Merrick v. Fischer, Rounds & Assocs.
939 N.W.2d 795
Neb.2020Background
- Jerald Merrick was injured on March 31, 2009 while driving for Western Hay Services, Inc.; Western Hay had no workers’ compensation policy.
- Western Hay purchased commercial lines insurance through broker Fischer, and Great West issued the commercial policy (auto, inland marine, and CGL) that contained workers’ compensation and employer’s-liability exclusions.
- Western Hay requested workers’ compensation coverage in February 2009; broker requested payroll to quote; payroll was not provided until April 1, 2009 (the day after the accident).
- Great West denied defense/coverage for Merrick’s underlying district‑court suit, citing the policy exclusions.
- Merrick obtained a stipulated $800,000 judgment against Western Hay, received an assignment of Western Hay’s claims against Fischer and Great West, and sued the broker (negligence) and insurer (duty to defend / bad faith).
- The district court granted summary judgment to Fischer and Great West; the Nebraska Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did broker Fischer have a duty to advise or procure workers’ compensation before the insured requested it? | Merrick: Fischer had an affirmative duty to tell Western Hay it had to carry workers’ comp and to procure it. | Fischer: No duty to procure or advise absent an insured request and cooperation; insured delayed by not providing payroll. | Held: No duty prior to insured’s request/cooperation; Fischer not negligent; summary judgment for Fischer. |
| Does broker status (vs. agent) impose a broader duty to evaluate risks and advise insureds? | Merrick: Brokers owe a heightened duty to act with reasonable care, including advising on typical industry risks (like workers’ comp). | Fischer: Broker/agent distinction does not expand the duty to volunteer advice absent agreement or inducement to rely. | Held: Distinction did not create a broader duty here; absent agreement to advise, no obligation to volunteer coverage advice. |
| Did Great West owe a duty to defend Western Hay in Merrick’s district‑court action? | Merrick: The suit in district court should be defended despite lack of workers’ comp coverage. | Great West: Policy contains clear workers’ compensation and employer’s‑liability exclusions barring coverage for employee injuries in course of employment. | Held: Exclusions are clear and unambiguous; underlying allegations fall within exclusions; no duty to defend. |
| Was Great West’s denial of defense a bad‑faith refusal to pay? | Merrick: Denial of defense and coverage was unreasonable and in bad faith. | Great West: Denial was based on a reasonable coverage position supported by policy exclusions. | Held: No bad faith—denial had a reasonable basis; summary judgment for Great West. |
Key Cases Cited
- Polski v. Powers, 221 Neb. 361, 377 N.W.2d 106 (1985) (an insurer/agent who does not agree to advise and does not lead insured to rely on advice is not negligent for failing to volunteer coverage advice)
- Broad v. Randy Bauer Ins. Agency, 275 Neb. 788, 749 N.W.2d 478 (2008) (broker is insured’s agent for procuring coverage and agency principles shape contract claims against brokers)
- Hansmeier v. Hansmeier, 25 Neb. App. 742, 912 N.W.2d 268 (Neb. Ct. App. 2018) (failure to advise employer of statutory workers’ comp notice requirements is not negligence where insured elected not to purchase and agent gave no false information)
- Bell v. O’Leary, 744 F.2d 1370 (8th Cir. 1984) (broker negligent where it accepted responsibility to secure eligibility for coverage and failed to discover ineligibility)
- Countryside Co‑op v. Harry A. Koch Co., 280 Neb. 795, 790 N.W.2d 873 (2010) (broker who agrees to procure coverage but fails is liable for proximate damages including amount that would have been due under the omitted policy)
- Federated Serv. Ins. Co. v. Alliance Constr., 282 Neb. 638, 805 N.W.2d 468 (2011) (rules for construing insurance contracts and insurer’s duties to defend and indemnify)
- LeRette v. American Med. Security, 270 Neb. 545, 705 N.W.2d 41 (2005) (elements and proof required to establish an insurer’s bad‑faith denial of benefits)