Thomas v. Benchmark Ins. Co.

Citation179 P.3d 421
Decision Date28 March 2008
Docket NumberNo. 95,202.,95,202.
PartiesRene THOMAS, as Parent and Natural Guardian of Juliana Sanchez and Viviana Sanchez, Minors and Heirs at Law of Ramon Sanchez; and Victor Reyes, Appellees, v. BENCHMARK INSURANCE COMPANY, Appellant.
CourtKansas Supreme Court

J. Franklin Hummer, of Shawnee Mission, argued the cause and was on the brief for appellant.

Mark Beam-Ward, of Hill, Beam-Ward, Kruse, & Wilson, LLC of Overland Park, argued the cause and was on the brief for appellees.

The opinion of the court was delivered by NUSS, J.:

This case concerns a dispute about automobile liability insurance. While fleeing police, Melissa Gutierrez lost control of the car she was driving at a high rate of speed, killing her and passenger Ramon Sanchez and injuring passenger Victor Reyes. In a declaratory judgment action, Reyes and Rene Thomas, as parent and natural guardian of minors and heirs at law of Sanchez, sought a ruling that Gutierrez' Benchmark Insurance Company policy provided coverage. The district court entered summary judgment against Benchmark; a divided panel of our Court of Appeals reversed in Thomas v. Benchmark Ins. Co., 36 Kan.App.2d 409, 140 P.3d 438 (2006). We granted review; our jurisdiction is pursuant to K.S.A. 20-3018(b).

The issues on appeal, and our accompanying holdings, are as follows:

1. Does the policy's intentional act exclusion bar coverage? Yes.

2. Does the illegal act exclusion bar coverage? Moot.

Accordingly, the judgment of the Court of Appeals reversing the district court is affirmed; the judgment of the district court is reversed.

FACTS

On November 8, 2003, Victor Reyes, Ramon Sanchez, and Melissa Gutierrez entered a pub in Overland Park. After consuming alcohol, Reyes and Sanchez became involved in a fight that moved outside. Eventually, Sanchez and Reyes got into Gutierrez' car, with Sanchez in the front passenger seat and Reyes in the back. Sanchez then pulled a handgun and, when the car was moving, fired approximately 10 times in the general direction of a group of six or seven people. Once Sanchez' gun was empty, Gutierrez drove away.

A police officer observed the car traveling north on Interstate 35 in excess of 80 miles per hour. While attempting to catch the car, the officer next spotted it on Interstate 635. After the officer activated his lights, Sanchez threw the gun out of the car. Eventually, Gutierrez pulled onto the highway shoulder. After the officer stopped and backup arrived, both officers exited their cars. But before Gutierrez could be ordered from the car, she drove away. According to Reyes, Gutierrez took off despite protest from both passengers.

The officer lost sight of Gutierrez' car as it exited Interstate 635 onto Shawnee Drive. While proceeding on Shawnee Drive, Gutierrez lost control; her car flipped several times and Sanchez was thrown from the car. Gutierrez and Sanchez died, and Reyes, who was wearing a seatbelt, survived with several injuries.

Reyes and Rene Thomas (Plaintiffs) filed a declaratory judgment action against Benchmark Insurance Company seeking a determination of the parties' rights under the automobile liability policy issued to Gutierrez. Benchmark responded that insurance coverage was barred due to (1) the criminal conduct of the driver and passengers — the "illegal act exclusion" — and (2) the intentional conduct of Gutierrez — the "intentional act" exclusion.

Plaintiffs moved for summary judgment. The parties later stipulated to the facts as provided in the police records, which included a statement given by Reyes to police in the early morning hours of November 9, 2003, for the limited purpose of the summary judgment motion.

After a hearing, the district court granted summary judgment for plaintiffs. The court concluded that the illegal act exclusion did not apply but did not address the intentional act exclusion.

A majority panel of the Court of Appeals reversed the district court, holding that Gutierrez' excessive speeding prohibited recovery under the intentional act exclusion. Thomas v. Benchmark Ins. Co., 36 Kan. App.2d 409, 421, 140 P.3d 438 (2006). The majority also agreed with the district court that the policy's "illegal act" exclusion did not apply. Judge Bukaty dissented from the majority's conclusion that Gutierrez' intentional conduct precluded coverage under the policy. 36 Kan.App.2d at 426-31, 140 P.3d 438.

Plaintiffs petitioned for review, and Benchmark cross-petitioned; this court granted review. More facts will be provided as necessary to the analysis.

