Wiegert-Stathes v. American Family Mutual Insurance Company, No. A-08-1041 (Neb. App. 10/20/2009)

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HEDY WIEGERT-STATHES, PERSONAL REPRESENTATIVE OF THE ESTATE OF ERICH WIEGERT, APPELLANT, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, APPELLEE.

No. A-08-1041.

Court of Appeals of Nebraska.

Filed October 20, 2009.

Appeal from the District Court for Dodge County: JOHN E. SAMSON, Judge. Affirmed.

K.C. Engdahl and Karisa D. Johnson, of Engdahl, Koukol, Goracke, Johnson & Dougherty, L.L.C., for appellant.

Robert T. Grimit, of Baylor, Evnen, Curtiss, Grimit & Witt, L.L.P., for appellee.

SIEVERS, CARLSON, and CASSEL, Judges.

MEMORANDUM OPINION AND JUDGMENT ON APPEAL

SIEVERS, Judge.

Hedy Wiegert-Stathes, on behalf of the estate of Erich Wiegert, appeals the order of the district court for Dodge County finding in favor of American Family Mutual Insurance Company (American Family) on Wiegert-Stathes' claims for breach of contract and attorney fees. For the reasons set forth herein, we affirm the order of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

On October 7, 1996, Wiegert obtained judgment in the amount of $360,000 against Fretaco, Inc., owner of a fast-food restaurant franchised by Taco John's International (Taco John's), where Wiegert and several others contracted hepatitis A during a 1991 visit. Fretaco had a business insurance policy with American Family. The policy had a policy limit of $500,000 per occurrence. Before Wiegert obtained his judgment, there was $387,000 remaining under the policy limits because of settlements with other people who had been injured during what has indisputably been treated as a single occurrence of hepatitis A.

A few days after the Wiegert judgment, while a motion for a new trial was pending, representatives from American Family; representatives from Taco John's; Gary Gillaspy, who was president and one of the two shareholders of Fretaco; and Jerry Grosser!, Gillaspy's personal attorney, began discussing how to proceed with the Wiegert judgment and the case of Paul Vesely, another claimant from the same occurrence. Vesely had a suit pending in the district court for Dodge County against Fretaco and its franchisor, Taco John's. On October 19, 1996, a conference call occurred between Eugene Hillman, the private practice attorney retained by American Family to defend Fretaco in the Wiegert case; Dennis Mullin, senior in-house claims counsel employed by American Family who was responsible for oversight of the Wiegert and Vesely cases; and Grossert. Hillman and Mullin both evaluated the Vesely case as more serious than Wiegert's because of the medical evidence in the Vesely case and because Vesely was claiming more damages. In the conference call, Grossert, on behalf of Fretaco, stated that he preferred American Family settle both cases, but also preferred that the Vesely case be settled if American Family only had enough remaining coverage to settle one case. Such preference was due to the hold harmless agreement given by Gillaspy personally to Taco John's, which applied to the Vesely case, but not to the Wiegert case. Under such agreement, Taco John's could seek indemnification from Gillaspy personally for any judgment against Taco John's in the Vesely case. During the conference call, Grossert, Hillman, and Mullin also discussed that it might take up to the remaining policy limits to settle the Vesely case, thereby leaving no money under the policy available to post a supersedeas bond in the Wiegert case if appealed.

On October 21, 1996, attorney Michael Pirtle, representing Taco John's, sent a letter to Mullin, requesting that American Family take immediate action to settle the Vesely case because Taco John's also preferred Vesely's case be settled over Wiegert's. Taco John's was a named defendant in the Vesely case but not in the Wiegert case. Grossert also sent a letter to Mullin on October 21, stating that American Family should do whatever is necessary to resolve "each of these cases" without exposing Gillaspy to personal liability. Grossert also stated in this letter that Fretaco was not waiving American Family's duty to defend it in the appeal of the Wiegert case, if such was filed, and was not waiving any claim or right of action it may have against American Family. Later that day, Grossert sent another letter adding the following language: "If [settling both cases] is not possible, it is the preference of Fretaco, Inc. and Gary and Elizabeth Gillaspy that American Family do whatever is necessary to settle the Vesely litigation, thereby eliminating the threatened personal exposure of the Gillaspys."

