.
On January 26, 2017, the district court issued an order
granting Allstate’s motion for summary judgment and deny-
ing Kaiser’s competing motion. The district court found that
Kaiser’s tenants had manufactured methamphetamine in the
house. Additionally, based on an affidavit from Allstate’s
expert, a professor of chemistry at the University of Nebraska
at Omaha, the district court found that methamphetamine dam-
aged Kaiser’s property in two ways: first, “methamphetamine
vapor is a toxic chemical, gas or liquid, depending upon the
assumed physical state at a particular point in time,” and sec-
ond, “[m]ethamphetamine residue is a contaminant, chemical
residue and pollutant.” Accordingly, the district court agreed
with Allstate that Kaiser’s property loss was excluded from
coverage under paragraphs 12 and 13(e) and (f) of Allstate’s
insurance policy. The district court also found that Kaiser’s
property loss was not covered under paragraph 18 or para-
graph 19(d).
Kaiser appealed the district court’s summary judgment. This
court summarily dismissed the appeal pursuant to Neb. Ct. R.
App. P. § 2-107(A)(2) (rev. 2017) because we could not find
that the district court had entered a final, appealable order. On
remand, the district court issued an order clarifying that its
previous order was intended to dismiss both Kaiser’s contract
cause of action and his bad faith cause of action.
Kaiser then filed the current notice of appeal.
III. ASSIGNMENTS OF ERROR
Kaiser assigns, consolidated and restated, that the district
court erred in finding that (1) Kaiser’s property loss was
excluded from coverage under paragraphs 12 and 13(e) and
(f) of the Allstate insurance policy, (2) Kaiser’s property loss
- 568 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
was not covered under paragraph 18 or paragraph 19(d) of
the Allstate insurance policy, and (3) summary judgment was
improper because a genuine issue of material fact remained
as to whether Kaiser’s property loss was caused by metham-
phetamine production or use.
IV. STANDARD OF REVIEW
[1,2] Interpretation of an insurance policy is a question of
law. 1 In reviewing questions of law, an appellate court must
reach its own conclusions independent of the lower court’s
conclusions. 2
[3] An appellate court reviews the district court’s grant of
summary judgment de novo, viewing the record in the light
most favorable to the nonmoving party and drawing all reason-
able inferences in that party’s favor. 3
V. ANALYSIS
1. Allstate Insurance Policy
The issue presented on appeal is whether the district court
erred in finding that under the Allstate insurance policy,
Kaiser’s property loss was excluded from coverage.
[4-6] In assessing which party in an insurance dispute bears
the burden of proving or disproving coverage, a court must
first determine whether the insurance policy presumptively
extends coverage to all, or only to specific, perils. 4 A specific
perils policy covers limited risks and, by implication, excludes
all other risks. 5 In contrast, an all perils policy impliedly
1
See Henn v. American Family Mut. Ins. Co., 295 Neb. 859, 894 N.W.2d
179 (2017).
2
See In re Estate of Adelung, 306 Neb. 646, 947 N.W.2d 269 (2020).
3
Russell v. Franklin County, 306 Neb. 546, 946 N.W.2d 648 (2020).
4
See Poulton v. State Farm Fire & Cas. Cos., 267 Neb. 569, 675 N.W.2d
665 (2004) (citing 7 Lee R. Russ & Thomas F. Segalla, Couch on
Insurance 3d § 101:7 (1997), and Annot., 30 A.L.R. 170 (1995)).
5
See Poulton, supra note 4.
- 569 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
c­ overs all risks except those expressly addressed in the policy’s
exclusion paragraphs. 6
[7,8] Under a specific perils policy, the insured carries the
initial burden of proving that a provision in the insurance
policy requires the insurer to provide coverage for a specific
type of loss. 7 But that initial burden is presumed met in an
all perils policy, provided the insured can show that covered
property was damaged. 8 Once the initial burden of proving
coverage is met, the insurer bears the burden of proving the
applicability of an exclusion under the policy as an affirma-
tive defense. 9
Here, Kaiser characterizes his Allstate policy as an all per-
ils policy. Allstate did not dispute that characterization in its
brief or at oral argument. Thus, assuming that Kaiser’s char-
acterization is accurate, Kaiser met his initial burden when
the parties stipulated that at the relevant time, the damaged
property was covered under the Allstate insurance policy. It
is, in turn, Allstate’s burden to prove that the property loss
from Kaiser’s tenants’ producing or using methamphetamine
in the house was specifically excluded from coverage by
its policy.
