Crawford v. Prudential Ins. Co. of America

• Decision Date: 08 December 1989
• Docket Number: No. 62718,62718
• Parties: Ronnie G. CRAWFORD, Appellee, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant.
• Court: Kansas Supreme Court

Page 900

783 P.2d 900

245 Kan. 724

Ronnie G. CRAWFORD, Appellee, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant.

No. 62718.

Supreme Court of Kansas.

Dec. 8, 1989.

Syllabus by the Court

1. Some general principles applicable in construing allegedly ambiguous provisions of an insurance policy are stated and applied.

2. Language in an exclusionary clause of an insurance policy is considered and found to be ambiguous.

3. Rules to be applied in determining whether an award of attorney fees under K.S.A. 40-256 is appropriate are stated and applied.

4. In an action against an insurance company by an insured to recover medical expenses for injuries sustained when plaintiff fell through a roof, the record is examined and it is held that the trial court erred in allowing attorney fees to the plaintiff pursuant to K.S.A. 40-256.

5. In an action upon an insurance policy, the denial of an allowance for attorney fees does not preclude the allowance of prejudgment interest where the amount in controversy is undisputed and where justified by the facts of the case.

John R. Cunningham, of White, O'Connor & Werner, P.A., Pittsburg, argued the cause and was on the brief for appellant.

Timothy A. Short, of Spigarelli, McLane & Short, Pittsburg, argued the cause and was on the brief for appellee.

Jack Peggs, of Peggs & Pickler, Wichita, and Steven Hornbaker, of Harper, Hornbaker & Altenhofen, Chartered, Junction City, were on the brief for the amicus curiae Kansas Trial Lawyers Ass'n.

HOLMES, Justice:

This is an appeal by the defendant, Prudential Insurance Company of America (Prudential), from a district court judgment that an exclusionary clause in a group insurance policy did not apply to the injuries suffered by the plaintiff, Ronnie G. Crawford. The Court of Appeals found the exclusionary clause did apply and reversed the district court. Crawford v. Prudential Ins. Co., 13 Kan.App.2d 452, 773 P.2d 678 (1989). We granted review.

Plaintiff Crawford suffered injuries on September 28, 1983, when he fell through the roof on property occupied by Pittsburg Aluminum Recycling, Inc. (Pittsburg). Crawford was assisting A.I. Leonard in repairing the roof for Pittsburg. Pittsburg had contracted with Leonard, an independent contractor, to repair the roof. Crawford agreed to help Leonard and was to be paid by the hour. Pittsburg had no contract or dealings with Crawford. The relationship between Leonard and Crawford is disputed.

Crawford contended that Leonard called him and asked if Crawford wanted to work on the re-roofing and told Crawford he would get $8.00 an hour, although Leonard did not mention who would pay Crawford. At the job site, Leonard instructed him on job duties, and Crawford "assumed" Leonard could fire him. Leonard did not inform Crawford of the details of his contract with Pittsburg.

Leonard contended that Crawford had visited him twice, inquiring whether Leonard knew of any jobs on both occasions. On the second occasion, Leonard informed Crawford of his agreement with Pittsburg to repair the plant roof, told Crawford that he charged Pittsburg $8.00 per hour and that Crawford could get the same amount, and expressed his inclination to reject the job. Crawford responded that he needed the money and stated, "[L]et's go do it." They used Leonard's tools and Leonard drove them to the plant because the tools were in his truck. Both Crawford and Leonard made suggestions concerning working hours and breaks. Leonard did not think he could fire Crawford.

It is undisputed that Leonard submitted a bill to Pittsburg for the entire amount, including Crawford's wages, and Pittsburg gave Leonard a check in that amount. Leonard gave Crawford's wages to Crawford's wife in cash. Neither Pittsburg nor Leonard withheld money for taxes. Other than as employees for the same employer several years before, Crawford and Leonard had not worked together previously. Leonard had no workmen's compensation insurance. Crawford suffered injuries in his fall from the roof of Pittsburg's building and incurred medical bills in the amount of $8,366.80.

Crawford's wife was employed by Ace Electric of Columbus, Kansas. Prudential had issued a group health and accident insurance policy to Ace Electric, and it is undisputed that Crawford, as a member of his wife's family, was an insured under the terms of the policy.

Crawford filed a workmen's compensation claim against Pittsburg and Leonard which, at the time of oral argument before this court, was still pending. Notwithstanding the pending workmen's compensation claim, Crawford filed an action on July 27, 1984, against Prudential seeking to recover his medical expenses. Prudential denied payment, relying upon an exclusionary clause in its policy with Ace Electric which reads:

"Generally Excluded Charges:

"(1) Occupational Injury or Disease charges--charges incurred in connection with (a) injury arising out of, or in the course of, any employment for wage or profit or (b) disease covered, with respect to such employment, by any workers' compensation law, occupational disease law or similar legislation."

