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MERRICK v. FISCHER, ROUNDS & ASSOCS.

Cite as 305 Neb. 230

Jerald Merrick, as assignee of Western Hay 

Services, Inc., appellant, v. Fischer, Rounds & 

Associates, Inc., doing business as Quality 

Truck Insurance, and Great West 

Casualty Company, appellees.

___ N.W.2d ___

Filed March 13, 2020. No. S-18-1173.

1. Summary Judgment: Appeal and Error. 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 

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

of law.

2. ____: ____. In reviewing a summary judgment, the court views the 

evidence in the light most favorable to the party against whom the 

judgment was granted and gives such party the benefit of all reasonable 

inferences deducible from the evidence.

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

insurance policy presents a question of law that an appellate court 

decides independently of the trial court.

4. Insurance: Agents: Brokers: Negligence: Proximate Cause: Liability: 

Damages. An insurance agent or broker who agrees to obtain insurance 

for another but negligently fails to do so is liable for the damage proximately caused by such negligence.

5. Insurance: Agents. When an insured asks an insurance agent to procure insurance, the insured has a duty to advise the insurance agent as 

to the desired insurance.

6. ____: ____. An insurance agent has no duty to anticipate what coverage 

an insured should have.

7. ____: ____. It is the duty of an insured to advise the agent as to the 

insurance he wants, including the limits of the policy to be issued.

Nebraska Supreme Court Online Library

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

05/29/2020 08:08 AM CDT
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8. Insurance: Brokers: Negligence: Proximate Cause: Liability: 

Damages. A broker who agrees to obtain insurance coverage for another 

but fails to do so is liable for damage proximately caused by such negligence, including the amount that would have been due under such policy 

if it had been obtained.

9. Insurance: Agents: Brokers. If an insurance agent or broker undertakes 

to advise an insured, the agent or broker must use reasonable care to 

provide accurate information.

10. Insurance: Agents: Brokers: Contracts: Breach of Contract: 

Negligence. Absent evidence that an insurance agent or broker has 

agreed to provide advice or the insured was reasonably led by the agent 

to believe he would receive advice, the failure to volunteer information 

does not constitute either negligence or breach of contract for which an 

insurance agent or broker must answer in damages.

11. Insurance: Contracts. A court construes insurance contracts like other 

contracts, according to the meaning of the terms that the parties have 

used. 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.

12. Insurance: Contracts: Liability. Whether an insurer has a duty to 

indemnify and defend an insured depends upon whether the insured’s 

claimed occurrence falls within the terms of the insurer’s coverage as 

expressed in the policy.

13. Insurance: Contracts: Liability: Damages. The insurer has a duty to 

indemnify an insured who becomes legally liable to pay damages for a 

covered occurrence.

14. Insurance: Liability. An insurer’s duty to defend is broader than the 

duty to indemnify.

15. ____: ____. An insurer has a duty to defend if (1) the allegations of the 

complaint, if true, would obligate the insurer to indemnify, or (2) a reasonable investigation of the facts by the insurer would or does disclose 

facts that would obligate the insurer to indemnify.

16. ____: ____. An insurer has a duty to defend its insured whenever it 

ascertains facts that give rise to potential liability under the policy. 

Conversely, an insurer is not bound to defend a suit if the pleadings 

and facts ascertained by the insurer show the insurer has no potential liability.

Appeal from the District Court for Scotts Bluff County: 

Andrea D. Miller, Judge. Affirmed.

Michael W. Meister for appellant.
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MERRICK v. FISCHER, ROUNDS & ASSOCS.

Cite as 305 Neb. 230

Sean A. Minahan and Patrick G. Vipond, of Lamson, Dugan 

& Murray, L.L.P., for appellee Fischer, Rounds & Associates, 

Inc.

Robert S. Keith and Alexis M. Wright, of Engles, Ketcham, 

Olson & Keith, P.C., for appellee Great West Casualty Company.

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

Papik, and Freudenberg, JJ.

Funke, J.