(a) Paragraphs 12 and 13(e) and (f)
The district court found that Allstate met its burden of proof
by showing that Kaiser’s property loss was caused by the pres-
ence of “methamphetamine vapor” and “[m]ethamphetamine
residue” in the house. According to the district court, this
meant that the property loss was excluded under paragraphs
6
See id.
7
See id.
8
See Gage County v. Employers Mut. Cas. Co., 304 Neb. 926, 937 N.W.2d
863 (2020).
9
See id.
- 570 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
12 and 13(e) and (f) of the Allstate insurance policy because
methamphetamine vapor is “a toxic chemical, gas or liquid,
depending upon the assumed physical state at a particular point
in time,” and methamphetamine residue is “a contaminant,
chemical residue and pollutant.” Kaiser assigns first that this
characterization was in error because the terms in paragraphs
12 and 13(e) and (f) are ambiguous.
[9-11] An insurance policy is a contract, and an appellate
court construes it like any other contract, according to the
meaning of the terms that the parties have used. 10 An appel-
late court gives terms in an insurance policy that are clear
their plain and ordinary meaning as a reasonable person in the
insured’s position would understand them. 11 But terms that are
reasonably susceptible to multiple conflicting meanings are
ambiguous and construed in favor of the insured. 12
We disagree with Kaiser that the terms in paragraphs 12
and 13(e) and (f) are ambiguous. Paragraph 12 specifically
excludes coverage for any property loss caused by or consist-
ing of “vapors, fumes, acids, toxic chemicals, toxic gasses,
toxic liquids, toxic solids, waste materials, [i]rritants, contami-
nants, or pollutants.” And paragraph 13(e) and (f) uses similar
language, excluding coverage for any property loss caused by
or consisting of “[s]mog” or “[c]ontamination, including, but
not limited to, the presence of toxic, noxious, or hazardous
gasses, chemicals, liquids, solids or other substances at the
residence premises . . . .” (Emphasis omitted.)
[12] Although they are not defined in the insurance pol-
icy itself, the relevant terms are contained in standard dic-
tionaries. Contamination is “[t]he action of contaminating,
or condition of being contaminated; defilement, pollution,
10
Van Kleek v. Farmers Ins. Exch., 289 Neb. 730, 857 N.W.2d 297 (2014).
11
Id.
12
See id.
- 571 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
infection.” 13 The terms in paragraphs 12 and 13(f) are also
defined. 14
Throughout his brief, Kaiser himself repeatedly referred to
the property damage as “contamination” and his restoration
efforts as “decontamination.” In corresponding with Kaiser,
the contractors he hired to restore the house also identified
the damage they encountered as contamination. In its work
plan for the house, Absolute Bio Recovery Service described
using a variety of techniques “to address contamination,”
and in its “Final Report Methamphetamine Decontamination,”
Meth Lab Cleanup identified the scope of its work as involv-
ing a “decontamination and post remedial assessment.” At the
time, Kaiser did not object to these characterizations of the
property loss as contamination. This evidence goes to show
that Kaiser, as the insured, reasonably interpreted the term
“contamination” as encompassing the type of property damage
he experienced.
[13,14] As Kaiser now suggests, definitions of the terms in
paragraphs 12 and 13(e) and (f) indicate that several of these
terms are synonymous. But his conclusion that the terms are
13
“Contamination,” Oxford English Dictionary Online, http://www.oed.com/
view/Entry/40057 (last visited Oct. 10, 2020).
