U.S. Specialty Ins. Co. v. Steele

• Decision Date: 07 May 2020
• Docket Number: Case No. 2:19-CV-02587-HLT-JPO
• Citation: 458 F.Supp.3d 1310
• Parties: U.S. SPECIALTY INSURANCE CO. INC., Plaintiff, v. Sharri STEELE, as executrix of the estate of Michael Tod Steele, et al., Defendants.
• Court: U.S. District Court — District of Kansas

458 F.Supp.3d 1310

U.S. SPECIALTY INSURANCE CO. INC., Plaintiff,

v.Sharri STEELE, as executrix of the estate of Michael Tod Steele, et al., Defendants.

Case No. 2:19-CV-02587-HLT-JPO

United States District Court, D. Kansas.

Signed May 7, 2020

Jillian Rose Wile, Greenville, TX, pro se.

Jess C. Rickman, III, Condred Curtis Roberts, III, Paul Travis Serafy, Hallett & Perrin PC, Dallas, TX, for Defendants.

MEMORANDUM AND ORDER

HOLLY L. TEETER, UNITED STATES DISTRICT JUDGE

In this declaratory action, Plaintiff, an insurance company, seeks to establish that an airplane insurance policy it issued to Dr. Daniel Dunn is not ambiguous and limits coverage to $100,000 per person for bodily injury. Defendants,¹ the family of a passenger killed in an airplane crash, assert that the terms of the contract are ambiguous and that they are entitled to $1,000,000 in coverage. Two motions are pending before the Court: Defendants’ summary-judgment motion (Doc. 26) and Plaintiff's motion for judgment on the pleadings (Doc. 28). Although the procedural posture of the two motions is different, the parties agree that this is an issue of law and do not dispute the material facts.² Judgment on the pleadings is therefore appropriate, and the Court takes up Plaintiff's motion. Because the Court agrees with Plaintiff that the policy is not ambiguous and limits coverage to $100,000 per person for bodily injury, the Court grants Plaintiff's motion for judgment on the pleadings and denies as moot Defendants’ motion for summary judgment.

I. BACKGROUND³

On May 13, 2017, Dr. Dunn purchased an airplane insurance policy (the "Policy") from Plaintiff. He selected "Coverage DL," which provides liability insurance for bodily injury to passengers and property damage caused by operation of the airplane.⁴

During the term of the Policy, on February 22, 2018, Dr. Dunn and one passenger—Michael Tod Steele—departed in Dr. Dunn's airplane for a flight from Ulysses to Scott City, Kansas. Shortly after take-off, the airplane crashed and both men were killed.

Over a year later, in May of 2019, Defendants’ counsel sent a demand letter to Plaintiff for $1,000,000, which is the amount Defendants contend they are entitled to under the Policy. Plaintiff's counsel responded with an offer of $100,000, which is the amount Plaintiff contends Defendants are entitled to under the Policy.

On August 19, 2019, Defendants filed suit against Dr. Dunn's surviving spouse, Ruth A. Dunn, in her capacity as personal representative of the estate of Dr. Dunn, in the District Court of Scott County, Kansas. Plaintiff then brought this declaratory action seeking to establish that the coverage limit is $100,000 per person for bodily injury. Doc. 1. On March 13, 2020, Defendants moved for summary judgment. Doc. 26. That same day, Plaintiff moved for judgment on the pleadings. Doc. 28. The state-court action is stayed pending this Court's declaratory judgment as to the limits of coverage under the Policy.

II. STANDARD

Plaintiff moves for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Courts evaluate motions under Rule 12(c) using the same standard that applies to motions to dismiss for failure to state a claim under Rule 12(b)(6). Ward v. Utah , 321 F.3d 1263, 1266 (10th Cir. 2003).

Under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In undertaking this analysis, courts accept as true all well-pleaded allegations in the complaint, though they need not accept legal conclusions. Id. Likewise, conclusory statements are not entitled to the presumption of truth. Id. at 679, 129 S.Ct. 1937. A claim is plausible if it is supported by sufficient factual content to allow a court to make a reasonable inference that the defendant is liable. Id. The plausibility standard requires "more than a sheer possibility that a defendant has acted unlawfully," but it "is not akin to a ‘probability requirement.’ " Id. at 678, 129 S.Ct. 1937. A complaint containing factual content that is merely consistent with liability fails to establish plausibility. Id.

III. ANALYSIS

Plaintiff alleges that the plain language of the Policy limits coverage for bodily injury to $100,000 per person. Defendants maintain that the total amount of liability coverage available under the Policy is ambiguous and that they are therefore entitled to recover $1,000,000, less the amount of property damage and other claims previously paid. For the following reasons, the Court finds that the plain language of the relevant contract provisions is not ambiguous and limits Defendants’ recovery to $100,000.