Jerald Merrick was injured in a truck accident in the 

course and scope of his employment. Merrick reached a settlement with his employer and received an assignment of rights 

against his employer’s insurance broker and insurer. Merrick 

filed this action claiming that the broker had a duty to advise 

Merrick’s employer to obtain workers’ compensation insurance and that the insurer had a duty to defend the employer 

in the underlying action. The district court for Scotts Bluff 

County granted summary judgment in favor of the broker and 

insurer. We affirm.

BACKGROUND

Western Hay Services, Inc. (Western Hay), is a company 

located in Morrill, Nebraska, that buys and sells hay and alfalfa 

and delivers the hay and alfalfa to feedlots and dairies in 

Colorado and Texas. During Western Hay’s first 4 years, owner 

Johnny Hill drove one truck and did not have employees. Hill 

subsequently added a second truck and, in 2009, hired Merrick 

as a truckdriver.

Since its inception, Western Hay has purchased insurance 

through an insurance broker, Fischer, Rounds & Associates, 

Inc., doing business as Quality Truck Insurance (Fischer). 

Great West Casualty Company (Great West) issued Western 

Hay a commercial lines insurance policy, effective from 

September 1, 2008, to September 1, 2009, which provided 

three different forms of coverage: commercial auto coverage, 
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Cite as 305 Neb. 230

commercial inland marine coverage, and commercial general 

liability coverage. Western Hay did not have workers’ compensation insurance.

The commercial auto policy states that Great West will “pay 

all sums an ‘insured’ legally must pay as damages because of 

‘bodily injury’ or ‘property damage’ . . . caused by an ‘accident’ and resulting from the ownership, maintenance or use of 

a covered ‘auto.’” The policy contains an exclusion entitled 

“Workers Compensation and Similar Laws,” which states that 

“[t]his insurance does not apply to . . . [a]ny obligation for 

which any ‘insured’ or any ‘insured’s’ insurer may be held 

liable under any workers compensation . . . law or any similar 

law.” The policy also contains an exclusion entitled “Employee 

Indemnification and Employer’s Liability” which states that 

the insurance does not apply to “‘[b]odily injury’” to an 

“‘employee’ of any ‘insured’ arising out of and in the course of 

. . . [e]mployment by any ‘insured.’”

The commercial inland marine policy states that Great West 

will pay sums “because of ‘loss’ to ‘covered property’ while 

in your custody or control in the ordinary course of transit for 

which you are legally liable as a ‘trucker.’”

Under the commercial general liability coverage provisions, 

“Coverage A” regarding “Bodily Injury and Property Damage 

Liability” states that Great West will “pay those sums that 

the insured becomes legally obligated to pay as damages 

because of ‘bodily injury’ or ‘property damage’ to which the 

insurance applies.” Coverage A contains exclusions equivalent 

to the workers’ compensation and employer’s liability exclusions in the commercial auto coverage provisions discussed 

above. In addition, Coverage A contains an exclusion for 

“‘[b]odily injury’” arising out of ownership, maintenance, 

use, or entrustment to others of any “‘auto.’” “Coverage C” 

regarding “Medical Expenses” states that Great West will pay 

medical expenses for “‘bodily injury’” caused by an accident 

“[b]ecause of your operations.” Coverage C contains all exclusions provided within Coverage A.
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Hill’s daughter, Tracie Margheim, was responsible for 

handling Western Hay’s insurance needs. Margheim spoke 

with an insurance agent with Fischer on a yearly basis prior 

to renewal of Western Hay’s insurance and on occasion to 

increase the insurance for special cargo trips. In August 2008, 

a Fischer insurance agent called Margheim to discuss the 

annual renewal. Upon speaking with Margheim, the insurance 

agent completed a renewal checklist which included question 

10: “Is work comp needed?” The agent answered question 

10 as “does not have,” because Western Hay had elected not 

to purchase workers’ compensation insurance. Thereafter, a 

Fischer insurance agent spoke with Margheim, confirmed the 

information on the renewal checklist, and submitted the information for a quote.

