Justia.com Opinion Summary: Stephen O'Bryant, a commercial truckdriver, was killed during the course of his employment as the result of a motor vehicle accident. Sylvia Devese, the representative of his estate, sought to recover under O'Bryant's occupational accident policy with Transguard Insurance Company of America. Transugard denied the claim on the ground that O'Bryant did not have a valid commercial driver's license (CDL) at the time of the accident, and the personal representative brought this action against Transguard for breach of contract and bad faith. The policy stated that no benefits would be paid for any claim resulting from any loss occurring while the insured person was operating a vehicle without a valid CDL. The trial court granted summary judgment in favor of Transguard. On appeal, the Supreme Court reversed and remanded, holding that Neb. Rev. Stat. 44-358 applies so as to require a showing of causation between the breach and the loss, despite the language of the policy.
Receive FREE Daily Opinion Summaries by Email Download as PDF
Loading PDF...
<![CDATA[
Nebraska Advance Sheets
devese v. transguard ins. co.
Cite as 281 Neb. 733
733
Roberts) that the fact of escaped livestock is, standing alone,
insufficient to raise an inference of negligence against Gentrup.
However, as discussed, because McLaughlin presented other
evidence in conjunction with the fact of escaped livestock,
§ 25-21,274 does not bar McLaughlin’s claim.
Conclusion
For the foregoing reasons, we reverse the judgment of the
district court and remand the cause for further proceedings
consistent with this opinion.
R eversed and remanded for
further proceedings.
Wright, J., not participating.
Sylvia Devese, P ersonal R epresentative of the Estate
of Stephen O’Bryant, deceased, appellant, v.
Transguard Insurance Company
of A merica, I nc., a foreign
corporation, appellee.
___ N.W.2d ___
Filed June 17, 2011.
No. S-10-250.
1. Summary Judgment. Summary judgment is proper when the pleadings and evidence 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.
2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an
appellate court views the evidence in the light most favorable to the party against
whom the judgment is granted and gives such party the benefit of all favorable
inferences deducible from the evidence.
3. Judgments: Appeal and Error. When dispositive issues on appeal present questions of law, an appellate court has an obligation to reach an independent conclusion irrespective of the decision of the court below.
4. Insurance: Contracts: Liability: Words and Phrases. An exclusion in an insurance policy is a limitation of liability, or a carving out of certain types of loss, to
which the insurance coverage never applied.
5. Insurance: Contracts: Words and Phrases. A condition subsequent is a provision that allows insurers to suspend or avoid coverage for a loss that occurs while
a failure of the condition exists after the risk has attached.
6. Insurance: Contracts. Regardless of an insurer’s labeling, a clause that requires
an insured to avoid an increased hazard is a condition subsequent for coverage.
Nebraska Advance Sheets
734
281 nebraska reports
Petition for further review from the Court of Appeals, Irwin,
Moore, and Carlson, Judges, on appeal thereto from the
District Court for Douglas County, Leigh Ann R etelsdorf,
Judge. Judgment of Court of Appeals reversed, and cause
remanded with directions.
Betty L. Egan and Mark A. Weber, of Walentine, O’Toole,
McQuillan & Gordon, for appellant.
Walter E. Zink II and Jarrod P. Crouse, of Baylor, Evnen,
Curtiss, Grimit & Witt, L.L.P., for appellee.
Heavican, C.J., Connolly, Gerrard, Stephan, McCormack,
and Miller-Lerman, JJ.
McCormack, J.
NATURE OF CASE
Stephen O’Bryant was a commercial truckdriver. He was
killed during the course of his employment as the result of a
motor vehicle accident. The representative of his estate sought
to recover under O’Bryant’s occupational accident policy with
Transguard Insurance Company of America, Inc. (Transguard).
Transguard denied the claim on the ground that O’Bryant did
not have a valid commercial driver’s license (CDL) at the
time of the accident, and the personal representative brought
this action against Transguard for breach of contract and bad
faith. The policy stated that no benefits would be paid for any
“[i]njury, loss or claim caused or contributed to by or resulting from . . . any loss occurring while the Insured Person . . .
is operating a Vehicle without a valid [CDL].” The trial court
granted summary judgment in favor of Transguard, and the
personal representative appeals. We find that Neb. Rev. Stat.
§ 44-358 (Reissue 2010) applies so as to require a showing of
causation between the breach and the loss, despite the language
of the policy.
