Coverage Analysis
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  Federal district court ruled in Maryland Cas. Co. v. Mike Miller Companies, Inc., 715 F.Supp. 321 (D. Kan. 1989) that a suit against the insured seeking damage for the insured's refusal to carry out work as required by its construction contract did not allege an "occurrence" since the insured's conduct was conscious and intentional and therefore not an "accident."  In Troy v. Allstate Ins. Co., 789 F.Supp. 1134 (D. Kan. 1992), the federal district court held that the sexual molestation of a child was not an "occurrence" since an intent to injure could be presumed as a matter of law from the nature of the deliberate act.

  The intentional acts of the insured’s son were not held to preclude coverage for claims against the parents under a  policy that excluded coverage for injuries intentionally caused by “an insured” in Catholic Diocese of Dodge City v.  Raymer, 825 P.2d 1144 (Kan. App.  1991), affirmed, 840 P.2d 456 (Kan.  1992).  Nevertheless, the Kansas Supreme Court subsequently relied on Raymer in Brumley v.  Lee, 1998 WL 427236 (Kan.  July 17, 1998)  finding coverage for claims against innocent insureds despite an exclusion for loss resulting from intentional acts by “any insured.”  The court found coverage for allegations that parents had failed to protect a child in their care from being fatally assaulted by their son-in-law.  Even though the policy excluded injuries that were intentionally caused by “any insured,” the court refused to find that the addition of the letter “Y” cured the ambiguity that otherwise arose from the conflict between exclusions for losses caused by “an” or “the” insured and the severability of interests clause in the policy (which provides that the interests of each insured must be considered separately).  Three dissenting justices criticized this result and pointed out that numerous other jurisdictions have upheld “any”-type exclusions. 

  In Lapeka, Inc. v. Security National Ins. Co., Inc., 814 F.Supp. 1540 (D. Kan. 1993), the District Court held that allegations of employment discrimination based upon a "disparate impact" theory alleged an "occurrence" since the insured's deliberate acts did not relate to any specific intent to cause harm.  On the other hand, Judge Vratil ruled in Travelers Cas. & Sur.  Co.  of Illinois v.  Rage Administrative and Marketing Services, 1999 WL 153238 (D.  Kan. January 8, 1999) that a CGL policy did not cover civil rights claims that a restaurant had refused to serve black customers as recovery under the statute required proof of a racial animus and was thus not an “accident” or “occurrence.”

  Alleged misrepresentations provided by a real estate agent were not the result of an “accident.”   ERA Franchise Systems, Inc.  v.  Northern Ins. Co.  of New York, 1998 WL 941099 (D.  Kan.  December 15, 1998).    Likewise, a federal district court has ruled that damages that a car buyer claimed to have suffered as a consequence of a dealer’s misrepresentation concerning the condition of a minivan were held not to allege an “occurrence” for property damage since the damages resulted from the poor condition of the minivan itself not any action of the seller.  USF&G v. Dealer’s Leasing, Inc., 2001 WL 392251 (W. Kan. March 28, 2001).


  Trial court adopted “all sums” theory  for hearing loss claims in Atchison, Topeka and Santa Fe Railroad Co. v. Stonewall Ins. Co., Shawnee County District Court No. 94-CV-1464 (Kan. July 24, 2000).   As each policy contained a self-insured retention, and language stating that no more than one deductible or SIR would apply to each occurrence, the court ruled that Santa Fe was only required to pay a single deductible no matter how many policy years were triggered.  The court ruled, however, that any designated insurer was entitled to contribution based on “other insurance” wordings.  The court refused to find, however, that the “other insurance” language allowed the insurers to seek contribution from the insured, declaring that the self-insured retentions were not “insurance.”  The court refused to find that Santa Fe would obtain an unjustifiable windfall because its insurers were forced to subsidize it and cover periods for which it had chosen not to purchase insurance.  In particular, the court found that Santa Fe did not face liability for the periods for which it did not have insurance.  Whereas the insurers are free to seek allocation amongst themselves, this allocation may not delay the full indemnification of Santa Fe.  While conceding that Kansas law requires that all primary coverage be exhausted before excess coverage is triggered, the court declared that this general rule does not apply inasmuch as the self-insured retentions are not primary insurance.  Unlike the case in Missouri-Pacific, in which the Appellate Court of Illinois had ruled that SIRs are insurance, the court declared that the Santa Fe retentions were not treated in the policies as insurance nor did the policyholder agree contractually to be a primary insurer.