In February 2009, Margheim contacted Fischer and requested 

that workers’ compensation coverage be added to Western 

Hay’s insurance. Fischer’s agent asked Margheim to provide 

Western Hay’s payroll records in order to obtain a quote for 

the new workers’ compensation coverage. Margheim provided 

Fischer with Western Hay’s payroll information on April 1.

The day prior, March 31, 2009, Merrick was injured in a 

truck accident while in the course and scope of his employment with Western Hay. Margheim notified Great West of the 

claim on that date. On April 1 and again on April 6, Great 

West spoke with Margheim and advised that Western Hay did 

not have workers’ compensation, personal injury, or auto medical insurance under the commercial lines policy. In a May 13 

letter, Great West advised Western Hay that all liability claims 

had been paid for a total loss amount of $600 and that the 

file was closed. Great West later advised Western Hay that it 

would continue its investigation of the claim and assessment 

of coverage under a full reservation of rights. Great West 

indicated that it would consider all additional information 

Western Hay may provide and, if warranted, reconsider its 

coverage position.
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Cite as 305 Neb. 230

In 2012, Merrick filed a negligence action against Western 

Hay in the district court for Scotts Bluff County alleging he 

was injured in the truck accident and had incurred $309,154.10 

in medical expenses as a result of his injuries. Merrick claimed 

that Western Hay was negligent for requiring him to drive 

during a high-wind warning and failing to carry workers’ compensation insurance. Merrick alleged that Western Hay was 

required to carry workers’ compensation insurance pursuant to 

Neb. Rev. Stat. § 48-106 (Reissue 2010) and that such insurance would have provided coverage for his injuries. Fischer 

was not notified of the lawsuit or asked to indemnify or defend 

Western Hay. Western Hay requested a defense and indemnity 

from Great West. After reviewing the allegations in the complaint, Great West sent a letter to Western Hay denying the 

request, indicating that the claim was not covered because the 

policy did not provide workers’ compensation coverage, coverage for an injury to an employee of the insured, or coverage 

for potential liability for failing to provide workers’ compensation benefits.

In February 2016, the district court entered a stipulated 

judgment in favor of Merrick and against Western Hay in the 

amount of $800,000. As part of the settlement, Western Hay 

assigned its claims against Fischer and Great West to Merrick. 

Fischer and Great West were not notified in advance of the 

stipulated settlement. Thereafter, Merrick, as the assignee of 

Western Hay, filed the present action against Fischer and 

Great West. Merrick alleged in this action that Fischer was 

negligent in failing to procure workers’ compensation insurance for Western Hay when Western Hay had specifically 

requested such insurance for its trucking business, failing 

to notify Western Hay of Nebraska’s statutory requirement 

for employers to carry workers’ compensation insurance, and 

failing to warn Western Hay that its insurance did not cover 

injuries to employees while in the scope of their employment. 

Merrick separately alleged that Great West denied Western 
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Hay’s request for a defense in bad faith. Merrick alleged that 

Fischer and Great West are responsible for payment of the 

judgment entered against Western Hay.

Fischer filed an answer which admitted that it is an insurance broker and alleged that it met any and all applicable duties 

and responsibilities. Great West filed an answer which alleged 

that Merrick’s claim is not covered under the relevant policy, 

because of the policy’s workers’ compensation and employer’s 

liability exclusions. Each defendant moved for summary judgment. Following a hearing, the district court issued an order 

sustaining both motions and dismissing Merrick’s complaint 

with prejudice.

In considering Merrick’s claim against Fischer, the court 

found the undisputed evidence showed that on February 2, 

2009, Western Hay called Fischer to request workers’ compensation insurance, but did not provide the payroll information necessary for Fischer to complete the quote until April 

1, the day after Merrick’s accident. The court concluded that 

Fischer had no duty to secure workers’ compensation insurance for Western Hay until after the payroll records were provided on April 1. The court further concluded that there was 

no evidence showing that Fischer breached a duty to obtain 

workers’ compensation insurance for Western Hay, failed to 

advise Western Hay regarding workers’ compensation insurance prior to its request for a quote, or failed to warn Western 

Hay that its insurance policy did not cover injuries to employees in the course and scope of their employment. The court 

concluded that Fischer was entitled to judgment as a matter 

of law.

