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Phillips v. St. Paul Fire & Marine Insurance Co.

May 30, 2008


Appeal from Wyandotte District Court; CORDELL D. MEEKS and R. WAYNE LAMPSON, judges.


K.S.A. 40-284 and K.S.A. 40-256 are analyzed and applied.

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

Reversed and remanded with directions.


St. Paul Fire & Marine Insurance Company (St. Paul) appeals the district court's decision to grant Douglas Phillips' partial summary judgment motion and to award him attorney fees. The outcome depends on the interpretation of K.S.A. 40-284(c) and K.S.A. 40-256.

This case began with an automobile accident. On March 18, 2003, Phillips, an employee of the Unified Government of Wyandotte County and Kansas City, Kansas (Unified Government), was injured when Robert Sengphong, an uninsured 13-year old, ran his vehicle into Phillips' truck.

Phillips filed suit against Sengphong, Mid-Century Insurance (Mid-Century), and St. Paul. American Family Insurance (American Family) insured Sengphong's vehicle but originally disclaimed coverage. However, it soon reversed its decision and tendered its $100,000 policy limit. Phillips amended the suit and dismissed his claim against Sengphong. The damage exceeded $150,000.

St. Paul provided automobile insurance coverage for Kansas City, Kansas, in 1996, 1997, and 1998. In 1998, the governments of Wyandotte County and Kansas City, Kansas, merged to form the Unified Government. St. Paul continued to provide automobile coverage for 1999. From 1996 to 1999, the Unified Government requested that St. Paul limit its uninsured/underinsured motorist (UM) coverage to $50,000. Between 2000 and 2002, Insurance Company of the West and Coregis Insurance Co. provided the automobile insurance for the Unified Government. During this period, the Unified Government continued to have UM coverage with a limit of $50,000.

In 2003, the Unified Government resumed its insurance coverage with St. Paul. This policy provided automobile liability coverage of $500,000 for each incident. St. Paul referred to the 2003 policy as new and gave the Unified Government a new policy number. The "General Information" sheet in St. Paul's underwriting file describes the policy as a new business. The Unified Government failed to properly complete the excess UM coverage rejection form, which would again have limited the policy to $50,000 UM coverage, although it intended to do so. The paperwork for the policy was signed on April 28, 2003, but it was not delivered to St. Paul until August 5, 2003. On August 28, 2003, St. Paul still knew the rejection form had not been properly completed. The policy showed that the Unified Government had $50,000 in UM coverage, not $500,000.

Both Phillips and St. Paul filed motions for summary judgment on the issue of the amount of UM coverage. The district court granted Phillips' motion for partial summary judgment for a finding of $500,000 in coverage and denied St. Paul's motion for a finding of $50,000 in coverage. The court found that the Unified Government purchased a new policy with St. Paul in 2003 and did not properly reject the excess UM coverage. Therefore, the court found that St. Paul refused to pay Phillips without just cause or excuse. It concluded, after taking into account the $100,000 paid by American Family, that the UM coverage available to Phillips under the policy was $400,000.

The case proceeded to an arbitration hearing at which Phillips was awarded $174,773.04 in damages. The district court then heard testimony from Jerry Levy, a Lawrence attorney, who testified as an expert witness on attorney fees. Levy reviewed all aspects of the case and determined that Phillips' attorney earned $69,990.21 in attorney fees. Levy fully explained his reasoning and was cross-examined by St. Paul's attorney.

On October 30, 2006, the district court incorporated and adopted the award from the arbitration hearing and, since it found St. Paul had refused to pay without just cause within the meaning of K.S.A. 40-256, adopted the attorney fees recommended by Levy. St. Paul appeals. We reverse because we find that under K.S.A. 40-284(c) the previous rejection of the higher benefit, under the statute, operated as a rejection of the higher benefit and cost in the new contract.

St. Paul first argues the district court did not correctly interpret K.S.A. 40-284(c). We agree.

"'"'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, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.' [Citations omitted.]"'" Korytkowski v. City of Ottawa, 283 Kan. 122, 128, 152 P.3d 53 (2007).

K.S.A. 40-284 provides the law regarding UM coverage. The Kansas Supreme Court has concluded that this statute is remedial in nature and should be liberally construed to provide protection to the insured against damages caused by the uninsured or underinsured. See Simpson v. Farmers Ins. Co., 225 Kan. 508, 512, 592 P.2d 445 (1979). However, subsection (c), because it detracts from the public goal of protecting the insured, must be narrowly and ...

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