  The federal court refused to endorse a "pick and choose" theory in Cessna Aircraft Co. v. The Hartford Acc. & Ind. Co., 900 F Supp. 1489 (D. Kan. 1995).  The court declined to rule as to whether the insured was entitled to claim coverage on a "joint and several" basis, holding that the insured had not established its right to claim such relief as a matter of law. 


   Kansas has both an intermediate appellate court and a state Supreme Court.


  Unfair claim settlement practices are defined in Kansas by K.S.A. 40-2404.  Unfair or deceptive consumer practices are proscribed by K.S.A. § 50-623 (1983)

  Under Kansas law, a claim for breach of an insurer's implied good faith settlement obligation is contractual in nature.  Abes v. Shaw, 906 P.2d 642 (Kan. 1995) and  Associated Wholesale Grocers, Inc. v. Americold Corp., 934 P.2d 65 (Kan. 1997).

  Kansas has refused to recognize the tort of bad faith in the first-party insurance context.  Spencer v. Aetna Life & Casualty Ins. Co., 611 P.2d 149, 159 (Kan. 1980).  Guaranty Abstract & Title Co. v. Interstate Fire & Casualty Co., 652 P.2d 665 (Kan. 1982).

  A third-party tort claimant has no right to assert bad faith claims against the tortfeasor’s liability insurer.   Bell v.  Tilton, 674 P. 2nd 468 (Kan.  1983). 

  A primary insurer that failed to make its policyholder aware of an early opportunity to settle a claim within policy limits has been held liable for the entire amount of an excess verdict, despite the insurer's contention that the settlement demand was asserted too early in the litigation and left open too short a time for it to substantively evaluate it and respond.  Hawkins v. Dennis, 905 P.2d 678 (Kan. 1995).

  Insurers are entitled to a reasonable period of time to analyze a situation requiring a coverage decision. Glenn v. Flemming, 247 Kan. 296, 799 P.2d 79 (1990).  

  An insurer may be liable for damages in excess of its policy limits if it is found to have denied coverage in bad faith or if it has negligently rejected a settlement offer within policy limits.  Americold, supra.  Where an insurer rejected a reasonable offer to settle within policy limits, the insured is free to negotiate a reasonable good faith settlement with the tort claimants even if the insurer offered to provide a defense under a reservation of rights.

  The existence of a coverage dispute is a factor to be considered in assessing whether an insurer may be liable for failure to settle within policy limits. Snodgrass v. State Farm Mutual Auto Ins. Co., 804 P.2d 1012, 1022 (Kan. App. 1991).  

  In assessing whether an insurer wrongfully refused to provide a defense, the court will look to whether the settlement was reasonable in the view of the insured at the time.  Determining whether a settlement above policy limits without the insurer's consent is reasonable, the solvency of the insured is relevant.  In Americold, the Kansas Supreme Court noted that an insured without assets would have less incentive to keep the settlement amount reasonable than an insured with collectible assets.  In such circumstances, the insured's potential insolvency may eliminate arms length bargaining as the insured does not have alternative assets that are available to the claimant in the event that recovery cannot be had from the insured's carrier.  

  An insurer may be held vicariously liable for the malpractice of its appointed defense counsel. Pacific Employers Ins. Co. v. P.B. Hoydale Co., 789 F.Supp. 1117, 1122 (D. Kan. 1992).  


  Held not to encompass claims for mental distress in Lapeka, Inc. v. Security National Ins. Co., Inc., 814 F.Supp. 1540 (D. Kan. 1993).  Similarly, a federal district ruled in  ERA Franchise Systems, Inc.  v.  Northern Ins. Co.  of New York, 1998 WL 941099 (D.  Kan.  December 15, 1998) that emotional distress suffered by a prospective purchaser due to inaccurate advice provided by the insured real estate agent was not a claim for “bodily injury” under the agent’s CGL policy.

  The purpose of notice provisions are to provide the insurer with an opportunity to make a "timely and adequate investigation in order to form an intelligent estimate of its rights and liabilities."  Phico Ins. Co. v. Providers Ins. Co., 888 F.2d 663, 668 (10th Cir. 1989) and Boone v. Lowry, 8 Kan. App.2d 293, 298, rev. den., 232 Kan. 875 (1983).  An insurer seeking to defeat coverage on the basis of a failure to give timely notice must prove that it was materially prejudiced Travelers Ins. Co. v. Feld Car & Truck Leasing Corp., 517 F.Supp. 1132 (D. Kan. 1981). 