14
See, e.g., “Vapor,” Oxford English Dictionary Online, http://www.oed.com/
view/Entry/221469 (last visited Oct. 10, 2020); “Fume,” Oxford English
Dictionary Online, http://www.oed.com/view/Entry/75429 (last visited
Oct. 10, 2020); “Acid,” Oxford English Dictionary Online, http://www.
oed.com/view/Entry/1547 (last visited Oct. 10, 2020); “Toxic,” Oxford
English Dictionary Online, http://www.oed.com/view/Entry/204104 (last
visited Oct. 10, 2020); “Waste,” Oxford English Dictionary Online, http://
www.oed.com/view/Entry/226027 (last visited Oct. 10, 2020); “Irritant,”
Oxford English Dictionary Online, http://www.oed.com/view/Entry/99857
(last visited Oct. 10, 2020); “Contaminant,” Oxford English Dictionary
Online, http://www.oed.com/view/Entry/40053 (last visited Oct. 10, 2020);
“Pollutant,” Oxford English Dictionary Online, http://www.oed.com/
view/Entry/146987 (last visited Oct. 10, 2020); “Smog,” Oxford English
Dictionary Online, http://www.oed.com/view/Entry/182692 (last visited
Oct. 10, 2020).
- 572 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
inherently ambiguous does not follow. Simply because mul-
tiple provisions in an insurance policy individually exclude
coverage for a single peril does not mean that those terms
are necessarily ambiguous. 15 Instead, a well-written insurance
policy will likely have terms that overlap, which might sup-
port the denial of coverage on several grounds in an appropri-
ate case. 16 Whether those terms are individually ambiguous
will depend on the susceptibility of their language to multiple
reasonable meanings, not on whether the terms overlap with
each other. 17 Kaiser has failed to specifically identify any sec-
ond meanings to which the terms are reasonably susceptible
in context.
Accordingly, Kaiser’s argument that the terms in paragraphs
12 and 13(e) and (f) are ambiguous and so should be construed
with different meanings than the district court assigned to them
is without merit. Like the rest of these terms, “contamination”
is readily defined in standard dictionaries, and Kaiser himself
used and accepted the term in describing the restoration of his
house. The district court did not err in finding that Kaiser’s
property loss was excluded from coverage as “contamination,”
among other perils, under paragraphs 12 and 13(e) and (f) of
the Allstate insurance policy. Kaiser’s first assignment of error
is without merit.
(b) Paragraphs 18 and 19(d)
Kaiser next assigns that even if the district court did not err
in finding his property loss was excluded under paragraphs
12 and 13(e) and (f), the district court still erred in not grant-
ing him relief under two other paragraphs of the Allstate
insurance policy. Specifically, Kaiser points to paragraphs 18
and 19(d). Although paragraph 18 generally excludes from
15
See, e.g., American Fam. Mut. Ins. Co. v. Wheeler, 287 Neb. 250, 842
N.W.2d 100 (2014).
16
See id.
17
See Henn, supra note 1.
- 573 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
coverage “vandalism,” it provides an exception for “sudden
and accidental direct physical loss caused by fire resulting
from vandalism.” (Emphasis omitted.) Likewise, although
paragraph 19 excludes from coverage property loss result-
ing from most “act[s] of a tenant,” paragraph 19 provides an
exception for “[a]ny act of a tenant [that] results in sudden
and accidental direct physical loss caused by . . . d) smoke.”
(Emphasis omitted.)
According to Kaiser, his property loss was predominantly
caused in accordance with these exceptions. And the insur-
ance policy provides that when there are two or more causes
of loss to the covered property, coverage is only excluded if
the predominant cause of loss is excluded. Therefore, Kaiser
contends that even if his property loss was excluded from
coverage under paragraphs 12 and 13(e) and (f) of the Allstate
insurance policy, the language regarding two or more causes
of loss should provide relief because the perils described in
paragraphs 18 and 19(d) were the predominant causes of loss.
We disagree.
[15] If the insurer meets its burden of proving the applicabil-
ity of any exclusions under the policy as affirmative defenses,
then the burden returns to the insured to prove the applicability
of an exception to any exclusions. 18 Here, as discussed above,
paragraphs 18 and 19 contain exceptions to the exclusions for
“vandalism” and “act[s] of a tenant.” (Emphasis omitted.) In
order for the exceptions to those exclusions to apply, Kaiser
has the burden to show that the harm was the “sudden and
accidental” result of fire or smoke.
