Upland Mut. Ins., Inc. v. Noel

Decision Date02 March 1974
Docket NumberNo. 47152,47152
Citation214 Kan. 145,519 P.2d 737
PartiesUPLAND MUTUAL INSURANCE, INC., Appellant, v. Raymond E. NOEL et al., Appellees.
CourtKansas Supreme Court

Syllabus by the Court

1. An exclusion clause in a homeowner's liability insurance policy which excludes from coverage the ownership, maintenance, operation or use of automobiles while away from the premises is limited in scope to those situations where claim is based directly and necessarily upon negligence in the ownership, maintenance, operation and use of an automobile and does not extend to a cause of action based upon negligent entrustment of an automobile to a known carleless and reckless driver.

2. Where an insurance company denies coverage and the duty to defend under a homeowner's liability insurance policy and brings a declaratory judgment action against the insured to determine that issue, the insured is entitled to recover attorney fees and expenses incurred in defense of the declaratory judgment action if it is determined that there is coverage and a duty to defend.

Jerry G. Elliott, of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause, and John E. Foulston, Wichita, and William A. Guilfoyle, of Lehman & Guilfoyle, Abilene, were with him on the brief for appellant.

Lee Hornbaker, of Harper, Hornbaker & Abbott, Junction City, argued the cause, and Steven L. Hornbaker, Junction City, and John P. Dieter, Abilene, were with him on the brief for appellees, Raymond E. Noel and Viola J. Noel.

Evart Mills, of Mills & Mills, McPherson, argued the cause, and was on the brief for appellees, Fredrick L. Forrester, Jr., Fredrick L. Forrester, Sr., and Marjorie Forrester.

PRAGER, Justice:

This is a declaratory judgment action brought by Upland Mutual Insurance, Inc., seeking a determination of whether or not it has coverage and a duty to defend under a homeowner's insurance policy issued to Raymond E. and Viola J. Noel. On November 28, 1970, a tragic collision occurred between two automobiles in Dickinson county, Kansas. One was a 1965 Chevrolet driven by Steven E. Noel and the other vehicle was driven by Rudolph Noel. Both drivers were sons of the defendants-appellants, Raymond E. and Viola J. Noel. Both of the young men were killed. Mary Forrester was a passenger in the 1965 Chevrolet driven by Steven Noel. Fredrick L. Forrester, Jr., was a passenger in the vehicle driven by Rudolph Noel. Mary was killed in the accident and Fredrick L. Forrester, Jr., suffered severe personal injuries. The defendants-appellees Fredrick L. Forrester, Sr., and Marjorie Forrester, are the surviving parents and heirs of Mary Forrester. They filed a claim against the estate of Steven E. Noel, deceased, in the probate court of Dickinson county seeking to recover damages for the wrongful death of their daughter Mary. Likewise Fredrick L. Forrester, Jr., filed a claim seeking to recover damages for his own personal injuries. The probate court allowed Fredrick L. Forrester, Jr., the sum of $65,000 as damages for his injuries and allowed the senior Forresters the sum of $32,000 as damages for the wrongful death of Mary. On September 7, 1972, the Forresters filed an action in the district court of Dickinson county against Raymond E. and Viola J. Noel seeking recovery for the above amounts from the Noels on the theory that Raymond E. Noel negligently entrusted the 1965 Chevrolet to Steven E. Noel and made it possible for him to drive and operate the same knowing that Steven E. Noel was a careless and reckless driver and was apt to cause injury to another in its use. The action, will be referred to as case number 17615 or the damage action. The Noels having been sued requested Upland Mutual to defend them in case number 17615 under the provisions of their homeowner's insurance policy. Upland Mutual took the position that it had no coverage under the homeowner's policy issued to the Noels and responded by filing this declaratory judgment action (case number 17632) in which it sought a determination that its homeowner's policy did not afford protection to the Noels in the Forrester damage action. By agreement of the parties the damage action has been stayed pending determination of this declaratory judgment action.

In the trial court the parties stipulated to the following additional facts: Steven E. Noel was the natural son of Raymond E. and Viola J. Noel and was born on May 13, 1951, Steven married Judy Sutton on March 9, 1969, and from that date until the date of his death on November 28, 1970, they were husband and wife. At the time of the accident the title of the 1965 Chevrolet driven by Steven was in the name of Raymond E. Noel and/or Steve Noel. On or about July 1, 1970, Steven was without an automobile and at that time Raymond E. Noel borrowed the money to buy the 1965 Chevrolet. Steven thereafter made the payments on the mortgage for such purchase as they became due. Thereafter Steven E. Noel and the principle use of the Chevrolet although his parents did have the possession and control of it at times.

