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Bridgebuilder Tax Legal Services, P.A. v. Torus Specialty Insurance Co.

United States District Court, D. Kansas

December 12, 2017



          John W. Lungstrum United States District Judge

         This matter comes before the Court on the parties’ cross-motions for summary judgment (Doc. ## 42, 58). For the reasons set forth below, the Court denies both motions.

         I. Background

         The following facts are undisputed for purposes of these motions. Plaintiff Bridgebuilder Tax Legal Services, P.A. (“Bridgebuilder”), located in Kansas, is a professional services firm comprised of attorneys and certified public accountants. Bridgebuilder is owned by Kevan Acord, a licensed and practicing attorney. Defendant insurer StarStone Specialty Insurance Company (“StarStone”) issued a professional liability insurance policy to Bridgebuilder.

         In August 2015, during the policy period, Bridgebuilder and Mr. Acord were sued in Kansas state court by their client, John Grissinger (individually and as trustee of a trust). Mr. Grissinger alleged that Bridgebuilder and Acord were negligent in advising him with respect to transactions in 2012 in which he loaned $6,000,000 to Northrock, LLC (“Northrock”). Bridgebuilder gave timely notice of the suit to StarStone, but StarStone denied coverage under the policy. Bridgebuilder defended the suit by Grissinger, which the parties settled after mediation in October 2015. In the settlement, Bridgebuilder paid in excess of the policy limit of $1,000,000.

         In the present action, which was removed from state court, Bridgebuilder seeks to recover from StarStone the amount it paid in the settlement of the Grissinger suit and the amount of the attorney fees it incurred in defending that suit. The case is presently set for a bench trial in April 2018.

         II. Summary Judgment Standards

         Summary judgment is appropriate if the moving party demonstrates that there is “no genuine dispute as to any material fact” and that it is “entitled to a judgment as a matter of law.” See Fed. R. Civ. P. 56(a). In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. See Burke v. Utah Transit Auth. & Local 382, 462 F.3d 1253, 1258 (10th Cir. 2006). An issue of fact is “genuine” if “the evidence allows a reasonable jury to resolve the issue either way.” See Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1219 (10th Cir. 2006). A fact is “material” when “it is essential to the proper disposition of the claim.” See id.

         III. Application of Exclusion Q

         StarStone seeks summary judgment based on its argument that the Grissinger claim against Bridgebuilder was excluded from coverage by the subject policy’s Exclusion Q. At the same time, Bridgebuilder seeks partial summary judgment to the effect that Exclusion Q does not preclude coverage here as a matter of law. Exclusion Q provides that the policy does not apply to any claim against the insured

based upon, arising out of, directly or indirectly resulting from, or in any way involving any actual or alleged investment advice, promotion, sale, solicitation, or recommendation of any securities, real estate or other investments by any insured.

         (Emphasis in original.) Under Kansas law, the insurer bears the burden of establishing that a policy exclusion applies, and exclusions are narrowly construed. See Fidelity & Dep. Co. of Md. v. Hartford Cas. Ins. Co., 189 F. Supp. 2d 1212, 1224 (D. Kan. 2002) (Lungstrum, J.) (citing Kansas cases).[1]

         The Court concludes that a question of fact remains for trial, as a reasonable factfinder could decide the applicability of Exclusion Q for either party. Bridgebuilder argues that Mr. Acord provided only legal advice to Mr. Grissinger concerning the Northrock transactions, not investment advice, for instance regarding the legality of the transactions and the risk involved in light of guarantees that Mr. Grissinger received. StarStone, however, has provided evidence to the contrary, including the following: Bridgebuilder’s bills to Mr. Grissinger over time indicate that Mr. Acord routinely gave him investment advice; Mr. Acord was an investor in Northrock, and he brought the investment to Mr. Grissinger’s attention; Mr. Acord told Mr. Grissinger that he would receive a 20 percent return on his investment in Northrock, that his investment was guaranteed and he would not lose money, and that the investment was a “no-brainer”. Such facts, which must be considered true for purposes of Bridgebuilder’s motion, would allow a reasonable factfinder to conclude that Mr. Acord gave investment advice to Mr. Grissinger or promoted or solicited the investment by Mr. Grissinger, within the plain and express terms of Exclusion Q. Accordingly, the Court denies Bridgebuilder’s motion for partial summary judgment concerning the applicability of Exclusion Q.

         At the same time, Mr. Acord insists that he provided only legal advice and not investment advice to Mr. Grissinger, that he did not make the statements attributed to him by Mr. Grissinger, and that he did not recommend or promote or solicit the Northrock investment.[2] Such evidence, taken in the light most favorable to Bridgebuilder for purposes of StarStone’s motion, creates a question of fact for trial. The Court also rejects StarStone’s argument that Exclusion Q applies as a matter of law because Mr. Grissinger’s state-court petition alleges that Mr. Acord “convinced” him to make the investments. The Court agrees with Bridgebuilder that it is possible for one to be convinced to act by a person even without ...

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