Farm Bureau Mut. Ins. Co. v. Kurtenbach By and Through Kurtenbach

• Decision Date: 10 July 1998
• Docket Number: No. 75674,75674
• Citation: Farm Bureau Mut. Ins. Co. v. Kurtenbach By and Through Kurtenbach, 961 P.2d 53, 265 Kan. 465 (Kan. 1998)
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Appellant, v. Scott KURTENBACH, By and Through his father and next friend Glenn KURTENBACH, Glenn Kurtenbach and Barbara Kurtenbach, husband and wife, Christopher L. Speltz, by and through his father and next friend Robert Speltz, Lyle Nelson, and Metropolitan Property & Casualty Insurance Company, Appellees.
• Court: Kansas Supreme Court

Page 53

961 P.2d 53

265 Kan. 465

FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Appellant, v. Scott KURTENBACH, By and Through his father and next friend Glenn KURTENBACH, Glenn Kurtenbach and Barbara Kurtenbach husband and wife, Christopher L. Speltz, by and through his father and next friend Robert Speltz, Lyle Nelson, and Metropolitan Property & Casualty Insurance Company, Appellees.

No. 75674.

Supreme Court of Kansas.

July 10, 1998.

Syllabus by the Court

1. This court's review of questions of law is unlimited.

2. The record is examined and it is held under the particular facts that coverage exists under a Farm Master insurance policy because the accident for which coverage was sought occurred "on the insured premises" and the motorcycle involved was not subject to Kansas motor vehicle registration within the meaning of the policy.

3. Where an insurer denies coverage and the duty to defend and brings a declaratory judgment action against the insured to determine that issue, the insured may recover his or her attorney fees incurred in the defense of the declaratory judgment action if it is determined as a result of that action that there is coverage. The same rule is applicable where an insurer agrees to assume the duty to defend under a reservation of rights, but before the underlying matter is resolved brings a declaratory judgment action seeking a determination that no duty to defend or coverage exists.

John D. Conderman, of Arthur, Green, Arthur, Conderman, Stutzman & Roberson, L.L.P., Manhattan, argued the cause and Derrick L. Roberson, of the same firm, was with him on the briefs for appellant.

Steven Hornbaker, of Harper, Hornbaker, Altenhofen & Opat, Chartered, Junction City, argued the cause and was on the brief for appellees Scott Kurtenbach, Glenn Kurtenbach, and Barbara Kurtenbach.

Paul Hasty, Jr., of Wallace, Saunders, Austin, Brown and Enochs, Chartered, Overland Park, argued the cause and was on the brief for appellee Metropolitan Property & Casualty Insurance Company.

DAVIS, Justice.

Farm Bureau Mutual Insurance Company, Inc., (Farm Bureau) filed a declaratory judgment action against its insureds, Glenn Kurtenbach and Barbara Kurtenbach, seeking a determination that it had no duty to defend or to pay any judgment under its Farm Master policy. The Kurtenbachs had been sued for damages based upon a collision between a motorcycle operated by their son Scott and a vehicle driven by Lyle Nelson. We granted Farm Bureau's petition for review of the Court of Appeals' decision affirming the decision of the trial court that coverage existed and also affirming the trial court's award of attorney fees and expenses. We affirm the judgment of the Court of Appeals as modified.

We must decide two questions: (1) whether the Court of Appeals' decision affirming the trial court's judgment that coverage existed under the Farm Master policy issued to the Kurtenbachs is correct and (2) whether Farm Bureau is responsible for attorney fees and expenses incurred by its insured in the successful defense of Farm Bureau's declaratory judgment action seeking a determination that no duty to defend or pay existed under the policy.

The material facts in this case are undisputed. Farm Bureau issued a Farm Master insurance policy to the defendants Glenn and Barbara Kurtenbach. On July 20, 1992, a motor vehicle accident occurred involving a motorcycle owned by the Kurtenbachs, and driven by their son Scott, and an automobile driven by defendant Lyle Nelson. Christopher Speltz, who was not a party to the underlying liability suit, was a passenger on the motorcycle driven by Scott.

The accident occurred as Scott attempted to drive the motorcycle across U.S. Highway 56. The Kurtenbachs owned and rented land on both sides of Highway 56 and, according to Glenn Kurtenbach, it was a necessary part of farming operations to drive the motorcycle across the highway to access that part of his farm on the other side. Scott was using the motorcycle in farming operations at the time of the accident.