The homeowner's policy issued by Upland Mutual to the Noels provided in pertinent part as follows:

"Provisions applicable to Section II

"This company agrees with the named insured:

"INSURING AGREEMENTS

"1. COVERAGE E-PERSONAL LIABILITY:

"(a) Liability: To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage, and the Company shall defend any suit against the Insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fradulent; but the Company may make such investigtion and settlement of any claim or suit as it deems expedient.'

'SPECIAL EXCLUSIONS

"Section II of this Policy does not apply:

* * *

* * *

"(b) under Coverages E and F, to the ownership, maintenance, operation, use, loading and unloading of (1) automobiles or midget automobiles while away from the premises or the ways immediately adjoining, . . .."

* * *

* * *

"4. Supplementary Payments: With respect to such insurance as is afforded by this policy for Coverage E, this Company shall pay, in addition to the applicable limits of liability:

* * *

* * *

"(d) all reasonable expense, other than loss of earnings, incurred by the insured at this Company's request."

The issues of law submitted for determination by the trial court were as follows: (1) Does plaintiff's contract of insurance provide coverage upon the defendant, Raymond E. Noel, and obligate the plaintiff to defend case number 17,615? (2) Does plaintiff's contract of insurance obligate the plaintiff to pay any judgment within its limits of liability that might be rendered against Raymond E. Noel in case number defendants, Raymond E. Noel and Viola J. defendants, Raymond E. Noel and Voila J. Noel, to reimburse them for their necessary legal fees and expenses in defending case number 17,615? (4) Is plaintiff obligated to the defendants, Raymond E. Noel and Viola J. Noel, to reimburse them for their necessary legal fees and expenses for defending this declaratory judgment action?

On January 10, 1973, the trial court filed its Memorandum of Decision which included the following conclusions of law:

'It is the opinion of the Court that the cause of action stated in Case No. 17,615 is grounded in common law negligence in that defendant's negligent action allowed a dangerous instrumentality to be at the disposal of a careless and reckless person. The details of the alleged negligence were spelled out in the petition and included causing and permitting Steven E. Noel to purchase and operate and automobile. Nowhere was it alleged that the insured, Raymond E. Noel, Maintained, operated, or used the automobile or that the same was negligently driven by him or his agent.

'Regardless of the truth of the allegations, nothing in the petition brought the claim within the policy exclusion. It follows, therefore, that the Insurance Company was obligated (a) to defend insured in Case No. 17,615 and (b) to pay any judgment within its limits of liability that might be rendered against insured, Raymond E. Noel, in Case No. 17,615.

'Following the Gowing case, 207 Kan. 78, 483 P.2d 1072, this Court finds that since the insurance company was under a contractual duty to defend insured Noel in Case No. 17,615 and failed to do so, it became liable to pay the attorney fees incurred by the Insured in defending that case.

'As for attorney fees of the insured Noel in the present Case No. 17,632, the insurance contract issued by plaintiff requires it to reimburse insured for all reasonable expenses incurred at the company's request. This is an extension of the contractual guarantee that the policyholder will be protected from all expense and attorneys fees even if a false, fraudulent, or groundless action is filed against him. The insurance company wanted and sought a declaratory judgment of non-liability. The filing of this case required insured to appear and answer and constitutes a request of the plaintiff. Therefore, plaintiff is liable under the provisions of its contract for the attorney fees incurred by the insured (Connecticut Fire Insurance Company v. Reliance Insurance Company, D.C.Kan., 208 F.Supp. 20).'

Thereafter Upland Mutual brought a timely appeal to this court. In its brief Upland Mutual summarizes its position as follows: The basic purpose of a homeowner's policy is to provide protection for home premises related occurrences. Accordingly the purpose of the off premises auto exclusion is to exclude coverage from all liability arising from an off-premises auto accident regardless of the theory of recovery asserted. Any liability on the part of Raymond Noel as a negligent entruster of a car is dependent upon establishing actionable negligence on the part of his son Steven in the operation of the...

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