Heinson v. Porter
| Citation | 244 Kan. 667,772 P.2d 778 |
| Decision Date | 14 April 1989 |
| Docket Number | No. 62246,62246 |
| Parties | Michael Allen HEINSON, Plaintiff-Appellee, v. Patti PORTER, Defendant, and Metropolitan Property and Liability Insurance Company, Garnishee-Appellant. METROPOLITAN PROPERTY AND LIABILITY INSURANCE COMPANY, Plaintiff, v. Patti PORTER, Defendant. |
| Court | United States State Supreme Court of Kansas |
Syllabus by the Court
1. In general, for a declaratory judgment between an insurer and insured determining there is no coverage under the policy for injuries sustained by a third person to be binding upon the injured person, such person must have been made a party to the action.
2. Under the totality of circumstances involved in the issuance of the homeowner's policy and the insurer's handling of the claim of the injured third party, it is held the district court did not err in concluding the insurer was estopped to deny coverage under the policy.
3. Under Kansas law, tort claims may not be assigned.
4. Any liability of an insurance company in excess of its policy limits must be based upon wrongdoing by the insurer which has caused loss to its insured.
Donald T. McMillan, of Rivkin, Radler, Dunne & Bayh, of Uniondale, N.Y., argued the cause, and David R. Schlee and Michele Anderson Bonhag, of Smith, Gill, Fisher & Butts, of Kansas City, Mo. and Jerome V. Bales, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, Overland Park, were with him on the briefs for garnishee-appellant.
Donald W. Vasos, of Vasos, Kugler & Dickerson, of Kansas City, argued the cause, and Stephen G. Dickerson, of the same firm, was with him on the briefs for plaintiff-appellee.
This is an appeal by the garnishee, Metropolitan Property and Liability Insurance Company (Metropolitan), from a summary judgment entered in favor of plaintiff-garnishor Michael Allen Heinson in the amount of $500,000. Liability arises from a $100,000 homeowner's policy issued by Metropolitan to defendant Patti Porter.
The facts underlying this litigation are presented as a confusing maze of narrow passages, twisting streets, and cul-de-sacs. However, once a thoroughfare has been established, resolution of the issues presents no great difficulty. Although numerous issues are designated by Metropolitan, they may be categorized as challenges to the propriety of the trial court's award to the plaintiff-garnishor of: (1) the $100,000 limits of the homeowner's policy; (2) the $400,000 difference between the policy limits and the $500,000 judgment the plaintiff-garnishor obtained against defendant-insured Porter; and (3) "pre-garnishment" interest.
The trial court based its award of the policy limits on: (1) construing the policy in favor of the insured where provisions thereof are capable of more than one construction; and (2) estoppel by Metropolitan to deny coverage as a result of its conduct toward its insured.
The pertinent policy provisions are as follows:
....
d. BODILY INJURY OR PROPERTY DAMAGE ARISING OUT OF BUSINESS PURSUITS OF ANY INSURED EXCEPT ACTIVITIES THEREIN WHICH ARE ORDINARILY INCIDENT TO NON-BUSINESS PURSUITS...."
There was evidence before the court that defendant Mrs. Porter advised the Metropolitan agent at the time she was seeking to purchase the homeowner's policy that she was operating a children's day care business in her home and wanted to know if she needed to purchase additional insurance to cover this activity. The agent advised her she would have such coverage in the homeowner's policy. Enough information was contained in the application relative to the day care business that one of Metropolitan's regional representatives telephoned Mrs. Porter prior to issuance of the policy to learn the full particulars of the business. Mrs. Porter answered all questions truthfully and, despite some doubts about issuing the policy, Metropolitan did issue the policy.
On October 8, 1979, plaintiff, who was age 10 months and one of Mrs. Porter's day care charges, fell from a highchair during his regular stay in her home and received serious head injuries. As a result thereof, plaintiff suffered permanent impairment of his gross and fine motor and cognitive skills, which requires ongoing occupational, physical, and speech therapy.
