A-18-0840, Rodney and Kathy Nielsen v. State Farm Fire & Casualty Company
District Court for Buffalo County, Nebraska, Judge John H. Marsh, District Judge
Attorney for Appellant: Shane M. Cochran, Snyder, Hilliard & Cochran, L.L.O, Kearney, Nebraska
Attorney for Appellee: Elizabeth Chrisp and Jeffrey Jacobsen, Jacobsen, Orr, Lindstrom & Holbrook, P.C., L.L.O,Kearney, Nebraska
FACTS: Rodney Nielsen and Kathy Nielsen (the Nielsens; homeowners) live in Kearney, Nebraska, and since 1980 they have had insurance on their home with State Farm Fire & Casualty Company (State Farm). In October 2014 the Nielsens came home from Colorado to discover they had six inches of water in their basement. The water was clear and there was no smell. The Nielsens contacted a service company to pump the water out of the basement but the water level kept rising until the water main leading from the street to the house was turned off. Repairs to the home needed to be made and a new water main was installed. The Nielsens needed to get a loan from a local bank in order to restore their home to its previous condition. Nobody ever discovered where the pipe had broken but after installing a new water main the Nielsens have not had any subsequent basement floods.
The Nielsens notified State Farm of their losses and made a claim against their homeowners coverage for the cost of repairs following the basement flood. State Farm denied the claim and advised the Nielsens their losses were excluded from coverage. The Nielsens filed an internal appeal with State Farm which was unsuccessful. Thereafter, the Nielsens filed a law suit against State Farm in the district court for Buffalo County, Nebraska.
The case was tried to a jury. The Nielsens testified they never received any revisions to their homeowners policy and the fact their water damages were excluded from coverage came as a surprise. State Farm called a witness who was responsible for handling policy renewals and processing payments who testified about company’s mailing procedures. The witness testified no mail addressed to the Nielsens was ever returned as undeliverable and their customer file does not include any notices of change of address. Additionally, the Nielsens’ premiums were always paid based on billing statements mailed to the only address State Farm ever had for them.
At the end of the evidence presented by the Nielsens the lawyer for State Farm asked the trial court to enter a “directed verdict” in its favor by finding the policy language excluded coverage for the Nielsens’ loss because the damages fell within the “water exclusion and that no reasonable person would find otherwise.” The “water exclusion” meant State Farm would not be responsible for damages from “water below the surface of the ground.” The trial judge agreed the language of the exclusion was not ambiguous and when it came time to instruct the jury they were told to decide whether the Nielsens received notice of the water exclusion prior to October 2014, and if not, what damages the Nielsens were entitled to recover, if any. The Nielsens objected to this finding because it was their position that “water below the surface of the ground” is water below the basement floor.
The jury returned a verdict in favor of State Farm. The Nielsens appealed to the Court of Appeals.
ISSUES ON APPEAL: The Nielsens raise four errors made by the district court. First, that the district court was wrong to direct a verdict for State Farm that the term “water below the surface of the ground” was not an ambiguous term. Second, that the district court was wrong to allow a State Farm employee to testify about mailing procedures based on hearsay and lack of foundation. Third, that the district court was wrong in failing to include an instruction to the jury that it was State Farm’s burden to prove policy amendments were mailed to the Nielsens. And fourth, that the district court was wrong in characterizing interest on the loan to make the repairs was an item of “special damages” which needed to be specifically requested by the Nielsens.