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Nebraska Supreme Court Advance Sheets

308 Nebraska Reports

STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

State Farm Fire & Casualty Company, appellee, 

v. TFG Enterprises, LLC, and Jeffrey 

Leonard, appellants, and Jeffrey 

Barkhurst, appellee.

___ N.W.2d ___

Filed February 19, 2021. No. S-20-271.

1. Insurance: Contracts: Appeal and Error. The interpretation of an 

insurance policy is a question of law, in connection with which an appellate court has an obligation to reach its own conclusions independently 

of the determination made by the trial court.

2. Summary Judgment: Appeal and Error. In reviewing a summary 

judgment, an appellate court views the evidence in the light most 

favorable to the party against whom the judgment is granted and gives 

such party the benefit of all reasonable inferences deducible from 

the evidence.

3. ____: ____. An appellate court will affirm a lower court’s grant of summary judgment if the pleadings and admitted evidence show that there is 

no genuine issue as to any material facts or as to the ultimate inferences 

that may be drawn from the facts and that the moving party is entitled to 

judgment as a matter of law.

4. Insurance: Contracts: Liability: Words and Phrases. An exclusion in 

an insurance policy is a limitation of liability, or a carving out of certain 

types of loss, to which the insurance coverage never applied.

5. Insurance: Contracts. When the terms of an insurance contract are 

clear, a court gives them their plain and ordinary meaning as a reasonable person in the insured’s position would understand them.

6. Insurance: Contracts: Appeal and Error. When an insurance contract 

is ambiguous, an appellate court will construe the policy in favor of 

the insured.

7. Insurance: Contracts: Words and Phrases. Regarding words in an 

insurance policy, the language should be considered not in accordance 

with what the insurer intended the words to mean but according to 

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

05/14/2021 12:12 AM CDT
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Nebraska Supreme Court Advance Sheets

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STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

what a reasonable person in the position of the insured would have 

understood them to mean.

8. Contracts: Words and Phrases. A contract is ambiguous when a word, 

phrase, or provision in the contract has, or is susceptible of, at least two 

reasonable but conflicting interpretations or meanings.

9. Insurance: Contracts. The language of an insurance policy should be 

read to avoid ambiguities, if possible, and the language should not be 

tortured to create them.

Appeal from the District Court for Douglas County: J. 

Michael Coffey, Judge. Affirmed.

William J. Hale, Thomas C. Dorwart, and Andrew W. 

Simpson, of Goosmann Law Firm, P.L.C., for appellants.

Patrick S. Cooper and Brian J. Fahey, of Fraser Stryker, P.C., 

L.L.O., for appellee State Farm Fire & Casualty Company.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

Papik, and Freudenberg, JJ.

Papik, J.

TFG Enterprises, LLC (TFG), and its principal, Jeffrey 

Leonard, appeal from a district court order finding that State 

Farm Fire & Casualty Company (State Farm) had no obligation under an insurance policy to defend or indemnify them 

in a lawsuit. The lawsuit alleged that TFG concealed facts and 

made misrepresentations regarding the condition of a property 

it sold. Because we agree with the district court that State Farm 

had no potential liability under the policy, we affirm.

BACKGROUND

Underlying Lawsuit and 

Request for Coverage.

In March 2019, Jeffrey Barkhurst filed a lawsuit against 

TFG and Leonard in the district court for Douglas County (the 

underlying lawsuit). Barkhurst alleged that when he purchased 

a house from TFG in August 2015, TFG failed to disclose 

and actively concealed several defects, including the intrusion 
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Nebraska Supreme Court Advance Sheets

308 Nebraska Reports

STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

of water, the presence of mold, substandard repairs, and structural issues. Based on these allegations, Barkhurst asserted that 

TFG and Leonard were liable for breach of contract, negligent misrepresentation, and fraudulent concealment. Barkhurst 

claimed he was entitled to receive in damages the costs necessary to bring the property to its represented condition at the 

time of sale.

State Farm had previously issued TFG a “Rental Dwelling 

Policy of Insurance” (the rental policy) on January 6, 2015. 

TFG and Leonard submitted a claim under the rental policy 

requesting that State Farm provide a defense in the underlying 

lawsuit. State Farm agreed to defend TFG and Leonard under 

a reservation of rights.

State Farm’s Declaratory 

Judgment Action.

State Farm subsequently filed the declaratory judgment 

action at issue in this appeal. State Farm sought a declaration 

that it owed no coverage obligations to TFG or Leonard under 

several provisions of the rental policy.

State Farm alleged that it owed no coverage obligations 

under the portion of the rental policy initially extending liability coverage to TFG. That portion of the policy provided that 

State Farm would indemnify and defend TFG “[i]f a claim 

is made or a suit is brought against any insured for damages 

because of bodily injury, personal injury, or property damage 

to which this coverage applies, caused by an occurrence, and 

which arises from the ownership, maintenance, or use of the 

insured premises . . . .” (Emphasis omitted.) The rental policy 

defined “occurrence” as “an accident, including exposure to 

conditions” which results in “a. bodily injury; b. property 

damage; or c. personal injury[,] during the policy period.” 

