Philadelphia Indem. Ins. v. Kansas City Home Care, 00-2391-JWL.

• Decision Date: 11 April 2001
• Docket Number: No. 00-2391-JWL.,00-2391-JWL.
• Parties: PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. KANSAS CITY HOME CARE, INC., et al., Defendants.
• Court: U.S. District Court — District of Kansas

139 F.Supp.2d 1194

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. KANSAS CITY HOME CARE, INC., et al., Defendants.

No. 00-2391-JWL.

United States District Court, D. Kansas.

April 11, 2001.

Robert P. Numrich, Todd M. Johnson, Evans & Dixon, L.L.C., Robert R. Barton, The Nygaard Law Firm, Kansas City, MO, for Plaintiff.

Robert R. McQuain, McQuain, Block, DeHardt & Rosenbloom, P.C., Kansas City, MO, Michael R. Taylor, The Law Firm, P.C., Independence, MO, Bernard F. Weinand, Blackwood & Langworthy, L.C., Kansas City, MO, Phillip C. Rouse, Randall L. Rhodes, Jennifer L. Benedict, Douthit, Frets, Rouse & Gentile, L.L.C., Kansas City, MO, for Defendants.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

This case comes before the court on the plaintiff's motion for summary judgment (Doc. 13), the plaintiff's motion for leave to file an amended complaint (Doc. 15) and defendant Lynda Moore's motion for partial summary judgment (Doc. 43). For the reasons set out below, the plaintiff's summary judgment motion is granted, thus mooting its motion to amend, and the defendant's motion for partial summary judgment is denied.

• Undisputed Facts

Philadelphia Indemnity Insurance Company ("Philadelphia Insurance") entered into an insurance contract with Kansas City Home Care, Inc. ("KCHC") and Kansas City Home and Health Services, Inc. ("KCHHS") effective October 30, 1997 to October 30, 1998. The contract provides coverage in two parts, the Commercial General Liability ("CGL") section and the Social Service Organization Professional Liability ("SSOPL") section. The CGL section provides coverage for "bodily injury," "property damage," "personal injury" and "advertising injury" if caused by an "occurrence." An "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The SSOPL section provides coverage for "damages" resulting from a "professional incident." A "professional incident" is defined as "any actual or alleged negligent" act, error or omission "in the actual rendering of professional services to others, including counseling services, in your capacity as a social service organization." According to the contract, "[p]rofessional services include[] the furnishing of food, beverages, medications or appliances in connection therewith." Both sections cover employees, "but only for acts within the scope of their employment" or while "performing duties related to the conduct" of the insured's business.

On December 13, 1999, Mark Toliver, Katherine Bruni and Christian Toliver (the "Toliver children") filed a counterclaim in a lawsuit before Judge VanBebber of this court.¹ The counterclaim defendants include KCHC, KCHHS and Lynda Moore. The counterclaim alleges that in February of 1998, the Toliver children contracted with KCHC and KCHHS for nursing, home health and personal services for Mariza Toliver at her home in Johnson County, Kansas. According to the counterclaim, KCHHS assigned an employee, Lynda Moore, to provide the contracted services to Mariza Toliver. The counterclaim alleges that Ms. Moore conspired with two other care givers to obtain an interest in the jewelry of Mariza Toliver and in a trust created by Mariza Toliver (the "Toliver Trust"). Ms. Moore allegedly used "improper or wrongful means" to influence Mariza Toliver, who suffered from "mental and physical impairments," to name Ms. Moore and another care giver as beneficiaries of Ms. Toliver's estate and the Toliver Trust. Mariza Toliver died on April 15, 1998, after executing a new will and trust documents naming Ms. Moore and another care giver as beneficiaries in place of the Toliver children. The counterclaim lists numerous causes of action, including breach of contract, fraud, conspiracy, violation of the Kansas Consumer Protection Act, and negligent hiring and supervision.

KCHC, KCHHS and Ms. Moore demanded that Philadelphia Insurance provide a defense and indemnity against the counterclaim. Philadelphia Insurance refused to defend or indemnify Ms. Moore and is defending KCHC and KCHHS under a reservation of rights. Philadelphia Insurance brought this lawsuit seeking declaratory judgment that it owes no duty to defend or to indemnify KCHC, KCHHS or Ms. Moore. Ms. Moore filed a counterclaim for declaratory judgment and damages for breach of the insurance contract. Philadelphia Insurance has moved for summary judgment and Ms. Moore has moved for partial summary judgment.

• Standards

Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The parties' papers do not identify any material questions of fact to be resolved. The only question presented by the summary judgment motions is the meaning of the insurance contract.

