Alliance Life Ins. Co. v. Ulysses Volunteer Fireman's Relief Ass'n

• Citation: 529 P.2d 171,215 Kan. 937
• Decision Date: 07 December 1974
• Docket Number: No. 47538,47538
• Parties: ALLIANCE LIFE INSURANCE COMPANY, Appellee, v. ULYSSES VOLUNTEER FIREMAN'S RELIEF ASSN. et al., Appellants.
• Court: Kansas Supreme Court

Page 171

529 P.2d 171

215 Kan. 937

ALLIANCE LIFE INSURANCE COMPANY, Appellee, v. ULYSSES VOLUNTEER FIREMAN'S RELIEF ASSN. et al., Appellants.

No. 47538.

Supreme Court of Kansas.

Dec. 7, 1974.

Syllabus by the Court

1. Venue in a declaratory judgment action is governed by the same rules as govern venue in any other type of action.

2. A declaratory judgment action cannot be maintained to settle a dispute which is purely academic. There must be a case of actual controversy involving the actual antagonistic assertion and denial of right.

3. The mere making of a contract, standing alone, does not give rise to a cause of action to construe it, and venue cannot be predicated on the mere making of the contract in the county where suit is brought.

4. In a declaratory judgment action it is the nature and dominant purpose of the underlying cause of action which determines venue.

5. If the dominant purpose of a declaratory judgment action is to determine an insurance company's liability, the cause of action 'arises' where the liability would exist.

6. Where venue of an action for either the breach of or to construe a life insurance policy is based on the statutes fixing it in the county where the cause of action 'arose,' that county is the one where the insured resided at the time of his death or where the beneficiaries reside and payment is to be made.

7. In determining the intention of the parties to a contract of insurance, the test is not what the insurer intends the printed language to mean, but rather what a reasonable person placed in the position of the insured would have understood the words to mean.

8. Where provisions of an insurance policy are ambiguous or conflicting the policy is to be construed strictly against the insurer and in favor of the insured. Where an insurer intends to limit or restrict the coverage under its policy, it should use language which clearly reveals its stated purpose.

9. A clause in a life insurance policy which excludes coverage if the insured is killed 'while piloting or serving as a crew member' of an airplane, when construed strictly against the insurer, is held to be applicable only if the insured at the time of the crash, or at least at a time when the crash was imminent, was either piloting the plane or actually performing or prepared to perform some function as a member of the crew.

10. An insurance company seeking to avoid liability under an exclusionary clause in its policy for a loss which is otherwise covered has the burden of proving that the loss falls within the exclusion.

11. Where the stipulated facts show and the insurance company concedes that, if an exclusionary clause is construed as the court construes this one, it cannot meet its burden of proving the clause applicable and is liable on the policy, judgment will be rendered against it for the amount of the policy.

E. F. Russell, Ulysses, argued the cause and was on the brief for appellants.

Evart Mills, of Mills & Mills, McPherson, argued the cause and was on the brief for appellee.

FOTH, Commissioner:

Alliance Life Insurance Company, of McPherson, brought this declaratory judgment action to determine its liability under a $10,000 accidental death policy it had written on Darrell Dean Major, of Ulysses, who was killed in an airplane crash. The defendants were the Ulysses Volunteer Fireman's Relief Assn., to whom Major had assigned his ownership rights under the policy, and Major's wife and children, the beneficiaries, all of Ulysses.

After the crash, which occurred in Grant county on October 1, 1972, claim was made under the policy and agents of Alliance entered into negotiations with counsel for the defendants. While those negotiations were pending Alliance brought this action on December 26, 1972, in McPherson county; all defendants were served in Grant county. They promptly moved to quash the summonses and to dismiss because of improper venue. When their motion was overruled, they renewed their objection to venue in their answer, and also counter-claimed for the face amount of the policy. An extensive pre-trial order was entered and the parties briefed their respective contentions. The trial court rendered a decision which reaffirmed its finding of venue, and construed the policy's 'aviation exclusion clause' to be applicable to Major's activities when he was killed. Accordingly it rendered judgment in favor of the plaintiff company and against the defendants, to the effect that 'it is not indebted to them in any manner.'

The defendants have appealed, their chief contentions being first, that McPherson county was the improper venue, and second, that the court erroneously found the policy's aviation exclusion clause to be applicable. We think both points are well taken.