In support of his argument that he comes within these
exceptions, Kaiser cites to insurance law cases from other
jurisdictions in which vandalism has been inferred by ten-
ants’ using and manufacturing illegal substances that resulted
18
See Dutton-Lainson Co. v. Continental Ins. Co., 271 Neb. 810, 716
N.W.2d 87 (2006).
- 574 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
in property damage. 19 We need not decide here whether to
follow those other jurisdictions because we conclude that
Kaiser has failed to show that his property loss was “sudden
and accidental.”
We have previously construed the phrase “sudden and
accidental” in an insurance policy. In Dutton-Lainson Co. v.
Continental Ins. Co., 20 we construed the phrase in the con-
text of an exception to a pollution exclusion. After incurring
costs from an environmental cleanup of pollutants used in its
manufacturing operations over some 37 years, Dutton-Lainson
Company (Dutton-Lainson) filed a claim for indemnification
with its insurer. Continental Insurance Company (Continental
Insurance) denied the claim, however, under an exclusion
for losses caused by pollution. In response, Dutton-Lainson
claimed that a sudden and accidental exception to the pollution
exclusion applied. The parties presented these arguments in
district court, and thereafter, the district court granted summary
judgment to Continental Insurance. Dutton-Lainson appealed,
renewing its argument that the sudden and accidental exception
to the pollution exclusion applied. 21
We rejected Dutton-Lainson’s argument. First, we found
that “[s]ince the ‘sudden and accidental’ exception to the
pollution exclusion clause [was] expressed in the conjunc-
tive, both requirements must be met for the exception to
become operative.” 22 We then reviewed how other courts had
interpreted the term “sudden” as a necessary component of
the phrase:
Courts have disagreed as to whether “sudden” refers
to something temporally abrupt from an objective
19
See, e.g., Livaditis v. American Casualty Co. of Reading, Pa., 117 Ga.
App. 297, 160 S.E.2d 449 (1968); Bowers v. Farmers Ins. Exchange, 99
Wash. App. 41, 991 P.2d 734 (2000); Graff v. Allstate Ins. Co., 113 Wash.
App. 799, 54 P.3d 1266 (2002).
20
Dutton-Lainson Co., supra note 18.
21
See id.
22
Id. at 821, 716 N.W.2d at 97.
- 575 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
standpoint, something unexpected from the subjective
standpoint of the insured, or whether the term is ambig­
uous. In considering the meaning of the term “sudden,”
several courts have noted that recognized dictionaries dif-
fer as to its meaning. 23
For example, we noted that definitions of the term “sudden”
varied in recognized dictionaries between having primarily to
do with a lack of notice and with a rate of occurrence. 24
In any event, however, we found that under the terms of the
policy, pollution that occurred over a significant period of time
was not covered as “sudden.” 25 “[A] reasonable person in the
position of the insured would understand the term ‘sudden,’
as found in the context of the qualified pollution exclusion, to
refer to the objectively temporally abrupt release of pollutants
into the environment.” 26 Thus, we affirmed the district court’s
grant of Continental Insurance’s motion for summary judg-
ment. Dutton-Lainson’s loss from pollution that occurred over
a period of 37 years was not sudden. 27
23
Id.
24
See id. at 821-22, 716 N.W.2d at 97-98 (comparing term “sudden” as
defined in “Webster’s Third New International Dictionary of the English
Language, Unabridged 2284 (1993), [as] ‘happening without previous
notice or with very brief notice; coming or occurring unexpectedly; not
foreseen or prepared for’”; with term “sudden” as defined in “Black’s Law
Dictionary 1432 (6th ed. 1990) [as] ‘[h]appening without previous notice
or with very brief notice; coming or occurring unexpectedly; unforeseen;
unprepared for’”; and with term “sudden” as defined in “Random House
Dictionary of the English Language 1900 (2d ed. 1987) . . . as ‘happening,
coming, made, or done quickly’”). See, also, “Sudden,” Oxford English
Dictionary Online, http://www.oed.com./view/Entry/193468 (last visited
Oct. 10, 2020) (“[h]appening or coming without warning or premonition;
taking place or appearing all at once”).
