Loucks v. Farm Bureau Mut. Ins. Co.

• Decision Date: 03 December 2004
• Docket Number: No. 91,488.,91,488.
• Citation: 33 Kan.App.2d 288,101 P.3d 1271
• Parties: PAUL LOUCKS, Appellee, v. FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Appellant.
• Court: Kansas Court of Appeals

33 Kan.App.2d 288

101 P.3d 1271

PAUL LOUCKS, Appellee, v. FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Appellant.

No. 91,488.

Court of Appeals of Kansas.

Opinion filed December 3, 2004.

Paul Hasty, Jr., and Merry M. Campbell-Tucker, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Overland Park, for appellant.

Gerald W. Scott, Leslie Hess, and Mark A. Scott, of Gerald W. Scott, P.A., of Wichita, for appellee.

Before GREENE, P.J., PIERRON and MALONE, JJ.

Petition for review denied 279 Kan. 1006 (2005).

MALONE, J.:

This is an underinsured motorist (UIM) insurance case. Farm Bureau Mutual Insurance Company, Inc. (Farm Bureau) appeals the judgment for damages and attorney fees in favor of its insured, Paul Loucks. The legislative purpose of mandating the offer of UIM coverage was to fill a gap inherent in motor vehicle financial responsibility legislation and compulsory insurance legislation. The coverage was intended to recompense innocent persons who are injured through the wrongful conduct of motorists who because they are not financially responsible cannot be made to respond in damages. O'Donoghue v. Farm Bureau Mut. Ins. Co., 275 Kan. 430, Syl. ¶ 4, 66 P.3d 822 (2003); see K.S.A. 40-284. This case demonstrates that unanswered questions remain concerning the procedural aspects of UIM claims and the rights and responsibilities of parties involved in such claims.

Factual and procedural background

On January 14, 1995, Loucks, acting in the course of his employment as a car salesman with Burtis Motor Company, Inc. (Burtis), was injured in an accident caused by a truck driven by Diciderio Celiz. Loucks was in the Burtis car lot showing a station wagon to a customer, Don Hapes. Loucks walked over to the station wagon where he opened the door, started the engine, and stepped out of the vehicle. Loucks was standing between the station wagon and a 1984 Cutlass. Hapes was listening to the engine while Loucks was telling him about the vehicle. Suddenly Loucks heard tires squealing. A truck driven by Celiz crashed into the parking lot, pinning Loucks between the Cutlass and the station wagon. Loucks sustained significant personal injuries resulting from the accident.

At the time of the accident, Celiz was insured under policies issued by State Farm Mutual Insurance Company (State Farm) and Shelter Insurance Company (Shelter) with aggregate limits of $50,000 in liability coverage. Loucks had a personal automobile policy with Farm Bureau with total UIM limits of $300,000. Burtis had insurance coverage through Universal Underwriters Insurance Company (Universal). The Universal policy provided UIM coverage to Burtis and its employees with limits of $25,000. Certain individuals were listed under an endorsement for UIM coverage with limits of $300,000. Loucks was not included in the endorsement.

On January 8, 1997, Loucks filed a personal injury and negligence lawsuit against Celiz in Finney County District Court, Loucks v. Celiz, case No. 97-C-8 (Celiz, 97-C-8). Loucks gave written notice of his action to his insurer, Farm Bureau. State Farm and Shelter hired David Rebein, an attorney, to represent Celiz. Loucks subsequently filed a motion for punitive damages. On June 1, 1999, Rebein stipulated that Celiz was 100% at fault and that punitive damages should be awarded.

State Farm and Shelter offered to settle Loucks' claims against Celiz for policy limits of $50,000. Loucks' attorney, Leslie Hess, notified Farm Bureau of the tentative settlement by complying with the provisions of K.S.A. 40-284(f). Farm Bureau, to preserve its UIM subrogation rights against Celiz, substituted its payment of $50,000 to Loucks.

On June 11, 1999, Farm Bureau filed a formal motion to intervene in Celiz, 97-C-8 to protect its UIM interest. However, Farm Bureau subsequently decided to withdraw its motion after reaching a settlement agreement with State Farm and Shelter. The agreement was reduced to writing in a June 18, 1999, letter from Farm Bureau's counsel to Rebein:

"Farm Bureau accepts your proposal whereby Farm Bureau withdraws its motion to intervene in this case in consideration for the agreement of your clients not to settle this lawsuit or confess judgment without Farm Bureau's consent, your agreement to appear at trial and vigorously defend the lawsuit, and your agreement to reimburse Farm Bureau the $50,000 substitution payment it has made."