As to Merrick’s claim against Great West, the court determined that the policy at issue contains exclusions for claims 

based on workers’ compensation liability. The court determined 

that due to such exclusions, Great West was not required to 

defend Western Hay in the underlying lawsuit. The court concluded that Great West was entitled to judgment as a matter 

of law.
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Cite as 305 Neb. 230

Merrick appealed. We moved the appeal to our docket pursuant to our statutory authority to regulate the caseloads of the 

appellate courts of this State.1

ASSIGNMENTS OF ERROR

Merrick assigns, restated, that the district court erred in (1) 

applying case law applicable to insurance agents rather than 

insurance brokers, (2) finding that Fischer fulfilled its duties 

as an insurance broker to Western Hay, and (3) finding that 

Great West did not owe a duty to defend Western Hay.

STANDARD OF REVIEW

[1,2] 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 those 

facts and that the moving party is entitled to judgment as a 

matter of law.2 In reviewing a summary judgment, the court 

views the evidence in the light most favorable to the party 

against whom the judgment was granted and gives such 

party the benefit of all reasonable inferences deducible from 

the evidence.3

[3] The interpretation of an insurance policy presents a question of law that an appellate court decides independently of the 

trial court.4

ANALYSIS

Fischer Not Negligent

Merrick argues that, as an insurance broker, Fischer had a duty 

to advise Western Hay of its obligation as an employer under 

the Nebraska Workers’ Compensation Act to carry workers’ 

1 See Neb. Rev. Stat. § 24-1106 (Cum. Supp. 2018).

2 Ray Anderson, Inc. v. Buck’s, Inc., 300 Neb. 434, 915 N.W.2d 36 (2018).

3 Id.

4 Gage County v. Employers Mut. Cas. Co., 304 Neb. 926, 937 N.W.2d 863 

(2020).
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compensation insurance.5 Merrick contends that had Fischer 

“simply told Western Hay that [it] had to carry coverage” then 

Fischer “would have met its duty of providing sound advice 

to Western Hay.”6 Merrick thus argues that the court erred in 

dismissing his negligence claim against Fischer.

[4-7] To prevail in any negligence action, a plaintiff must 

show a legal duty owed by the defendant to the plaintiff, a 

breach of such duty, causation, and resulting damages.7 An 

insurance agent or broker who agrees to obtain insurance for 

another but negligently fails to do so is liable for the damage 

proximately caused by such negligence.8 When an insured asks 

an insurance agent to procure insurance, the insured has a duty 

to advise the insurance agent as to the desired insurance.9 An 

insurance agent has no duty to anticipate what coverage an 

insured should have.10 It is the duty of an insured to advise the 

agent as to the insurance he wants, including the limits of the 

policy to be issued.11

In Polski v. Powers,

12 this court noted that although it may 

be good business for an insurance agent to make insurance 

coverage suggestions, absent evidence that an insurance agent 

has agreed to provide advice or the insured was reasonably led 

by the agent to believe he would receive advice, the failure to 

volunteer information does not constitute either negligence or 

breach of contract for which an insurance agent must answer in 

damages. We went on to hold that it would be an unreasonable 

5 See, Neb. Rev. Stat. § 48-103 (Reissue 2010); § 48-106.

6 Brief for appellant at 10.

7 Lewison v. Renner, 298 Neb. 654, 905 N.W.2d 540 (2018).

8 Hobbs v. Midwest Ins., Inc., 253 Neb. 278, 570 N.W.2d 525 (1997); 

Flamme v. Wolf Ins. Agency, 239 Neb. 465, 476 N.W.2d 802 (1991).

9 Dahlke v. John F. Zimmer Ins. Agency, 245 Neb. 800, 515 N.W.2d 767 

(1994).

