INSURANCE-RELATED COURT CASES
Digested from case reports published online
No dice for gutter company
On April 9, 2018, Millard Gutter Company filed a complaint against Shelter Mutual Insurance Company in district court. Millard brought the action in its own name as “the assignee of various insured property owners” who purchased insurance from Shelter and whose property “sustained loss due to a storm occurring in 2013.” The assignments were not attached to the complaint but were described therein as “valid assignments of the right to proceeds under an insurance policy issued by Shelter.”
The complaint alleged that Millard provided Shelter copies of the assignments and made claims for storm damage to the insured properties. The complaint broadly alleged that all of the Shelter policies were in full force and effect, the storm damage was covered, and all policy conditions had been met. The complaint did not identify the addresses or locations of the insured properties, the dates of the alleged storm damage, or the dates the assignments were made. Millard alleged that Shelter breached the policies when it “failed to make direct payment to [Millard Gutter]” and failed to include Millard “as a payee on any checks or other payments for the loss.” The complaint also alleged that Shelter’s failure to pay Millard amounted to “bad faith and constitutes a separate violation of the implied covenant of good faith and fair dealing owed under the insurance contracts.” The complaint sought unspecified general and special damages in an amount to be determined at trial.
Shelter moved to dismiss the bad faith claims pursuant to a state statute, arguing that the complaint failed to state a claim because Millard lacked standing to assert a first-party bad faith claim. Additionally, Shelter moved for a more definite statement under the state statute, arguing that without more detail identifying the insured properties and the nature and scope of the alleged assignments, Shelter could not reasonably form a responsive pleading. More specifically, Shelter argued that it could not discern, from the allegations of the complaint, which claims the policyholders had purportedly assigned, where the insured properties were located, whether all named insureds had executed the assignments, or whether the assignments were made pre-loss or post-loss.
In a March 26, 2019 order, the district court sustained the motion for a more definite statement, finding that the original complaint was “insufficient to identify the homeowners and put [Shelter] on notice of each individual homeowner’s claim.” Millard was ordered to file, within 14 days, an amended complaint that identified the pertinent, policy numbers and attached the assignments on which it relied. Millard never filed an amended complaint.
In a separate order entered April 8,2019, the court granted Shelter’s motion to dismiss the bad faith claims for lack of standing.
The court also considered and rejected Millard’s argument that it had standing to assert the bad faith claims by virtue of the alleged assignments. First, the court recited the general rule that only a present interest may be validly assigned, and it noted that the complaint contained no factual allegations suggesting that any Shelter policyholder had an existing bad faith claim at the time the assignments were made. Additionally, the court reason-ed that even if the assignments purported to include an existing claim for first-party bad faith, allowing Millard to bring such claims in its own name would violate a case law ruling that held that the proceeds of personal injury tort litigation may be validly assigned, but control of the litigation may not. The court therefore concluded that Millard’s complaint did not contain sufficient factual allegations to establish standing to assert claims of first-party bad faith. Millard appealed.
On appeal, the supreme court stated that the focus was not on whether the claim being advanced had merit; it was on whether Millard was the appropriate party to assert the claim. According to the court, regardless of the validity for other purposes, the post-loss assignments from Shelter’s policyholders could not, as a matter of law, give Millard standing to prosecute the policyholders’ tort actions for first-party bad faith against Shelter. Millard’s arguments to the contrary were deemed to be without merit.
The record supports the trial court’s determination that Millard deliberately disobeyed the order to make more definite details available, stalled progression of the case by waiting almost 17 months to advise the court of its decision to stand on the original complaint, and failed to show good cause for the resulting failure to prosecute. The court found no merit to any of Millard’s arguments that it was an abuse of discretion to dismiss the case with prejudice. The judgment of the district court was affirmed.
Millard Gutter Company v. Shelter Mutual Insurance Company—Nebraska Supreme Court—October 14, 2022—No. 312 Neb 606.