NATURE OF CASE
Aрpellant Rosemary Pogge sustained injuries in a three-car accident in Omaha, Nebraska. Rosemary and her husband, appellant Philip H. Pogge, filed a lawsuit distinct from the instant appeal generally alleging negligence against the drivers of the other two vehicles. The Pogges reached settlements with the two drivers and their insurers and subsequently dismissed the negligence suit. With respect to the first driver, Lois Sisson, the Pogges settled for the full amount of her liability policy. With respect to the second driver, Nathan Mandell, the Pogges settled for $75,000, which was $25,000 less than his liability policy limit.
Following these settlements, the Pogges brought a declaratory judgment action in the district court for Douglas County. This declaratory judgment action gives rise to the instant appeal. In their declaratory judgment action filed against their insurer American Family Mutual Insurance Company (American Family), appellee, the Pogges sought a determination of the extent of the underinsured motorist coverage available to them under the “Family Car Policy” issued by American Family to the Pogges. Their underinsured motorist coverage contained an exhaustion clause generally providing that benefits could be obtained only after the Pogges exhausted other available insurance. This declaratory judgment case was the subject of a previous appellate decision,
Pogge v. American Fam. Mut. Ins. Co.,
Upon remand to the district court, the Pogges and American Family filed cross-motions for summary judgment. At the evidentiary hearing, the Pogges introduced numerous items of evidence, including Mandell’s deposition testimony regarding the accident. Fоllowing the hearing, the district court ruled as a matter of law that “settling with Mandell’s insurer for less than the policy’s limit precludes [the Pogges] from recovering underinsured motorist benefits under their policy.” The district court sustained American Family’s motion for summary judgment, overruled the Pogges’ motion for summary judgment, and dismissed the Pogges’ declaratory judgment action. The Pogges appeal.
We conclude that the district court erred as a matter of law in concluding that the fact of settlement established Mandell’s negligence and further determining that settlement with Mandell for less than the policy limit precluded coverage under the Pogges’ underinsured motorist insurance. We further conclude, based on the record made on the parties’ cross-motions for summary judgment, that because there is no evidence of Mandell’s negligence, the Pogges were not required to exhaust Mandell’s liability insurance coverage in order to claim underinsured motorist benefits under their American Family policy. Thus, the district court erred in denying the Pogges’ motion for summary judgment and further errеd in granting American Family’s motion for summary judgment and dismissing the case. Accordingly, we reverse the orders relative to the motions for summary judgment and dismissal and remand the cause for further proceedings with respect to damages and attorney fees.
STATEMENT OF FACTS
On January 15, 1999, Rosemary was involved in an automobile accident in Omaha involving two other vehicles. In the accident, Sisson, the driver of the first vehicle, was traveling westbound on Jackson Street and failed to yield to north-south cross-traffic having the right-of-way at the intersection of 114th and Jackson Streets. Sisson’s vehicle collided with a second vehicle driven by Nathan Mandell, who was traveling northbound on 114th Street. The impact of the collision between Sisson’s and Mandell’s vehicles caused Mandell’s vehicle to spin in a northwesterly direction and strike Rosemary’s car, which was stopped facing east at a stop sign on Meadow Road at the comer of Meadow Road and 114th Street, an intersection slightly north of the 114th and Jackson Streets intersection. Rosemary, who was alone in her vehicle, sustained serious bodily injuries.
At the time of the accident, Sisson’s car was insured by Safeco Insurance (Safeco), with a liability limit of $100,000, and Mandell’s car was insured by State Farm Mutual Insurance (State Farm), also with a liability limit of $100,000.
The Pogges’ car was insured by American Family, and their insurance policy contained underinsured motorist coverage of $100,000, which provided, in relevant part, as follows:
We will pay compensatory damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of аn underinsured motor vehicle. The bodily injury must be sustained by an insured person and must be caused by accident and arise out of the use of the underinsured motor vehicle.
We will pay under this coverage only after the limits of liability under any bodily injury liability . . . policies havebeen exhausted by payment of judgements [sic] or settlements.