  A federal court has ruled that an insured's decision to enter into settlements of environmental liability claims without the knowledge or consent of its insurers will not automatically vitiate coverage unless the insurers can show that they were prejudiced by the settlements. Cessna Aircraft Co. v. The Hartford Acc. & Ind. Co., 900 F Supp. 1489 (D. Kan. 1995).


  Claims for wrongful termination and employment discrimination were not an "offense" within scope of personal injury coverage in Lapeka, Inc. v. Security National Ins. Co., Inc., 814 F.Supp. 1540 (D. Kan. 1993).  Employer's surreptitious recording of employee phone conversations did not involve any advertising, nor was it a "personal injury" since the utterances were not communicated to a third party.  MGM, Inc. v. Liberty Mut. Ins. Co., 839 P.2d 537 (Kan. App. 1992).


  Insured has burden of showing that the claimed loss is of a type within the general coverage provisions. Lapeka, Inc. v. Security National Ins. Co., Inc., 814 F.Supp. 1540 (D. Kan. 1993); Golf Course Superintendents Assoc. v. Underwriters at Lloyd's London, 761 F.Supp. 1485, 1489 (D. Kan. 1991).  The burden then shifts to the insurer to demonstrate applicability of a policy exclusion. Baugher v. Hartford Fire Ins. Co., 522 P.2d 401 (Kan. 1974); Arnold v. Adventure Line Mfg. Co., 495 P.2d 1007 (Kan. 1972).

  A federal district has held that the insurer's burden extends to showing the inapplicability of exceptions that might reinstate coverage.  USF&G v. Morrison Grain Co., 734 F.Supp. 437 (D. Kan. 1990), aff'd, 999 F.2d 489 (10th Cir. 1993).  However, Judge Belot asserted in Federated Mutual Ins. Co. v. Botkin Grain Company, C.A. No. 91-1223 (D. Kan. June 16, 1994), aff'd in part, rev'd in part, 64 F.2d 537 (10th Cir. 1995), that insurers have the entire burden of establishing the applicability of the pollution exclusion, including the "sudden and accidental" exception.  The 10th Circuit avoided ruling on this issue, holding that the insurers had met their burden whether it was their's to prove or not.

 Although a federal court has since ruled in Cessna Aircraft Co. v. The Hartford Acc. & Ind. Co., 900 F Supp. 1489 (D. Kan. 1995) that the insured has the burden of proving a "sudden and accidental" release, another court ruled in New Coleman Holdings, Inc. v. Aetna Casualty & Surety Co., 1995 U.S. Dist. LEXIS 18068 (D. Kan. November 3, 1995) that this only applied with respect to issues of indemnity and that an insurer still had a duty to defend unless it could establish that there was no possibility that the underlying environmental liability claims were based on "sudden and accidental" releases.


  Under the law of Kansas, the interpretation of a contract as a matter governed by the law of the state in which the last act necessary for the contract's formation is completed.  Sims v. Metropolitan Life Ins. Co., 685 P.2d 321 (Kan. App. 1984); American Motorist Ins. Co. v. General Host Corp., 919 F.Supp. 1506 (D. Kan. 1996).  In the insurance context, coverage is therefore governed by the state in which the policy is signed and countersigned.  Jameson v. Pack, 815 F.Supp. 410, 413 (D. Kan. 1993); RLI Ins. Co. v. Kary, 779 F.Supp. 1300 (D. Kan. 1991); and Civic Assoc., Inc. v. Security Ins. Co., 749 F.Supp. 1076 (D. Kan. 1990).

  A federal district court ruled from the bench in Certain Interested Underwriters of Lloyds v. Boeing Sedgwick, No. 99-C-536 (D. Kan. October 7, 1999 that Washington law should be applied to claims against Boeing based upon contamination at waste sites in Kansas.  Although the court ruled that the service of suit clause was not controlling in the Kansas action, he nonetheless found that a Kansas court would adopt a place of contracting approach to the disposition of the choice of law issue.


 The "notice prejudice" rule does not apply to the requirement in a fidelity bond that a loss be reported to the insurer within 30 days after its discovery. National Union Fire Ins. Co. of Pittsburgh v. Resolution Trust Corporation, No. CIV. A. 94-2088 (D. Kan. April 15, 1996).


