Layne Christensen Co. v. Zurich Canada

• Decision Date: 25 January 2002
• Docket Number: No. 85,351.,85,351.
• Citation: 38 P.3d 757,30 Kan. App.2d 128
• Parties: LAYNE CHRISTENSEN CO., and ELGIN EXPLORATION COMPANY, LTD., Appellees/Cross-appellants, v. ZURICH CANADA, Appellee/Cross-appellee, and TIG INSURANCE COMPANY, Appellee/Crossappellant, and RELIANCE NATIONAL INDEMNITY COMPANY, Appellant/Cross-appellee.
• Court: Kansas Court of Appeals

30 Kan. App.2d 128

38 P.3d 757

LAYNE CHRISTENSEN CO., and ELGIN EXPLORATION COMPANY, LTD., Appellees/Cross-appellants, v. ZURICH CANADA, Appellee/Cross-appellee, and TIG INSURANCE COMPANY, Appellee/Crossappellant, and RELIANCE NATIONAL INDEMNITY COMPANY, Appellant/Cross-appellee.

No. 85,351.

Court of Appeals of Kansas.

Opinion filed January 25, 2002.

John M. Waldeck, of Niewald, Waldeck & Brown, of Overland Park, and Ira Lipsius and Andrew Karonis, of Schindel, Farman & Lipsius, LLP, of New York, New York, for appellant/cross-appellee Reliance National Indemnity Company.

Douglas M. Greenwald and Jeanne Gorman Rau, of McAnany, Van Cleave & Phillips, P.A., of Kansas City, for appellee/cross appellee Zurich Canada. Douglas R. Richmond and Gerald A. King, or Armstrong Teasdale LLP, of Kansas City, Missouri, for appellee/cross-appellant TIG Insurance Company.

Before GERNON, P.J., KNUDSON and BEIER, JJ.

BEIER, J.:

This appeal arises out of a truck accident in California which injured a 6-year-old. We must determine whether the primary insurance policy's coverage limit was stated in Canadian or United States dollars, and, if Canadian, whether either or both of two other policies come into play.

Reliance National Indemnity Company appeals from the district court's judgment (1) that the coverage limit was stated in Canadian dollars and thus Zurich Canada's insurance policy did not provide full coverage for the insureds' $2 million loss; (2) that Reliance's policy provided secondary coverage; and (3) that the excess insurer, TIG Insurance, was not responsible for any part of the $2 million loss. TIG cross-appeals, joining in Reliance's claim that Zurich's policy fully covered the loss and, in the alternative, opposing the assertion that Reliance's policy did not cover the loss.

We must address the following issues:

• Did Reliance acquiesce in the judgment, thereby barring all or part of this appeal?

• Did the district court err in finding Zurich's policy was not ambiguous?

• Did the district court err in applying Canadian law to interpret Zurich's policy?

• If Canadian law does apply in this case, did the district court properly interpret and apply Canadian law?

• If Zurich's policy does not fully cover the loss, did the district court err in finding Reliance's policy provided coverage for the loss? and

• Did the district court err in finding TIG's policy did not cover the loss in this case?

Factual Background

The Parties

Layne Christensen Company (Layne) is a Delaware corporation with its principal place of business in Johnson County, Kansas. Elgin Exploration Company, Limited (Elgin) was incorporated in and has its principal place of business in the province of Alberta, Canada. In December 1995, Layne acquired Elgin when it purchased Elgin's then-parent corporation, Christensen Boyles Corporation (CBC).

At all relevant times, Elgin and/or Layne were covered by automobile insurance policies issued by several different carriers, including the three involved in this case. Zurich Canada (Zurich), is a Canadian insurance company with its principal place of business in Ontario. TIG Insurance Company (TIG) is a California corporation with its principal place of business in Texas. Reliance National Indemnity Company (Reliance) is a Wisconsin corporation with its principal place of business in Pennsylvania.

The Underlying Suit

In 1996, Elgin was working on a project in California. On August 26, 1996, an Elgin employee from the project was driving a truck rented by Elgin when he struck Devin Wallen, the 6-year-old child. Wallen was seriously injured.

Wallen and his mother filed suit in California state court against Elgin and the driver shortly after the accident. The Wallen suit was settled by Elgin in July 1997 for $2 million in United States dollars. Representatives of Zurich, TIG, and Reliance approved the settlement. Zurich contributed $1,456,133.96, the equivalent of $2 million Canadian dollars, toward the settlement. TIG and Reliance each paid $146,933.02, and Layne/Elgin contributed $250,000, all in United States dollars. All parties reserved their rights to seek a declaration of their respective obligations for the loss.

