86 F.3d 997 (10th Cir. 1996), 95-3221, Glickman, Inc. v. Home Ins. Co.

Docket Nº:95-3221.
Citation:86 F.3d 997
Party Name:GLICKMAN, INC., Plaintiff--Appellant, v. The HOME INSURANCE COMPANY, Defendant--Appellee, Kansas Insurance Department, Amicus Curiae.
Case Date:June 17, 1996
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 997

86 F.3d 997 (10th Cir. 1996)

GLICKMAN, INC., Plaintiff--Appellant,

v.

The HOME INSURANCE COMPANY, Defendant--Appellee,

Kansas Insurance Department, Amicus Curiae.

No. 95-3221.

United States Court of Appeals, Tenth Circuit

June 17, 1996

Page 998

Jerold Oshinsky, Anderson, Kill, Olick & Oshinsky, Washington, DC (Robert L. Carter, Anderson, Kill, Olick & Oshinsky, Washington, DC; and Jeff Kennedy and Michael G. Jones, Martin, Pringle, Oliver, Wallace & Swartz, L.L.P., Wichita, Kansas, with him on the briefs), for Plaintiff-Appellant.

Alan K. Goldstein, Goldstein and Price, L.C., St. Louis, Missouri (Douglas E. Gossow, Goldstein and Price, L.C., St. Louis, Missouri; and Joseph W. Kennedy, Morris, Laing, Evans, Brock & Kennedy, Wichita, Kansas, with him on the brief), for Defendant-Appellee.

Brian J. Moline, General Counsel, Special Assistant Attorney General, and Kathleen Sebelius, Commissioner of Insurance, Kansas Insurance Department, Topeka, Kansas, filed an amicus curiae brief for the Kansas Insurance Department.

Before PORFILIO, ANDERSON, and TACHA, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

Glickman, Inc. appeals from a denial of attorney's fees under Kan. Stat. Ann. § 40-256, in this insurance coverage diversity case. This appeal calls upon us to interpret § 256. That statute punishes insurance companies that refuse, without just cause or excuse, to pay the full amount of an insured loss, by requiring them to pay the plaintiff's attorney's fees incurred in a coverage action against the insurer. As pertinent, § 256 provides:

Attorney fees in actions on insurance policies; exception. That in all actions hereafter commenced, in which judgment is rendered against any insurance company ... if it appear from the evidence that such company ... has refused without just cause or excuse to pay the full amount of such loss, the court in rendering such judgment shall allow the plaintiff a reasonable sum as an attorney's fee for services in such action, including proceeding upon appeal, to be recovered and collected as part of the costs....

(Emphasis added). The parties agree that this statute, which refers only to refusals to pay, has been judicially extended to cover refusals to defend. We, therefore, do not address that proposition. The central question before us is whether the statutory qualifier "without just cause or excuse" embodies one legal standard for refusals to indemnify and a stricter standard for refusals to defend. The appellant, Glickman, Inc., and the Kansas Insurance Department, as amicus curiae, contend that if there is a mere possibility of coverage, there is no just cause or excuse for failing to defend, while the existence of a bona fide dispute over coverage constitutes just cause or excuse for failing to indemnify. We hold that the plain language of the statute does not support different tests for refusals to defend and refusals to indemnify, nor does it support the proposition--however desirable--that "just cause or excuse" for refusing to defend exists only when there is no possibility of coverage. The plain wording of the statute does not translate refusal "without just cause or excuse to pay the full amount of ... loss" into refusal to defend where there is a possibility of coverage. To hold otherwise would be a judicial amendment, not an interpretation, of this state statute. Contrary to the appellant's argument, no Kansas appellate court has held otherwise in a case constituting binding precedent. Accordingly, the district court did not apply an improper standard in determining that Glickman is not entitled to attorney's fees pursuant to § 256.

As for the numerous other assignments of error raised by Glickman, we conclude that the district court did not err, either in procedure or substance, in granting summary judgment denying Glickman an award of attorney's fees against the defendant, The Home Insurance Company. Therefore, we affirm the judgment of the district court.