Mrs. Porter reported the incident to Metropolitan. On June 29, 1982, thirty-two months later, plaintiff brought suit against Mrs. Porter, alleging her negligence had caused plaintiff's injuries. Mrs. Porter notified Metropolitan of the lawsuit on August 13, 1982. Metropolitan then commenced a line of action involving many changes of position. This may be summarized as follows:
August 17, 1982--Reservations of rights letter denying coverage based upon: (1) late notice; (2) business pursuits exclusion; and (3) liability assumed by contract.
Early September 1982--Coverage reviewed and determination made loss was covered. This determination was made based upon inaccurate information in Metropolitan's computer as to coverage purchased. Reservation of rights letter was withdrawn. Independent counsel hired for Mrs. Porter.
September 16, 1982--File again reviewed and determination made withdrawal of reservation of rights letter was too broad. New reservation of rights letter was sent based on late notice only--mailgram to same effect also sent.
September 24, 1982--Internal memo written expressing concern over why policy was issued when company knew risks of day care operation were involved.
September 28, 1982--File reviewed and computer error noticed. Much internal conferring proceeded as to the situation.
September 29, 1982--Telephoned Mrs. Porter and explained a new reservation of rights letter would be sent. Internally, company expressed concern about estoppel to deny coverage.
November 4, 1982--New reservation of rights letter sent raising all three original grounds.
Internal memoranda reflect that Metropolitan continued to be concerned that events had proceeded too far and that it would be estopped to deny coverage. Nevertheless, on April 6, 1983, Metropolitan brought a declaratory judgment action against Mrs. Porter to determine whether or not there was coverage. Plaintiff Heinson was not a party thereto and had no knowledge of same during its pendency. This case was settled on the basis that Metropolitan would pay Mrs. Porter $500, which would cover Mrs. Porter's attorney fees for defending the declaratory judgment action and taking her through bankruptcy proceedings.
In the Release and Agreement signed June 6, 1983, in the declaratory judgment action, Mrs. Porter specifically agreed to:
"FOREVER RELEASE AND DISCHARGE Metropolitan, its agents and servants and all other persons, agents, firms, entities and corporations of and from any and all liability, actions, claims, demands, right or interest which the undersigned now has or may hereafter have in connection with the aforesaid policy of insurance in regard to the claims asserted by Heinson as above recited, it being expressly understood and stated by the undersigned that she has no coverage in regard to the Heinson allegations nor has she a right of defense under the aforesaid policy of insurance by virtue of the foregoing and that the consideration hereby paid is paid solely by Metropolitan Insurance Company to avoid expense and delay in connection with the aforesaid matters and to obtain final judicial resolution hereof."
The journal entry in the declaratory judgment action was filed June 2, 1983. Judgment was entered in favor of Metropolitan against Mrs. Porter and decreed that: (1) Metropolitan was not obligated to defend Mrs. Porter in the Heinson suit; (2) Mrs. Porter had no coverage under her insurance policy with Metropolitan; and (3) the policy excluded any coverage for Mrs. Porter for the Heinson lawsuit.
On August 19, 1983, Metropolitan withdrew its defense of Mrs. Porter in the Heinson action. On August 22, 1983, Mrs. Porter filed proceedings in bankruptcy. On January 19, 1984, Mrs. Porter was discharged in bankruptcy. The Heinson claim continued only to the extent of any insurance coverage. On September 24, 1984, plaintiff Heinson and Mrs. Porter settled their action. The district court approving the settlement had no knowledge of the declaratory judgment action and the Porter-Metropolitan- "Metropolitan settlement. The judgment in the settlement was for $500,000. One of the terms of the settlement was that plaintiff would look only to Metropolitan for payment and would never seek collection of the judgment from Mrs. Porter. This aspect of the facts will be discussed in more depth in the next issue.
The trial court held that the determination of no coverage in the declaratory judgment action was not binding upon the plaintiff. Metropolitan challenges this determination.
Plaintiff argues that he should have been named in the declaratory judgment action as an injured claimant in a personal injury action as a...
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