(Emphasis omitted.) State Farm alleged that it owed no coverage to TFG because there had been no “occurrence” and no 

“property damage.”

State Farm also alleged that it owed no coverage obligations because of several exclusions in the rental policy. The 
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308 Nebraska Reports

STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

exclusions relied upon by State Farm provided that there 

would be no liability coverage for “property damage to property owned by any insured”; “property damage to property 

rented to, occupied or used by or in the care of the insured”; 

or “property damage or personal injury to premises [the 

insured] sell[s], give[s] away, or abandon[s], if the property 

damage, or personal injury arises out of those premises.” 

(Emphasis omitted.)

Summary Judgment.

State Farm filed a motion for summary judgment. At the 

hearing on the motion for summary judgment, State Farm 

offered and the district court received an affidavit signed by 

its counsel. Attached to the affidavit were a copy of the rental 

policy, a copy of the complaint in the underlying lawsuit, 

copies of letters State Farm sent to TFG and Leonard reserving its rights, and discovery responses of TFG and Leonard. 

In the discovery responses, TFG and Leonard admitted that 

they purchased the house at issue in January 2015 and that 

none of the conditions or defects identified in Barkhurst’s 

lawsuit existed when it purchased the property. TFG and 

Leonard also admitted that from the time they purchased the 

house in January 2015 until the time they sold it in August 

2015, they used the house and the house was in their care and 

possession. In response to an interrogatory asking them to 

describe in detail what they contended was the “occurrence” 

triggering coverage under the rental policy, TFG and Leonard 

objected that the question called for a legal conclusion. TFG 

and Leonard did not offer any evidence in opposition to State 

Farm’s motion for summary judgment.

The district court granted State Farm summary judgment. 

It found State Farm owed no coverage obligations for three 

reasons. First, the district court found that any breaches of 

the contract between Barkhurst and TFG, and any fraudulent 

concealment or negligent misrepresentations by TFG, did not 

cause property damage as required to trigger coverage under 

the rental policy. Second, it determined that the allegations 
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308 Nebraska Reports

STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

of breach of contract, fraudulent concealment, and negligent 

misrepresentation did not meet the definition of an “occurrence,” because they were not accidental. It also determined 

that the exclusions relied upon by State Farm barred coverage.

TFG and Leonard now appeal.

ASSIGNMENTS OF ERROR

TFG and Leonard assign three errors on appeal. They contend, restated, that the district court erred (1) by finding that 

there was no “occurrence” which triggered coverage, (2) by 

finding that any “occurrence” did not cause property damage 

for purposes of the rental policy, and (3) by finding that the 

exclusions barred coverage.

STANDARD OF REVIEW

[1] The interpretation of an insurance policy is a question of 

law, in connection with which an appellate court has an obligation to reach its own conclusions independently of the determination made by the trial court. Jones v. Shelter Mut. Ins. Cos., 

274 Neb. 186, 738 N.W.2d 840 (2007).

[2] In reviewing a summary judgment, an appellate court 

views the evidence in the light most favorable to the party 

against whom the judgment is granted and gives such party 

the benefit of all reasonable inferences deducible from the 

evidence. Id.

[3] An appellate court will affirm a lower court’s grant of 

summary judgment if the pleadings and admitted evidence 

show that there is no genuine issue as to any material facts or 

as to the ultimate inferences that may be drawn from the facts 

and that the moving party is entitled to judgment as a matter of 

law. State Farm Fire & Cas. Co. v. Dantzler, 289 Neb. 1, 852 

N.W.2d 918 (2014).

ANALYSIS

In support of their first two assignments of error, TFG and 

Leonard argue that the district court was mistaken to consider 

only the allegations of Barkhurst’s lawsuit in determining 
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STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

whether there was an “occurrence” and whether such an occurrence caused property damage. They contend that because 

there is evidence that the defects to the house were not present 

when TFG purchased it, there is a genuine issue of material 

fact as to whether those defects were caused by some not yet 

identified accident that took place while TFG owned the property, which they suggest might be revealed in the adjudication 

of the underlying lawsuit. They assert the rental policy would 

provide coverage if such an accident could be identified and 

thus State Farm is obligated to provide TFG and Leonard with 

a defense.

We are skeptical that TFG and Leonard have created a genuine issue of material fact as to whether there was an “occurrence” under the rental policy and whether the underlying 

lawsuit is a suit for property damage, but it is unnecessary for 

us to reach those questions. As we will explain, even if it is 

assumed that the defects in the house were caused by an accident that took place while TFG owned the property and that 

the underlying lawsuit is a suit brought for property damage 

and thus falls within the initial grant of coverage in the rental 

policy, the exclusions relied upon by State Farm would still 

bar coverage.