A federal court exercising diversity jurisdiction must apply the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In Kansas, the construction of a contract is governed by the law of the state in which the contract was made. Simms v. Metropolitan Life Ins. Co., 9 Kan.App.2d 640, 642, 685 P.2d 321 (1984). KCHC, KCHHS and Philadelphia Insurance agree that the insurance contract in issue was made in Missouri.

Under Missouri law, the interpretation of a contract is a matter of law. Caldwell v. Heritage House Realty, Inc., 32 S.W.3d 773, 775 (Mo.Ct.App.2000). Courts must interpret an insurance contract by its plain meaning. Marchand v. Safeco Ins. Co. of America, 2 S.W.3d 826, 829 (Mo.Ct.App. 1999) "We cannot distort unambiguous language to create an ambiguity." American Motorists Ins. Co. v. Moore, 970 S.W.2d 876, 878 (Mo.Ct.App.1998).

"An insurer's duty to defend under an insurance policy is broader than its duty to indemnify." Valentine-Radford, Inc. v. American Motorists Ins. Co., 990 S.W.2d 47, 51 (Mo.Ct.App.1999). The duty to defend arises when a complaint alleges facts that give rise to a claim potentially within the contract's coverage. Auto Club Family Ins. Co. v. Jacobsen, 19 S.W.3d 178, 183 (Mo.Ct.App.2000). The duty to defend is determined by comparing the language of the insurance policy with the allegations in the complaint. Id. "In addition to the plaintiff's allegations, facts known to the insurer or ascertainable through reasonable investigation can also create a duty to defend." Valentine-Radford, 990 S.W.2d at 51.

The insured carries the burden of proving that there is coverage under the insurance contract. Id. The insurer, however, carries the burden of proving that an exclusion applies. Id.

• Discussion

Philadelphia Insurance argues in its motion for summary judgment that neither the CGL nor the SSOPL sections of the insurance contract provide coverage for the allegations made in the counterclaim. KCHC and KCHHS filed a joint response to Philadelphia Insurance's motion for summary judgment and Ms. Moore filed a separate response. KCHC, KCHHS and Ms. Moore apparently concede that the CGL section does not provide coverage, but argue that the SSOPL section provides coverage.² Whether Philadelphia Insurance owes a duty to defend or indemnify KCHC and KCHHS is a different question than whether it owes a duty to defend or indemnify Ms. Moore, an employee of KCHC. The court, therefore, will consider each question in turn.

• KCHC and KCHHS

KCHC and KCHHS argue that the SSOPL section provides coverage because the counterclaim alleges negligent hiring and supervision. According to KCHC and KCHHS, negligent hiring and supervision fits the definition of a "professional incident." The definition of a "professional incident" is a negligent act, error, or omission "in the actual rendering of professional services to others...." The court doubts that negligence in hiring and supervision falls within coverage for negligent acts in "the actual rendering of professional services to others." Philadelphia Insurance, however, does not make this argument. Instead, Philadelphia Insurance points to an exclusion in the contract specifying that the contract does not cover damages "arising out of acts, errors or omissions of a managerial or administrative nature." According to Philadelphia Insurance, acts of a "managerial nature" include the hiring and supervision of employees. For support, Philadelphia Insurance cites Webster's Ninth Collegiate Dictionary defining the term "manage" as "to exercise executive, administrative, and supervisory direction of...." KCHC and KCHHS respond by arguing that the meaning of "managerial" is ambiguous because it is not defined in the contract and, therefore, should be construed against Philadelphia Insurance, the drafter of the contract.

"A contract is ambiguous only if its terms are susceptible of more than one meaning so that reasonable persons may fairly and honestly differ in their construction of the terms." Eisenberg v. Redd, 2001 WL 118562, *2 (Mo. Feb. 13, 2001). "An ambiguity arises in the context of an insurance policy when there is duplicity, indistinctness, or uncertainty as to the meaning of a particular word in the policy." Schoettger v. American Nat'l Property & Casualty Co., 10 S.W.3d 566, 569 (Mo.Ct.App.2000). Terms in an insurance contract are interpreted by their ordinary meaning. Martin v. United States Fidelity & Guaranty Co., 996 S.W.2d 506, 508 (Mo.1999). To determine the ordinary meaning of a term in an insurance contract, the Missouri Supreme Court "consults standard English language dictionaries." Id. If there is no ambiguity, the court need not resort to construction of the contract, but rather the intent of the parties is determined from the four corners of the contract. Id. "To ascertain the intent of the parties to an unambiguous contract, we give the language used its natural, ordinary, and common sense meaning, and consider the entire...