On June 24, 1999, Loucks moved to dismiss Celiz, 97-C-8. Loucks had already recovered $50,000, representing Celiz' liability policy limits. Also, Loucks knew from discovery that Celiz, a Mexican citizen, had returned to Mexico and was judgment proof. The district court permitted dismissal of the lawsuit without prejudice. Loucks never released Celiz from liability for the accident.

On October 20, 1999, Loucks filed a UIM action against Farm Bureau in Finney County District Court, Loucks v. Farm Bureau, case No. 99-C-270 (Farm Bureau, 99-C-270). Farm Bureau filed a motion to dismiss for failure to state a cause of action. The district court denied Farm Bureau's motion to dismiss.

On December 10, 1999, the initial case of Celiz, 97-C-8 was refiled as Loucks v. Celiz, case No. 99-C-310 (Celiz, 99-C-310) as a subrogation action brought by Farm Bureau in the name of its insured Loucks. The lawsuit was filed by Wendell Wurst, counsel for Farm Bureau. This case was consolidated with Farm Bureau, 99-C-270 for purposes of discovery. Wurst subsequently withdrew as plaintiff's counsel in Celiz, 99-C-310. Loucks' personal attorneys declined to prosecute the refiled case. Several months later, Bradley Maudlin, an attorney, entered an appearance for the plaintiff in Celiz, 99-C-310 at the direction of Farm Bureau. However, Maudlin made no attempt to contact Loucks about the case.

On December 22, 2000, Farm Bureau filed a motion requesting the cases be tried separately and requesting that Celiz, 99-C-310 should be tried first. Loucks filed a response that Farm Bureau, 99-C-270 should be tried first. On May 10, 2001, the district court ruled that Farm Bureau, 99-C-270 should be tried first and set the trial for October 16, 2001. On September 7, 2001, Farm Bureau filed a motion for summary judgment on Loucks' claim for UIM benefits in Farm Bureau, 99-C-270. The motion alleged that Loucks had breached his insurance policy with Farm Bureau by dismissing his original personal injury lawsuit against Celiz and pursuing a direct action against Farm Bureau. The district court did not rule on this motion prior to trial. On October 16, 2001, Farm Bureau, 99-C-270 came before the district court for a jury trial. Loucks presented evidence of his injuries and damages resulting from the January 14, 1995, accident. The jury returned a verdict of $171,750 in favor of Loucks.

On March 11, 2002, Farm Bureau filed another motion for summary judgment in Farm Bureau, 99-C-270. This motion alleged that Loucks was an insured person under the Universal policy issued to Burtis and that the Universal policy provided primary coverage for Loucks' claim. On December 30, 2002, the district court ruled against Farm Bureau on the motions for summary judgment. On January 27, 2003, the district court entered judgment in favor of Loucks in the amount of $146,207.27, which was less than the jury verdict due to a credit for expenses covered by workers compensation. The district court also ordered that Loucks was entitled to recover attorney fees from Farm Bureau pursuant to K.S.A. 40-256 and K.S.A. 40-908.

Although Judge Philip C. Vieux entered the order allowing attorney fees, Judge Michael L. Quint conducted the hearing to determine the amount of fees to be awarded. After hearing evidence, Judge Quint awarded attorney fees on behalf of Leslie Hess in the amount of $37,387.50, plus expenses of $3,361.10. The court awarded attorney fees on behalf of Gerald Scott in the amount of $134,790. Farm Bureau timely appeals.

Issues

Farm Bureau makes the following claims on appeal:

1. The trial court erred in finding that Loucks did not breach the insurance policy by dismissing his lawsuit against Celiz and pursuing a direct action against Farm Bureau. 2. The trial court erred in ordering that the UIM case of Farm Bureau, 99-C-270 be tried before the subrogation case of Celiz, 99-C-310.

3. The trial court erred in finding that Loucks did not have UIM coverage with Universal.

4. The trial court erred in finding that Loucks was entitled to attorney fees from Farm Bureau.

5. The trial court erred in assessing the amount of attorney fees. We will address the issues in the order raised by Farm Bureau.

Breach of insurance policy

Farm Bureau argues the district court erred in finding that Loucks did not breach the insurance policy by dismissing his lawsuit against Celiz and pursuing a direct action against Farm Bureau. According to Farm Bureau, Loucks' actions bar any recovery under the Farm Bureau policy for UIM protection. The district court denied Farm Bureau's motion for summary judgment on this issue.

"Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, [appellate courts] apply the same rules and where . . . reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. [Citation omitted.]" Bracken v. Dixon

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