10 Id.

11 Manzer v. Pentico, 209 Neb. 364, 307 N.W.2d 812 (1981).

12 Polski v. Powers, 221 Neb. 361, 377 N.W.2d 106 (1985).
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burden to impose upon insurance agents a duty to anticipate 

what coverage an individual should have, absent the insured’s 

requesting coverage in at least a general way.13

Relying on this line of authority, the district court found that 

Fischer had no duty to advise Western Hay regarding workers’ 

compensation insurance until Western Hay requested a quote 

for workers’ compensation insurance in February 2009. Fischer 

responded to that request by asking for Western Hay’s payroll 

information in order to obtain a quote for the necessary coverage. Fischer did not receive the requested information until 

after Merrick’s accident. On April 8, Fischer informed Western 

Hay that it had obtained a quote, but the quote was too expensive. The district court reasoned that under these facts, Fischer 

had no duty to obtain workers’ compensation insurance for 

Western Hay and advise Western Hay regarding such insurance until Western Hay’s request in February 2009. The court 

found that it was the actions of Western Hay which delayed 

the insurance quote and that Fischer had not provided Western 

Hay with any false information regarding the commercial line 

policy’s coverage or the need for workers’ compensation coverage. Thus, the court found that Fischer had not breached its 

duty to Western Hay and that Fischer was entitled to judgment 

as a matter of law.

Merrick suggests that the district court did not sufficiently 

recognize that Fischer is an insurance broker and not an 

insurance agent. We have previously addressed the distinction 

between an insurance broker and an insurance agent.

“A representative of the insured is known as an ‘insurance 

broker.’ A broker represents the insured by acting as a 

middleman between the insured and the insurer, soliciting 

insurance from the public under no employment from any 

special company, and, upon securing an order, places it 

with a company selected by the insured, or if the insured 

has no preference, with a company selected by the broker. 

13 Id.
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Cite as 305 Neb. 230

In contrast, an ‘insurance agent’ represents an insurer 

under an exclusive employment agreement by the insurance company.”14

Merrick’s primary argument on appeal is that “the duty 

owed by an insurance broker differs from that of an insurance agent as to a broker’s duty to advise clients concerning 

certain matters.”15 Merrick argues that based on cases like 

the Eighth Circuit’s decision in Bell v. O’Leary,

16 a broker 

owes an insured a duty to act with reasonable care, skill, and 

diligence. Merrick then goes on to argue, without supporting 

legal authority or standard of care testimony, that Fischer had 

an affirmative duty to advise Western Hay for insurance risks 

known to the trucking business and that in order for Fischer 

to fulfill its duty to act with reasonable care, Fischer was 

required to advise Western Hay to carry workers’ compensation insurance.

We find that under the facts of this case, and upon consideration of Merrick’s theory regarding the duty an insurance 

broker owes to an insured, Merrick’s reliance on the distinction between an insurance broker and an insurance agent is 

misplaced.

Merrick’s argument is not supported by the rationale articulated in our decision in Broad v. Randy Bauer Ins. Agency.

17

In that case, we acknowledged that courts often use the term 

“insurance agent” loosely,18 but recognized the need to consider how agency principles affect an insurance intermediary’s 

contract liability. Upon review of agency principles recognized 

14 Broad v. Randy Bauer Ins. Agency, 275 Neb. 788, 794, 749 N.W.2d 478, 

483 (2008). See, also, Moore v. Hartford Fire Ins. Co., 240 Neb. 195, 481 

N.W.2d 196 (1992); 3 Steven Plitt et al., Couch on Insurance 3d § 45:1 

(2011).

15 Brief for appellant at 7.

16 Bell v. O’Leary, 744 F.2d 1370 (8th Cir. 1984).

17 Broad, supra note 14.

18 See, e.g., id.; Bell, supra note 16; 3 Plitt et al., supra note 14.
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in the insurance context, we concluded that an insurance agent 

is not personally liable to the insured for contracts the agent 

makes on behalf on the insurer.19 However, we recognized 

the existence of a valid cause of action against a broker for 

breach of contract to procure insurance, because the broker 

is the insured’s agent.20 Thus, Broad recognized that agency 

principles may dictate the causes of action available against a 

broker or agent. The distinction between an agent and a broker is important because acts of an agent are imputable to the 

insurer and acts of a broker are imputable to the insured.21 Our 

decision in Broad did not suggest, as Merrick assumes, that 

agency principles affect the scope of the general duty that an 

insurance intermediary owes to an insured to act with reasonable care.

