Nebraska Supreme Court Holds that Severability Clause Did Not Change Exclusions’ “Plain” Language or “Create Ambiguity”

The Nebraska Supreme Court has affirmed a trial court’s decision that exclusions in a homeowner’s insurance policy and in a personal umbrella insurance policy barred coverage for claims against the homeowner that his son had sexually assaulted a minor, ruling that a severability clause in the policies did not change the exclusions’ “plain language” or “create ambiguity.”                      

The Case

Two parents sued a homeowner, alleging that his son had sexually assaulted their minor daughter. The insurance carrier that had issued a homeowner’s insurance policy and a separate personal umbrella insurance policy to the homeowner sought a declaratory judgment that its policies did not cover the homeowner. 

The district court granted summary judgment in favor of the insurer, and the homeowner appealed. He argued that the severability clause in the policies, which stated that, “[t]his insurance applies separately to each insured,” changed the effect of (or rendered ambiguous) exclusions that otherwise barred coverage for him. 

The Nebraska Supreme Court’s Decision 

The court affirmed. 

The court pointed out that the policies’ exclusions barred coverage for injuries intentionally caused by “any insured” and injuries resulting from sexual abuse by “an insured” or “any insured.” 

In the court’s view, the severability clause’s command to apply the insurance separately to each insured did not change the exclusions’ “plain language or create ambiguity” and did not change that the exclusion referenced “an insured” or “any insured.” 

The court concluded that the policies excluded the homeowner from coverage for injuries resulting from the alleged intentional sexual abuse committed by the homeowner’s son (who also was an “insured” under the policies). 

The case is American Family Mutual Ins. Co. v. Wheeler, No. S-13-240 (Neb. Jan. 24, 2014).