Evergreen Recycle, L. L.C. v. Ind. Lumbermens Mut. Ins. Co.
| Decision Date | 01 May 2015 |
| Docket Number | 110,329. |
| Parties | EVERGREEN RECYCLE, L.L.C., Appellee/Cross-appellant, v. INDIANA LUMBERMENS MUTUAL INSURANCE COMPANY, Appellant/Cross-appellee, v. Eck Agency, Inc., Appellee/Cross-appellant. |
| Court | Kansas Court of Appeals |
Kevin M. McMaster and Jennifer M. Hill, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., of Wichita, for appellant/cross-appellee.
N. Russell Hazlewood and Jacob S. Graybill, of Graybill & Hazlewood, LLC, of Wichita, for appellee/cross-appellant Evergreen Recycle, L.L.C.
Gerald L. Green, of Gilliland & Hayes, LLC, of Hutchinson, for appellee/cross-appellant Eck Agency, Inc.
Before HILL, P.J., McANANY, J., and LARSON, S.J.
Indiana Lumbermens Mutual Insurance Company (Lumbermens) appeals from the judgment awarded to Evergreen Pallet, L.L.C. and Evergreen Recycle, L.L.C. (Evergreen) in the amount of $231,000 based on Evergreen's claim that Lumbermens improperly failed to pay a claim for losses associated with a fire in a commercial mulch pile owned and maintained by Evergreen. On appeal, Lumbermens contends the district court erred in granting various motions for summary judgment, in interpreting the amount of coverage provided under the policy, and in various trial rulings.
Evergreen sued Lumbermens after Lumbermens refused to pay Evergreen's claim. Evergreen had purchased the insurance policy through its agent, Eck Agency, Inc. During discovery, Lumbermens asserted various affirmative defenses that it claimed excused its duty to pay for Evergreen's property loss.
Lumbermens filed a third-party petition against Eck Agency seeking indemnity in the event that Eck Agency was found to be Lumbermens' agent and if Lumbermens was found liable to Evergreen. After discovery and the pretrial conference, Eck Agency moved for summary judgment. The district court granted the motion and dismissed Eck Agency from the lawsuit.
Before trial, the district court ruled on 10 motions for summary judgment or motions for partial summary judgment. The district court granted multiple motions for partial summary judgment in favor of Evergreen, finding that Lumbermens had failed to present sufficient evidence of genuine issues of material fact on many of its affirmative defenses. Lumbermens twice moved for summary judgment, once shortly after the lawsuit was filed and again after the close of discovery.
The case proceeded to a jury trial on the sole issue of whether the notice requirement under the policy, i.e., “prompt notice,” was met by Evergreen. After a 13–day jury trial, the jury returned a verdict in Evergreen's favor for $235,000. After reducing the judgment by the deductible, the court entered judgment for Evergreen in the amount of $231,000.
Lumbermens appeals, asserting the various points of error broadly categorized above. After carefully reviewing each of Lumbermens' points of error, we affirm. Evergreen filed a cross-appeal, but our disposition of the issues raised by Lumbermens renders the cross-appeal moot.
Jeff Ralls is the owner of Evergreen Pallet, L.L.C. and Evergreen Recycle, L.L.C. Ralls started in the pallet business in 2000, and Evergreen Pallet is in the business of manufacturing and refurbishing pallets. Third-party defendant Eck Agency assisted Evergreen in acquiring an insurance policy from Lumbermens.
In January 2008, Ralls acquired the business premises of a defunct recycling business. The prior owner of the recycling business had been previously shut down by the Kansas Department of Health and Environment (KDHE) for failing to maintain the site according to KDHE regulations. On those premises, Ralls began Evergreen Recycle. The business of Evergreen Recycle primarily involves turning wood waste into mulch and turning other organic waste into compost.
Due to the prior owner's violation of regulations, the KDHE met with Evergreen representatives soon after Ralls purchased the business. The KDHE identified specific problems and began working with Ralls to clean up the property and bring it within compliance of the codes. The KDHE required that Evergreen post a bond, and the amount of the bond decreased over time as the facility came into compliance of the codes.