On October 23, 1996, American Family settled with Vesely for $387,555, which was thought to be the remaining funds left under the policy. Jane Hansen, an attorney for American Family who took over the Wiegert and Vesely cases from Mullin, sent Grossert a letter on October 24, stating that settlement with Vesely was final and that American Family would not post a supersedeas bond in the Wiegert case. Wiegert's judgment was appealed to this court on November 13. American Family continued to defend Fretaco during the appeal of the Wiegert judgment, but did not post a supersedeas bond. We affirmed Wiegert's judgment of $360,000 against Fretaco. See Wiegert v. Taco John's, 7 Neb. App. xi (No. A-96-1155, May 6, 1998), and a petition for further review by the Nebraska Supreme Court was denied on June 24, 1998.

On December 20, 1996, Wiegert filed an application for garnishment against Fretaco and American Family. In such proceedings, the district court awarded Wiegert $829.72, which was determined to be the remaining coverage under the American Family policy, but the court denied Wiegert's claim that he could garnish American Family for more than the policy limits. Levy was undertaken by Wiegert on Fretaco in December 1996, and at the time, Fretaco had approximately $47,000 in assets. Fretaco settled with Wiegert for this amount, plus gave Wiegert an assignment of its claims against American Family. Fretaco closed its business on January 17, 1997, and is no longer a functioning corporation.

Using Fretaco's assignments of its potential claims against American Family, Wiegert filed a complaint on May 10, 2004, against American Family in the district court for Dodge County, alleging bad faith, breach of contract, waiver, and estoppel, and entitlement to attorney fees. On September 22, the district court sustained American Family's motions for summary judgment on the breach of contract and attorney fees causes of action. Trial was held on the other causes of action, and the district court found that Wiegert had failed to sustain his burden on bad faith, estoppel, and waiver, and the court dismissed these remaining causes of action with prejudice. The court also overruled Wiegert's motion to alter or amend the September 22 judgment, and Wiegert perfected his appeal to this court. Wiegert died pending appeal to this court, and the case was revived by Wiegert-Stathes, the personal representative of Wiegert's estate. Finding that res judicata from the garnishment proceedings did not bar litigation of the claims for breach of contract or attorney fees, we reversed, and remanded for further proceedings on these two claims. See Wiegert-Stathes v. American Fam. Mut. Ins. Co., No. A-05-200, 2007 WL 1276954 (Neb. App. May 1, 2007) (not designated for permanent publication).

The district court for Dodge County held trial on June 2 and 3, 2008, on the claims for breach of contract and attorney fees that we had remanded for trial. In its order of September 3, the district court found that bad faith was not proved with respect to the breach of contract claim because the "evidence demonstrates that [American Family's] representatives reasonably relied upon the request or preference given by its insured's (representatives of Fretaco) to settle the companion claim rather than allocate funds to pay for a supersedeas bond in the Wiegert case." The court likewise found that the theories of waiver and estoppel did not apply to the breach of contract claim because Wiegert-Stathes failed to meet her burden of proof and because the court previously denied similarly requested relief.

The district court also found that under the policy, American Family clearly had a duty to defend its insured, but that such duty ended when the applicable limit of insurance was used for payment of judgments or settlements. The court further found that the supplementary payments provision required American Family to pay the cost of bonds to release attachments, but only for bond amounts within the applicable limits of insurance. The trial court distinguished this case from Johnson v. Maryland Casualty Co., 103 Neb. 371, 171 N.W. 908 (1917), where the insurance company was required to post a supersedeas bond as part of its duty to defend, because unlike in Johnson, here the underlying judgment exceeded the policy limits. The trial court found that American Family did not have a responsibility to obtain a supersedeas bond beyond the available policy limits. The court distinguished this case from case law in other jurisdictions, in particular Seessel v. New Amsterdam Casualty Co., 140 Tenn. 253, 204 S.W. 428 (1918); Richmond v. Kelley, Nos. 3799 & 3374, 1984 WL 320911 (Pa. Commw. Aug. 30, 1984); and Zahler v. DeSantis, No. 4326, 1980 WL 194170 (Pa. Commw. Apr. 10, 1980), because such case law did not address a situation where multiple, separate claims had been made on the policy, and such cases relied upon the lack of good faith by the insurance company to justify requiring the posting of bonds above and beyond the policy limits. The court found that Wiegert-Stathes did not establish bad faith by American Family, and therefore, the court determined that Wiegert-Stathes did not carry her burden of proof to establish a breach of contract. The court denied relief for attorney fees as well. Wiegert-Stathes filed a notice of appeal on October 2, 2008.

ASSIGNMENTS OF ERROR

Wiegert-Stathes assigns as error,...