  The lawyer retained by an insurer represents the interests of the insured and the insurer.  Glenn v. Fleming, 781 P.2d 1107 (Kan. App. Ct. 1989), aff’d in part, rev’d in part, 799 P.2d 79 (Kan. 1990).  On the other hand, where a conflict of interests exists, the insurer must obtain independent counsel to represent its insured. Patrons Mutual Ins. Assoc. v. Harmon, 732 P.2d 741 (Kan. 1987).  


  Kansas has taken a broad view of the meaning of “all sums” as extending to all types of damages and penalties that may be awarded as a consequence of a coverage claim.   Southern American Insurance v. Gabbert-Jones, Inc., 769 P.2d 1194 (Kan. App. 1989) and State Farm v. Martinez, 995 P.2d 890 (Kan. App. 2000).  In Martinez, the Court of Appeals found that civil penalties that the State Attorney-General sought to impose on an insurance claims consultant for the unauthorized practice of law were “damages...because of” a covered injury, as the policy did not require that the sums be paid directly to the injured party or be “for” a covered injury.
  Conflicting decisions.  Federal district court held that there was no coverage for clean-up costs in U.S.F.& G. v. Morrison Grain Co., 734 F.Supp. 437 (D. Kansas 1990), aff'd on other grounds, No. 90-3123 (10th Cir. July 22, 1993).  However, more recent rulings have found that clean-up costs are "damages" in Glickman, Inc. v. The Home Ins. Co., No. 93-1421 (D. Kan. June 29, 1994); Cessna Aircraft Co. v. The Hartford Acc. & Ind. Co., 900 F Supp. 1489 (D. Kan. 1995); Harpool, Inc. v. Trinity Universal Ins. Co., 18th Judicial District, No. 89 C 702 (Kansas November 17, 1989).


  The Kansas Supreme Court ruled in State Farm Fire & Cas. Co. v. Finney, 770 P.2d 460 (Kan. 1989) that an insurer could not use an action for declaratory relief to resolve key factual issues in the underlying case against its insured.  The court held that the insurer would not be estopped from relitigating these issues in the coverage case once the liability suit was concluded.

  Insurer must name underlying claimant in DJ; otherwise claimant is not bound by finding of no coverage and may recover in a direct proceeding.  Heinson v. Metropolitan Property and Liability Ins. Co., 244 Kan. 557, 772 P.2d 778 (1989). 

  Attorneys fees not normally recoverable unless the insurer committed an unfair or deceptive practice in refusing to defend a claim. Heinson, supra.  However, K.S.A. 40-256 allows for an award of reimbursement of attorney's fees to any insured that prevails in an action in which the insured "has refused without just cause or excuse to pay such loss."  Koch v. Prudential Ins. Co., 470 P.2d 756 (Kan. 1970); City of Salina, Kansas v. Maryland Cas. Co., C.A. No. 93-4005 (D. Kan. April 29, 1994); Container Supply Co. v. Fireman's Fund Ins. Co., 715 F.Supp. 326 (D. Kan. 1989).   "Just cause or excuse" has been defined as "a position which is not frivolous or patently without reasonable foundation.  Clark Equipment Co. v. Hartford Accident & Indemnity Co., 608 P.2d 903, 907 (Kan. 1980).  Accordingly, an award of fees is not permitted if there was a bona fide basis for refusing to pay.  Allied Mut. Ins. Co. v. Gordon, 811 P.2d 1112, 1125 (Kan. 1991).  In Glickman, Inc. v. The Home Ins. Co., No. 93-1421 (D. Kan. May 12, 1995), aff'd, 1996 WL 329601 (10th Cir. June 17, 1996) the Tenth Circuit affirmed a lower court's ruling that an insurer's contention that Superfund clean up claims were not "damages" was not frivolous and precluded any award of fees to the insured in light of the close split in the case law around the country and the absence of any clear Kansas precedent on this issue.  The court rejected the insured's contention that a higher standard of "just cause" should be applied to the duty to defend.

  The Supreme Court of Kansas has ruled, however, that mere negligence is sufficient to support an award of fees and that the insured is not obligated to establish bad faith per se. Hawkins v. Farm Bureau Mut. Ins. Co., No. 70,392 (Kan. October 27, 1995).  Further, the court ruled that the award of fees was not limited to a fixed hourly rate and could include a pre-existing contingent fee agreement if that was deemed to be reasonable in the discretion of the trial court.