The district court determined that the exclusion did not apply to Crawford's injuries and granted judgment for $8,366.80, together with prejudgment interest from August 26, 1987, costs, and attorney fees in the amount of $2,788.93. On appeal, the Court of Appeals held the exclusionary clause applied and reversed the judgment of the district court.

The issues as framed by the appellant are:

1. Whether the district court erred in finding coverage by interpreting the policy exclusion as applying only to injuries covered by workers' compensation.

2. Whether the district court erred in granting attorney fees and prejudgment interest considering plaintiff caused any delay and a bona fide dispute on coverage existed.

The parties stipulated as to the evidence in the district court, which consisted primarily of transcripts and depositions from the workmen's compensation case. After the filing of briefs, the district court issued its opinion, which included findings of fact and conclusions of law as follows:

"WHEREUPON, after hearing the evidence and being duly advised by counsel, the Court finds as follows:

"1. That Plaintiff was injured on September 28, 1983, while working on the roof at Pittsburg Aluminum Recycling and incurred $8,366.80 in medical expenses as a result of such injury.

"2. That Plaintiff filed a timely claim for coverage of said medical expenses under Policy No. 45700-010, but Defendant denied such claim on December 27, 1983, relying upon the following policy exclusion:

"(1) Occupational Injury or Disease Charges--charges incurred in connection with (a) injury arising out of, or in the course of, any employment for wage or profit or (b) disease covered, with respect to such employment, by any workmen's compensation law or similar legislation."

"3. That Plaintiff was not an employee of Pittsburg Aluminum Recycling.

"4. That Plaintiff was not an employee of his co-worker A.I. Leonard, with whom Plaintiff was engaged in a joint venture at the time of his injury.

"5. That even if Plaintiff were an employee of said A.I. Leonard, his injury would not be compensable because said A.I. Leonard's payroll was below the statutory minimum under the Kansas Workers' Compensation Act, K.S.A. 44-501 et seq.

"6. That Plaintiff's injury did not 'arise out of and in the course of employment' and is not compensable under the Kansas Workers' Compensation Act.

"7. That the exclusion relied upon by Defendant has been previously construed by the Kansas Supreme Court in Beinz [Bienz], Administratrix v. John Hancock Mut. Life Ins. Co., 195 Kan. 422 (1965).

"8. That said exclusion does not apply unless (a) workers' compensation benefits have been recovered or (b) the injured party has a legal right to recover workers' compensation benefits, regardless of whether or not a claim is made for workers' compensation benefits. See Beinz [Bienz], supra, at 426 .

"9. That the purpose of said exclusion is to prevent a double recovery by the insured.

"10. That the exclusion relied upon by Defendant does not apply since Plaintiff did not recover workers' compensation benefits and does not have a legal right to recover such benefits.

"11. That the rule limiting application of said exclusion is well established under Kansas Law. See Beinz [Bienz] supra; St. Francis Hosp. & School of Nursing, Inc. v. Eckman & United Benefit Life Co., 212 Kan. 131 (1973); and Knoble v. National Carriers, Inc., 212 Kan. 331 (1973).

"12. That where policy provisions have been previously construed by the Court, an insurer has a duty to act in accordance with such existing case law. Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. 681, 689 (1973).

"13. That in light of the decisions of the Kansas Supreme Court in Beinz [Bienz], St. Francis, and Knoble, supra, Defendant had no 'just cause or excuse' for denying Plaintiff's claim, and therefore Plaintiff should be awarded attorney fees pursuant to K.S.A. 40-256.

"14. That Plaintiff's agreement with his attorneys for a one-third contingent fee is fair and reasonable. See Grayson v. Grayson, 184 Kan. 116 (1959); Russell v. Mackey, 225 Kan. 588 (1979); Ballweg v. Farmers Ins. Co., 228 Kan. 506 (1980).

"NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED BY THE COURT that Plaintiff be and hereby is granted judgment against Defendant under said insurance policy in the sum of $8,366.80 together with interest thereon from August 26, 1987, at ten per cent (10%) per annum until judgment, pursuant to K.S.A. 16-201, and at the judgment rate thereafter, commencing Feb. 12, 1988, in accordance with K.S.A.1987 Supp. 16-204(e), and for costs in the sum of $55.00.

"IT IS FURTHER ORDERED, ADJUDGED AND DECREED BY THE COURT that Plaintiff be and hereby is awarded attorney fees in the sum of $2,788.93, pursuant to K.S.A. 40-256.

"IT IS SO ORDERED...