Rent-A-Roofer, Inc. v. Farm Bureau Property & Casualty Insurance Company

Summary

The Nebraska Supreme Court held that an insurer must show prejudice to avoid liability or a duty to defend based on breaches of notice and voluntary payments provisions. Prejudice may be established as a matter of law when an insured fails to notify the insurer until after completing the defense and entering a binding settlement, depriving the insurer of any opportunity to investigate, defend, or participate in settlement discussions. The court affirmed summary judgment for Farm Bureau.

Holdings

1. An insurer seeking to avoid liability under a voluntary-payments provision must show that the insured's breach prejudiced the insurer.
2. Prejudice may be established as a matter of law when the insured's settlement deprives the insurer of any opportunity to protect its interests in the litigation or participate in settlement discussions.
3. Farm Bureau was not liable for Rent-A-Roofer's defense costs because Rent-A-Roofer did not notify Farm Bureau until after the NRC defense and binding settlement were complete.
4. An insurer's denial of a prior claim does not waive notice of a subsequent claim when the claims involve different parties, complaints, and occurrences.

Questions Presented

1. Whether an insurer must demonstrate prejudice before denying coverage based on an insured's breach of a voluntary-payments provision.
2. Whether an insurer is relieved of its duty to defend when the insured gives notice only after the defense has concluded and the insured has entered into a binding settlement.
3. Whether Farm Bureau waived Rent-A-Roofer's notice obligation by denying coverage for a prior claim.
4. Whether Rent-A-Roofer was entitled to recover its defense costs.

Disposition

affirmed