[8,9] Here, Merrick has asserted a claim against Fischer 

for negligence. We have previously recognized that a broker 

who agrees to obtain insurance coverage for another but fails 

to do so is liable for damage proximately caused by such 

negligence, including the amount that would have been due 

under such policy if it had been obtained.22 If an insurance 

agent or broker undertakes to advise an insured, the agent or 

broker must use reasonable care to provide accurate information.23 Thus, Nebraska law requires an insurance broker 

to secure the insurance requested by the insured and if the 

insurance broker is advising the insured, the broker must do 

19 Broad, supra note 14, citing Gieseke v. Hardware Dealers Mut. Fire Ins. 

Co., 46 Ill. App. 2d 131, 195 N.E.2d 32 (1963).

20 See Broad, supra note 14.

21 See, United Fire & Cas. Ins. Co. v. Garvey, 419 F.3d 743 (8th Cir. 2005); 

Mark Andy, Inc. v. Hartford Fire Ins. Co., 229 F.3d 710 (8th Cir. 2000); 3 

Plitt et al., supra note 14.

22 Countryside Co-op v. Harry A. Koch Co., 280 Neb. 795, 790 N.W.2d 873 

(2010), disapproved on other grounds, Weyh v. Gottsch, 303 Neb. 280, 929 

N.W.2d 40 (2019).

23 Flamme, supra note 8.
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so with reasonable care. Merrick posits that Fischer’s duty in 

this case is broader than previously recognized by this court 

and encompasses a duty to evaluate risks within the insured’s 

business and advise the insured regarding those risks or, more 

specifically, to advise an insured employer to obtain workers’ 

compensation insurance even in the absence of a request for 

such insurance.

We are persuaded that Merrick’s claim against Fischer is 

resolved by application of the Nebraska Court of Appeals’ 

decision in Hansmeier v. Hansmeier.

24 There, the owners of 

a farming operation obtained insurance through an insurance 

agent. The farm had one full-time employee but did not provide insurance for the employee. The employee then injured 

his thumb in an auger, and the injury was not covered under 

the farm’s liability policy. The farm had not complied with 

§ 48-106(7), which provides that if an employer who is engaged 

in an agricultural operation, as described under § 48-106(2)(d), 

elects to be exempt from the Nebraska Workers’ Compensation 

Act, then the employer must provide employees written notice 

that the employer does not provide workers’ compensation 

coverage and the employee must sign the notice. Section 

48-106(7) states that the failure to provide the required notice 

subjects the employer to liability under the Nebraska Workers’ 

Compensation Act for any employee not notified. The farm 

owners did not provide the required notice, the employee 

brought a workers’ compensation claim against the farm owners, and the parties reached a settlement.

The farm owners in Hansmeier then brought a negligence 

claim against their insurance agent based on the failure to 

properly advise them regarding the necessity or availability 

of workers’ compensation insurance. The Court of Appeals 

found that any claim of negligence or negligent representation failed as a matter of law. The court stated that the parties had discussed workers’ compensation insurance, but the 

24 Hansmeier v. Hansmeier, 25 Neb. App. 742, 912 N.W.2d 268 (2018).
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farm owners elected not to purchase such insurance. The 

court found that the insurance agent had not provided any 

false information to the insureds and that the agent had no 

further responsibility to inform the insureds of their obligations under the notice provisions of the Nebraska Workers’ 

Compensation Act.25

[10] We agree with the proposition articulated in Hansmeier

that the Nebraska Workers’ Compensation Act governs employers, not insurance agents.26 Our prior cases have generally 

indicated an insurance intermediary owes a duty of reasonable 

care, whether the intermediary is an agent or broker.27 Given 

that, under Hansmeier, the Nebraska Workers’ Compensation 

Act does not affect an insurance agent’s duty to act with 

reasonable care, we hold that the same is true for insurance 

brokers. Absent evidence that an insurance agent or broker has 

agreed to provide advice or the insured was reasonably led by 

the agent to believe he would receive advice, the failure to 

volunteer information does not constitute either negligence or 

breach of contract for which an insurance agent or broker must 

answer in damages.28

The Eighth Circuit Court’s decision in Bell is factually 

distinguishable.29 In that case, an insurance broker obtained 

flood insurance for two different owners of mobile homes. 