The Pogges filed suit against both Sisson and Mandell, generally alleging negligence and seeking damages resulting from the accident. Thereafter, the Pogges negotiated a settlement with both Sisson’s and Mandell’s carriers. Sisson’s insurer, Safeco, offered Sisson’s liability policy limit of $100,000. State Farm, Mandell’s insurer, offered $75,000, which was $25,000 less than the policy limit. The Pogges notified American Family that they had reached a tentative settlement of their claims against Sisson and Mandell. In a letter dated January 9, 2001, American Family advised the Pogges that it did not “have any objection to [the settlement or to Sisson and Mandell’s receiving] full and complete releases.” The letter also stated:
American Family does not intend to substitute its own funds nor [sic] seek subrogation . . . beсause it is American Family’s position that the underinsured motorist coverage available to the Pogges under their policy with American Family . . . would not be available to the Pogges for this claim in that they are agreeing to settle their claim for less than the full policy limits of all underlying liability policies available for this accident.
The parties to this appeal indicate that the Pogges accepted Safeco’s and State Farm’s offers and settled the negligence lawsuit. Thereafter, the Pogges made dеmand upon American Family under their underinsured motorist insurance coverage, claiming that their damages exceeded the $175,000 settlement. American Family refused the demand.
On January 14, 2003, the Pogges filed their “petition” against American Family, which we treat, as did the Nebraska Court of Appeals, as a “complaint” subject to the new rules of notice pleading. See Neb. Ct. R. of Pldg. in Civ. Actions 1 (rev. 2004). The complaint contained two counts. The first count sought a declaratory judgment with regard to the coverage afforded the Pоgges under the provisions of their underinsured motorist insurance. The second count alleged that American Family had breached its duty of good faith and fair dealing caused by refusing to pay underinsured motorist benefits. In their complaint, the Pogges noted their respective settlements with Sisson and Mandell and alleged that their damages as a result of the accident exceeded the sum of such settlements and that as such, they were entitled to coverage under their underinsured motorist insurance with American Family. A copy of the policy was attached to the complaint.
American Family filed a motion to dismiss the Pogges’ lawsuit under Neb. Ct. R. of Pldg. in Civ. Actions 12(b)(6) (rev. 2003). American Family asserted that the Pogges’ failure to exhaust the policy limits of all of the insurance purportedly available to the Pogges from Sisson’s and Mandell’s insurance policies precluded benefits under the underinsured provisions of the American Family policy. Relying in part upon this court’s decision in
Ploen
v.
Union Ins. Co.,
The Pogges appealed the district court’s order sustaining American Family’s motion to dismiss to the Court of Appeals. The Court of Appeals reversed the district court’s order and remanded the cause for further proceedings.
Pogge I.
In its opinion, the Court of Appeals acknowledged that the enforceability of the American Family exhaustion clause was governed by the
Ploen
decision and that the American Family exhaustion provision was similar to the provision in
Ploen.
The Court of Appeals noted, however, that given the facts, there were “several significant differences between
Ploen
and the instant case” and that dismissal by the district court was error.
Pogge
I,
Upon review of the motion to dismiss under rule 12(b)(6), the Court of Appeals determined that it could “.‘conjure’ up a set of facts”, that could be proved that would allow the Pogges to recover under their underinsured motorist insurance with American Family.
Pogge I,
[W]e hold that Mandell’s policy is not an applicable policy merely because State Farm paid part of its coverage into the settlement; rather, if the policy is applicable or available and must be exhausted, it is because Mandell was guilty of negligence which proximately caused injury to Rosemary. However, from the facts of the accident as pleaded, there is a readily imaginable set of facts — Mandеll’s absence of negligence proximately causing injury — which would make Mandeb’s policy inapplicable.
Id.
at 71,
The Court of Appeals determined that under the principles of notice pleading, the district court erred in dismissing the Pogges’ declaratory judgment action on a rule 12(b)(6) motion, “because there [was] a set of facts, which if proved, would make Mandeb’s State Farm policy inapplicable and therefore not subject to exhaustion.”
Pogge I,
On February 2, 2005, following remand, American Family filed its motion for summary judgment. On March 18, the Pogges filed a cross-motion for summary judgment, in effect asserting that Mandeb was not negligent and that therefore, they did not need to exhaust his insurance policy in
The thrust of Mandeb’s deposition testimony was that at the time of the accident, he was driving slightly below the speed limit. He stated that he saw Sisson’s vehiclе as she was stopped at a stop sign. Mandeb further testified that because he had the right-of-way, he assumed Sisson would wait for his vehicle to pass, but instead, as he reached the intersection, “she shot out.” Mandeb testified that after Sisson hit him, his vehicle was out of control, “spinning back and forth.” Mandeb stated that it was while his vehicle was uncontrollably spinning that he hit Rosemary.
