Millard Gutter Co. v. Shelter Mut. Ins. Co.
312 Neb. 606
Neb.2022Background
- After a 2013 storm, Millard Gutter obtained assignments from multiple Shelter Mutual policyholders and sued Shelter as assignee for breach of insurance contracts and for first-party bad faith.
- The complaint alleged Millard Gutter had “valid assignments” of the right to proceeds but did not attach assignments or identify policy numbers, insured properties, dates of loss, or assignment dates.
- Shelter moved to dismiss the bad-faith claims for lack of standing and moved for a more definite statement as to the breach claims; the district court ordered Millard Gutter to amend and attach the assignments.
- Millard Gutter did not amend; the court dismissed the bad-faith claims for lack of standing, later issued a show-cause for lack of progression, and then dismissed the entire action with prejudice for failure to comply and prosecute.
- Millard Gutter appealed, principally contesting standing to bring first-party bad-faith claims, the court’s order for a more definite statement, and dismissal with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Millard Gutter (a nonpolicyholder assignee) has standing to assert first-party bad-faith claims | As assignee of policyholders’ postloss rights, Millard Gutter can assert any existing bad-faith claims or its own bad-faith claims based on postassignment conduct | Only a policyholder (or covered person/beneficiary) may bring first-party bad-faith tort claims; assignments cannot transfer the right to prosecute such torts | Court: No standing. Bad-faith tort is a personal/intention tort; proceeds may be assigned but the right to prosecute/control such torts cannot be validly assigned to a nonpolicyholder. |
| Whether existing first-party bad-faith claims (if any) are assignable to Millard Gutter | Policyholders could assign existing bad-faith claims to an assignee who then prosecutes them | Assignments cannot convey the right to prosecute/control personal tort actions like first-party bad faith | Court: Proceeds from personal torts may be assigned, but assignments conveying the right to prosecute/control such torts are invalid; therefore Millard Gutter cannot acquire standing that way. |
| Whether Millard Gutter could assert its own bad-faith claim as assignee (i.e., insurer owed duty to assignee) | Assignment of policy proceeds places assignee in insured’s shoes so insurer owes it same covenant of good faith | The implied covenant of good faith arises from the insurer-policyholder contract; a postloss assignment does not create a contractual relationship or expand insurer duties | Court: Rejected plaintiff. No contractual relationship or duty of good faith existed between Shelter and Millard Gutter, so Millard Gutter cannot bring its own first-party bad-faith tort. |
| Whether the court abused discretion in ordering a more definite statement and/or in dismissing with prejudice for failure to amend and prosecute | The court should not have required more detail or dismiss with prejudice; dismissal should be without prejudice under statute | Complaint was vague (no assignments/policy numbers); court properly ordered amendment and, after deliberate noncompliance and long delay, properly dismissed with prejudice as a sanction and for failure to prosecute | Court: No abuse. The order to attach policy numbers and assignments was reasonable; dismissal with prejudice was within the court’s inherent and statutory authority given deliberate noncompliance and lengthy delay. |
Key Cases Cited
- Braesch v. Union Ins. Co., 237 Neb. 44 (Neb. 1991) (recognized first-party bad-faith tort and held only policyholder/covered person or beneficiary may bring it)
- Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co., 295 Neb. 419 (Neb. 2016) (held postloss breach-of-contract claims for insurance proceeds are assignable and assignee may sue on contract claim)
- Mutual of Omaha Bank v. Kassebaum, 283 Neb. 952 (Neb. 2012) (adopted rule that proceeds of personal-injury torts may be assigned, but assignment of prosecution/control of the action is invalid)
- Olson v. Union Fire Ins. Co., 174 Neb. 375 (Neb. 1962) (early recognition of insurer bad-faith tort principles)
- Ruwe v. Farmers Mut. United Ins. Co., 238 Neb. 67 (Neb. 1991) (discussed elements and remedies for first-party bad-faith claims)
- Krohn v. Gardner, 248 Neb. 210 (Neb. 1995) (assignment must transfer a present interest to be valid)