The parties agree that under the facts of this case venue could only lie in McPherson county if that was the county 'in which the cause of action arose.' (K.S.A.1973 Supp. 60-603(3), 60-604(2).) It is undisputed that the only contact any of the principals had with McPherson county was the acceptance of Major's application for the policy at Alliance's home office there. Beyond that: the defendant Fireman's Relief Assn. is officed in Grant county and was doing no business in McPherson county; Major lived in Grant county and his family still lives there; the airplane crash in which Major was killed occurred in Grant county.

Under conventional and accepted legal doctrine, because the application was accepted in McPherson county the contract of insurance was 'made' in that county. (Morrison v. Hurst Drilling Co., 212 Kan. 706, 512 P.2d 438, and cases cited therein.) We take it as well settled, however, that the mere 'making' of a contract, standing alone, does not give rise to a cause of action; there must in addition be a breach. See Bruner v. Martin, 76 Kan. 862, 93 P. 165; Shearer v. Insurance Co., 106 Kan. 574, 189 P. 648; Swift v. Clay, 127 Kan. 148, 272 P. 170; Lips v. Egan, 178 Kan. 378, 285 P.2d 767. Each of those cases stands for the proposition that the place of making a contract is irrelevant to the issue of where a cause of action arises for its breach; the controlling place is that of the breach, i. e., the place where the obligor failed to fulfill his obligation. Insurance contracts are no different; in an action on a fraternal benefit certificate we held that the cause of action 'arose' here when the insured died a resident of this state and the beneficiary was a resident of this state, although the contract of insurance was written in another state. Hornick v. Catholic Slovak Union, 115 Kan. 597, 224 P. 486. This is in accord with the encyclopedists:

'. . . It is held that a cause of action for a breach of an obligation to pay under an insurance policy arises at the place where the insurer is to pay the loss, and where the policy is silent as to where the payment of the loss is to be made, it is presumably to be made at the residence of the insured, and therefore a cause of action arises and is maintainable in the county of the insured's residence where the insurer fails to pay in such county. . . . Within the meaning of a statute fixing venue in the county where a cause of action arises, a cause of action on a life insurance policy arises in the county of the residence of the insured at the time of his death.' (44 Am.Jur.2d, Insurance, § 1898.)

See also, Travelers Fire Ins. Co. v. Ranney-Davis Mercantile Co. (10th Cir., 1949), 173 F.2d 844, cert. den. 337 U.S. 930, 69 S.Ct. 1495, 93 L.Ed. 1737; 46 C.J.S. Insurance § 1196.

Plaintiff contends, however, that this is not an action for a breach of the insurance contract-which it concedes would lie in Grant county-but merely one to construe a contract. A cause of action to construe a contract, it says, does not follow the normal rules just stated but arises where the contract is made. This proposition will not withstand analysis.

The declaratory judgment act is not designed to resolve academic disputes; there must be a case of 'actual controversy' involving the 'actual antagonistic assertion and denial of right.' (K.S.A. 60-1701. See, KAKE-TV & Radio, Inc., v. City of Wichita, 213 Kan. 537, 516 P.2d 929; Wagner v. Mahaffey, 195 Kan. 586, 408 P.2d 602.) So long as Major, the insured, was alive the company had no 'cause of action' to construe the exclusionary clauses of its policy, because it had no 'controversy' with anyone. Whether any particular conduct on the part of the insured was or was not excluded was purely academic, and the courts would not have entertained an action to construe any of the policy's various exclusionary clauses. It was only when Major met his death by accident that an actual controversy between the company and the beneficiaries under the policy came into being; it was then that a cause of action of any kind first 'arose.'

Knowing when the cause of action arose is not enough, however; the issue here is where it arose. To determine that issue it is essential to examine the nature of that cause of action. While the company insists that it is simply a matter of construing the policy, our previous discussion has shown that no 'cause of action' to construe the policy existed in the absence of a question of liability. The company's interest in construing its exclusionary clause in this suit was based solely on its desire to establish a defense to a potential action on the policy. In short, the real substance of the controversy here was not merely what the policy meant, but whether the company did or did not have a duty to pay the proceeds of the policy. This becomes apparent from the judgment sought and entered below: the trial court was not content to construe the exclusionary clause and stop, but went ahead and entered the judgment plaintiff requested, exonerating the company from all liability under the policy.

A comparable venue question confronted the court in Garrison v. Morrow (Tex.Civ.App., 1957), 300 S.W.2d 175. In that case ...