In a letter dated January 14, 2008, Sedgwick County Fire Marshal Tim Millspaugh informed Ralls of the fire codes applicable to the outside storage of combustible material as relevant to the mulch recycling business. The code limits the size of mulch piles to 25 feet in height, 150 feet in width, and 250 feet in length. Over 1 year later, in February 2009, Ralls was still working with the Fire Marshal to make improvements and achieve compliance with all of the fire codes.
In May 2008, Evergreen Recycle was added as an additional insured to Evergreen's policy with Lumbermens. At the time Evergreen Recycle was added to the policy, Ralls initially declined additional coverage for the mulch piles that were located on the property. Several months later, Cheri Ricke, working for Eck Agency, helped Ralls inquire about adding mulch coverage to the existing policy. Ralls reported to Ricke on the phone that there were four piles of mulch and assigned a value to each pile. In an August 21, 2008, email providing the information to Lumbermens' senior underwriter Nancy Curran, Ricke stated:
Curran responded: “Using a $2 rate $117,000 = $2340 AP annually.”
In September 2008, Lumbermens issued insurance on the mulch in the limits requested by Eck Agency with a $2,340 annual premium. The amounts representing the four piles were combined and added to the declarations sheet on the policy as “stock in open” for coverage in the combined amount of $117,000. The policy did not require Evergreen to keep the mulch in four separate piles.
During a KDHE inspection on February 12, 2009, employees of KDHE and Evergreen Recycling first discovered wisps of smoke coming from a small spot on the top of its shredded, dried mulch pile. Ralls thought at first that it was just a hot spot that could be easily extinguished. But after the employees dug into the pile, they determined it was bigger than originally thought and included tunnels of glowing material. Ralls called the fire department because he was concerned about the number of embers he was finding in the pile.
The fire department arrived and assisted Evergreen in its efforts to cool and extinguish the smoldering mulch. The mulch pile that caught fire was in violation of the size of piles allowed by the fire codes, which required that piles should not exceed 25 feet in height, 150 feet in width, and 250 feet in length. Ralls estimated the size of the mulch pile at the time the fire started at approximately 20 yards (60 feet) high, 100 yards (300 feet) wide, and 150 yards (450 feet) long. Ralls admitted the size of the pile was in violation of the fire code.
On the day the fire was discovered, Ralls called insurance agent Michael Eck, an employee of Eck Agency, to report the fire. Eck was at Evergreen's office picking up a check when he received Ralls' call. Eck could see the smoke and the fire trucks. Ralls was unsure if he wanted to make a claim for the fire loss at that time, and he did not believe he had to make an immediate decision on whether to file a claim.
The fire burned from February 12, 2009, until early March. The fire was deep inside the pile and apparently originated near the bottom of the pile of mulch. The fire department did not monitor the fire around the clock but instead devised a plan to help Evergreen fight the fire. The fire department allowed Ralls to monitor the fire overnight and returned as needed during daytime hours to put more water on the mulch pile. The fire department fought the fire by hauling water onto the hot spots and by putting a foam concentrate on the materials that allowed the water to soak into the wood.
Evergreen continued to disassemble the pile, soak the material with water as it was removed, place the wet material in windrows, resoak any smoldering material, and call the fire department for assistance if necessary. Evergreen rented water trucks so that it could continue to soak the pile of mulch as needed. Evergreen also rented a bulldozer and two four-wheel loaders to assist in its efforts to extinguish the fire. Evergreen employees drove over the pile with a bulldozer to compress the mulch and smother the fire. Evergreen employees and volunteers worked around the clock to soak and monitor the smoldering pile and the windrows. Fire Marshal Millspaugh testified that it appeared to him that Evergreen was making a good faith effort to extinguish the fire.
The KDHE inspectors made regular visits to the fire scene while the fire suppression effort was in progress. The inspectors prepared written reports describing the size of the pile and the efforts being made to suppress the fire. They took over 170 photographs during the course of the fire, memorializing the scene from the date when smoke was first discovered and ending when the fire was extinguished. Evergreen employees also took photographs and made video recordings of the mulch pile and the fire suppression activities.
On February 25, 2009, the large pile of mulch had been largely deconstructed and placed in windrows. The fire was mostly out, although there were “small smolders” in the windrows for another 10 to 14 days. After the fire had been extinguished, selling the remaining windrowed mulch was not an option because it was charred, mixed with dirt, and smelled bad.
Also on February 25, 2009, a neighbor came to Evergreen and threatened to file a class action lawsuit. The...
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