Gage County v. Employers Mut. Cas. Co.
937 N.W.2d 863
Neb.2020Background:
- In 1985 Helen Wilson was murdered; six people (the "Beatrice Six") were convicted after investigations by Gage County law‑enforcement and later exonerated by DNA; civil rights suits followed (filed 2009–2011) alleging manufactured evidence, malicious prosecution, false arrest, and related claims against Gage County, deputies, and the county attorney.
- Gage County had three EMC policies effective Feb. 2, 1989–1990: a CGL (occurrence) policy ($1M per occurrence/$2M aggregate) whose insuring clause covered "personal injury" (including false arrest and malicious prosecution) but included an undefined "professional services" exclusion; a claims‑made "linebacker" policy (excluded "personal injury" and defined "professional services" by an exclusive list of professions); and an umbrella policy that provided excess (and in some cases drop‑down) coverage and separately defined "professional liability" and listed "law enforcement" under an "excluded occupations liability" provision.
- Gage County tendered defense in 2009; EMC denied coverage under the CGL (invoking the professional services exclusion), denied the linebacker policy (no claims‑made trigger), and denied umbrella coverage (professional/excluded occupations exclusions).
- A federal jury found Gage County liable (through a county policy/custom) and entered judgments totaling over $28 million; judgments were upheld on appeal.
- Gage County sued EMC for declaratory relief. The district court granted EMC summary judgment, concluding the CGL professional services exclusion barred coverage. The Nebraska Supreme Court reversed and remanded, holding the policies’ plain language—read together—show the professional services exclusion does not bar coverage for law enforcement acts alleged in the Beatrice Six suits; it also found potential umbrella coverage and ruled claims against deputy/psychologist Price arose from deputy acts, not psychologist services.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the CGL "professional services" exclusion bars coverage for alleged malicious prosecution/false arrest by law enforcement | Law enforcement is an occupation, not a "professional service" under these policies; the policies’ language does not exclude police acts | Police acts involve specialized skill/training and thus qualify as "professional services" (Marx definition) | Exclusion does not apply to law enforcement here; read with other policies, parties treated law enforcement as an "occupation," so CGL exclusion does not bar coverage for those claims |
| Whether courts should apply Marx or professional‑negligence/statutory definitions to define "professional services" | Use statutory/case law definition of "profession" (§25‑222 framework) to show law enforcement is not a profession | Marx definition (act‑focused, specialized mental skill) controls and supports exclusion | Court declined to import either body of case law; governed by the parties’ unambiguous policy language and the interrelated policy scheme |
| Whether the umbrella policy provides excess or drop‑down coverage | Umbrella may provide excess/drop‑down coverage depending on CGL availability | Umbrella excludes law enforcement/professional liability and thus no excess coverage | Reversed district court; umbrella coverage may be available depending on CGL coverage—summary judgment denying umbrella premature; remanded |
| Whether claims against Price as a psychologist are excluded as professional services | Allegations against Price concern his actions as a deputy (investigative acts), not his psychologist role | Price’s psychologist role is a professional service and excluded | Claims against Price arose from deputy/investigative acts, not psychologist services; exclusion does not bar those claims; even mixed allegations do not negate coverage |
Key Cases Cited
- Marx v. Hartford Acc. & Ind. Co., 183 Neb. 12, 157 N.W.2d 870 (1968) (articulated an act‑focused definition of "professional services" used in prior insurance disputes)
- R.W. v. Schrein, 264 Neb. 818, 652 N.W.2d 574 (2002) (applied Marx definition in an insurance context)
- Drake‑Williams Steel v. Continental Cas. Co., 294 Neb. 386, 883 N.W.2d 60 (2016) (allocation of burdens in insurance coverage disputes)
- Federated Serv. Ins. Co. v. Alliance Constr., 282 Neb. 638, 805 N.W.2d 468 (2011) (insurance contract interpretation principles)
- Harleysville Ins. Group v. Omaha Gas Appliance Co., 278 Neb. 547, 772 N.W.2d 88 (2009) (examine overall pattern of insurance when construing interrelated policies)
- Safeco Ins. Co. of America v. Husker Aviation, Inc., 211 Neb. 21, 317 N.W.2d 745 (1982) (respect the contract the parties made; do not rewrite clear policy language)
- National Cas. Co. v. Western World Ins. Co., 669 F.3d 608 (5th Cir. 2012) (rule that professional‑and‑nonprofessional mixed allegations do not automatically negate coverage)