  In Citizens Ins. Co. v. Charity, 93-2382 (D. Kan. December 19, 1994), the U.S. District Court ruled that insurers must reimburse their policyholders for the cost of defending a DJ that the insurer had commenced, finding that such costs are within the grant of coverage for Supplementary Payments as reasonable sums that the insured incurs at the insurer's request.  See also Upland Mutual Ins., Inc. v. Noel, 519 P.2d 737 (Kan. 1974).  See also Westchester Fire Ins. Co. v. City of Pittsburg, 794 F.Supp. 353, 355 (D. Kan. 1992).


   --Claims Manuals

   --Drafting History

   --Other Policyholder Claims

   --Reinsurance Information



  A duty to defend exists "so long as the insured can show a non-frivolous possibility that the claim against it may fall within the coverage of the insurance contract."  American Motorists Ins. Co. v. General Host Corp., 946 F.2d 1489, 1490 (10th Cir. 1991).  MGM, Inc. v. Liberty Mut. Ins. Co., 855 P.2d 77, 79 (Kan. 1993). In assessing their potential obligations, insurers must look beyond the pleadings and consider any facts actually known to them or which could reasonably have been discovered. Patrons Mut. Ins. Co. v. Harmond, 732 P.2d 741, 744 (Kan. 1987); Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. 681, 512 P.2d 403, 407 (1973).

  Kansas is nearly unique in focusing on the underlying theory of liability as distinguished from the facts giving rise to injury.  Upland Mutual Ins.  v.  Noel, 519 P.2d 737 (Kan.  1974), as reaffirmed in Brumley v.  Lee, 1998 WL 427236 (Kan.  July 17, 1998). 

  The duty to defend has been held to extend to an obligation to appeal where reasonable grounds for an appeal exist.  Glenn v. Flemming, 799 P.2d 78, 88 (Kan. 1990)

  Trial court held that PRP letter was a "suit" in Harpool, Inc. v. Trinity Universal Ins. Co., No. 89 C 702 (Kansas Dist. Ct. November 17, 1989).


  An insurer that provides a defense under a reservation of rights is not estopped to assert its policy defenses in a subsequent coverage action.  St. Farm Fire & Casualty Co. v. Finney, 77 P.2d 460 (Kan. 1989).  


  An excess insurer's policy obligations ordinarily only arise if the primary coverage does not exist or is exhausted.  INA v. Medical Protective Co., No. 83-3082 (10th Cir. July 25, 1985).  On the other hand, an excess insurer has been held to owe a pro rata share of defense costs corresponding to its indemnity obligation, including costs incurred prior to the date that the underlying policies became exhausted. American Fidelity Ins.  Co.  v.  Employers Mutual Casualty Co., 593 P.2d 14, 22 (Kan. App.  1979).


  Separate loan swaps by insured savings and loan held to involve separate "occurrences" in North River Ins. Co. v. Huff, 628 F.Supp. 1129, 1133 (D. Kan. 1985).  Similarly, in Penalose Cooperative Exchange v. Farmland Mutual Ins. Co., 789 P.2d 1196 (Kan. App. 1990), the Kansas Court of Appeals held that on-going acts of embezzlement over two policy periods triggered both policies.  More recently, in St. Paul Fire & Marine Ins. Co. v. Chong, 787 F.Supp. 183 (D. Kan. 1992) a federal court ruled that an attorneys' negligence in representing three Korean citizens in a criminal proceeding, which subsequently led to their being deported, was not subject to a single policy limit for a "series of related wrongful acts" and ruled instead that there were multiple discrete omissions and actions on the part of the insured which resulted in discrete losses to each of the three defendants.

  Where a general liability policy contained a separate sub-limit for sexual molestation claims stating that all acts of sexual misconduct by a single individual would be considered a single "occurrence", the Tenth Circuit has ruled that claims by multiple individuals who were molested must nonetheless all be considered part of the same "occurrence." Kansas State Bank & Trust v. Midwest Mutual Ins. Co., 1994 WL 192035 (10th Cir. 1994).  