Kansas law provides that, like any other written contract, the language of an insurance policy is construed to give effect to the intention of the parties. Catholic Diocese of Dodge City v. Raymer , 251 Kan. 689, 840 P.2d 456, 459 (1992).⁵ If the terms of the contract are unambiguous, a court considers only the plain language of the contract without applying rules of construction. Osterhaus v. Toth , 291 Kan. 759, 249 P.3d 888, 896 (2011). Upon a finding of ambiguity, however, a court may look outside the contract to extrinsic or parol evidence in interpreting the contract's language. Waste Connections of Kan., Inc. v. Ritchie Corp. , 296 Kan. 943, 298 P.3d 250, 264 (2013).

The question of whether a written contract is ambiguous is one of law for a court. Simpson v. City of Topeka , 53 Kan.App.2d 61, 383 P.3d 165, 177 (2016). "Typically, the words used in a contract should be given their common or customary meaning." Id. Ambiguity exists where " ‘the face of the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning.’ " Id. (quoting Raymer , 840 P.2d at 459 ). Put simply, an ambiguous contract contains " ‘provisions or language of doubtful or conflicting meaning.’ " Id. (quoting Simon v. Nat'l Farmers Org., Inc. , 250 Kan. 676, 829 P.2d 884, 888 (1992) ). "The test to determine whether an insurance contract is ambiguous is not what the insurer intends the language to mean, but what a reasonably prudent insured would understand the language to mean." First Fin. Ins. Co. v. Bugg , 265 Kan. 690, 962 P.2d 515, 519 (1998). Because an insurer prepares its own contracts, it has a duty to make the meaning clear and, where the terms of an insurance policy are "ambiguous or uncertain, conflicting, or susceptible of more than one construction, the construction most favorable to the insured must prevail." Raymer , 840 P.2d at 459. "If the insurer intends to restrict or limit coverage provided in the policy, it must use clear and unambiguous language in doing so; otherwise, the policy will be liberally construed in favor of the insured." Id. In construing an insurance policy, the court considers the instrument as a whole. Iron Horse Auto, Inc. v. Lititz Mut. Ins. Co. , 283 Kan. 834, 156 P.3d 1221, 1225 (2007) ; Am. Nat'l Prop. & Cas. Co. v. Sear , 2017 WL 3970698, at *2 (D. Kan. 2017).

Here, the Court finds no ambiguity in the language of the Policy. The relevant section of the Policy is "Part 3 – Liability to Others," which in pertinent part reads:

Coverage DL covers bodily injury to passengers and others and property damage in a combined limit of liability for each occurrence which includes a lower limit for each passenger.

The most we will pay for bodily injury to each passenger is shown in Item 6DL opposite "each person." The most we will pay for all bodily injury and property damage is shown in Item 6DL opposite "each occurrence."

Doc. 29-1 at 25 (emphasis deleted).⁶ The "Item 6" that this provision refers to is a table on the Policy's "Coverage Identification Page." Id. at 2. Under Item 6, in box DL (i.e., "Item 6DL"), opposite "each person" is "$100,000" and opposite "each occurrence" is "$1,000,000."⁷ Read together, Item 6DL and Coverage DL make clear that the Policy provides up to $100,000 for bodily injury to each passenger, with a maximum total limit of $1,000,000 for all bodily injury and property damage arising out of a single occurrence. The terms of the Policy unambiguously provide for a higher "combined limit" of $1,000,000 for "each occurrence" that "includes a lower limit for each passenger" of $100,000. Id. at 25. Applied to this case, the maximum amount that Plaintiff must pay Defendants for Mr. Steele's bodily injury under the Policy is the "each person" limit of $100,000.⁸

Defendants assert that the last sentence of Coverage DL in Part 3 renders the Policy ambiguous because it is not expressly subject to the limit for bodily injury to each person. They assert that a reasonably prudent insured would interpret "[t]he most we will pay for all bodily injury and property damage is shown in Item 6DL opposite ‘each occurrence’ " to mean that if both property damage and bodily injury arise from the same occurrence, the most Plaintiff would pay for all claims would be $1,000,000, unrestricted by the "each person" limitation.⁹ Doc. 30 at 5.

To support this argument, Defendants cite Farm Bureau Mutual Insurance Co. v. Winters , 248 Kan. 295, 806 P.2d 993 (1991), for the proposition that when an insurance policy does not expressly subject a "per occurrence" limit to a "per person" limit, the policy is subject to conflicting interpretations and considered ambiguous. Based on Winter , Defendants assert that if Plaintiff intended to limit its exposure to $100,000 for each person, then it should have clearly stated that the "each occurrence" limit is "subject to the each person limit" in the last sentence of Coverage DL. Doc. 30 at 5-6.

The Court disagrees with Defendants and finds no ambiguity in the Policy. Defendants’ approach is contrary to Kansas law, under which the Court must consider the relevant provisions of an...