The motorcycle was a 1978 Yamaha DT 175 dirt and trail bike. It had been purchased for farm use and had never been licensed or registered since its purchase in 1979. In his deposition, Glenn Kurtenbach stated that he used the motorcycle primarily for farm purposes although he would sometimes ride the motorcycle on his property to "have fun with it" or to go fishing. Scott had ridden the motorcycle on the township road west of his parents' house approximately 10 to 15 times. The motorcycle was equipped with headlights, a speedometer, a brake light, turn indicators, one mirror, and a horn, although the horn did not work. It was also equipped with a muffler, front and back fenders, and a tachometer.

The dispute in this case centers upon the incidental coverage provisions of the Farm Master policy. The Farm Master policy is a comprehensive general liability policy insuring the Kurtenbach's farm, including their dwelling and 805 acres. The policy expressly excludes from coverage:

"1. Bodily injury or property damage arising out of the ownership, maintenance or use of:

....

b. motorized vehicles or watercraft owned or operated by or rented to an insured person, except as provided under Incidental Liability and Medical Coverages."

However, the policy provides coverage under "INCIDENTAL MOTORIZED VEHICLE COVERAGE" in the following circumstances:

"2. INCIDENTAL MOTORIZED VEHICLE COVERAGE. We pay for bodily injury or property damage which:

a. occurs on the insured premises and results from the ownership, maintenance, use, loading or unloading of:

(1) Motorized Vehicles not subject to motor vehicle registration because of their type or use; or

(2) Recreational Motor Vehicles;

b. occurs anywhere and results from:

(1) golf carts being used for golfing purposes;

(2) utility, boat, camping trailers except when the trailer is carried on, towed by or attached to a motor vehicle or recreational motor vehicle owned by an insured;

c. motorized vehicles designed exclusively for use off public roads and used principally to service the insured premises."

The question of coverage and the question involving the award of attorney fees are questions of law in this case. Our review is unlimited, and we are not bound by the prior determinations of the trial court and the Court of Appeals. See Gillespie v. Seymour, 250 Kan. 123, 129, 823 P.2d 782 (1991).

Coverage

The trial court and the majority and dissenting opinions of the Court of Appeals all concluded that the accident occurred "on the insured premises" under Incidental Motorized Vehicle Coverage Provision 2.a. However, the trial court and the Court of Appeals arrived at different conclusions regarding coverage questions under the remaining provisions of the Incidental Motorized Vehicle Coverage in the policy. The trial court based its coverage determination upon its conclusion that the incidental coverage provisions of the policy were ambiguous. Provision 2.c. provides that Farm Bureau "pay[s] for bodily injury or property damage which: ... motorized vehicles designed exclusively for use off public roads and used principally to service the insured premises." While it is true that language such as "results from" is missing from 2.c., the lack of such language does not automatically create an ambiguity calling for a determination of coverage.

The Court of Appeals did not reach the question of ambiguity under the provisions of 2.c. but decided the question under 2.a. (1) which provides:

"2. INCIDENTAL MOTORIZED VEHICLE COVERAGE. We pay for bodily injury or property damage which:

a. occurs on the insured premises and results from the ownership, maintenance, use, loading or unloading of:

(1) Motorized Vehicles not subject to motor vehicle registration because of their type or use."

Like the Court of Appeals, we do not reach the question of the ambiguity of 2.c. relied upon by the trial court, but instead base our decision upon 2.a. Thus, in our review, two questions are involved in determining if 2.a. (1) provides coverage: (1) whether the bodily injury or property damage occurred on the insured premises and (2) whether it resulted from the ownership of a motorized vehicle not subject to motor vehicle registration because of its type or use.

(1) Did the accident occur on the insured premises?

The accident occurred on Highway 56, property not owned by the Kurtenbachs. Farm Bureau asked that we construe its policy focusing upon the definition of "insured premises" and conclude as a matter of law that this accident did not occur on the insured premises. At the time the policy was issued, the insured owned property and farmed property split by Highway 56. As a result, it is necessary to examine the policy language to determine whether the accident occurred on the insured premises.

While not bound by the trial court's determination of this issue or the determination of either majority or dissenting opinions of the Court of Appeals on this issue, we note that all concluded under the given facts that even though the accident occurred on Highway 56, it occurred "on the insured premises" within the provisions of the policy.

In discussing the trial court's finding that the accident occurred on the insured premises, the majority opinion of the Court of Appeals stated:

"The policy defines 'insured premises' in part as: 'the farming premises which you own, rent or operate described in the declarations.' The policy defines 'farming' as 'the maintenance or use of premises for the production of crops or the raising or care of livestock, including all necessary operations.' (Emphasis added.) The court accepted [Kurtenbachs'] argument that driving the motorcycle across Highway 56 was a necessary part of farming operations and, therefore, occurred on the 'farming premises.' Farm Bureau challenges this finding.

"Farm Bureau first points out that the Kurtenbachs do not own Highway 56. The ownership of Highway...