BACKGROUND
On September 19, 2003, O’Bryant, a member of the
National Association of Independent Truckers, LLC, entered
into a group vehicle master policy with Transguard. The policy,
Nebraska Advance Sheets
devese v. transguard ins. co.
Cite as 281 Neb. 733
735
which was effective until July 1, 2004, included occupational
accident coverage.
An insured person is defined under the policy as an independent contractor who is a member of the National Association
of Independent Truckers in good standing and who is a certificate holder of the coverage. Under the “General Exclusions
and Limitations” section, the policy states: “This Coverage
Part does not cover and no benefits will be paid for any Injury,
loss or claim caused or contributed to by or resulting from:
. . . any loss occurring while the Insured Person, covered CoDriver, Partner or Helper is operating a Vehicle without a valid
[CDL].” On April 14, 2004, O’Bryant’s CDL was suspended
due to an unsatisfied judgment arising out of an automobile accident.
On June 30, 2004, O’Bryant was involved in a semi-truck
collision and sustained injuries resulting in his death. It is
undisputed that O’Bryant’s CDL was still suspended at the
time of the accident. O’Bryant’s beneficiaries made a claim
with Transguard for benefits under the occupational accident
coverage of the policy. Transguard denied the claim, and Sylvia
Devese, as the personal representative for O’Bryant’s estate,
brought this action against Transguard for breach of contract
and bad faith.
Relying on the CDL provision quoted above, Transguard
moved for summary judgment. Devese responded that
Transguard was required to show causation between the absence
of a valid CDL and the accident and that Transguard had failed
to present any such evidence. The trial court granted summary
judgment in favor of Transguard.
Devese appealed. On December 20, 2010, the Nebraska
Court of Appeals summarily affirmed the judgment in favor
of Transguard, citing Omaha Sky Divers Parachute Club, Inc.
v. Ranger Ins. Co. (Omaha Sky Divers). We granted Devese’s
petition for further review on the grounds that Omaha Sky
Omaha Sky Divers Parachute Club, Inc. v. Ranger Ins. Co., 189 Neb. 610,
204 N.W.2d 162 (1973).
Nebraska Advance Sheets
736
281 nebraska reports
Divers was recently overruled by D & S Realty v. Markel Ins.
Co. (D & S Realty).
ASSIGNMENTS OF ERROR
Devese asserts that the Court of Appeals erred in (1) affirming the order of the trial court granting Transguard’s motion
for summary judgment and (2) holding that Omaha Sky Divers
was controlling.
STANDARD OF REVIEW
[1] Summary judgment is proper when the pleadings and
evidence 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.
[2] In reviewing a summary judgment, an appellate
court views the evidence in the light most favorable to the
party against whom the judgment is granted and gives such
party the benefit of all favorable inferences deducible from
the evidence.
[3] When dispositive issues on appeal present questions
of law, an appellate court has an obligation to reach an
independent conclusion irrespective of the decision of the
court below.
ANALYSIS
In Omaha Sky Divers, we addressed an aircraft insurance
policy clause which stated, under the exclusions section, that
the policy did not apply to any occurrence while the aircraft
was operated by someone other than a pilot as set forth under
the declarations section. The declarations section, in turn,
specified that only pilots having a valid medical certificate
will operate the aircraft. We held that the exclusion was clear
D & S Realty v. Markel Ins. Co., 280 Neb. 567, 789 N.W.2d 1 (2010).
Riggs v. Nickel, 281 Neb. 249, 796 N.W.2d 181 (2011).
Id.
State v. Peterson, 280 Neb. 641, 788 N.W.2d 560 (2010).
Omaha Sky Divers, supra note 1.
Nebraska Advance Sheets
devese v. transguard ins. co.
Cite as 281 Neb. 733
737
and unambiguous. Despite the fact that the accident was not
contributed to by any medical issues of the pilot, the insurance
company was not required under the contract to show causation
between the breach and the accident.
We further held that the exclusion did not constitute a warranty or a condition within the meaning of § 44-358. Section
44-358 states in part:
The breach of a warranty or condition in any contract or
policy of insurance shall not avoid the policy nor avail the
insurer to avoid liability, unless such breach shall exist at
the time of the loss and contribute to the loss, anything
in the policy or contract of insurance to the contrary notwithstanding.