 A state trial court has ruled that the “cause” of thousands of NIHL claims against a railroad was the insured’s failure to implement a hearing conservation program.  In Atchison Topeka & Santa Fe Railway Company v. Stonewall Insurance Company, Shawnee County Case No. 94-CV-1464 (Kan. Dist. Ct. July 24, 2000), Judge Parrish rejected the insurers’ argument that the failure to provide a safe hearing loss program was a “non-event,” declaring  that insurance treatises, case law and common sense required a finding that the failure to act could be an “event.”  Further, in light of the broad interpretation accorded to the words “arising out of,” the court declared that even if the proximate cause of each plaintiff’s injury was noise conditions at a given job site, the legal “cause” was the insured’s failure to take steps to prevent the loss from occurring.  Moreover, the court refused to find that the insured’s repeated failures to implement a hearing loss safety program constituted multiple “occurrences.”  A similar earlier ruling in the same case was reversed in 1997 based upon the court’s determination that an inadequate factual record existed to support summary judgment for the insured.  Atchison, Topeka and Santa Fe Railroad Co. v. Stonewall Ins. Co., Shawnee County District Court No. 94-CV-1464 (Kan. September 18, 1995), reversed and remanded, 1997 WL 1048134 (Kan 1997).


  The Kansas Court of Appeals ruled in Farm Bureau Mut. Ins. Co. v. Laudick, 18 Kan. App. 782, 859 P.2d 410 (1993), rev. den. (Kan. November 9, 1993) that the exclusion unambiguously precludes coverage for gradual releases of pollutants. Federal courts ruled in American Motorists Ins. Co. v. General Host Corp., 667 F.Supp. 1423 (D. Kan. 1987), affirmed, 946 F.2d 1482 (10th Cir. 1991); USF&G v. Morrison Grain Co., 734 F.Supp. 437 (D. Kan. 1990), aff'd, 999 F.2d 489 (10th Cir. 1993) and Cessna Aircraft Co. v. The Hartford Acc. & Ind. Co., 900 F.Supp. 1489 (D. Kan. 1995) that "sudden" has a temporal meaning and that pollution occurring as the result of the insured's intentional disposal practices over a period of years was neither "sudden" nor "accidental."  In Cessna, Judge Vratil rejected the insured's regulatory estoppel claims as being contrary to Kansas law.   Similarly, isolated spilling events which occurred at a service station over a period of years and which combined to eventually cause a pollution problem were held not to be "sudden and accidental" in Federated Mut. Ins. Co. v. Botkin Grain Co., 844 F.Supp. 673 (D. Kan. 1994), aff'd, 64 F.2d 537 (10th Cir. 1995).

  However, a U.S. District Court has ruled that the exclusion does not eliminate a duty to defend if the underlying pleadings do not foreclose the possibility that the discharges of pollutants were "sudden and accidental."  Glickman, Inc. v. The Home Ins. Co., No. 93-1421 (D. Kan. June 29, 1994).

  In Pennsylvania National Mut. Cas. Ins. Co. v. City of Pittsburg, Kansas, 794 F.Supp. 353 (D. Kan. 1992), aff'd, 987 F.2d 1516 (10th Cir. 1993), the Tenth Circuit upheld a lower court ruling that the exclusion did not preclude coverage for personal injuries suffered by motorists as the result of being sprayed by malathion by a city insecticide operation.  The Court rejected the insurer's contention that the discharges were not "sudden and accidental" because similar "fogging" operations had been on-going for sixteen years, holding that what was important was the specific discharge that had caused the underlying claimant's injuries.  Similarly, because the discharge had apparently occurred inadvertently as the city truck was traveling between spraying locations, the Court found that it was clearly "accidental."  This is a companion case to Westchester Fire in which the District Court ruled that malathion was not a "pollutant” under policies containing “absolute” exclusions.

  A New Jersey trial court has opined that the Kansas Supreme Court would adopt the Morton theory of "regulatory estoppel."  Cessna Aircraft Co. v. Hartford Accident & Indemnity Co., Morris No. L-3868-92 (N.J. Super. February 4, 1997)(Kansas law).

  In Associated Wholesale Grocers, Inc. v. Americold Corporation, 934 P.2d 65 (Kan. 1997), the state Supreme Court concluded that the absolute pollution exclusion in the NPIC policy was ambiguous in the context of a fire claim.  The court rejected the insurer's effort to draw a distinction between smoke and the toxic materials contained in the smoke.  Further, it found that the "release or escape of pollutants" language in the exclusion was ambiguous.  Citing to the Tenth Circuit's carbon monoxide ruling in Regional Bank, the court held that the exclusion was ambiguous in the context of hostile fire smoke damage situations.  Although the exclusion did not contain an exception for "hostile fires," the court held that the form was ambiguous as to whether the "hostile fire" exception in the underlying National Union policy should be incorporated by reference.  In any event, the court found that an insured might have a reasonable expectation of coverage for such events.