BACKGROUND

The chronology leading to this lawsuit is not disputed, although the parties characterize the facts differently. In August 1992, Glickman was named as a third party defendant

Page 999

in an environmental response costs action, Barton Solvents, Inc. v. Southwest Petro-Chem, Inc., No. 91-2382-V, 1993 WL 382047 (D.Kan.) ("Barton Solvents" action), brought pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601-9675 ("CERCLA"). More than five months later, on January 28, 1993, Glickman's attorneys wrote Glickman's insurance agent, William H. Cohen of Insurance Management Associates in Wichita, Kansas, asking him to "review insurance policies that may have been in effect" in 1971 and "several years thereafter" and "determine whether the insurers may be obligated to assist our client in the defense of this matter." Appellant's App., Tab 22, at 239-40. The letter then stated that it should be regarded as a claim.

Insurance Management Associates responded that it did not have copies of any such policy or policies, and forwarded the inquiry to the defendant/appellee in this case, The Home Insurance Company. Home responded to Glickman's counsel on February 12, 1993, with a three-page letter. The letter, among other things, asked questions relating to the merits of the Barton Solvents action, and asked for copies of the twenty-year-old policies, the existence or terms of which had not been verified. Glickman's counsel responded promptly, demanding a defense, among other things, and advising Home that Glickman had no copies of insurance policies because of a fire. Home did not reply for more than five months, during which time Glickman's counsel repeatedly demanded Home's attention to the matter and threatened suit, including a claim for bad faith.

On July 23, 1993, Home wrote a five-page letter to Glickman's counsel still questioning the existence of all but one policy of insurance. As to that policy, Home set out the terms of coverage, stating, among other things, that remediation costs are not covered damages under the policy. The letter also raised a variety of other potential defenses, but closed by saying that Home was willing to discuss with Glickman, and all other potential carriers, Glickman's defense in the Barton Solvents action.

Home wrote again on August 3, 1993, supplying a copy of the one policy it had found, again asking for information regarding other potential carriers, and again stating that when it had the necessary information, it would be in a position to discuss a possible defense. Glickman's counsel wrote back on August 23 and August 31, 1993, furnishing information and threatening suit if Home did not pay prior litigation expenses and undertake Glickman's defense from that time forward. Home did not respond, and on September 14, 1993, Glickman filed this action against Home seeking a declaratory judgment that Home was liable for Glickman's defense costs and any damages assessed against it in the Barton Solvents action. It also sought a judgment for costs and attorney's fees in this action pursuant to § 256.

In the district court, Home contested coverage, among other things, on the ground that environmental response costs are not damages within the terms of the policy. Ultimately this defense proved unsuccessful.

On June 28, 1994, the district court granted Glickman's motion for partial summary judgment, ruling that response costs are damages within the meaning of a liability policy and that Home was obligated to defend Glickman in the Barton Solvents action and reimburse it for defense costs already incurred. Home did so, paying $85,000 for Glickman's legal expenses incurred in the Barton Solvents action. Subsequently, Home paid $45,000 to settle claims against Glickman in that action.

On March 31, 1995, Home moved for summary judgment on Glickman's claim under § 256 that Home must pay Glickman's attorney's fees in this case as a penalty for refusing a defense in the Barton Solvents action. The district court granted Home's motion, ruling that Glickman was not entitled to fees under § 256. It stated, in part:

The court finds that an award of attorney fees in the present case cannot be justified under K.S.A. 40-256. As the court noted in its previous order, in reference to the controlling question of whether response costs could be considered damages for purposes of insurance coverage, "there is an extensive line of authority

Page 1000

supporting both positions." (June 29, 1994 Order, p. 7.) At the time, there were no relevant Kansas appellate court decisions; two decisions in the Kansas federal court had reached opposing conclusions. Indeed, as Glickman, in its separate motion to compel discovery has admitted, Home's position was "arguable given the split amongst the circuits...

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