Because § 44-358 did not apply to impose a causation requirement as a matter of law, the plain language of the policy controlled and we affirmed judgment in favor of the insurer.
At the hearing on its motion for summary judgment,
Transguard argued that the language of the policy in this case
was similar to the one discussed in Omaha Sky Divers. We
agree. Both policies clearly make coverage dependent upon
the existence of valid, specified licenses. We do not read the
policies as requiring causation between those licenses and
the loss.
But in D & S Realty, we overruled Omaha Sky Divers
to the extent that we had concluded § 44-358 did not apply
so as to require, as a matter of law, a showing of causation
between the absence of the required license and the accident.
D & S Realty involved a property insurance contract which
stated that the carrier would not pay for loss caused by water
damage if the building was vacant for more than 60 consecutive days prior to the loss. Looking at the provision’s purpose
and function, we found that the relevant clause was a “condition,” as contemplated by § 44-358, and not an “exclusion.”
Therefore, despite the plain language of the insurance contract, the insurer was required by § 44-358 to demonstrate a
causal connection between the condition and the loss in order
to avoid liability.
D & S Realty, supra note 2.
Nebraska Advance Sheets
738
281 nebraska reports
[4-6] We explained in D & S Realty that a condition subsequent is distinct from an exclusion. An exclusion is a limitation of liability, or a carving out of certain types of loss, to
which the insurance coverage never applied. A preloss condition subsequent, in contrast, is a provision that allows insurers to suspend or avoid coverage for a loss that occurs while
a failure of the condition exists after the risk has attached.
We held that “increased hazard” clauses, such as the vacancy
clause of the property insurance policy in issue in that case,
were conditions subsequent and not exclusions. We said,
“[R]egardless of an insurer’s labeling, a clause that requires an
insured to avoid an increased hazard is a condition subsequent
for coverage.”10
We said that Omaha Sky Divers presented a similar classification problem: “The certification provision excluded coverage
unless the pilot possessed the necessary medical certification,
which was proof of the pilot’s medical fitness. The proof was
intended to protect the insurer from the increased hazard of a
pilot with health problems flying the plane.”11 We overruled
Omaha Sky Divers to the extent that it could be read to hold
that increased hazard conditions are exclusions.12
As explained, the policy provision in Omaha Sky Divers
avoided coverage for an occurrence while the plane was operated by a pilot without a medical certification. And the risk of
loss had clearly attached. Thus, as a postattachment, preloss
condition (subsequent) to the insurer’s obligation to pay bene
fits, the insured was required to maintain proof of a pilot’s
medical fitness.
Maintaining proof of an insured’s qualification to perform
a covered activity is the type of condition subsequent that
§ 44-358 was intended to address. The policy in Omaha Sky
Divers did not provide that coverage would be voided for loss
10
11
12
See id.
See id.
Id. at 581, 789 N.W.2d at 13.
Id. at 580, 789 N.W.2d at 13.
D & S Realty, supra note 2.
Nebraska Advance Sheets
devese v. transguard ins. co.
Cite as 281 Neb. 733
739
caused by the plane’s being operated by a medically unfit pilot.
Clearly, the insurer could limit its coverage to loss occurring
when the plane was operated by a qualified and medically fit
pilot. That was the insured risk. But by requiring the insured
to maintain proof of a pilot’s medical fitness regardless of any
causal connectedness to the loss, the insurer avoided liability
for a failure of condition that “in no way contributed to the
accident,”13 which was caused by a brake failure.
As we explained in D & S Realty, § 44-358 was intended to
limit an insurer’s ability to avoid liability for a failure of preloss conditions subsequent that are “so broad that an insured’s
violation of them is not causally relevant to the loss.”14 Thus,
we erred in Omaha Sky Divers by holding that the contributeto-the-loss standard under § 44-358 did not apply to a preloss
condition subsequent that required the insured to maintain
proof of a pilot’s medical fitness to fly a plane.
Similarly, the issue here involves the distinction between an
insured’s qualification to perform an activity and proof of the
insured’s qualification. “License” has more than one meaning.
It can be authorization to do what would otherwise be illegal.15
But a license is also proof that the holder is qualified to perform an activity.16 It is the latter sense that is relevant here.
The policy does not purport to avoid coverage if the insured
violated a motor vehicle statute.