The mobile home owners experienced flood damage, and their 

insurance claims were denied because the policies had been 

issued erroneously. The insurer determined that the mobile 

homes were not eligible for flood insurance because they 

were located in unincorporated areas. The Eighth Circuit held 

that under Missouri law, an insurance broker who fails to 

determine whether a client is eligible for insurance coverage 

25 See id.

26 Id.

27 See, Hobbs, supra note 8; Flamme, supra note 8.

28 See Polski, supra note 12.

29 Bell, supra note 16.
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is negligent.30 The court found that the insured had relied on 

the broker to obtain the requested insurance, that the broker 

accepted that responsibility, and that by failing to discover the 

insureds were ineligible for coverage and by failing to notify 

them of that fact, the broker was negligent.31

In the present case, even when the evidence is viewed in the 

light most favorable to Merrick, there is no failure to obtain 

effective insurance by Fischer that is analogous to the actions 

of the broker in Bell. Rather, the failure in this case was on the 

part of the insured for failing to request workers’ compensation 

insurance and failing to timely provide payroll information. 

Merrick acknowledged at oral argument that he was not alleging any negligence in procuring the requested insurance and 

that he did not challenge the district court’s finding that the 

actions of Western Hay delayed the insurance quote by failing 

to provide the necessary information until 1 day after Merrick’s 

accident. Further, we note that the Eighth Circuit was applying 

Missouri law in Bell, and the Missouri Supreme Court has specifically rejected the argument that insurance brokers have the 

duty Merrick is arguing for here.32

Just as in Hansmeier, Fischer never provided Western Hay 

with false information regarding insurance coverage and there 

were no agreements between Western Hay and Fischer which 

obligated Fischer to advise Western Hay of its obligation 

to maintain workers’ compensation insurance.33 As a result, 

Fischer had no duty to advise Western Hay of its obligations 

under the Nebraska Workers’ Compensation Act.

Further, as we stated in Broad, a broker represents the 

insured by acting as a middleman between the insured and the 

30 Id.

31 Id.

32 See, e.g., Emerson Elec. Co. v. Marsh & McLennan Co., 362 S.W.3d 7 

(2012) (brokers have no duty to advise insured on its insurance needs 

unless they specifically agree to do so).

33 See Hansmeier, supra note 24.
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insurer, soliciting insurance from the public under no employment from any special company, and, upon securing an order, 

places it with a company selected by the insured or, if the 

insured has no preference, with a company selected by the broker.34 The evidence indicates that no order for workers’ compensation insurance was placed by Western Hay until February 

2009 and that Western Hay failed to provide the necessary 

payroll information to secure such an order. As a result, Fischer 

did not breach its duty to Western Hay.

Fischer is entitled to judgment as a matter of law. This 

assignment of error is without merit.

Great West Owed No Duty to Defend

Merrick argues that Great West had a duty to defend Western 

Hay in the underlying lawsuit and acted in bad faith when it 

failed to provide a defense. The district court found that the 

commercial lines policy clearly excluded coverage for workers’ compensation liability and that as a result, Great West was 

not required to defend Western Hay. Merrick argues that the 

workers’ compensation exclusion in the policy is inapplicable 

because the case was brought in district court, not workers’ 

compensation court.

