HUH??? Well, my Dear Readers, we do know that everything in insurance has to do with context – both factual and contractual.

What is the exact wording of the insurance agreement?  Because we know that under Nebraska law (and all other states) policy interpretation is a matter of contract law.  If the terms are not ambiguous, the courts will give the language its true meaning. If the terms are ambiguous, then the insured wins.  Also what are the underlying facts? Coverage is not looked at in a vacuum.  Nor are the insurance company’s defenses to the contract examined standing alone.  One of those defenses is the cooperation clause.

Under the cooperation clause, a policyholder has a duty to cooperate with the insurance company in investigating, defending and settling the claim.  Failure to cooperate can void coverage.  However the obligation to “cooperate” cannot be grounds for denial unless the insurer gives a plausible reason explaining exactly how the alleged failure to cooperate materially prejudiced its ability to tender a defense.  Mefferd v. Sieler & Co.,  676 N.W.2d 22, 26 (2004) (an insurer cannot assert a breach of a cooperation provision as a policy defense in the absence of a showing of prejudice or detriment to the insurer).

The crux of the issue is this:  did the policyholder fail to cooperate in such a way that the insurer was not “meaningfully able to protect its interests?”  Id. (discussing failure to provide notice and to provide cooperation).  The purpose of the cooperation clause is to prevent collusion between the injured and the insured and to facilitate the handling of claims by the insurer.  Iowa Mut. Ins. Co. of De Witt, Iowa v. Meckna,  144 N.W.2d 73, 80 (1966).

But if the insurer has reserved its right to  defend and indemnify under that same policy, it cannot argue later that the policyholder’s lack of cooperation is a defense to coverage.  “An insurer does not have the right without consent of the insured to retain control of the defense of an action indemnifiable under the apparent terms of an insurance policy and at the same time reserve the right to disclaim liability on the policy.”  Id. at 81.   Where an insurer sees fit to gamble on its insistence on a reservation of rights agreement, and to ignore the fact of an action against its insured, it is in no position to complain about the actions of its insured Id.


In order to avail itself of the non-cooperation clause defense to coverage, an insurance company must show (1) that it accepted coverage, (2) that the insured did not reasonably cooperate in investigation or defense of the claim, and (3) that the insurance company was unable to meaningfully protect its interests in the lawsuit as a result of the policyholder’s failure to cooperate.