Shada v. Farmers Ins. Exch.

444 	286 NEBRASKA REPORTS
M arie Shada, appellant, v. FarMerS
inSurance exchange and aBc
coMpany, appelleeS.
840 N.W.2d 856
Filed August 9, 2013. 	No. S-12-1155.
1. Judgments: Appeal and Error. An appellate court independently reviews ques-
tions of law decided by a lower court.
2. 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 infer-
ences that may be drawn from the facts and that the moving party is entitled to
judgment as a matter of law.
3. ____: ____. In reviewing a summary judgment, an appellate court views the
evidence in the light most favorable to the party against whom the judgment was
granted and gives that party the benefit of all reasonable inferences deducible
from the evidence.
4. Actions: Insurance: Motor Vehicles: Breach of Contract. An insured’s cause
of action on an insurance policy to recover underinsured motorist benefits accrues
at the time of the insurer’s breach or failure to do that which is required under the
terms of the policy.
5. Insurance: Motor Vehicles: Contracts: Tort-feasors. Underinsured motorist
coverage is a contract which indemnifies an insured when a tort-feasor’s insur-
ance coverage is inadequate.
6. Limitations of Actions: Insurance: Motor Vehicles: Contracts. Neb. Rev. Stat.
§ 25-205 (Reissue 2008), which provides for a 5-year statute of limitations on
written contracts, applies in an insured’s suit against its underinsured motorist
coverage insurer when the insured has timely filed the underlying claim against
the underinsured motorist.
Appeal from the District Court for Douglas County: duane
c. dougherty, Judge. Reversed and remanded for further
proceedings.
Martin A. Cannon, of Cannon Law Office, for appellant.
Daniel P. Chesire and Cathy S. Trent-Vilim, of Lamson,
Dugan, & Murray, L.L.P., and, on brief, Kara S. Jermain, for
appellee Farmers Insurance Exchange.
heavican, c.J., Wright, connolly, Stephan, MccorMack,
M iller-lerMan, and caSSel, JJ.
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:38 AM CST

SHADA v. FARMERS INS. EXCH. 	445
Cite as 286 Neb. 444
M iller-lerMan, J.
NATURE OF CASE
On January 4, 2011, Marie Shada filed this action in the
district court for Douglas County based on contract against
Farmers Insurance Exchange (Farmers) and another entity,
the latter of which is not relevant to this appeal, alleging that
Farmers failed to pay “sums available” for underinsured motor-
ist coverage under her insurance policy with Farmers. Shada
admitted that she never made a formal demand on Farmers
prior to filing suit. As affirmative defenses in its answer,
Farmers alleged that Shada’s action is barred by the statute of
limitations or by laches. Farmers then filed a motion for sum-
mary judgment.
The district court concluded that the limitations period
commenced when Shada settled with the underinsured driver
in December 2001 and that Shada’s claim was barred by
the 5-year contract statute of limitations. Neb. Rev. Stat.
§ 25-205(1) (Reissue 2008). The district court entered an order
granting Farmers’ motion for summary judgment on this basis.
Shada appeals. Because we conclude that the district court
erred as a matter of law in its selection of the commence-
ment for limitations purposes, we reverse, and remand for
further proceedings.
STATEMENT OF FACTS
On November 6, 1996, Shada was injured in an automo-
bile accident with another driver, Timothy Hinze, who was
insured by American Family Insurance. The accident was
caused by the negligence of Hinze. At the time of the acci-
dent, Shada had an automobile insurance policy with Farmers,
which included uninsured and underinsured motorist coverage.
With Farmers’ knowledge and consent, on December 28, 2001,
Shada received a settlement from Hinze’s insurer.
Shada filed this action based on contract on January 4,
2011. In her complaint, she alleged that her damages from the
1996 accident exceeded the coverage available from Hinze’s
insurer and that Farmers had failed to pay “sums available”
for her benefit pursuant to her underinsured motorist coverage.