  A federal court gave a limited meaning to the absolute exclusion in Westchester Fire Ins. Co. v. City of Pittsburg, Kansas, 768 F.Supp. 1463 (D. Kan. 1991),  finding that it was not intended to apply to injuries arising out of municipal sprayings of pesticides.

  The Kansas Court of Appeals upheld the "absolute" exclusion to third party claims arising out of leaking tanks at the insured's gas station in Crescent Oil Co. v. Federated Mut. Ins. Co., 20 Kan. App. 428, 888 P.2d 869 (Kan. App. 1995), rejecting the insured's claims that ambiguity could be found in the so-called drafting history or through its conflict with the "products hazard."  the court refused to limit the scope of the exclusion to "industrial contamination" along the lines suggested by the Westchester court.

  In City of Salina, Kansas v. Maryland Cas. Co., 856 F.Supp. 1467 (D. Kan. 1994),  District Court distinguished such cases, holding that the discharge of sodium hydroxide from the insured's sewer was an "alkali" that clearly constituted an "irritant or contaminant" within the policy definition of "pollutant." 

  However, in a "non-environmental" context, a federal district court in Kansas found coverage for burns suffered by a child when she accidentally came into contact with formic acid that the insured had brought into her parents' home to determine whether their carpets were suitable for dyeing.  In Regent Ins. Co. v. Holmes, 835 F.Supp. 579 (D. Kan. 1993), Judge Vratil ruled that "the term pollutant connotes a substance that is harmful or toxic to persons or the environment generally" and therefore did not extend to a substance such as formic acid that would only be harmful under certain unfortunate circumstances such as these.


  Economic loss resulting from employment discrimination was not "property damage" in Lapeka, Inc. v. Security National Ins. Co., Inc., 814 F.Supp. 1540 (D. Kan. 1993).  See also Security State Bank of Kansas City v. Aetna Cas. & Sur. Co., 825 F.Supp. 944 (D. Kan. 1993)(claims against a bank for mishandling the sale of stock under an escrow agreement with the plaintiffs were held not to allege a loss of use of "tangible property") and  ERA Franchise Systems, Inc.  v.  Northern Ins. Co.  of New York, 1998 WL 941099 (D.  Kan.  December 15, 1998)(no coverage for investment losses suffered by an insured as a result of inaccurate advice provided by a real estate agent).


  Coverage is forbidden under Kan. Stat. Ann. Sec. 40-2,115 (1994). It is against the public policy of Kansas to allow a wrongdoer to purchase insurance to cover punitive damages.  Koch v. Merchants Mutual Bonding Company, 507 P.2d 189 (Kan. 1973).  Further, the Kansas Supreme Court ruled in Flint Hill Electric Cooperative Assoc. v. Federated Rural Electric Ins. Corp., 1997 WL 333940 (Kan. May 30, 1997) that it is against public policy to afford coverage for punitive damages that are awarded on the basis of the insured's own conduct.  Cf. Southern American Ins. Co. v. Gabbert-Jones, Inc., 13 Kan. App.2d 324, 769 P.2d 1194 (1989)(holding that coverage for such awards is not against public policy).  However, the Kansas Supreme Court also refused to find coverage for punitive awards in the toxic shock cases in St. Paul Surplus Lines Ins. Co. v. International Playtex, 245 Kan. 258 (1989).   


  Although insurance policies should be construed like other contracts, their terms will be interpreted, if possible, to give effect to the intention of the parties.  Catholic Diocese of Dodge City v. Raymer, 840 P.2d 465 (Kan. 1992).  

  "If an insurance policy is clear and unambiguous, the words are taken in their plain, ordinary and popular sense."  American Media, Inc. v. Home Indemnity Co., 232 Kan. 737, 740, 658 P.2d 1015, 1018 (Kan. 1983) and Unified School District 501 v. Continental Cas. Co., 723 F.Supp. 564, 566 (D. Kan. 1989).  An insured's reasonable understanding or expectation of coverage will prevail over policy language unless provisions are drafted clearly and distinctly.  Penalose Cooperative Exchange v. Farmland Mutual Ins. Co., 789 P.2d 1196 (Kan. App. 1990) and Gowing v. Great Plains Mut. Ins. Co., 483 P.2d 1072 (Kan. 1971).  