We agree that an insurer can require an insured to have a
valid CDL as a condition for coverage, because the license
functions as proof that the insured is qualified to operate
commercial vehicles. But if licensure is a requisite to being a
qualified insured, the insurer would have presumably required
this proof as part of the application process. Further, if an
13
14
15
16
Omaha Sky Divers, supra note 1, 189 Neb. at 612, 204 N.W.2d at 163.
D & S Realty, supra note 2, 280 Neb. at 580, 789 N.W.2d at 13.
See Syracuse Rur. Fire Dist. v. Pletan, 254 Neb. 393, 577 N.W.2d 527
(1998).
See, Mulholland v DEC Int’l, 432 Mich. 395, 443 N.W.2d 340 (1989);
Osborn v. Hertz Corp., 205 Cal. App. 3d 703, 252 Cal. Rptr. 613 (1988);
Asdourian v. Araj, 38 Cal. 3d 276, 696 P.2d 95, 211 Cal. Rptr. 703
(1985).
Nebraska Advance Sheets
740
281 nebraska reports
insured had falsely represented his or her qualifications in the
application, then the insurer would have had reason to seek
a revocation.
The availability of a revocation defense shows that the
license provision was not intended to relieve Transguard of
liability because an insured was never qualified to operate a
commercial vehicle. Instead, the unlicensed driver provision
operated to avoid liability for a loss, after the risk attached, if
an insured was operating a commercial vehicle while he or she
had failed to maintain a valid CDL. An insurance provision
that conditions benefits based solely on whether the insured has
failed to comply with a licensing or certification requirement
seeks to broadly control a potential cause of loss—an unqualified insured.17
We conclude in this case that Transguard sought to avoid
the risk of loss of an unqualified driver. As applied to the
insured, the license requirement functions as a condition for
coverage that the insured maintain proof of his or her continuing qualification. Because the provision imposes conditions for coverage on the insured’s conduct after the risk has
attached, it is a preloss condition subsequent. As we explained
in D & S Realty, there is no meaningful difference between a
policy that excludes coverage unless specified conditions are
met and one that provides coverage if specified conditions
are met.18
But the lack of the license, in itself, did not show that
O’Bryant was unqualified to operate a commercial vehicle.
Transguard’s failure of a condition defense illustrates that the
condition was broader than necessary to protect Transguard
from assuming liability for the risk that O’Bryant was unqualified to operate commercial vehicles.19 A significant difference
exists between a suspension of a license for failure to pay a
judgment and a revocation or refusal of a license for reasons
17
18
19
See Robert Works, Insurance Policy Conditions and the Nebraska
Contribute to the Loss Statute: A Primer and A Partial Critique, 61 Neb.
L. Rev. 209 (1982).
See, D & S Realty, supra note 2; Works, supra note 17.
See Works, supra note 17.
Nebraska Advance Sheets
devese v. transguard ins. co.
Cite as 281 Neb. 733
741
that show the licensee is unfit to drive a commercial vehicle.
By requiring O’Bryant to maintain his CDL as a condition
for coverage without any requirement that the loss occurred
because the insured was unqualified to operate a commercial
vehicle, Transguard could avoid liability for technical reasons. That is, it could avoid liability if O’Bryant’s license
lapsed or was suspended for reasons that were unrelated to
his qualifications.
Because of the condition’s excessive breadth and its failure
to require any causal connectedness to the loss, it is the type
of condition to which § 44-358 was intended to apply. Thus,
Transguard could not avoid liability unless it showed that
O’Bryant’s breach of the condition contributed to the loss.
We also disagree with Transguard that it has demonstrated
a causal link between the breach and the loss because it was
undisputed that O’Bryant was driving when he was not supposed to. The mere act of driving was not a breach of the condition. The breach was failing to maintain a valid CDL. Under
§ 44-358, Transguard was required to demonstrate a causal
connection between the breach and the loss.
Transguard did not present any evidence as to the cause of
the accident or O’Bryant’s abilities as a commercial driver.
Therefore, viewing the evidence in the light most favorable
to Devese, it was inappropriate to issue summary judgment in
favor of Transguard. We reverse the decision of the Court of
Appeals summarily affirming the trial court’s order of summary judgment and remand the cause to the Court of Appeals
with directions to remand the cause to the trial court for further
proceedings consistent with this opinion.
CONCLUSION
For the foregoing reasons, we reverse the decision of the
Court of Appeals and remand the cause with directions.
R eversed and remanded with directions.
Wright, J., not participating.
]]>