446 	286 NEBRASKA REPORTS
Shada did not specify the manner in which Farmers allegedly
breached the contract of insurance. Shada sought damages of
$250,000 plus attorney fees and costs.
Farmers moved for summary judgment. A hearing was held
on the motion. At the hearing, Farmers submitted and the
court received four exhibits, including: Shada’s deposition, to
which her responses to requests for admission were attached;
the affidavit of Farmers’ branch claims manager; the affidavit
of a claims representative for Farmers; and the affidavit of the
attorney for Farmers. Shada admitted in her deposition that
she never made a formal demand on Farmers for underinsured
motorist coverage. Shada submitted and the court received
three exhibits, including: the affidavit of Shada, which set forth
a copy of her policy with Farmers; another affidavit of Shada,
which set forth her medical bills and records; and the affidavit
of Shada’s attorney.
The record from the hearing shows that on December 28,
2001, with the consent of Farmers, Shada received a settlement
of policy limits with Hinze’s insurer. Shada’s attorney stated
in his affidavit that following Shada’s settlement with Hinze’s
insurer, he had had “informal chats” with Farmers’ attorney
and Farmers’ adjustor regarding Shada’s upcoming claim for
underinsured motorist coverage and that he was “never told
that the claim would be dishonored as untimely or given a
deadline for submitting one.”
The record further shows that on November 24, 2010,
Shada’s attorney sent a letter to Farmers indicating that he was
preparing a demand on Farmers on Shada’s behalf for under-
insured motorist coverage. In his affidavit, Shada’s attorney
stated that he was advised that Farmers viewed such upcom-
ing claim for underinsured motorist coverage as untimely and
that such claim would not be paid. Shada’s attorney further
stated in his affidavit that “[e]ven absent a formal demand, I
viewed this as a denial of the claim and filed suit [on January
4, 2011].”
The district court originally overruled Farmers’ motion
for summary judgment. Farmers moved for reconsideration,
and the district court granted the motion. The order granting

SHADA v. FARMERS INS. EXCH. 	447
Cite as 286 Neb. 444
Farmers’ motion for summary judgment upon reconsideration
is before us on appeal.
In Snyder v. EMCASCO Ins. Co., 259 Neb. 621, 629, 611
N.W.2d 409, 416 (2000), we recognized the contract-based
nature of an underinsured coverage dispute and held that “an
insured’s cause of action on an insurance policy to recover
underinsured motorist benefits accrues at the time of the insur-
er’s breach or failure to do that which is required under the
terms of the policy.” The parties and the district court acknowl-
edged Snyder in the summary judgment proceedings.
In the court’s ruling in this case, it noted that the parties
agreed the claim was subject to the 5-year limitations period
for contracts under § 25-205(1) but that they disagreed on the
date the statute began to run. Shada asserted that the breach
occurred when, shortly after she advised Farmers on November
24, 2010, that she would be filing an underinsured motor-
ist claim, Farmers told her that a claim would be considered
untimely and would not be paid. Farmers responded that the
present case differed from Snyder, wherein the insured made
her claim for underinsured motorist benefits within a month
after settling with the tort-feasor; in the present case, Shada
waited almost 10 years and still had not made a claim. Farmers
contended that when a demand has not been timely made, the
statute of limitations should begin to run on the date of the
settlement of the underlying tort case. Farmers cited cases from
other jurisdictions in support of its argument. See, Yocherer
v. Farmers Ins. Exchange, 252 Wis. 2d 114, 643 N.W.2d 457
(2002); Oanes v. Allstate Ins. Co., 617 N.W.2d 401 (Minn.
2000); Brown v. American Family Ins. Group, 989 P.2d 196
(Colo. App. 1999).
In the district court’s order granting summary judgment in
favor of Farmers, it stated that “[a]fter extensive reconsidera-
tion,” it determined that in Snyder, the Nebraska Supreme Court
“did not consider the ramifications on the statute of limitations
when an insured indefinitely postpones making a demand on
the insurer for such benefits.” The district court thereafter
stated that the contract-based approach adopted in Snyder
“vests too much control in one party to determine the timetable

448 	286 NEBRASKA REPORTS
for his or her claim, to the other party’s detriment.” After
discussing stare decisis and the circumstances under which it
may be abandoned, the district court stated it was “reluctant to
abandon the contract-based approach for the statute of limita-
tions for [underinsured motorist] claims as set forth in Snyder.”
But, in a departure from Snyder, the district court nevertheless
concluded that the law ought to be as follows:
The date commencing the statute of limitations in
actions for underinsured motorist coverage should be on
the first of the following dates: (1) the date [on] which
there has been a final resolution of the underlying claim
with the tortfeasor, be it through denial of the claim,
settlement, judgment, or some other resolution; or (2)
the date the [underinsured motorist] insurer denies an
insured’s demand for [underinsured motorist] benefits,
whichever is earlier.
Applying its new rule, the court concluded that the statute of
limitations on Shada’s claim against Farmers ran in 2006, 5
years after Shada settled with Hinze’s insurer, and that there-
fore, her action filed on January 4, 2011, was time barred. The
court granted summary judgment in Farmers’ favor and dis-
missed Shada’s complaint.
Shada appeals. We granted Farmers’ petition to bypass.
ASSIGNMENT OF ERROR
Shada claims that the district court erred when it found
that her case was time barred by the 5-year contract statute
of limitations.
STANDARDS OF REVIEW
[1] An appellate court independently reviews questions of
law decided by a lower court. Beveridge v. Savage, 285 Neb.
991, 830 N.W.2d 482 (2013).
[2,3] 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. Id. In reviewing a summary judgment, an appellate