ANALYSIS
Issue 1: The intentional act exclusion bars coverage.
Standard of Review

The parties stipulated to the facts as provided in the police records for the limited purpose of the summary judgment motion. Moreover, we must interpret the insurance contract. Our review is therefore de novo. See Roy v. Young, 278 Kan. 244, 247, 93 P.3d 712 (2004) (Where there is no factual dispute, appellate review of an order granting summary judgment is de novo.); see Marshall v. Kansas Med. Mut. Ins. Co., 276 Kan. 97, 111, 73 P.3d 120 (2003) (Review of the interpretation of insurance contracts is unlimited.).

Arguments

According to the Benchmark policy's initial grant of coverage, Benchmark agreed to pay: "damages for bodily injury or property damage for which you or any family member becomes legally responsible because of an auto accident." The policy defined an auto accident as "an unexpected and unintended event that causes bodily injury or property damage and arises out of the ownership, maintenance or use of an auto or other motor vehicle."

After the policy's initial grant of coverage, it excluded, among other things, "bodily injury caused intentionally by you or any family member or at your or any family member's direction." (Emphasis added.) Plaintiffs argue that the Court of Appeals majority erred in reversing the district court's summary judgment order on the basis of this intentional act exclusion. While they admit Gutierrez drove recklessly or wantonly and at excessive speeds, they assert that her loss of vehicle control was not intentional. Plaintiffs claim that under the majority's rationale, an insurance company could simply deny coverage any time a wreck occurred if the driver committed a traffic violation, e.g., speeding.

As we understand Benchmark's response, it takes no issue with the initial grant of coverage; rather, it simply argues that this intentional act exclusion barred coverage otherwise existing because the wreck and injuries were "natural and probable consequences" of Gutierrez' intentional act of driving at an excessive rate of speed. It cites inter alia, State Farm Fire & Cas. Co. v. Falley, 23 Kan.App.2d 21, 926 P.2d 664 (1996), rev. denied 261 Kan. 1086 (1997). Benchmark has the burden to demonstrate that the exclusion applies. See Buchanan v. Employers Mutual Liability Ins. Co., 201 Kan. 666, Syl. ¶ 2, 443 P.2d 681 (1968).

Relying upon its interpretation of this court's prior decisions, the Court of Appeals majority felt obligated to apply the natural and probable consequences test. It determined that the injuries were intentionally caused and therefore excluded coverage. 36 Kan.App.2d at 418, 140 P.3d 438. The dissent essentially urged application of a test that required Gutierrez to have intended both the act and to cause some kind of injury or damage.

Before proceeding with the analysis, a review is in order.

Review

Kansas public policy prohibits insurance coverage for intentional acts: "[A]n individual should not be exempt from the financial consequences of his own intentional injury to another." Shelter Mut. Ins. Co. v. Williams, 248 Kan. 17, 28, 804 P.2d 1374 (1991); see Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. 681, 686, 512 P.2d 403 (1973). Consequently, the legislature has authorized motor vehicle liability insurers to exclude coverage "for any damages from an intentional act." See K.S.A. 40-3107(i)(6). Such exclusionary clauses should be narrowly construed against the insurer. See Marquis v. State Farm Fire & Cas. Co., 265 Kan. 317, 327, 961 P.2d 1213 (1998).

"In a certain sense, all acts are intentional, save perhaps for involuntary muscle spasms." Dykes, Occurrences, Accidents, and Expectations: A Primer of These (and Some Other) Insurance-Law Concepts, 2003 Utah L.Rev. 831, 846-47 (2003). See Falk v. Whitewater, 65 Wis.2d 83, 221 N.W.2d 915 (1974) (Almost all negligent conduct is composed of individual intentional components.). Accordingly, a distinction is drawn between intentional acts and the intent to cause injury. See Pachucki v. Republic Insurance Co., 89 Wis.2d 703, 278 N.W.2d 898 (1979) (An intentional act is a separate legal consideration and must be distinguished from the intent to cause injury.) (citing Falk v. Whitewater, 65 Wis.2d 83, 221 N.W.2d 915 [1974]). Kansas recognizes, for example, that an intentional act may nevertheless result in unintended injury. See Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. at 687, 512 P.2d 403.

The parties agree upon Gutierrez' intentional acts, e.g., driving her car at an excessive speed. Accordingly, we are concerned with the second step of the Kansas intentional act exclusion analysis: whether, through her intentional acts, she intentionally caused the injuries. If so, coverage is excluded. Short of direct evidence of Gutierrez' intent to cause injury, i.e., through her testimonial admission, her intent to cause injury may be inferred. In Kansas, intent to cause injury may be inferred if the injury is the natural and probable consequence of her intentional acts. Particularly because the facts are stipulated to, we may make this intentional injury determination as a matter of law. See Roy v. Young, 278 Kan. at 247, 93 P.3d 712 (where there is no factual dispute, appellate review of an order granting summary judgment is de novo); Loveridge v. Chartier, 161 Wis.2d 150, 468 N.W.2d 146 (1991) (whether defendan...

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