[11] A court construes insurance contracts like other contracts, according to the meaning of the terms that the parties 

have used. 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.35

[12-14] Whether an insurer has a duty to indemnify and 

defend an insured depends upon whether the insured’s claimed 

occurrence falls within the terms of the insurer’s coverage as 

expressed in the policy.36 The insurer has a duty to indemnify 

34 See Broad, supra note 14.

35 Federated Serv. Ins. Co. v. Alliance Constr., 282 Neb. 638, 805 N.W.2d 

468 (2011).

36 Id.
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an insured who becomes legally liable to pay damages for a 

covered occurrence.37 An insurer’s duty to defend is broader 

than the duty to indemnify.38

[15,16] A court must initially measure an insurer’s duty 

to defend an action against the insured by the allegations in 

the complaint against the insured, but in determining its duty 

to defend, an insurer must look beyond the complaint and 

investigate and ascertain the relevant facts from all available 

sources.39 An insurer has a duty to defend if (1) the allegations of the complaint, if true, would obligate the insurer to 

indemnify, or (2) a reasonable investigation of the facts by the 

insurer would or does disclose facts that would obligate the 

insurer to indemnify.40 Thus, an insurer has a duty to defend its 

insured whenever it ascertains facts that give rise to potential 

liability under the policy.41 Conversely, an insurer is not bound 

to defend a suit if the pleadings and facts ascertained by the 

insurer show the insurer has no potential liability.42 Although 

an insurer is obligated to defend all suits against the insured, 

even if groundless, false, or fraudulent, the insurer is not 

bound to defend a suit based on a claim outside the coverage 

of the policy.43 To show a claim for bad faith, a plaintiff must 

show the absence of a reasonable basis for denying benefits of 

the insurance policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying 

the claim.44

37 Id.

38 Id.

39 Id.

40 Id.

41 Id.

42 Id.

43 Mortgage Express v. Tudor Ins. Co., 278 Neb. 449, 771 N.W.2d 137 

(2009).

44 See LeRette v. American Med. Security, 270 Neb. 545, 705 N.W.2d 41 

(2005).
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Upon our de novo review of the commercial lines policy, 

we are persuaded that Western Hay’s underlying claim is 

excluded under the employer’s liability exclusion. As detailed 

above, both the commercial auto and commercial general 

liability provisions of the commercial lines policy contain a 

workers’ compensation exclusion and an employer’s liability exclusion. The workers’ compensation exclusion excludes 

any obligation for which any “‘insured’” may be held liable 

under any workers’ compensation law or similar law. The 

employer’s liability exclusion states that the insurance policy 

does not apply to “‘[b]odily injury’” to an “‘employee’ of any 

‘insured’ arising out of and in the course of . . . [e]mployment 

by any ‘insured.’”

We determine that the language of the employer’s liability exclusion is clear and unambiguous and that based on an 

ordinary understanding of the terms within the exclusion, a 

reasonable person in the insured’s position would understand 

that the policy does not cover injuries to employees occurring 

in the course and scope of their employment. The allegations 

in Merrick’s complaint in the underlying action made clear 

that he sought to hold Western Hay liable for damages based 

on injuries he sustained during the course and scope of his 

employment as a truckdriver. These allegations demonstrate 

that Great West had no potential liability under the commercial lines policy based on Merrick’s injuries. As a result, Great 

West had a reasonable basis for denying benefits of insurance 

coverage and did not act in bad faith in refusing to provide a 

defense to Western Hay.

And it makes no difference here that Merrick’s claim was 

asserted in the district court rather than the Nebraska Workers’ 

Compensation Court. As we have already explained, the policy 

exclusion was clear and unambiguous. The procedure permitting a suit in the district court by an injured worker against 

an uninsured employer does not impose an obligation upon 

an insurer where the policy at issue clearly excludes any 

such coverage.
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Based on the employer’s liability exclusion, Great West 

had no contractual obligation to defend or indemnify Western 

Hay in the lawsuit brought by Merrick. Great West had a valid 

basis for denying coverage, and thus, Great West is entitled to 

judgment as a matter of law. This assignment of error is without merit.

CONCLUSION

For the foregoing reasons, we affirm the decision of the district court granting summary judgment in favor of Fischer and 

Great West.

Affirmed.