SHADA v. FARMERS INS. EXCH. 	449
Cite as 286 Neb. 444
court views the evidence in the light most favorable to the
party against whom the judgment was granted and gives that
party the benefit of all reasonable inferences deducible from
the evidence. Durre v. Wilkinson Development, 285 Neb. 880,
830 N.W.2d 72 (2013).
ANALYSIS
Shada claims generally that the district court erred when
it granted Farmers’ motion for summary judgment based
on its determination that Shada’s claim was time barred by
the 5-year contract statute of limitations. Shada specifically
claims that the district court erred as a matter of law when it
adopted a new rule and deviated from Snyder v. EMCASCO
Ins. Co., 259 Neb. 621, 611 N.W.2d 409 (2000). We agree
with Shada that the district court erred as a matter of law
when it departed from Snyder and further conclude that, given
the undisputed facts and applying the controlling law to the
action as pled, Shada’s claim is not time barred under the
5-year contract statute of limitations. Therefore, we reverse
the judgment of the district court and remand the cause for
further proceedings.
[4] This case is controlled by Snyder. As noted above,
in Snyder, we held that “an insured’s cause of action on an
insurance policy to recover underinsured motorist benefits
accrues at the time of the insurer’s breach or failure to do that
which is required under the terms of the policy.” 259 Neb. at
629, 611 N.W.2d at 416. In Snyder, we recognized that courts
follow various approaches to determine when an insured’s
cause of action for underinsured motorist benefits accrues. We
analyzed the jurisprudence in this area and joined the major-
ity of courts that have held that “because the action sounds
in contract, the claim accrues and the statute of limitations
begins to run on the earliest date the contract is breached.”
Id. at 627, 611 N.W.2d at 415 (citing cases holding majority
rule). In the instant case, the district court found Snyder want-
ing and applied the minority view which we had previously
rejected. Upon revisiting the issue, we believe our holding in
Snyder remains sound and we continue to adhere to our view
expressed therein.

450 	286 NEBRASKA REPORTS
[5] We have repeatedly observed that underinsured motor-
ist coverage is a contract which indemnifies an insured when
a tort-feasor’s insurance coverage is inadequate. Dworak v.
Farmers Ins. Exch., 269 Neb. 386, 693 N.W.2d 522 (2005);
Snyder v. EMCASCO Ins. Co., supra. See, also, Schrader v.
Farmers Mut. Ins. Co., 259 Neb. 87, 608 N.W.2d 194 (2000).
Most relevant to our analysis are our opinions in Schrader
and Snyder.
[6] In Schrader, we quoted the rationale of the Supreme
Court of Rhode Island, which provided:
“Although a tortious injury is an incidental element in the
insured’s suit against his insurer over a policy contract,
the action is fundamentally one in contract. The [insured]
here would have no action if it were not for the coverage
provided by her insurance policy. The insurer’s liability
[a]rises solely from the insurance contract and noth-
ing else.”
259 Neb. at 94, 608 N.W.2d at 199 (quoting Pickering v.
American Empl. Ins. Co., 109 R.I. 143, 282 A.2d 584 (1971)).
We recognized in Schrader that because underinsured motor-
ist coverage is generally governed by contract, a vast major-
ity of jurisdictions conclude that the contract statutes of
limitations apply where there is no specific statute address-
ing the time period within which this type of action must be
brought against the underinsured motorist coverage insurer.
See, also, 3 Alan I. Widiss & Jeffrey E. Thomas, Uninsured
and Underinsured Motorist Insurance § 34.3 (rev. 3d ed. 2005
& Cum. Supp. 2012). Accordingly, in Schrader, we held that
§ 25-205, which provides for a 5-year statute of limitations
on written contracts, applies in an insured’s suit against its
underinsured motorist coverage insurer when the insured
has timely filed the underlying claim against the underin-
sured motorist.
As explained in Schrader, jurisdictions have adopted a
variety of approaches as to when the underinsured cause of
action accrues. See Snyder v. EMCASCO Ins. Co., 259 Neb.
621, 611 N.W.2d 409 (2000). These theories generally isolate
three different events as triggering the statute of limitations
and the accrual of the cause of action: the date of the accident;