25
See Dutton-Lainson Co., supra note 18.
26
Id. at 823-24, 716 N.W.2d at 99.
27
See id. Accord, Mapes Indus. v. United States F. & G. Co., 252 Neb. 154,
560 N.W.2d 814 (1997); Bituminous Cas. Corp. v. Aaron Ferer and Sons
Co., No. 4:06CV3128, 2007 WL 2066452 (D. Neb. July 16, 2007).
- 576 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
[16] Our analysis here is similar. As in Dutton-Lainson,
the Allstate insurance policy expresses the phrase “sudden
and accidental” in the conjunctive. Therefore, to carry his
burden of proving coverage under paragraph 18 or paragraph
19(d), Kaiser must show that his property loss resulted in
direct physical loss that was both “sudden and accidental.”
Because we conclude that Kaiser has failed to show that his
property loss was sudden, we need not determine whether it
was accidental.
Kaiser’s argument that the property loss was sudden rests
on his assertion that as a result of his tenants’ producing
or using methamphetamine indoors, methamphetamine vapor
and residue “quickly bonded to most surfaces throughout the
rental house.” 28 Because this bonding occurred “quickly,”
Kaiser would have us infer that the resulting property loss
as a whole was sudden. But this argument wrongly frames
the issue.
In Dutton-Lainson, we could also have framed the property
loss as the result of numerous sudden discharges of pollutants
over 37 years. 29 Likely, some amount of the pollutants at issue
had escaped quickly every day, each time contributing to the
ultimate loss for which Dutton-Lainson sought indemnification
from Continental Insurance. But we opted against framing the
property loss in terms of its smallest components. 30 Instead,
because Dutton-Lainson sought indemnification for one prop-
erty loss—that is, the cleanup from one pollution—we framed
it accordingly. And because that one property loss occurred
over a period of 37 years, it was not sudden. 31
28
Brief for appellant at 29.
29
See Dutton-Lainson Co., supra note 18.
30
See id.
31
See id.
- 577 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
[17] Here, too, Kaiser’s claim to Allstate is for one whole
property loss, not its component parts. Kaiser leased the whole
property to tenants. Allstate insured the whole property from
certain perils. The tenants produced or used methamphetamine
in the house and thereby rendered the house uninhabitable as a
whole. Kaiser filed a claim to Allstate demanding payment for
the whole loss. Thus, we frame the property loss at issue not
by each release of methamphetamine vapor and residue, but by
the loss that resulted from their many releases and for which
Kaiser sought indemnification. We decline to embrace Kaiser’s
logic of death by a thousand paper cuts.
Viewed through a proper frame, then, the evidence in
the record indicates that Kaiser’s property loss as a whole
occurred over time, not suddenly. Kaiser himself testified
that his tenants resided at the property for more than a year,
from April 15, 2012, until May 1, 2013. He received reports
throughout the year from persons living near the house that
the house was being used for suspicious drug-related activi-
ties. On at least one occasion, in April 2013, Kaiser learned
that someone living there had “got[ten] in trouble for doing
meth last night.”
Although he did not know specifically when during that year
the tenants began producing or using methamphetamine in the
house, Kaiser indicated in his amended complaint that such
producing or using could have occurred as soon as April 15,
2012, the day the tenants took possession of the house. Kaiser
specifically stated that to the best of his knowledge, the use or
production of methamphetamine was ongoing throughout the
tenancy: “the Tenants who were occupying the Property had
been using methamphetamine in the Property and/or operat-
ing an illegal methamphetamine lab on the Property, unbe-
knownst to [Kaiser].” (Emphases supplied.) The phrases “had
been using” and “[had been] operating” imply that the tenants’
use of methamphetamine or operation of a methamphetamine
- 578 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
laboratory in the house occurred in the past but on a contin­
uous, ongoing basis. 32
It was Kaiser’s burden to prove that his property loss
occurred “suddenly and accidentally.” But Kaiser did not put
forth any evidence that his property loss occurred in this way.