  The meaning of an insurance contract is based, not on what the insurer understood it to mean, but what a "reasonably prudent insured would understand the language to mean."  Farm Bureau Mutual Ins. Co. v. Winters, 806 P.2d 993 (Kan. 1991).  Thus, the Kansas Supreme Court has ruled that a contract of insurance "should not be construed through the magnifying eye of a technical lawyer but rather from the standpoint of what an ordinary person would believe it to mean."  Wheeler v. Employers Mutual Casualty Co., 505 P.2d 768 (Kan. 1973).  

  Kansas follows the rule of "contra proferentum" even if the insured is a large, sophisticated party, unless the insured participated directly in the drafting of the provisions at issue.  Coleman Co. v. California Union Ins. Co., 960 F.2d 1529, 1532 (10th Cir. 1992)(criticizing rule).  

  In general, insurance policies, like all other contracts, are to interpreted to give effect to the intention of the parties.  Patrons Mut. Ins. Assoc. v. Harmon, 732 P.2d 741 (Kan. 1987).  Where a policy is unambiguous in its meaning, the court must enforce that meaning and not re-write the contract.  Catholic Diocese of Dodge City v. Raymer, 840 P.2d 456, 459 (Kan. 1992).  However, if an insurer has failed to express its intent by clear and unambiguous language, the policy will be construed in favor of the insured.  In particular, "the subjective or undisclosed intent of the insurer does not control interpretation of the policy."  Westchester Fire Ins. Co. v. City of Pittsburgh, 768 F.Supp. 1463, 1467 (D. Kan. 1991).   

  Ambiguity arises if provisions have a doubtful or conflicting meaning as gleaned from a natural and reasonable interpretation of its language.  Ambiguity will not be found unless the application of pertinent rules of interpretation leave it genuinely uncertain which of two meanings is the proper one.  Patrons, supra and Catholic Diocese of Dodge City v. Raymer, 251 Kan. 689, 840 P.2d 456 (1992).  


  None adopted.


  Kansas follows the majority rule that coverage is triggered when the claimant sustains actual damage and not when the act or omission that caused such damage was committed.  Scott v. Keever, 512 P.2d 346, 212 Kan. 719 (1973)(no coverage where defective ladder was sold during policy period but did not cause injury until after policy expired).  

  As yet, Kansas courts have not had occasion to apply this principle in the context of latent injury claims.  However, in Cessna Aircraft Co. v. The Hartford Acc. & Ind. Co., 900 F Supp. 1489 (D. Kan. 1995), Judge Vratil declared that coverage should be "triggered" in any policy year in which groundwater had been actually injured or exposed to contaminants.  Earlier, in Johnson v. Studyvin, 828 F.Supp. 877 (D. Kan. 1993), the District Court adopted an "injury in fact" trigger in an asbestos in buildings claim and ruled that the "loss of use" language was ambiguous and should trigger coverage for any "occurrence" during the policy period even if the "loss of use" occurred thereafter.  Accord, Johnson v.  Studyvin, 839 F.Supp. 149 (D. Kan. 1993).

  In Federated Mutual Ins. Co. v. Botkin Grain Company, C.A. No. 91-1223 (D. Kan. June 16, 1994), aff'd in part, rev'd in part, 64 F.2d 537 (10th Cir. 1995), the U.S. District Court expressed skepticism that Kansas would adopt a Keene-style continuous trigger but held that such a trigger was in any event inappropriate in the absence of any evidence of cumulative or progressive property damage during the policies at issue.

 In Atchison, Topeka and Santa Fe Railroad Co. v. Stonewall Ins. Co., Shawnee County District Court No. 94-CV-1464 (Kan. July 24, 2000), a state trial court adopted an “exposure” trigger (dates of employment) for NIHL claims against a railroad.  The court ruled that all policies during the period of exposure (employment) are triggered.  The court ruled that hearing loss occurred continuously and progressively.  The court refused to find that the insured was required to establish that injury had actually occurred in each of the underlying cases, declaring that it was sufficient that the insured had brought forward believable evidence that this is what the plaintiffs were claiming.

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