Merrick v. Fischer, Rounds & Assocs., Inc.

305 Neb. 230

939 N.W.2d 795

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.

No. S-18-1173.

Supreme Court of Nebraska.

Filed March 13, 2020

Michael W. Meister, Scottsbluff, for appellant.

Sean A. Minahan and Patrick G. Vipond, of Lamson, Dugan & Murray, L.L.P., Omaha, for appellee Fischer, Rounds & Associates, Inc.

Robert S. Keith, Omaha, 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 settlement 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 insurance 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, commercial inland marine coverage, and commercial general liability coverage. Western Hay did not have workers’ compensation 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 ‘accident’ 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 exclusions 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 exclusions provided within Coverage A. 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 information 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 employment 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 medical 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.

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’ compensation 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 insurance 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 complaint, 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, coverage for an injury to an employee of the insured, or coverage for potential liability for failing to provide workers’ compensation 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 insurance 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 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 insurance 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 judgment. 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’ compensation insurance, but did not provide the payroll information 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 insurance for Western Hay until after the payroll records were provided 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 insurance prior to its request for a quote, or failed to warn Western Hay that its insurance policy did not cover injuries to employees 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 determined that the policy at issue contains exclusions for claims based on workers’ compensation liability. The court determined that due to such exclusions, Great West...