The only evidence offered by American Family was the affidavit of a State Farm representative, the significance of which was that State Farm had sеttled the Pogges’ claim against Mandell for $75,000 of Mandell’s $100,000 policy limit.
In an order filed May 24, 2005, the district court sustained American Family’s motion for summary judgment, overruled the Pogges’ motion for summary judgment, and dismissed the case. The district court’s order does not reflect consideration of or contain an evaluation of the evidence offered to show Mandell’s negligence or absence thereof. Instead, the district court determined that the exhaustion language in the American Family policy was “nearly identical” to that in
Ploen v. Union Ins. Co.,
The Pogges appeal the distriсt court’s decision with regard to coverage under their underinsured motorist insurance but make no assignment of error or argument on appeal directed to that part of the district court’s order dismissing their breach of good faith claim. Therefore, that claim remains dismissed, and that portion of the district court’s order will not be further addressed in this opinion. With respect to the dismissal of the Pogges’ declaratory judgment cause of action that had sought a ruling as to the availability of underinsured benefits, we conclude cоverage is available to the Pogges, and we reverse, and remand for further proceedings consistent with this opinion.
ASSIGNMENTS OF ERROR
On appeal, the Pogges assign five errors that can be restated as two. The Pogges claim that the district court erred (1) in sustaining American Family’s motion for summary judgment with respect to the declaratory judgment cause of action and overruling the Pogges’ motion for summary judgment with respect to the declaratory judgment cause of action and (2) in denying the Pogges their attorney fees sought pursuant to Nеb. Rev. Stat. § 44-359 (Reissue 2004). In their brief, the Pogges also seek attorney fees on appeal, but no application has been filed with this court, and we, therefore, do not consider this issue.
Summary judgment is proper when the pleadings and evidence admitted 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.
Sjuts v. Granville Cemetery Assn., ante
p. 103,
ANALYSIS
On appeal, the Pogges raise several arguments challenging the district court’s order sustaining American. Family’s motion for summary judgment with respect to the declaratory judgment cause of action, overruling their motion for summary judgment as to that cause of action, and dismissing the case. In this opinion, we refer only to those arguments integral to our disposition of the appeal. The Pogges claim that the district court erred in concluding that (1) the fact that the Pogges settled with Mandell’s insurer established Mandell’s negligence and (2) the fact that Mandell settled for less than the policy limits precluded the Pogges from coverage under their underinsured motorist insurance policy. Moreover, the Pogges note that the district court failed to consider their evidence, which the Pogges claim established an uncontradicted prima facie case that Mandell was not negligent and that therefore, they were not required to exhaust Mandell’s insurance limits before they could recover under their underinsured motorist insurance with American Family. In response, American Family argues that Mandell’s settlement with the Pogges constitutes, in effect, an admission of liability by Mandell and that therefore, the district court did not err in determining the Pogges were precluded from recovery under their underinsured motorist coverage due to their failure to exhaust the limits of Mandell’s liability insurance policy.
We agrеe with certain of the Pogges’ arguments and conclude that the district court erred as a matter of law when it concluded that the Pogges’ settlement with Mandell constituted an admission of liability by Mandell, thus precluding the Pogges from recovering under the provisions of their underinsured motorist policy, when such settlement was for less than Mandell’s policy limit. Moreover, we agree with the Pogges that the district court erred by failing to consider the evidence adduced with regard to Mandell’s negligence or absence thereof, which consideration bears on the exhaustion issue. Even giving the inferences to American Family, our consideration of the evidence demonstrates that the Pogges are entitled to coverage, and we enter orders accordingly.
Settlement Does Not Preclude Coverage.
The essence of the Pogges’ complaint is one seeking coverage under the terms of their underinsured motorist insurance with American Family. We have held that where coverage is denied, the burden of proving coverage under a policy is upon the insured.
Farm Bureau Ins. Co. v.