To the contrary, the evidence that Kaiser himself offered indi-
cates that the loss actually occurred as the result of his tenants’
smoking or producing methamphetamine in the house on an
ongoing basis over a significant period of time, perhaps up to
a year.
[18] But “an event occurring over a period of time is not
sudden.” 33 Thus, just as we held in Dutton-Lainson that pol-
lution occurring over 37 years was not sudden, 34 we now also
hold that a property loss from methamphetamine vapor and res-
idue occurring by indoor methamphetamine use or production
over a period of months or more is not sudden. A reasonable
person in Kaiser’s position would not understand “sudden”
to refer to a property loss occurring over a period of months.
Kaiser has failed to carry his burden of proving otherwise.
Because Kaiser has failed to carry his burden of proving
that his property loss was sudden and accidental, he has also
failed to carry his burden of proving that his property loss was
covered as predominantly caused in accordance with para-
graphs 18 and 19(d). The district court did not err in finding
Kaiser’s property loss was excluded from coverage under para-
graphs 12 and 13(e) and (f) of the Allstate insurance policy and
32
See The Chicago Manual of Style ¶ 5.120 (15th ed. 2003); “Past perfect
continuous,” Cambridge Dictionary Online, http://www.dictionary.cam­
bridge.org/us/grammar/british-grammar/past-perfect-continuous (last vis­
ited Oct. 10, 2020) (as defined in grammar section: “[W]e use the past
perfect continuous to talk about actions or events which started before
a particular time in the past and were still in progress up to that time in
the past”).
33
Dutton-Lainson Co., supra note 18, 271 Neb. at 823, 716 N.W.2d at 99.
34
Id.
- 579 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
not covered under paragraph 18 or paragraph 19(d). Kaiser’s
second assignment of error is without merit.
2. Summary Judgment
Kaiser next assigns that the district court erred in grant-
ing Allstate’s motion for summary judgment because a gen­
uine issue of material fact remained as to whether Kaiser’s
property loss was caused by the tenants’ producing or using
methamphetamine.
In its order, the district court concluded that the evidence
from Allstate’s expert indicated that the tenants’ metham-
phetamine production, not use, caused Kaiser’s property loss.
Kaiser disputes this factual finding. He contends that although
in his initial complaint he claimed his property loss was the
result of methamphetamine production, he did not have a basis
for that conclusion and now believes it could have been meth-
amphetamine use instead. Kaiser accordingly assigns that sum-
mary judgment was not proper. We disagree.
[19,20] Summary judgment is proper when the pleadings
and the evidence admitted at the hearing disclose that there
is no genuine issue as to any material fact or as to the ulti-
mate inferences that may be drawn from those facts and that
the moving party is entitled to judgment as a matter of law. 35
An appellate court will affirm a lower court’s grant of sum-
mary 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. 36
Here, it is immaterial whether Kaiser’s tenants damaged
the house by producing or using methamphetamine indoors.
As both parties and both parties’ experts testified, the cause of
loss was “methamphetamine vapor” and “methamphetamine
35
Arnold v. Walz, 306 Neb. 179, 944 N.W.2d 747 (2020).
36
Id.
- 580 -
Nebraska Supreme Court Advance Sheets
307 Nebraska Reports
KAISER v. ALLSTATE INDEMNITY CO.
Cite as 307 Neb. 562
residue.” Based on that evidence, the district court correctly
concluded that the property loss was excluded from coverage
under paragraphs 12 and 13(e) and (f) of the Allstate insurance
policy and was not covered under paragraphs 18 and 19(d).
Even if, as Kaiser urges, we were to find that a genuine factual
dispute remained, the dispositive fact remains that metham-
phetamine vapor and methamphetamine residue are excluded
causes of loss under the Allstate insurance policy. Therefore,
whether the methamphetamine vapor and methamphetamine
residue were released inside the house through production or
through use is immaterial to this court’s ultimate conclusions
of law.
We concur with the district court’s grant of summary judg-
ment. Kaiser’s third assignment of error is without merit.
VI. CONCLUSION
The district court’s order granting Allstate’s motion for sum-
mary judgment is affirmed.
Affirmed.