The Zurich Policy

In July 1993, Johnson & Higgins Ltd. (J&H), an insurance brokerage firm based in Alberta, Canada, requested a price quote from Zurich for an automobile fleet insurance policy for Elgin. Although Elgin previously had insurance through its parent corporation CBC, Zurich was told Elgin wished to "remove themselves from the parent's insurance programme." The request sought a $2 million coverage limit but did not specify whether the limit was to be measured in United States or Canadian dollars. Zurich was informed that Elgin operated primarily in Canada, but that Elgin had three trucks in the United States. Zurich provided Elgin a conditional price quote and requested additional details on its United States exposure.

Ultimately, Elgin accepted Zurich's quote and policy number 9991237F was issued for 1 year beginning August 24, 1993. Zurich charged the first year premium in Canadian dollars. The policy covered all vehicles Elgin owned, leased, or registered in its name. The coverage limit was $2 million; there was no deductible. Coverage extended to Elgin's automobiles while they were operated or parked within Canada, the United States, or upon a vessel plying between the two countries.

The Zurich policy and its later endorsements were silent as to whether the $2 million limit was measured in Canadian dollars if an accident occurred in the United States. No documents were provided to Elgin stating that claims would be calculated in Canadian dollars, even for accidents occurring in the United States. However, no explicit representation was made that such claims would be paid in United States dollars.

In August 1994, Zurich renewed Elgin's policy for a second 1-year period to run through August 24, 1995. Zurich charged a premium in Canadian dollars. The premium was financed and paid through J&H in Calgary. The policy was renewed for a third year in August 1995 in the same fashion.

In April 1996, after Elgin and its parent corporation had been acquired by Layne, Elgin notified Zurich its new insurance brokers were the Lockton Companies (Lockton) and its Canadian representative, Morris & Mackenzie, Inc. Lockton is a Missouri corporation with its principal place of business in Kansas. Morris & Mackenzie, Inc. (M&M), is a Canadian insurance broker with offices in Alberta, Canada.

In July 1996, Zurich notified M&M that it would not renew Elgin's fleet policy for a fourth year because of Elgin's loss history. A policy provision requiring 60 days' notice of nonrenewal prompted Zurich to offer to extend the policy's term to September 24, 1996. M&M requested the policy be extended. At about this same time, M&M advised Zurich that Elgin was going to use a rented truck and five other vehicles on the California job. The rented truck identified in the notice was the truck ultimately involved in the Wallen accident.

At M&M's request, Zurich extended Elgin's policy to October 15, 1996, as reflected in endorsement 95-13. An additional premium was charged for the extension. Zurich also issued Endorsement No. 95-14, which re-rated the policy to include the six vehicles being used in California. The additional premium for this coverage was $7,002. "Re-rating" meant Zurich added a territorial surcharge because its exposure in California was higher. One of the factors used in determining the surcharge was the exchange rate between Canadian and United States dollars, although it appears to have exerted downward pressure on the surcharge. Another endorsement, No. 95-15, was issued adjusting Elgin's premiums for the policy period ending August 1996, requiring an additional payment.

During the years the Zurich policies were in effect, the insurance brokers billed Elgin for the premiums, accepted payments from Elgin, and then forwarded the payments less commissions to Zurich. The payments made by the brokers to Zurich included payments from Elgin and from other entities who had obtained Zurich policies through the brokers.

Regarding the 1996 endorsements, Zurich authorized M&M to bill Elgin for the additional premiums. M&M did not bill Elgin for those endorsements until December 1996 and January 1997 (after the Wallen accident). Apparently, M&M sent the invoices to Lockton in Kansas who, in turn, sent them to Layne.

In March 1997, Lockton issued a single invoice to Elgin to cover the premiums for Endorsement Nos. 95-13, 95-14, and 95-15. Within 2 weeks, Layne paid Lockton $23,682 in United States dollars for the endorsements. Lockton subsequently issued a check to M&M drawn on a United States bank and payable in United States funds. The check covered the premium for all of the endorsements, less Lockton's commissions. The premiums were paid in United States dollars without converting the charges for the currency exchange rate. Therefore, the payment exceeded $23,682 in Canadian dollars. Between 1993 and 1996, any losses for which Elgin was indemnified under the Zurich policy were not paid in United States dollars. Neither Elgin nor Layne was aware of any United States claims having been paid by Zurich in United States rather than Canadian dollars, and the record is silent on whether there were, in fact, any claims in the United States. At various times, Zurich issued certificates to governmental entities verifying Elgin's insurance coverage; the certificates indicated the coverage was based on Canadian dollars, but it is apparent the certificates would not have been seen by Elgin personnel.

The Reliance Policy

Effective May 1, 1996, Reliance renewed policy number NKA XXXXXXX-XX to Layne, providing automobile liability coverage for 1 year with a policy limit of $2 million. The renewal submission provided to Reliance by Layne's agent, Lockton, listed vehicles owned by or...