SHADA v. FARMERS INS. EXCH. 	451
Cite as 286 Neb. 444
the date the underlying tort claim is resolved; and the date the
contract is allegedly breached, such as when the insurer rejects
the insured’s claim for benefits. Id. See, also, Hamm v. Allied
Mut. Ins. Co., 612 N.W.2d 775 (Iowa 2000) (describing three
theories of when cause of action accrues and statute of limita-
tions begins to run); 3 Widiss & Thomas, supra, § 34.4. In
Schrader, it was not necessary for us to decide which theory of
accrual to adopt.
In Snyder, we were faced squarely with the accrual issue
and joined the majority of states which have determined that
the action accrues at the time of the insurer’s breach. In
explaining the rationale for this rule, we quoted the reasoning
of the Supreme Judicial Court of Massachusetts, which stated
that “‘[p]rior to the time when the contract is violated there
is no justiciable controversy, and it would be illogical to let
the statute of limitations for bringing an action begin to run
before the action can be brought.’” Snyder v. EMCASCO Ins.
Co., 259 Neb. at 627, 611 N.W.2d at 415 (quoting Berkshire
Mutual Insurance Co. v. Burbank, 422 Mass. 659, 664 N.E.2d
1188 (1996)).
Customarily, an insurance policy for underinsured motorist
benefits will include an “exhaustion clause,” which requires
the insured to exhaust payments from the underinsured motor-
ist tort-feasor before the insurer will pay the insured according
to the policy. In the present case, Shada’s insurance policy for
underinsured motorist benefits with Farmers included such
an “exhaustion clause,” and it is not disputed that Shada
brought an underlying tort claim against Hinze, the underin-
sured motorist tort-feasor, and settled that claim with Farmers’
consent. The present case stems from Shada’s allegation that
the settlement amount is insufficient and that she is there-
fore entitled to underinsured coverage under her contract
with Farmers.
Shada has sued Farmers for a breach of contract, but she
has not alleged a breach or a specified failure of Farmers to
perform under the contract of insurance. In Snyder, we stated
that accrual commences upon a breach and we observed
that this proposition is “sound and consistent with our well-
established rule that an action on a written contract accrues

452 	286 NEBRASKA REPORTS
at the time of breach or failure to perform.” 259 Neb. at 628-
29, 611 N.W.2d at 416. As the Nevada Supreme Court stated,
it would not make sense “to begin the statute of limitations
before the insured even has a justiciable claim for breach of
contract.” Grayson v. State Farm Mut. Auto. Ins., 114 Nev.
1379, 1381, 971 P.2d 798, 799 (1998). Since our decision in
Snyder, there has continued to be a split of authority as to
when accrual begins; however, the majority of jurisdictions
still hold that the cause of action for underinsured motorist
benefits accrues and the statute of limitations begins to run on
the date the insurance contract is breached. See, e.g., Brooks v.
State Farm Insurance Co., 141 N.M. 322, 154 P.3d 697 (N.M.
App. 2007); Shelter Mut. Ins. Co. v. Nash, 357 Ark. 581, 184
S.W.3d 425 (2004) (collecting cases).
Given 	the 	contractual 	nature 	of 	underinsured 	motorist
claims, our case law, and the jurisprudence in a majority of
other jurisdictions, we believe Snyder v. EMCASCO Ins. Co.,
259 Neb. 621, 611 N.W.2d 409 (2000), was soundly decided
and we continue to follow our holding in Snyder. The district
court failed to follow Snyder and adopted a minority view,
which we previously considered and rejected. Upon reevalu-
ation, we continue to adhere to our previously adopted view
that the action accrues upon the insurer’s breach and accord-
ingly conclude that the district court erred as a matter of law
when it failed to follow this precedent. We reverse the order of
the district court which granted summary judgment in favor of
Farmers and remand the cause for further proceedings.
We note that in its answer, Farmers raised as affirmative
defenses both the statute of limitations and laches. In its
decision, the district court ruled only on the statute of limi-
tations defense and did not comment on the issue of laches.
Because the district court did not address the issue of laches
and because Farmers did not raise the district court’s failure
to consider laches in a cross-appeal, we do not address the
issue here.
CONCLUSION
The district court failed to apply our holding in Snyder that
the action accrues upon the insurer’s breach and erred as a

SHADA v. FARMERS INS. EXCH. 	453
Cite as 286 Neb. 444
matter of law when it determined that Shada’s action against
Farmers for underinsured motorist benefits accrued upon her
settlement with the tort-feasor’s insurer and was time barred.
Therefore, we conclude that the district court erred when it
granted Farmers’ motion for summary judgment and dismissed
the case. We reverse the judgment and remand the cause for
further proceedings consistent with this opinion.
reverSed and reManded For
Further proceedingS.