[Copyrighted Material Omitted]
Appeal from the District Court for Lancaster County: STEPHANIE F. STACY, Judge.
Cynthia R. Lamm, of Law Office of Cynthia R. Lamm, and Jacob Tewes, Senior Certified Law Student, for appellant.
Gary J. Nedved, of Keating, O'Gara, Nedved & Peter, P.C., L.L.O., for appellee.
HEAVICAN, C.J., WRIGHT, CONNOLLY, MCCORMACK, MILLER-LERMAN, and CASSEL, JJ. STEPHAN, J., not participating.
[291 Neb. 788] McCormack, J.
NATURE OF CASE
The appellant, Rent-A-Roofer, Inc., doing business as A-J Roofing & Waterproofing, settled a lawsuit without notifying its insurer--the appellee, Farm Bureau Property & Casualty Insurance Company (Farm Bureau)--of the lawsuit. After settlement, Rent-A-Roofer attempted to claim damages from Farm Bureau. Farm Bureau declined coverage because Rent-A-Roofer failed to meet the notice and voluntary payments provisions of its insurance policy. The district court found that, where the insured failed to meet both the notice and voluntary payments provisions, prejudice had been established as a matter of law and allowed Farm Bureau to avoid liability under the policy. Rent-A-Roofer appeals, claiming it is entitled to costs of defense for the suit.
At all relevant times, Rent-A-Roofer held a commercial general liability insurance policy with Farm Bureau.
In September 2007, the State of Nebraska filed a lawsuit in the district court for Lancaster County for damages arising from Rent-A-Roofer's alleged failure to install a roof in a good and workmanlike manner. The date of the State's loss was during the policy year of 2004 to 2005. Rent-A-Roofer disputed the faultiness of its workmanship and submitted the defense of the matter to Farm Bureau.
Farm Bureau decided that the complaint sought damages only for faulty workmanship and determined that the policy excluded such faulty workmanship under the " 'your work'" exclusion. Farm Bureau informed Rent-A-Roofer that the property damage did not arise out of a covered " 'occurrence,'" so Farm Bureau would not indemnify or defend its insured. Thereafter, Rent-A-Roofer hired its own counsel to defend the suit and reached a settlement in exchange for a release and dismissal of the suit.
[291 Neb. 789] In August 2010, the National Research Corporation (NRC) filed a lawsuit against Rent-A-Roofer and six other defendants in the district court for Lancaster County. Similar to the case brought by the State, NRC also alleged that Rent-A-Roofer and the other defendants had failed to construct and renovate its property in a workmanlike manner, among other claims. Rent-A-Roofer did not notify Farm Bureau of the NRC claim at that time because, " based upon the company's experience in the case brought by the State, [Rent-A-Roofer] did not believe there was
coverage for the claim." 
Instead of notifying Farm Bureau of the claim against it, Rent-A-Roofer hired and paid for its own legal counsel. Rent-A-Roofer proceeded with its hired counsel to mediation, where, on August 17, 2011, Rent-A-Roofer reached a settlement with NRC. On September 12, Rent-A-Roofer notified Farm Bureau of its involvement in litigation with NRC and made a demand under Rent-A-Roofer's policy with Farm Bureau.
The insurance policy held by Rent-A-Roofer contained a notice provision which stated: " 2. Duties In The Event Of Occurrence, Offense, Claim Or. Suit[:] a. You must see to it that we are notified as soon as practicable of an 'occurrence' or an offense which may result in a claim." The ...