Martinsen,
As noted above, in reviewing the adequacy of the Pogges’ complaint, the
[W]e hold that Mandell’s policy is not an applicable policy merely because State Farm paid part of its coverage into the settlement; rather, if the policy is applicable or available and must be exhausted, it is because Mandell was guilty of negligence which proximately caused injury to Rosemary. However, from the faсts of the accident as pleaded, there is a readily imaginable set of facts — Mandell’s absence of negligence proximately causing injury — which would make Mandell’s policy inapplicable.
Despite the fact that in Pogge I, the Court of Appeals rejected the argument that the fact of settlement for less than Mandell’s policy limits alone precluded the Pogges from recovery under their underinsured motorist insurance, the district court, upon remand and on cross-motions for summary judgment, nevertheless determined that “settling with Mandell’s insurer for less than the poliсy’s limit precludes [the Pogges] from recovering underinsured motorist benefits under their policy.” Based upon this reasoning, the district court sustained American Family’s motion for summary judgment and dismissed the Pogges’ declaratory judgment action.
Implicit in the district court’s decision is a determination that the fact of settlement established Mandell’s liability. This conclusion is an error of law. Under Nebraska law, evidence of settlement is not admissible to prove liability for the settled claim. See, Neb. Rev. Stat. § 27-408 (Reissue 1995);
Baker
v.
Blue Ridge Ins. Co.,
No Evidence Regarding Mandell’s Negligence. Mandell’s Insurance Is Not Available.
The instant case was before the district court on cross-motions for summary judgment. A party moving for summary judgment must make a prima faсie case by producing enough evidence to demonstrate that the movant is entitled to judgment if the evidence were uncontroverted
The Pogges moved fоr summary judgment on the issue of coverage under their insurance policy, an issue for which they had the burden of proof. See
Farm Bureau Ins. Co. v. Martinsen,
We have reviewed the record in this case, and we determine the Pogges produced enough evidence to establish a prima facie case that, if left uncontroverted at trial, would entitle them to judgment as a matter of law. That showing shifted the burden to American Family to produce evidence of a material factual issue. Even considering the affidavit of the American Family representative, and taking all inferences in favor of American Family, American Family did not produce evidence to contradict the Pogges’ evidence regarding Mandell’s lack of negligence. Therefore, American Family failed to meet its burden of producing evidence, and there is no material fact in dispute regarding Mandell’s lack of negligence and no evidence which would preclude the Pogges’ demand for coverage. See NEBCO, Inc. v. Adams, supra. In view of the foregoing, we conclude the district court erred in granting summary judgment in favor of American Family, in denying the Pogges’ motion for summary judgment, and in failing to grant summary judgment in favor of the Pogges.
Accordingly, we reverse the district court’s order granting summary judgment in favor of American Family and denying the Pogges’ summary judgment motion and we remand the cause for further proceedings on the issue of damages. Upon remand, the district court is directed to determine on the existing record what damages, if any, the Pogges sustained as a result of the accident that exceed the sum of their settlements with Sisson and Mandell, and as a result, what insurance proceeds, if any, they are entitled to receive under their underinsured motorist insurance with American Family.
Attorney Fees Are to Be Considered by the District Court on Remand.
In the instant appeal, the Pogges claim they were improperly denied attorney fees by the district court. Attorney fees are available to an insured under § 44-359 “upon . . . judgment against” an insurance company “in addition to the amount of his or her recovery.” See
Kirwan
v.
Chicago Title Ins. Co.,
CONCLUSION
We conclude the district court erred as a matter of law in concluding that the Pogges’ settlement with Mandell constituted an admission of liability by Mandell and that because the Pogges settled for less than Mandell’s policy limits, the Pogges failed to exhaust Mandell’s policy and were precluded from receiving benefits under their underinsured motorist insurance coverage with American Family. We further determine that the Pogges established their entitlement to cоverage under their underinsured motorist coverage with American Family. Accordingly, the district court erred in granting the summary judgment motion of American Family and in denying the summary judgment motion of the Pogges. We reverse the orders and direct that judgment be entered in favor of the Pogges. We further direct the district court upon remand to determine the Pogges’ damages on the existing record. Finally, we direct the district court to consider the Pogges’ motion for attorney fees at the trial level under § 44-359. We reverse the district court’s orders and remand the cause for further proceedings consistent with this opinion.
Reversed and remanded for FURTHER PROCEEDINGS.