[4,5] An exclusion in an insurance policy is a limitation 

of liability, or a carving out of certain types of loss, to which 

the insurance coverage never applied. See, e.g., D & S Realty 

v. Markel Ins. Co., 280 Neb. 567, 789 N.W.2d 1 (2010). To 

determine whether an exclusion applies, the terms of the insurance policy must be interpreted. See, e.g., Cincinnati Ins. Co. 

v. Becker Warehouse, Inc., 262 Neb. 746, 635 N.W.2d 112 

(2001). A court construes insurance contracts like other contracts, according to the meaning of the terms that the parties 

have used. Merrick v. Fischer, Rounds & Assocs., 305 Neb. 

230, 939 N.W.2d 795 (2020). When the terms of an insurance 

contract are clear, a court gives them their plain and ordinary 

meaning as a reasonable person in the insured’s position would 

understand them. Id.
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308 Nebraska Reports

STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

We read the exclusions in the rental policy to exclude 

coverage for the damages claimed in the underlying lawsuit. 

As we have noted, the exclusions section of the rental policy 

provided that the liability coverage did not apply to “property 

damage to property owned by any insured”; “property damage 

to property rented to, occupied or used by or in the care of the 

insured”; and “property damage or personal injury to premises 

[the insured] sell[s], give[s] away, or abandon[s], if the property damage, or personal injury arises out of those premises.” 

(Emphasis omitted.) To the extent that, as TFG and Leonard 

contend, the underlying lawsuit was one for property damage 

to the house, it falls squarely within each of these exclusions. 

It is undisputed that the house was owned, in the care of, and 

then sold by TFG.

We are not blazing a new trail by finding that there is no 

possibility of coverage under the exclusions in the rental 

policy. Many other courts have found that similar insurance 

policies containing exclusions for property damage to property 

owned by or occupied by the insured provide no liability coverage when the insured is sued for making misrepresentations 

in the sale of property. See, e.g., Allstate Ins. Co. v. Chaney, 

804 F. Supp. 1219 (N.D. Cal. 1992); State Farm Fire and Cas. 

Co. v. Neumann, 698 F. Supp. 195 (N.D. Cal. 1988); Shelter 

Mut. Ins. Co. v. Ballew, 203 S.W.3d 789 (Mo. App. 2006); 1st 

Londonderry Dev. Corp. v. CNA Ins., 140 N.H. 592, 669 A.2d 

232 (1995). Similarly, many courts have found that insurance 

policies containing exclusions for property damage to property 

that is sold by the insured provide no liability coverage for 

lawsuits alleging misrepresentations in the sale of property. 

See, e.g., State Farm Fire and Cas. Co. v. Wimberly, 877 F. 

Supp. 2d 993 (D. Haw. 2012); Stull v. American States Ins. Co., 

963 F. Supp. 492 (D. Md. 1997); Borden, Inc. v. Affiliated FM 

Ins. Co., 682 F. Supp. 927 (S.D. Ohio 1987).

[6,7] The only argument TFG and Leonard can muster in 

opposition to the district court’s conclusion that the exclusions barred coverage is that the exclusions are ambiguous. In 
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STATE FARM FIRE & CAS. CO. v. TFG ENTERS.

Cite as 308 Neb. 460

support of this argument, TFG and Leonard correctly observe 

that when an insurance contract is ambiguous, we will construe the policy in favor of the insured. See Henn v. American 

Family Mut. Ins. Co., 295 Neb. 859, 894 N.W.2d 179 (2017). 

They also correctly point out that words in an insurance policy 

are to be interpreted not in accordance with the insurer’s intent, 

but what a reasonable person in the position of the insured 

would have understood them to mean. See id. But even with 

these principles in mind, we discern no ambiguity.

[8,9] A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings. American 

Fam. Mut. Ins. Co. v. Wheeler, 287 Neb. 250, 842 N.W.2d 100 

(2014). Further, the language of an insurance policy should be 

read to avoid ambiguities, if possible, and the language should 

not be tortured to create them. Cincinnati Ins. Co. v. Becker 

Warehouse, Inc., 262 Neb. 746, 635 N.W.2d 112 (2001). TFG 

and Leonard offer no reasonable alternative interpretation of 

the exclusions, and there is thus no basis for a finding that the 

exclusions are ambiguous.

Given the plain language of the exclusions, State Farm had 

no potential liability from the underlying lawsuit under the 

rental policy. It thus had no duty to defend or indemnify TFG 

and Leonard. See Merrick v. Fischer, Rounds & Assocs., 305 

Neb. 230, 939 N.W.2d 795 (2020). The district court did not 

err in granting summary judgment to State Farm.

CONCLUSION

Because the district court did not err in finding that State 

Farm owed no coverage obligations to TFG and Leonard, 

we affirm.

Affirmed.