First Financial Ins. Co. v. Bugg
| Decision Date | 10 July 1998 |
| Docket Number | No. 79085,79085 |
| Citation | 265 Kan. 690,962 P.2d 515 |
| Parties | FIRST FINANCIAL INSURANCE CO., Appellant, v. Verdell and Earlene BUGG, d/b/a Tewz Enuff, Joi Woodberry, Tina M. Davis, and Lela R. Smith, Appellees. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. As a general rule, the interpretation or construction and meaning and legal effect of written instruments are matters of law exclusively for the court and not questions of fact for determination by the jury. Regardless of the construction given a written contract by the trial court, an appellate court may construe a written contract and determine its legal effect.
2. Policies must be construed according to the sense and meaning of the terms used, and if the language is clear and unambiguous, it must be taken in its plain, ordinary, and popular sense. The test to determine whether an insurance contract is ambiguous is not what the insurer intends the language to mean, but what a reasonably prudent insured would understand the language to mean.
3. An insurance policy is not ambiguous unless there is genuine uncertainty as to which of two or more possible meanings is proper.
4. The failure of an insurance policy to specifically define "assault and battery" does not necessarily create ambiguity. Although assault and battery have varying definitions, these definitions only slightly deviate and regardless of the definition used, they all convey the same general meaning. The terms assault and battery are not ambiguous because they are not open to different interpretations.
5. When a liability insurance policy contains an assault and battery exclusion, a negligence claim for injuries arising out of an assault and battery is irrelevant. An assault and battery exclusion clause is intended to exclude all claims arising out of an assault and battery.
6. Under the general rule, a liability insurer which assumes the defense of an action against the insured may save itself from the bar of waiver or estoppel in a subsequent action upon the policy if, in the action against the insured, it clearly disclaims liability under the policy and gives notice of its reservation of a right to set up the defense of noncoverage.
Larry G. Karns, of Glenn, Cornish, Hanson & Karns, Topeka, argued the cause and was on the brief, for appellant.
Gary D. White, Jr., of Schroer, Rice, P.A., Topeka, argued the cause, and James L. Wisler, of the same firm, was on the brief, for appellees Davis and Smith.
Kala Spigarelli, of Spigarelli, McLane & Short, Pittsburg, was on the brief, for appellee Woodberry.
This is a declaratory judgment action brought by First Financial Insurance Company (First Financial) to determine if its liability insurance policy provided coverage for the incident in question. The policy at issue covers Verdell and Earlene Bugg doing business as Tewz Enuff, a bar, and their employees.
Joi Woodberry, Tina M. Davis, and Lela R. Smith were patrons in the bar and were shot during a disturbance in the bar when shots were exchanged between another patron and one or more insureds. The injured patrons filed suit alleging Verdell and Earlene Bugg and their employees negligently caused their injuries. First Financial insured the Buggs and filed a declaratory judgment action to determine whether the insurance policy provided coverage for the incident. The trial court held the insurance policy was ambiguous and that First Financial had a duty to defend the lawsuit. The injured patrons are the plaintiffs in the personal injury actions and defendants in this declaratory action along with the Buggs.
First Financial appealed and the case was transferred to this court pursuant to K.S.A. 20-3018(c). Three issues are presented. Defendants contend the insurance contract is ambiguous in that the exclusion clause relating to assault and battery and intentional acts is ambiguous and that their injuries were caused by an "occurrence" and were therefore covered under the insurance policy. They further claim that First Financial is estopped to deny coverage because it undertook defense of the personal injury action without disclaiming liability, etc.
When the shooting occurred, the bar was dark and filled to capacity. Trevor Russell exchanged words with Willie Bell, an employee of the bar. The two went outside where Bell eventually struck Russell in the face. Russell later reentered the bar with a gun and began firing; gunshots were returned by one or more employees.
The injured patrons filed suit claiming the Buggs were negligent for (a) firing a gun in a crowded tavern, (b) failing to have exits clearly marked within the tavern, and (c) failing to properly protect patrons from an assailant.
First Financial had a commercial insurance policy with Verdell and Earlene Bugg. The policy provides liability coverage for "bodily injury" and "property damage" caused by an "occurrence." The policy defines "occurrence" as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions."
The policy has an "exclusion" section. The main body--"exclusion section"--provides in pertinent part:
The policy contains the following endorsement:
Under that section, clearly marked in capital letters is the following:
"EXCLUSION-ASSAULT OR BATTERY
Exclusion a. of COVERAGE A (Section I) is replaced by the following:
a. 'bodily injury,' 'property damage,' or 'personal injury':
(1) Expected or intended from the standpoint of any insured; or
(2) Arising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery."
The Forms and Endorsement section clearly sets forth the endorsement and states it applies to coverage and is made part of the policy.
Six days after the incident, First Financial caused a letter to be sent to the Buggs stating that it would investigate the March 25 incident, but that it reserved "the right at any time to withdraw from such investigation, discussion, or other actions, and to disclaim liability under the policy, for the reasons stated and for such others that may appear, upon giving such advanced notice as the circumstances may permit." On November 14, 1994, First Financial caused another letter to be sent to the Buggs informing them that due to the policy's assault and battery exclusion, First Financial was denying coverage for any claims occurring as a result of the March 25 incident. The letter also noted that the Buggs had been advised of First Financial's notice of non-waiver and reservation of rights on March 31, 1994.
On July 7, 1995, First Financial sent a letter to the Buggs via certified mail. This letter quoted the assault and battery exclusion and stated that "[d]ue to, but not necessarily limited to the above exclusions, First Financial Insurance Company contends that you may not have coverage for this occurrence." The letter continued:
Ultimately, the district court held that "[t]he policy is ambiguous, and as such, must be construed in favor of the insured." Consequently, the court ruled, First Financial is obligated to represent the Buggs (the insureds) in the lawsuits brought by Woodberry, Davis, and Smith. Furthermore, the district court ruled that First Financial is liable for any legal obligations the Buggs incur due to injuries sustained by Woodberry, Davis, and Smith.
Woodberry, Davis, and Smith claim First Financial's policy is ambiguous and, consequently, the construction most favorable to the insured must prevail. Gowing v. Great Plains Mutual Ins. Co., 207 Kan. 78, Syl. p 1, 483 P.2d 1072 (1971). Spivey v. Safeco, Ins. Co., 254 Kan. 237, 240, 865 P.2d 182 (1993).
Policies must be construed according to the sense and meaning of the terms used, and if the language is clear and unambiguous, it must be taken in its plain, ordinary, and popular sense. Bramlett v. State Farm Mutual Ins. Co., 205 Kan. 128, 130, 468 P.2d 157 (1970). Similarly, courts should not strain to create an ambiguity where, in common sense, there is none. Bell v. Patrons Mut. Ins. Ass'n, 15 Kan.App.2d 791, 794, 816 P.2d 407, rev. denied 249 Kan. 775 (1991). The test to determine whether...
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