Bailey v. Farmers Union Co-op. Ins. Co. of Nebraska

In Bailey v. Farmers Union Co-op. Ins. Co. of Nebraska (1992) 1 Neb.App. 408 498 N.W.2d 591 (Bailey), a supervising adjuster "mistakenly presumed" in the early stages of a claim that the destruction of the insured's home by collapse during renovation was not covered under her homeowner's policy. (Id., 498 N.W.2d at p. 595.) Later there was "internal brainstorming about possible defenses" to her claim, but the only defenses ultimately raised were that she had failed to satisfy certain procedural requirements under the policy, including that she claim replacement costs within 180 days of the loss. (Ibid.) Although the insurer appeared to have internally conceded the substantive merit of the claim, in dealings with the insured it insisted that the claim was " 'doubtful and disputed.' " (Id. at pp. 595, 596.) After the insured rejected a settlement offer limiting her recovery to the actual cash value of the home, an adjuster told her attorney "that the actual cash value figure was the total value of the claim and that Farmers Union would not cover repair and replacement costs." (Id. at p. 596.) The trial court found that the adjuster was lying when he testified at trial that the company had always intended to honor a replacement cost claim, that the insurer's conduct was " 'replete with bad faith,' " and that the insurer's "intransigence" prevented the insured from complying with the requirement that she "rebuild and claim replacement costs within 180 days of the loss ... ." (Id. at p. 597.) On appeal the insurer cited authorities upholding the right to enforce a contracting condition "as a means of preventing fraud by the insured ... ." (Bailey, supra, 498 N.W.2d at p. 598.) The reviewing court distinguished these cases because none of them "addressed the scenario in which the insured failed to meet a time deadline because of the interference of the insurer." (Ibid.) The insured was prevented from complying, wrote the court, "by the adjuster's insistence that the insured was entitled to receive nothing more than actual cash value. The insured could not proceed with rebuilding as long as Farmers Union refused to commit itself to future reimbursement of the insured for rebuilding costs. She did not have the money to initiate rebuilding on her own, and she would not have been able to secure a loan without the assurance by Farmers Union that additional replacement costs would be covered up to the policy limit. Though required to do so under the policy, Farmers Union never made that commitment." (Ibid.) "The insured was prevented from satisfying the condition of rebuilding and claiming costs within 180 days by Farmers Union's refusal to assure Bailey that, in addition to the actual cash value figure, the cost of rebuilding her home would be covered up to the policy limit." (Ibid.)